Friday, October 24, 2008

Nightmare on Main Street

[Cue lightning crash and booming thunder]

Something wicked this way comes, and its coming is foretold in a seemingly innocuous grant application filed by the Mayor just last week. In many ways, everything we have written about over the last year has culminated in this story. Improper influence of a select group of private interests in City policy making, wasteful City spending, the hijacking of Winslow Tomorrow , double speak and lack of transparency by the City, withholding of information from City Council and a complete disregard of community priorities have all played a role in the City’s latest attempt to reanimate the corpse of Winslow Tomorrow.

Streetscape Lives!

Even before the current global economic crisis, back when our own local financial woes were first, and finally, being disclosed, it was understood that the Winslow Tomorrow Streetscape was dead. With no money to fund critical road repairs and other important community priorities, the Administration announced that the only portion of the project that would go forward would be “a barebones utility project”. Even that simple replacement of the three utilities deemed inadequate or failing by City staff and consultants has remained highly controversial due to the lack of Winslow Way property owner participation in costs, the question of whether a lesser fix would suffice and the disproportionate burden that will be placed on 2,200 utility ratepayers.

The City Administration, with the help of four Councilpersons (Peters, Snow, Stoknes and Franz), has nonetheless continued to press forward with the utility project, calling it the “highest priority capital project” on the Island. They have argued that it is a matter of public safety and that it must go forward regardless of our financial circumstances. Why then is this “barebones” “emergency” utility replacement project – now referred to as the “The Winslow Way Reconstruction Project” – being described in the City’s application for an economic development grant as necessary to “stimulate private reinvestment” in the Core District?

When listing on the grant application which infrastructure improvements will be made during the project, it is not “replacement of failing sewer pipes” that tops the list, but rather “widening sidewalks”. And the list goes on to include other non-essential Winslow Tomorrow-esque elements including “accessibility and intersection functionality” and “enhancing landscaping”.

It would appear that despite the gravity of the City’s financial circumstances, having cited the need to cut funding for most community priorities, having co-opted the federal funds awarded to another decade old public safety project – Wing Point Way – and planning to hit utility rate payers with as much as a 44% rate increase, the Administration is still pursuing funds to “enhance the livability and vitality of Winslow Way”, and is doing so in the name of downtown revitalization.

The Phantoms of Winslow Way

City staff and officials have long dismissed as improbable citizen concerns that Winslow Tomorrow projects and zoning changes will result in an imminent and radical redevelopment of Winslow Way. Throughout the process, planning staff have successfully calmed any such fears raised before the Planning Commission with repeated reassurances that such redevelopment will not happen overnight and will not result in an urban canyon of three-story (or taller) mixed-use buildings along our Main Street. Yet the City now argues that not only will Winslow Way soon be the epicenter of a massive redevelopment effort, but that we must use City (and State, and Federal, and utility rate payer) funds to ensure its success.

The Mayor’s argument for the Economic Development District (EDD) grant is that we want to direct new growth into Winslow. The City argues that our Comprehensive Plan mandates this and that our “growth strategy goals cannot be accomplished without significant improvements to the existing infrastructure of downtown” – failing to recognize, of course, that such growth could be directed elsewhere in Winslow such as along Madison, High School Road, SR305 or the Government Way property.

Why the myopic focus on Winslow Way? Why threaten to destroy our community’s small town sense of place with the prospect of three-story plus mixed-use buildings when there are far more appropriate locations for such structures? And why not heed the voice of the community that has been so vocal about the sanctity of our Main Street and which ranked “downtown planning” as 30th out of 32 community priorities on the City’s own survey?

The answer is clear in the City’s responses on the grant application, which only verify what many have suspected for years – that the interests of two private corporations have dictated downtown policy and planning for at least the last two years, if not longer. These responses clearly show that the true impetus for the proposed Winslow Way utility upgrades is to facilitate redevelopment planned by Town and Country Markets and Haggar-Scribner LLC.

Apparently the City, which has long feigned ignorance of the extent and timing of these planned redevelopment projects, is intimately familiar with many of the key details. According to the grant application, Haggar-Scribner Properties, which has now reportedly accumulated at least seven contiguous parcels over the last few years, and which now controls half the land on the north side of the heart of Winslow Way, has shared a “redevelopment proposal” with the City. The proposal includes an expanded clinic, retail services, office space, housing and “associated parking” for an estimated cost of $40-60 million. Across the street, Town and Country Markets plan to invest $20-30 million in their own expansion project.

When were the details and timelines of these plans communicated to the City? Under what circumstances? Certainly not in the public eye. According to our sources, representatives from these two entities and their supporters have met privately with City staff and officials countless times over the last several years. They have served on committees, advocated for zoning changes and were central figures in Winslow Tomorrow. They were the impetus behind the doomed parking garage study that we will be paying interest on for many years to come. Even when not physically present, their influence has been a constant pressure on the City Council and Planning Commission as City staff, the recently departed editor of our local paper of record and other advocates for Downtown redevelopment have repeatedly raised the spectre of “losing our anchor tenants if you don’t act now”.

