Billion-Dollar Budget … City spending to increase 25 percent over five years

By Craig Powell

First, there’s the headline number: The city is poised, for the first time in its history, to spend more than $1 billion in the fiscal year that begins on June 30. Total general-fund spending (which pays for police, fire, etc.) is set to hit $450 million next year, while “enterprise” spending (primarily, the utilities department) consumes $584.2 million.

The city expects to employ 4,552 people next year, a slight increase over the current year, but an increase of 720 positions from five years ago. The city expects to employ 130 fewer people than it did in 2008.

City officials are forecasting that the budget will sink into major deficit beginning in just two years, when a general-fund operating deficit of $11 million is expected to grow to $26 million by 2022. You would expect that a city manager, facing the prospect of such red ink, would propose a city budget for next year that calls for major cuts in spending to head off the coming fiscal ditch. But you would be wrong. Fiscal discipline is a very foreign, even suspect concept at City Hall these days. In fact, city manager Howard Chan’s recently released budget forecast anticipates sharp increases in general-fund spending on city operations over each of the next several years, rising from $412.9 million this year to $515.9 million in 2023, a 25 percent increase in operations spending over five years—a spending pace that’s more than twice the inflation anticipated during that period.

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RT on the Rocks … Fight over fare hikes splits transit board

By Craig Powell

 

To get a sense of how broke Regional Transit is, consider this analogy. Let’s say you’re part of a Sacramento family. You have a fairly well-off, middle-class lifestyle, but in the last couple of years you’ve really splurged, buying yourself a big, new Mercedes and a big, pricey cabin up at Lake Tahoe, all financed to the hilt. Meanwhile, the small business you run, RT Clothing, has never regained the boatload of customers you lost when you decided to jack up your prices by 20 percent in the middle of the last recession (oops), leaving you with a flat income for years. Fortunately, your wife, a retiree who collects both a military pension from the federal government and a healthy state government pension, has been collecting cost-of-living increases for years. She brings home close to 80 percent of the family income these days, bless her. Together, you have a family income of close to $150,000 per year.

The charming new home you bought 30 years ago in Light Rail Estates is showing serious signs of age and, let’s be honest, neglect. Your roof is shot, the paint’s badly peeling, you may need a new furnace and your backyard pool has algae stains and a rather unpleasant odor. Lately, some of the sketchier kids in your neighborhood have been jumping over the fence when you’re not home, swimming in your pool, hanging around for hours on end and leaving their trash everywhere. It’s gotten so bad that many of your longtime friends no longer accept invitations to your summer pool parties. You’ve spotted some of them going into Bob and Nancy Uber’s backyard down the street. The Ubers put in a nice, new pool last year and they let their friends drop in to swim whenever they want.

Things are going so-so until one day you decide to open up your bank and credit card statements for the first time in six months. You’re stunned (stunned!) to see all of the savings you thought you were socking away each month have somehow evaporated. Not only that, you owe a whopping $18,000 on your Visa bill. (How did that happen?) In a panic, you check the balance in your checking account and your heart sinks further. You have just $3,000 in cash and, at the rate your family burns money, it will be long gone in three months’ time.

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The Pot Tax … Helping kids at the expense of the general fund

By Craig Powell

Jay Schenirer means well, he really does. But programs launched with the best of intentions are no guarantee of sound policy or effectiveness, as Schenirer’s recent proposal confirms.

His basic idea is to dramatically increase city funding of programs for children and young adults by getting voters in June to approve a “new” 5 percent tax on marijuana cultivation, with the proceeds directed exclusively to youth services, bypassing the city’s general fund. Schenirer and his hardworking staff have spent the past year compiling research studies that show the benefits such programs can have on outcomes for kids.

Schenirer is certainly not new to youth issues: He’s spent most of his adult life working on them—in state service, on the city school board, as an education consultant and as the founder of youth-focused nonprofits since his 2010 election to the city council. (He’s raised more private funds for these nonprofits from corporations and foundations than any other councilmember with the exception of our city’s star private fundraiser, Mayor Kevin Johnson.) Schenirer is almost certainly the council’s foremost authority on youth issues, with Rick Jennings—the long-term CEO of the Center for Fathers and Families who served on the city school board alongside Schenirer—a close second.

Schenirer and his staff have prepared a thoughtful 22-page blueprint for how to create a new city department of youth services, an idea that city manager John Shirey threw cold water on by calling it a wasteful increase in city overhead. Shirey prefers to have the parks department, which administers the city’s current youth services programs, handle any expansion of such programs.

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Eye on Sacramento Releases Report on the Sacramento Streetcar Project

MEDIA RELEASE

 For Immediate Release

Date/Time: January 14, 2015; 1:30 p.m.

