Expansive Plans … The mayor’s budget message proposes wide-ranging ideas

Published on Wednesday, 01 April 2015

Expansive Plans

The mayor’s budget message proposes wide-ranging ideas

By Craig Powell

As I wrote last month, the mayor and city council have taken aggressive steps in the past few months to assert much greater front-end control over both the city budget and the city manager (hiring an independent budget analyst, forming a new council budget committee, public outreach on budget matters). But the process changes were just the beginning. On March 10, the mayor took the unprecedented step of releasing a “Mayor’s Message on Budget Priorities” that lays out what is likely the most expansive plan ever proposed for the role of city government in Sacramento. It proposes a cautious approach to city spending and debt management in the near future while proposing more than a dozen new and unprecedented programs and initiatives.

Notably, the mayor’s plan was not the product of deliberation and consensus by the council’s new budget and audit committee. Instead, it is the mayor’s own vision and was slated for initial council review late last month. If it ends up being approved by the council, it will represent marching orders to city manager John Shirey on how to draw up the city budget for the next fiscal year that begins July 1.

The central premise of Johnson’s plan is that the city must exercise spending caution in the short term as the city nears a fiscal cliff in 2019 (due to escalating pension contributions and expiration of the Measure U half-percent sales tax hike), but that the city must ultimately fix its fiscal problems by taking aggressive steps to grow the local economy, resulting in higher city tax revenues. His ideas for growing the local economic pie are bold: He proposes a slew of new investments, plans and programs that, if approved, would inject the city more assertively into local economic development than ever before.

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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

view/download … The Sacramento Streetcar Project … An Eye On Sacramento Executive Summary

Police and Pension Reform … Burden of new contributions erased by pay hikes

Published on Friday, 01 August 2014

Police and Pension Reform

Burden of new contributions erased by pay hikes

By Craig Powell

After three long years of informal and formal bargaining, mediation, more formal bargaining and, finally, a binding determination by an arbitrator, the city has a new labor contract with the Sacramento Police Officers Association. City police will finally join all other major city bargaining unions and be required to contribute the full employee’s share into the California Public Employees’ Retirement System (9 percent of their salaries)—and then some. In addition, city cops will be required to pony up another 3 percent of their salary to pension contributions—replacing a portion of the city’s existing contribution to cop pensions—for a total contribution by cops of 12 percent of their salary. In contrast, members of the next highest contributing city union, the firefighters, contribute 9.2 percent of their salaries to pensions.

To ease the pain of such a major reduction in take-home pay, the arbitrator awarded the police salary hikes, starting next year, of 3 percent in each of the next 3 years, totaling 9.3 percent once fully implemented. (Sergeants will get 7 percent raises.) The new contract’s near-term impact on the city’s general fund budget: a savings of $1.25 million in the current fiscal year and $2.24 million in 2014-2015, shifting to a net cost of $300,000 in 2016-2017 and $1.59 million in 2017-2018.

The arbitrator’s decision caps off a three-year effort by city manager John Shirey to require all city employees to contribute 100 percent of the employee’s share of their pensions. Until Shirey’s initiative, most nonpublic-safety city employees paid between 3 and 4 percent of their salaries to their pensions, while police, firefighters and city managers paid zip toward pensions. Shirey kicked off his campaign to require full contributions by setting a good personal example: He insisted that his own employment agreement require him to make a full 7 percent pension contribution. (Of course, that’s a little easier when you are making $258,000 per year.) Next, he required all nonrepresented city employees, including all city managers, to pony up. Then, as each city union contract expired, he insisted that each contract require workers to make full contributions.

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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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City of Sacramento Sales Tax Increase, Measure U (November 2012)

  • Citizen law suit filed against City of Sacramento 

    Petition for Writ of Mandate – City of Sacramento Measure U – Tax Increase

    … The writ sought by Petitioners will rectify an egregious and extraordinary confluence of actions and dereliction of duties by the City, its City Council and its Mayor which have combined, whether by design or mere neglect of officially assigned responsibilities, to effectively deprive Petitioners of their right and opportunity to place arguments against Measure U before Sacramento voters and, more critically, to deprive Sacramento voters of their fundamental right to see and consider the arguments of both proponents and opponents of Measure U instead of having available to them only the arguments of proponents of Measure U …

Petition for Writ of Mandate – City of Sacramento Measure U – Tax Increase

VERIFIED PETITION FOR WRIT OF MANDATE

Exhibit A – Argument Against Measure U

DECLARATION OF CRAIG K. POWELL IN SUPPORT OF VERIFIED PETITION FOR WRIT OF MANDATE

Exhibit Powell-1 Mayor to write argument against Sacramento sales tax hike

Exhibit Powell-2 Selection of Argument Authors …

Exhibit Powell-3 Mayor Johnson’s Ballot Argument Against Measure U

Exhibit Powell-4 Mayor Johnson fails to write argument against tax measure

DECLARATION OF DENNIS NEUFELD IN SUPPORT OF VERIFIED PETITION FOR WRIT OF MANDATE

Exhibit Neufeld-1 E-mail from Dennis Neufeld

Exhibit Neufeld-2 E-mail exchanges between Dennis Neufeld and Assistant City Clerk Stephanie Mizuno

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.

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