The Monster that Ate Winslow

The cruel hypocrisy that has followed this project from its inception is the City’s claim, repeated in the current grant application, that Streetscape improvements and subsequent redevelopment will help us retain our small local businesses. In fact, the application argues that this project is “critical” to retaining them. But as Rod Stevens, a development consultant who specializes in revitalization, and many others have argued, those small businesses not killed off by the Streetscape construction itself will surely perish under the inevitable increases in rent that will follow redevelopment.

Another twisted irony is the City’s argument on the grant application that grant funds will help offset painful utility rate increases for Winslow residents. This creative response to the question of how the project will “significantly benefit an area experiencing or threatened with substantial economic distress” was less than forthright given the fact that it is the City itself that has chosen to charge the bulk of the project to those households unfortunate enough to be served by City utilities, while giving a free ride to Winslow Way property owners.

The City never directly addresses the issue of benefiting property owners’ financial participation – or lack thereof – in the project, though it does cite “private donations” as a portion of the necessary local matching funds. But this references the $1 million that Winslow Way property owners have offered to pay, not for any portion of the "necessary" utility replacements, but for the aesthetic improvement of under grounding power lines.

What then are the City’s sources for matching local funds? The City cites: “Utility revenue, the City’s general fund, state grant funds, federal grant funds and private donations.” The utilities currently have no reserve funds, so this money will come in the form of utility bonds that have yet to be issued. The general fund, by all accounts, is at best 100% encumbered, and at worst in the red, so any “general fund” money will come from future Councilmanic Debt that would have to be successfully issued on the current municipal bond market. It’s hard to imagine how other state and federal grants could be counted as local matching funds, especially if they each require local matching funds as well.

Death by Omission

While the Administration might successfully defend some of its less than accurate statements as standard grant writing spin, there’s no escaping the glaring omissions and misstatements in its response to the application question on “Community Support”. The application asks the applicant to describe “community involvement in and support for the project”. Not only does the City’s response fail to mention anything about the long and vocal opposition to the Streetscape project and the larger vision it advances (including two petitions signed by more than a thousand citizens), but it mischaracterizes the entire Winslow Tomorrow process.

Apparently it was not enough to claim that the process resulted in a plan that embraced large-scale redevelopment, which it did not. Now the endeavor is described as having been formed by “a group of citizens interested in the re-development potential of the downtown area”. Tell that to the dozens of citizens who thought they were working on a plan to limit the impact of “inevitable” growth on their community.

What is the ultimate goal of the Mayor, her Administration and the Councilors that support her in pursuing the redevelopment of Winslow Way? A wise citizen once asked why, if the underlying motivation is a desire to increase City revenues, we do not have an open and honest conversation about that. Perhaps it is because the type of development that is projected for downtown is primarily residential. A developer’s return on urban multistory mixed-use projects lies in the condos on the upper floors. The retail space below is practically an afterthought. In order to fill that retail space with successful tax paying tenants, there must be demand.

The City’s application claims that retail space is in short supply, but in fact vacancies abound. The City claims that our community will need an additional 350,000 square feet of retail space by 2025. That would be equivalent to more than the total square footage of Seattle's Pacific Place, or three and a half Safeway Shopping centers. Given that there is little danger of Costco, Target or Home Depot relocating to the Island, it doesn’t take an urban planner to realize that those projections are absurd.

The fact is that an overwhelming majority of Island citizens, who may or may not agree on the inevitability or desirability of growth generally, do not want growth directed onto Winslow Way. Given current economic conditions, it's safe to assume that an overwhelming majority would also agree that now is not the time for big capital projects of any kind. Unfortunately, now is an ideal time for the City to slip past the community any number of unpopular policy changes or project approvals. The drama of an intense national election and economic crisis has the full attention of the community and the Holidays are around the corner. We must nonetheless find a way to awaken the silent majority. If we fail, this nightmare is sure to become our reality.

(To post or read comments on this story click on 'COMMENTS' below)

Saturday, August 16, 2008

The Herd and the Hustle

When this article written by City Hall watcher and commentator R.D. Stevens came our way, we thought it was something the whole community needed to read. The topic – our City's inability to manage major Public Works projects – is especially timely, with the Administration and Council majority poised to issue another controversial bond on August 27th, and the Winslow Way Streetscape funding debate far from settled.

Published with the author's permission.

* * * * * * *

A Nice Place on Puget Sound

Imagine that you and some friends and relatives have a nice place on Puget Sound. You’ve lived there for a number of years, and one day your hired property man tells you the sewage treatment system needs repairs and that he’s worried that the State won’t relicense it the next time around. He estimates the cost of the upgrades at $4300. You tell him to go ahead with the design.