Contact: Craig Powell, President, Eye on Sacramento

Phone: (916) 718-3030

E-mail: craig@eyeonsacramento.org

 

Eye on Sacramento Releases Report on the Sacramento Streetcar Project

Eye on Sacramento (EOS), a local civic watchdog and policy advisory group, announced today the release of a comprehensive Report on the Sacramento Streetcar Project, along with a 3-page Executive Summary of the Report.

EOS President Craig Powell said, “Currently, little is known about critical details of the streetcar project, including projected revenues and expenses, future operating deficits, impacts of such deficits on the City of Sacramento’s general fund, bond financing costs, governance of the system, traffic impacts on city streets and freeway ramps, construction impacts on merchants, the adequacy of contingency reserves, the consequences of cost overruns, the experiences of other cities which have recently installed streetcars, and, most important to many, whether streetcars would likely have the catalytic effect on local development that supporters of the project claim Our report is designed to help fill this vacuum of public information.

“We are also mindful that almost 1500 owners of property in Downtown and Midtown will be receiving advisory ballots in the next few days on whether they wish to impose a special tax levy on themselves to help finance some of the project’s $150 million total estimated cost. Yesterday, EOS mailed to each of these owners copies of the attached Executive Summary, together with links to our 42-page Report on EOS’s web site – www.eyeonsacramento.org – to help them arrive at a more informed decision on the proposed tax that is best for them.

“Our Report also seeks to correct some misinformation that has been disseminated in the media about the duration of the proposed special tax levy on Downtown/Midtown property owners, and the total tax assessment that such owners can expect to pay if the levy is approved. We also address some matters of particular concern to such property owners, such as the absence of protective provisions that could reduce owner risks, the fairness of how the tax burden is spread among owners and concerns over a special discounted rate for Arena developers that we estimate could save them approximately $10,000,000 in tax levies, at the expense of all other owners in the proposed financing district.”

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view/download … The Sacramento Streetcar Project … An Eye On Sacramento Report

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Balanced in Name Only … Small budget surplus is no cause to break out the champagne

Published on Sunday, 01 June 2014

Balanced in Name Only

Small budget surplus is no cause to break out the champagne

By Craig Powell

There is only a tiny handful of policy wonks who actually look forward to the release each year of the city manager’s proposed city budget for the fiscal year that starts on July 1. I’m one of them. City budget manager Leyne Milstein drove that point home in my interview of her last month, joking that I was one of only three people who have actually read the document that only a wonk could endure, much less enjoy.

But endure it I did and, knowing that most of you don’t spend your nights curled up with the city budget, I’m offering you the CliffsNotes version of it this month.

The good news is that after five years of battling chronic budget deficits, city manager John Shirey is proposing a $383 million general-fund budget that actually ekes out a small $2 million budget surplus. (The total city budget, which includes fee-collecting “enterprise funds” like city utilities, the convention center and marina, is actually $872 million, but most attention is paid to the city’s general-fund budget, which funds basic city services such as police, fire, parks, etc.) That means no cuts next year in services or city employees.

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Eye on Sacramento’s Final Report on Proposed Water and Sewer Rate Hikes

EYE ON SACRAMENTO’S FINAL REPORT – City of Sacramento Water and Sewer Rate Hikes and Infrastructure Repair Plan

 EXECUTIVE SUMMARY

Through years of neglect and under investment, the city’s water and sewer infrastructure is a mess.  The mess is a consequence of several factors: (1) the city council’s historic failure to focus on long-term needs and its “core” government mission; (2) the failures of the city council and city managers to adequately oversee the Department of Utilities (DOU); (3) broken promises by DOU management on how revenues from earlier rate hikes would be spent; and (4) unsound city policy that has allowed escalating labor costs to crowd out infrastructure spending.

Even if the problem is fixed with massive new investment in utilities infrastructure, how can the city ensure that it doesn’t backslide into such a mess again?  The DOU can avoid a repeat of the current mess by returning utility tax revenues back to the DOU to sustain ongoing infrastructure investment, by adopting smart DOU oversight reforms, by providing specialized oversight of infrastructure spending, by securing concessions from city unions to free up funds for infrastructure spending and by adopting a number of labor reforms.

While framed as a proposed three-year hike in water and sewer rates, the DOU’s plans to borrow $1.8 billion over the next several years will “lock-in” double-digit annual rate hikes for the next 10 to 15 years, as set forth in DOU rate projections  The city council and the public need to be aware that, with the tripling of Regional Sanitation’s sewer rates over the next eight years, the water and sewer rate hikes proposed or projected by the DOU, along with future expected hikes in storm drainage and solid waste rates, will push up the monthly city utility bills for a typical homeowner from $120 per month to over $380 per month over the next 15 years.