The following year he estimates the cost at $9500, not including $750 for design. A year after that, he tells you the engineers are still designing, they’ve only completed 30 percent of the design, and they now need about twice as much to finish.

Yet another year goes by while your man and the engineers go off to re-design the project. He comes back to you for more money, again for design, and this time including construction management services as well, something you thought he was going to take care of. You feel like you have no choice but to sign for more work.

Five years into the project, he tells you the cost is now over $14,000. You’re not done yet, you know you will be paying more, and you wonder how things got so out of control. Then you realize you were never really in control in the first place.

Multiply by A Thousand

Multiply this by a factor of a thousand and you have the story of our City’s wastewater treatment plant at the base of Wing Point. This is the largest project in the City’s history it is still not done. What started out as a $4.5 million project is now projected to cost $14.3 million.

Based on industry averages for similar projects, it appears that the Administration has overspent on engineering by about $750,000 to $1 million. And because of delays along the way, inflation in construction costs probably added another $750,000 to $1 million. All told, the cost of bad management is probably $1.5 to $2.0 million.

What Went Wrong?

My statements here are based on facts gleaned from the Administration’s response to my public records request for cost estimates and public meeting notes. ( I have included a concise history of the project at the end of this article). What is most surprising is the almost total lack of written management reporting from the Public Works Department to elected officials. There are many Power Point presentations put together by the consultants, mostly focused on the technical aspects of the project, but these do not include all the costs – like their own fees.

It appears that few Council members have known what the total cost will be, for the numbers they have quoted were for construction costs only, and have not included engineering – a sizable expense. Nonetheless, once the project was well underway, and after Public Works had entered into detailed design, some Council members did manage to at least raise the question, “Is this the right project?”

The Administration seems to lack the skills to track variances in time and budget on major projects. Daniel Smith and Gayle Seyl, two citizens working independently, and each with backgrounds in forensic accounting and fraud investigation, have made separate public records requests for reports containing this sort of information, and have yet to obtain them. Council member Kim Brackett has made similar requests on capital projects and staff has told her that they would get back to her in six months. These reports are the basic information that any supervisor or board needs to exercise oversight and control, and our Council does not get them.

There are many similarities here between the management of this project and the management of the Heery work on Winslow Tomorrow. The Public Works department has been in charge of both projects. Both involved contracts with large engineering firms. On both, Public Works moved ahead on detailed design without first fully exploring the alternatives and making Council fully aware of the details of these options. And on both projects, much of the money spent on professional engineers went into meetings that might have been avoided if the Public Works had taken the time to clearly outline and get policy support for project parameters before engaging in detailed design.

Making It Better

In situations like this Joe Honick, a City Hall watcher and concerned citizen, always wants to know how we can improve things.

First, there are basic questions of staff openness and trust. The solution to these problems is obvious.

Second, we need basic accounting and management reporting – the stuff of professionalism. This includes comprehensive and concise written reports that explain the rationale for a project, and the real options for carrying it out, including the costs, benefit, risks, time and degree of difficulty of each. These reports would give our elected officials the information they (and not staff) need to decide which options are best. These reports should include a clear statement of all of the costs, and not seek to lessen the perception of these by revealing only those directly for construction. It is amazing how, on major projects, and changes to these projects, the Council is willing to accept information just hours or minutes before Council meetings (or get no advance written information at all) and will then make quick decisions, all based on a sense of urgency conveyed by staff and the Mayor.

After the project is underway, Council should expect and ask for status reports on the larger projects, which should provide detail on which items are off budget or schedule, and why. These reports should be signed by the Public Works Director, and not his subordinates. The City of Bainbridge Island is small enough that he should know the details of major projects.

Learning from Past Mistakes

Four members of the City Council still want to press ahead next year with the replacement of utilities under Winslow Way. Here are the questions that Council members should raise now, before getting in another “herd and hustle” of rising costs:

  • Do we know what all of the costs will be, including the final bill for engineering and construction management?
  • Do we know who will be responsible for bringing the project in time and on budget, and what management reports they will submit along the way?
  • Given the past history of spending and over-runs on the wastewater treatment plant and Winslow Tomorrow, does the senior staff of the Public Works Department have the skills to oversee this project?
  • If the project goes over budget, how will we pay for it?
  • What tasks will be done by engineers already on salary, and what will be contracted out?

Given the problems of the past, the operative words should be “Show me."


Key Milestones in the Wastewater Treatment Plant

4/13/03 Esvelt Engineering estimates needed improvements at $4.368 million, including $.585 for initial UV work and $3.783 million for additional upgrades. These estimates include neither design nor construction management.

8/11/04 City signs $756,219 contract with Tetra Tech to prepare engineering drawings to 100% design level.

11/30/04 Public Works stages community workshop; neighbors complain that they were given only one day’s notice to attend, and that few received it. Power Point slides from presentation put cost of upgrades at $6.8 million, and make no mention that these costs do not include engineering.

8/5/05 Vanir Construction, a sub-contractor to Tetra Tech, estimates completion by 1/7/08, and construction costs alone at $9.6 million. Public Works memo to city council puts cost of Class A reclaimed water at $1.5 million (about the same or lower cost than is now being contemplated for simply extending the outfall farther into the Sound.)

7/25/05 City Finance Director Elray Konkel writes a citizen, “Current customers are protected today and (are) intended to be protected in the future by System Participation fees which are applied to new development… The current capacity of the plant is considered sufficient to accommodate the current and future growth within the boundaries of the Sewer district.”

11/05 City Council raises question of whether space constraints have significantly added to costs, asks “Is this the right project?”

11/14/05 Public Words director Randy Witt sends out emails asking for “bar napkin” level of detail on costs of alternative actions, and asks if the State Department of Ecology will allow the City to defer upgrades if the City instead brought water and biosolids to Class A levels. Tetra Tech writes Public Works, “There is no Ecology deadline for completing the improvements in the City’s engineering report”, and Lance Newcombe, then an engineer with the City, speculates that the City might have bought time for the upgrade work by having added UV treatment.

8/09/06 City caps work on current Tetra Tech contract at $730,000, noting that cost over-runs and design revisions had led to only 30% of the design being completed, even though 100% had been specified. City signs “Phase 2” contract with Tetra Tech for $690,300, bringing total contract with Tetra Tech to $1.42 million. Although the new contract is labeled “Phase 2”, it is essentially a re-write for design revisions and for work not completed in the first contract.

8/15/06 Public Works tells PWT subcommittee that construction will likely be completed in mid to late 2008.

1/19/07 Public Works estimates construction cost at $12.419 million.

2/14/07 City amends Tetra Tech contract for design revisions, increasing bringing total to $1.88 million through 2007 only. The proposed contract amendment would have brought the total to $2.32 million.

11/29/07 City rebids work for $9.051 million. Although Public Works claims that higher engineering costs helped lower the cost of the second bid, it is not clear if the higher engineering costs were truly attributable to the bidding, and if the bids came in lower because the second-round bidders knew the bid amounts from the first round or because the economy was visibly slowing.

2/27/08 City increases Tetra Tech contract by $207,366, bringing total amount paid and obligated to $2.08 million. Based on amount proposed but not signed for the first amendment, there will likely be a future amendments to this contract of at least $233,000, which would bring it to $2.320 million.

6/25/08 Public Works writes memo to City Council recapping financial history of the project, but giving few details and little explanation of the reasons for the delays or cost increases. Various internal worksheets put the overall cost, including UV work, at $14.3 million, a three- to four-fold increase from the original estimates prepared in 2003.

(To post or read comments on this story click on 'COMMENTS' below)

Wednesday, May 14, 2008

Get Your Pitchfork, Ma

In early 2007, the City entered into a nearly $1 million bloated Phase I Winslow Way Streetscape contract with Heery International that was at least as much about selling the Streetscape project to the public as it was about the initial design process. For a City of our size, this was a reckless use of taxpayer money under any circumstances. But now, at a time when our financial reality dictates that the City bite off no more than one or two capital projects a year, when the City has already undertaken a $12.8 million sewer plant upgrade, when roads across the Island are long overdue for repair and preservation work and budget cuts will send so many community organizations home empty handed, the $1.4 million Phase II Heery contract before Council tonight is simply appalling.

Just take a look at last year’s Phase I contract and Phase II now before Council and prepare to be amazed. Follow the links here and here and read the contracts for yourselves. You can probably skip the fill-in-the blank contracts (that’s right, million dollar fill-in-the-blank contracts) and just review the fee matrices in the attachments. This is one of those situations where you don’t need our help – the documents are fairly self-explanatory and should make any taxpayer cringe.

We are paying consultants to talk to consultants, consultants to talk to staff and consultants to talk to the public. We are paying consultants to oversee consultants who are considering the issues, paying them to create documents and presentation materials memorializing the recommendations, then paying them to address Council to explain the recommendations. We are paying for workshops, charettes, roundtables, coffees, graphics, displays and banners. And to top it off, we are paying consultants to prepare the very invoices they will use to bill the City.

Probably the most jaw-dropping statistic is how much the City will have paid for Streetscape related public relations work after the completion of Heery’s Phase II contract. A conservative estimate – tallying up only those tasks listed in the two contracts that are clearly public relations related – would be just over $229,000. In other words, the same amount that was to be spent on the Senior Center renovation this year or more than enough to cover what was to be spent on trail acquisition and construction this year – items expected to be reduced or eliminated from the 2009 (or 2008) budget.