The city’s proposed and projected rate hikes will have a profound impact on middle class and working class residents and those on fixed incomes.  The proposed infrastructure repair program will impose an effective lien of $32,500 on the typical Sacramento home.  With local unemployment now back up to 11.4%, 51% of all Sacramento homes underwater on their mortgages and an 8.1% drop in Sacramento home values last year and a further drop of 2.1% projected for the rest of the year, the city council could not pick a worst time to impose a major new financial burden on Sacramento’s citizens and communities.

The recently discussed life-line subsidy idea fails the test of fairness as it would reward better off homeowners while doing nothing to assist worse off renters.

The proposed hikes will have major negative impacts on commercial property, the housing stock, new construction, property tax collections, local school districts and local economic growth prospects.

Before launching a project of this magnitude, the city should install a permanent DOU director with significant experience and expertise in planning and overseeing major, complex utilities infrastructure projects on the scale that is being proposed.  The city council and the public must have confidence in the oversight capacity of DOU management, particularly in light of longstanding concerns with the functioning of the DOU.

With the planned rehab of the city’s two water treatment plants and the city’s placement of numerous underground, stand-by holding tanks in the central city over the past 10 years, the city has substantially diminished the risk of a water or sewer infrastructure failure causing either a significant threat to public safety or a serious disruption of life in Sacramento.  According to DOU director Dave Brent, the principal risk of infrastructure failure is now limited to highly localized impacts that are not expected to endanger public health.  Consequently, there is no public safety reason to initiate major rate hikes in the depths of the current recession and no reason to finance the bulk of the needed work with massive borrowings instead of funding the work on a “pay-as-you-go” basis.

City treasurer Russ Fehr has consistently advised the city council to limit the use of debt financing to only those big-ticket projects that simply cannot be financed out of current cash flow.  He states that the city is “facing a debt nightmare” and that “borrowing for routine maintenance is insane.”

Overreliance on utility debt financing and poor management of utilities infrastructure projects has led to two major municipal bankruptcies this year, in Harrisburg, PA, and Jefferson County (Birmingham), AL.  Bond covenants, including coverage rations, can have capricious effects on utility rates and communities, particularly during sharp economic downturns.

The proposed first tranche of bond financing should only be used to rehab the water treatment plants.  It should not be used to accelerate the installation of water meters, a strategy that would substantially increase ratepayers costs with no significant corresponding benefit.

The DOU’s $250,000 public relations campaign to sell major rate hikes and infrastructure repairs to the public and the city council has been largely a waste of ratepayer funds.  The DOU has maintained a false and misleading narrative on the nature and extent of the proposed rate hikes and has doggedly withheld from public view 15-year rate hike projections and financial plans that would have revealed the full extent of future rate hikes and infrastructure financing.

Eye on Sacramento advises the city council to: (1) to approve single-year hikes in water and sewer rates as a “place setter” to provide the city with the time to renegotiate key labor agreements to unlock cost savings and enact needed reforms and DOU and project oversight measures; (2) authorize debt issuances only to finance the rehab of the city’s water treatment plants; and (3) direct city staff to redesign its infrastructure repair program and its financial plan to fund the lion’s share of the repairs on a prudent, less costly, less risky “pay-as-you-go” basis.

read more of   EYE ON SACRAMENTO’S FINAL REPORT – City of Sacramento Water and Sewer Rate Hikes and Infrastructure Repair Plan

Pipe Dreams, Three-year water and sewer rate hikes would be just a down payment

When the utility folks get up to testify at city council hearings, they are typically the last to appear, long after the homeless and Occupy Sacramento activists have left, leaving a weary mayor and city council behind to summon the attention span necessary to ponder the implications of federal clean water mandates and steel-riveted transmission lines. It’s a subject that rarely sustains the attention of either politicians or city voters. Inattention, however, has its own special costs in government, as it does in real life.

To say that the city council has exercised inadequate oversight over the city’s utility systems would be an understatement. The consequences of its neglect range from the current major snafu in garden refuse pickup to a grand jury investigation and lawsuits two years ago over the city’s illegal diversion of millions of dollars of ratepayer funds.  read more …

The City’s Garbage Contract with BLT Enterprises: Time for Full Accountability

Review the full report

IX. SUMMARY

We sincerely hope that Sacramento city officials and the Sacramento County Civil Grand Jury, as well as local media, will investigate and further examine the problems and serious issues that have plagued the City of Sacramento’s administration of its waste disposal contract over the past 15 years, as identified in this Eye on Sacramento report. It is time for full accountability.  … full report