Looking at a recent list of other possible spending reductions prepared by the Administration, we get a glimpse of what else might be sacrificed in the desperate attempt to fund the Streetscape. Among the cuts proposed, some will impact public safety such as eliminating an emergency satellite phone, delaying the hire of two new patrol officers, delaying repair to patrol cars and eliminating the Island’s Emergency Preparedness Coordinator.

Another interesting cut would be the elimination of the “Wyatt Water Main Upgrade”. The result of cutting this item would be “continued low pressure and flow along Wyatt between Madison and Grow”. Would that be fire flow by any chance? That may be a very relevant question as it is also noted that this water main, which runs along an area destined for perhaps the largest future redevelopment effort in Winslow (including the Government Way surplused navy housing), “may be upgraded without City expense by future development”. Apparently some developers are more equal than others.

The Administration appears to be really scraping the barrel with it’s proposed cuts, yet it refuses to tighten the belt on the Heery contract. Consider the proposal to reduce the frequency of sewer main cleanings to once every three years (already down from an annual cleaning as of 2004) to save a paltry $5,000, while at the same time advocating for spending more than $40,000 for three Fourth of July Streetscape booths over a three-year period under the Heery Contracts.

And why are we paying Heery, an international uber-firm, to manage the project at all? Why not handle project management and public relations in house? “Administration and Project Management” will cost the City $96, 972 under Phase II, along with $28,773 in “Reimbursable Expenses”. What does this entail? Well, under the Phase I contract, and an earlier version of Phase II, the individual tasks were line-itemed along with their associated fees. Under the latest iteration of the Phase II contract, the generic term “Administration and Project Management” appears under each of the four work phases of the contract along with an all inclusive fee. On page 7 of the scope of work (Attachment A), the functions included in Administration and those included in Project Management are broadly detailed.

We think it might have been more useful to see a breakdown of the costs associated with each administration and management task. One of the more interesting fees listed in the Phase I contract was $24,656 to “Provide monthly report to COBI with updated budget, schedules, and summary of work during period along with monthly invoice. Recurring, 8 months”. In other words, Heery billed the City over $3,000 per month for a monthly summary and bill. Another interesting item from the Phase I contract was the $8,928 authorized for the presentation of the 30% Streetscape design (the final product of Phase I) to Council. If one assumes a 60 minute presentation, it was to cost the City $148 per minute to hear the results of the hundreds of thousands of dollars in design work it had paid for.

Looking back at that list of proposed cuts, we find that $30,000 could be saved by finishing the Waterfront Master Plan with staff rather than consultants. What’s even more amazing than the fact that our in house planning staff is capable of planning and design (who knew?) is the idea that there would be any question of whether consultants would continue to be hired to do anything that the City’s existing staff could adequately accomplish. Surely with no cash and no bonding capacity the City’s goal should be to find and harness the talent within, just as any reasonable homeowner would do-it-himself or go without when times are tough.

Where should our City Council go from here? Eliminate Heery and eliminate the Streetscape elements still included in the project, and they will be eliminating many, if not all, of the questions surrounding the legality of billing the project to the Utility ratepayers, and will be approaching a financially sound solution for this project. It does not appear that a majority of the Council is likely to find this path on it’s own. It's up to the community to pick up our pitchforks (figurative or virtual) and head to tonight’s Council meeting, by foot or by e-mail, to help perhaps just one of our lost Councilors find his or her way back to the realm of reason and responsibility.

(To post or read comments on this story click on 'COMMENTS' below)

Sunday, April 27, 2008

Talking Around the Questions

Preliminary results. Raw data. Tabulations. Draft copies. The long awaited community priorities survey is in, but judging from the volume of information and the myriad of ways in which it could be interpreted or spun, it looks like the effort to decipher public opinion has just begun.

We have written before about the distinction between the "scientifically valid" random phone survey and the not so reliable self-selecting on-line survey. Judging from what we've heard and seen we can be confident that the on-line survey has no value from a numerical perspective, as several sources have reported taking the survey multiple times by simply disabling cookies or by using a different IP address. And quite frankly, based on the wording of some of the phone survey questions, we have to wonder about that one as well.

Only one thing appears to be certain, and that is that there will surely be some creative attempts by Winslow Way Streetscape supporters to explain how citizens voting for "safe and efficient utilities" and "maintaining existing roads" were expressing support for the Streetscape despite their low ranking of "downtown planning" and the prevalence of road maintenance and utilities issues Island-wide.

Interested citizens might want to arm themselves with the actual data generated by the two surveys in preparation for their formal presentation to Council and subsequent press. The basic results of both surveys are available as attachments to the upcoming City Council agenda for the April 30th special meeting. However, what is not included are the narrative portions of the on-line survey. Fortunately, a friend of the PostScript forwarded those results to us. We have uploaded a reformatted copy of the first narrative question "What are the top three hopes/desires or issues (if any) about local government that concern you?" It might seem hypocritical to disparage the on-line survey in one breath and in another offer the results, but throwing out the numerical value of the survey need not negate to value of reading the unedited concerns and of Island residents. The proportions may be off, but the flavor is still there.

Go here for the on-line data and here for the phone data that are attached to this weeks Council agenda. For narrative answers we have uploaded the following survey questions:

To read responses to the question of why respondents answered as they did to the question "How would you rate the quality of life on Bainbridge Island now?" (question #3) go here.

To read responses to the question of why respondents answered as they did to the question of "Thinking ahead five years from now, how would you rate the quality of life on Bainbridge Island?" (question #5) go here.

To read responses to the first time (question #1) survey takers were asked "What are the top three hopes/desires or issues (if any) about local government that concern you?" go here.

To read responses to the second time (question #30) survey takers were asked "What are the top three hopes/desires or issues (if any) about local government that concern you?" go here.

To read responses to the question of why respondents chose the two issues they believed jeopardize quality of life on the Island (question #7) go here.

To read responses to the question inviting comments on zoning and planning (question # 9) go here.

To read responses to the question inviting comments on City infrastructure (question # 17) go here.

(To post or read comments on this story click on 'COMMENTS' below)

Friday, April 25, 2008

A Roadmap to Leadership

Once again, we find greater understanding of the City's current circumstances by looking back over how we got here and listening to those who were on the front lines. Former Councilperson Bob Scales demonstrates with this paper, circulated earlier this week, that his commitment to the Island's well being remains strong even in "retirement". Thank you Bob for sharing these valuable insights, reminding us of recent history soon forgotten and helping not only the Council, but the community find its bearings in the chaos of City Hall.

Published with the author's permission.


Bob’s 10 Step Program for Municipal Financial Success

Proposal for the Bainbridge Island City Council

from Bob Scales

Bainbridge Island City Councilmember 2004-2007

1. Trust but verify

2. Don’t ignore City Council policies and priorities

3. Sell surplus City property

4. Don’t raise taxes or rates in a recession

5. Use consultants sparingly and cautiously

6. Keep your promises.

7. Don’t break the law

8. Be an advocate

9. Don’t make excuses – make decisions

10. Find out what went wrong

1. Trust but verify

In October 2007 the Mayor presented her proposed 2008 budget to the City Council. This was the most abbreviated budget document we had ever seen. We went from the normal 3” binder to a ½” binder. The Council expressed concerns about the lack of detailed information in the budget document and we questioned how we would be able to produce a final budget from the limited data the Mayor gave us. We were told by the Finance Director, City Administrator and Mayor that they had prepared the document by following all of the Council’s budget directions and therefore we did not need detailed information and should just approve the budget as proposed.

The Mayor’s proposed budget had $9 million in councilmanic debt. We learned in December 2007 that it was actually $10 million in debt. Virtually every project in the 2008 CIP was funded with debt. The Council felt that the City could not sustain this level of debt and that it was not appropriate to fund projects like routine road maintenance with debt. We asked the administration to cut $2.5 million out of the operating budget and the Council cut $3.5 million out of the 2008 capital program. The administration’s reaction to the cuts was very strong. The finance director accused the Council of mismanaging the City’s finances. The City Administrator told the Council that we just ruined months of staff work. The Council was told that the City’s finances were sound and there was no need to cut the operating budget. The Council did not bow to this pressure and passed a budget with only $4 million in debt. The Council went through a very good exercise during the budget process and decided that what remained in the 2008 CIP was worth being funded by debt if necessary.

Just 3 months after the budget was passed the Mayor and Finance Director informed the Council that the City would be $2 million in the red in 2008. Imagine the hole the City would be in if the Council had approved the Mayor’s proposed budget. Unfortunately the 2008 budget does not appear to be worth the paper it is written on.

Before the Council takes any action on amending the 2008 budget you should verify what you are being told by the Administration. The revenue numbers they gave the Council in December were wrong. Why would you believe the numbers they are giving you now just 3 months later? The finance department should give the Council and the community a detailed assessment of the City’s finances in a form that can be easily understood. It’s not good enough for them to say just trust us. Verify what they are telling you.

2. Don’t ignore City Council policies and priorities

The City Council has never had a very good institutional memory. Councilmembers change and motions and actions taken by Councils in the past tend to get lost or forgotten. There is no one in the City who is the keeper of the Council’s priorities and actions. This would be one argument for having a dedicated staff person for the Council.

The Council has the ability to change any action taken by prior Councils. However, until they do so, they are bound by the policies established by prior Councils. It is frustrating for me to see this Council ignore or disregard policies set by the last year’s City Council.

Here are a couple of examples:

Winslow Streetscape – In the 2008 budget process the Council approved funding for the next phase of the Winslow Streetscape project. However, the Council also said that we would not approve the contracts until the administration presented a detailed financial plan for funding the entire project. The administration was told to consider all possible funding options including an LID. From what I have seen the Mayor is proposing a $1.3 million contract with Heery to be paid for entirely with utility revenue bonds. I have not seen any plan for funding the entire project. Unless the Council changes its policy, you should not approve this contract until you have approved a funding strategy for the entire project.

Surplus of Open Space – The City Council placed a strict condition on the purchase of the Williams property. The Council required that at least $850,000 of the purchase price be raised from the sale of surplus city property. The Open Space Commission and the administration were asked to present Council with a recommended list of surplus properties by December 12, 2007. They did not meet the deadline so now this Council must act on this policy. Unfortunately the OSC and the LUC are recommending that the decision on which surplus properties to sell be deferred until next December. This amounts to ignoring and disregarding the Council’s original direction. If this Council doesn’t want the revenue then vote to change the Council’s original direction, but don’t keep deferring making a decision

3. Sell surplus City property

The City needs additional revenue to meet unexpected shortfalls in the 2008 budget. The City owns millions of dollars in property which is not being used for any meaningful public purpose. There are also open space parcels which were purchased with the clear understanding that portions could be sold to raise money for other open space purchases. In December the Council approved the sale of $850,000 of surplus city property. What is the city waiting for? Selling the Suzuki property alone could raise $3.5 million. This is a property that the City has been sitting on for years and has decided not to use for a police/court facility. I know of a family that has offered the city $200,000 to purchase a city easement next to their property. That’s money that could be put in the bank tomorrow if the city would just act on it. The City should offload surplus properties as fast as possible

4. Don’t raise taxes or rates in a recession

What should government do during a recession? Econ 101 says that government should work to stimulate the economy in a recession by increasing spending or cutting taxes or both. Now is not the time for the City to pull back on public spending or to raise taxes (like the proposed $20 car tax). The City needs to care for and improve the City’s basic infrastructure to encourage private investment and promote economic vitality. The City should maintain funding for social services, affordable housing and community development. The economic downturn will be temporary, but if the City stops investing in the community it will have long term negative impacts.

Also remember that the City raised SSWM rates 30% this year and over 100% in the last 4 years. This is a fee that affects every household and business on the island. These rates were raised to eliminate the general fund subsidy of the SSWM utility. However, it is unclear where all this new general fund money has gone. The City budget is a black hole and you never know if you will get anything tangible for your money. If the City decides to raise taxes or rates in the future, you must make certain how the new revenues will be spent and then hold the administration accountable for spending the money appropriately.

5. Use consultants sparingly and cautiously

The City’s professional services budget has mushroomed in the last few years. It wasn’t until the 2008 budget that the Council was able to make any meaningful cuts in professional services. The Administration line for many years was that professional service contracts were needed because the City did not have enough staff to complete the Council’s work plan. They used this argument to advocate for more staff because they said that these projects could be completed in house more efficiently and at a reduced cost. So the Council approved staff increases and by December 2007 the City was fully staffed and ready to roll. Beware of administration requests for additional consulting services and complaints that employees are overworked.

> To keep reading/read all "10 Steps" click here

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Wednesday, April 23, 2008

Funding to be Determined II

At first blush, it might appear at tonight’s City Council meeting that the Administration and other Winslow Way Streetscape supporters have reconsidered their positions on the Heery International contract and are now ready to delay the project in order to seek grants and to more fully consider the City’s financial circumstances. What more could we want? But upon closer inspection, it is quite clear that this latest proposal is a feeble attempt to hold together an untenable project and to keep the project moving forward at all costs.

Phasing the Pain

An interesting memorandum (see earlier post below) has been circulating today, written yesterday by City Staff and delivered only this morning to Council, proposing to divide Phase II of the Heery contract into four phases, with a cost allocated to each phase. Construction would occur in 2010 rather than in 2009, and the City will apply for a Transportation Improvement Board (TIB) grant in August, at the end of Phase I. There has also been discussion of applying for the Public Works Trust Fund Loan in 2009, as previously suggested by Councilpersons Brackett, Vancil and Knobloch, but until now not possible with a 2009 construction schedule.

According to the memorandum, these proposed revisions to the contract are offered to address concerns expressed about “the City’s financial status”, though it’s not at all clear how the proposed changes, or the plan to apply for grants and loans at a later date, will fully address the fundamental problems that have led to concerns expressed by the public, and many on Council, in recent weeks.

This is virtually the same contract, the same plan, with different packaging. The fact is that no matter how they try to divide it up, recombine it, stretch it out, emphasize one aspect or the other or introduce yet another red herring – today it’s the possibility of a grant or loan – they cannot force this project, as it is proposed, into a palatable form. Any potential scenario they can drum up will face the same hard realities and limitations, the most significant being that the City simply does not have a viable funding source to even pay for the design, let alone the construction of the utility portion of the project, much less any extra amenities (aka bells and whistles).

While superficially it may appear that this increasingly incremental approach to the project is more responsible, the current proposal is in fact a step in the opposite direction. If we assume that it is irresponsible to fund the design of a project that the City cannot afford to build, is it not even more irresponsible to incrementally fund a design that the City cannot afford, for a project that the City cannot afford to build? Looking at the phased plan released today, we see funding identified for Phase I, but following the costs listed for each subsequent phase, we see “Funding to be determined. Funding to be determined. Funding to be determined.”

On a Wing and a Prayer

When the full Council last visited the Heery contract, on April 9th, it was assumed that the contract would be paid for with Councilmanic (non voter approved) bonds. Since the last regular City Council meeting, Council and Staff have been informed that the City has no more Councilmanic bonding capacity, as there is no cash available to make new debt service payments. That leaves voter approved bonds, revenue bonds, loans and grants as potential sources of funding for the Streetscape and other capital facilities projects. We have yet to hear of any proposal to ask the voters to pay for the project, and up until now, the Administration and four members of Council have been unwilling to delay the project long enough to apply for loans and grants that might be available for a later construction date. That has left Revenue Bonds on the table, which are paid for by utility rate payers, but which place stringent limitations on what portion of a project can be funded, particularly when it comes to soft costs. And there are some really mushy costs throughout the Heery contract.

As we understand it, the response to the revelation of “no bonding capacity” was a decision to place virtually the entire burden of the design and much of the construction costs onto the backs of the City’s ratepayers. We can only assume that sometime over the last few days certain members of the Council majority that support going forward at all costs (Peters, Franz, Snow and Stoknes), and/or the Administration, have realized that to do so would be legally indefensible, as no theory could support the allocation to ratepayers of any portion of the Streetscape amenities work or outreach/ public relations activities. And of the remaining costs, a large percentage will be non-engineering related soft costs with, at best, a tenuous nexus to the actual utility work. Thus, the City is left once again without a source of funding for the Streetscape design and construction, and thus arises the need to further break down the funding of the project. This phasing of the Heery contract will at the same time give the appearance of easing into the project with the ability to “walk away” at any point – in other words, it will give a false sense of security to certain members of Council, and keep together the current majority pushing the project forward.

So why not put behind us the path it took to get here and embrace the opportunity to apply for the TIB grant and maybe even the Public Works Trust Fund loan? Because the possibility of future funding does not change the City’s current financial situation. If those advocating for this latest proposal were agreeing to delay proceeding until funding was found for the design work, and at least some reliable funding was secured for construction, maybe they’d be on to something. But as it stands now, they are proposing to “stay the course” and keep moving the project forward without any clear funding source.

Let Them Eat Cake

Another red herring that will be thrown out tonight is a new plan by the Winslow Way property owners to make a $1 million “contribution” to the project in the form of an LID. Listen closely when you hear this proposal tonight, and you will learn that the money is offered only for the Streetscape “amenities” – trees, benches, nice pavement etc. – not for any portion of the essential utility repairs and upgrades that are the only reason (purportedly) that this project is being pushed to the front of the line, before all other capital projects on the Island, during these difficult financial times.

Which leads us to another fundamental flaw that continues to follow this project in all its recent forms. We have yet to hear a justification for removing this project from the annual Capital Facilities Plan process which by law the City is obligated to use to evaluate and prioritize Capital Projects each year. That process is currently underway and set to end in June. It was already improper to ask Council to approve the Heery contract prior to the CFP, but now, with the proposal that the decision points for the phased contract be before and after the CFP process, the attempt to avoid the legitimate process has left the project literally straddling the CFP in a rather absurd fashion.

Amidst these unanswered questions, under the darkness of our City’s financial forecast and still without any reference to the results of the (already completed) Community Priorities survey, Council will be asked tonight to keep the ball rolling and agree to proceed with Phase I of a revised Heery contract. No doubt we’ll hear many bemoaning what a difficult decision this will be. No, with reality breathing down our necks, it’s really quite simple. It’s time for Council to pull the plug on this sacred cow and send it back into the herd of capital improvement projects waiting for their turn at the empty public trough.

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Funding to be Determined I

This Memorandum was provided to City Council this morning, the same day that Council will be considering the Heery contract/ the decision to continue to fund the Winslow Way Streetscape design process. When last we checked, there was no evidence of these changes on the agenda – thus no notice to the public. We'll be working on a story addressing the memo, but as we feel it is critical that Citizens be as fully informed as possible, in as timely a manner as possible regarding such controversial and pressing issues, we are publishing the memo immediately.