PART 1: Thanks to Measure U, a little help from the county and some vacancies in city departments, the budget will be balanced for the first time in several years
Very well written analysis of the meeting and the budget. I share your concerns about whether the different graphs represent the changes in assumptions. They did not share the actual budget sheets the graphs were produced from so we cannot check the work. When these graphs first appeared when Diana Rich was mayor, the sales tax and revenue assumptions were well under historical trends and expense increases were higher. The reserves plummeted and the result was declaration of a financial emergency. Now it is unclear what assumptions are being used for revenues or expenses. We don't know whether they are using the Barlow Hotel projections for TOT tax or something the city has developed independently. We don't know when the fees for building the hotel are budgeted, one might assume it will take longer than expected to start construction as they are still looking for financing. The Barlow assumptions for TOT tax and sales tax revenues were considered pretty rosy when they were shared several meetings ago. The danger here of course is that the council sees the rapidly rising reserves and doubles down on spending increases. I suspect the unions are eyeing those projections as well. It would be helpful for assumptions and data to be explicitly stated. I have a couple other comments...I will do another post for brevity.
You also did a nice job of introducing the issue of the large amount of money that the City’s General Fund is “receiving from the water and sewer departments”. In reality the money is coming from rate payers. Assuming the $1,796,323 and 3,000 hookups, each water and wastewater rate payer is paying $100 on each bimonthly bill for city expenses which may or may not be directly related to water and wastewater. The total amount is very close to the expected revenue from the ½ cent sales tax.
Rate payers in Sebastopol pay one of the highest rates for water in the county. We have our own aquifer, and pump and treat our own water. Why is it more expensive than other cities that have to buy their water?
Overhead is part of the reason. If you look at the budgets for nearby water districts that are not attached to a city they have a volunteer board. They have a Superintendent and a number of workers. They do not appear to pay more than $300,000 to bill rate payers six times a year.
Sebastopol rate payers pay significant overhead cost of a board (city council), a superintendent (Public Works Operations Supervisor) who is supervised (according to the ClearSource model) by ½ of the city manager’s time. In addition to billing services, there is a substantial overhead charge for accounting. Water districts typically spend about $10,000 in legal expense, not $185,000.
The challenge is for years the city has been using these rate payer funds to, in your words, “buoy the bottom line of the city’s general fund”. It may be difficult for the city council to face the stark reality that they must do the right thing.
Proposition 218 was passed back in 1996 to address the issue of city’s using fees to plug budget gaps created by the restrictions Proposition 13 created on increasing property tax revenue. Prop 218 states that any allocation of cost by a city must be actual expenses incurred by the water/wastewater provider for serving that particular provider.
Terry Madsen of ClearSource argued, “The allocation of those costs is really a rational, reasonable allocation based on industry standards”. The standard would seem to be Proposition 218 (the law) that rates should reflect the actual expenses incurred by the water provider for serving that particular property.
I feel informed!
Very well written analysis of the meeting and the budget. I share your concerns about whether the different graphs represent the changes in assumptions. They did not share the actual budget sheets the graphs were produced from so we cannot check the work. When these graphs first appeared when Diana Rich was mayor, the sales tax and revenue assumptions were well under historical trends and expense increases were higher. The reserves plummeted and the result was declaration of a financial emergency. Now it is unclear what assumptions are being used for revenues or expenses. We don't know whether they are using the Barlow Hotel projections for TOT tax or something the city has developed independently. We don't know when the fees for building the hotel are budgeted, one might assume it will take longer than expected to start construction as they are still looking for financing. The Barlow assumptions for TOT tax and sales tax revenues were considered pretty rosy when they were shared several meetings ago. The danger here of course is that the council sees the rapidly rising reserves and doubles down on spending increases. I suspect the unions are eyeing those projections as well. It would be helpful for assumptions and data to be explicitly stated. I have a couple other comments...I will do another post for brevity.
You also did a nice job of introducing the issue of the large amount of money that the City’s General Fund is “receiving from the water and sewer departments”. In reality the money is coming from rate payers. Assuming the $1,796,323 and 3,000 hookups, each water and wastewater rate payer is paying $100 on each bimonthly bill for city expenses which may or may not be directly related to water and wastewater. The total amount is very close to the expected revenue from the ½ cent sales tax.
Rate payers in Sebastopol pay one of the highest rates for water in the county. We have our own aquifer, and pump and treat our own water. Why is it more expensive than other cities that have to buy their water?
Overhead is part of the reason. If you look at the budgets for nearby water districts that are not attached to a city they have a volunteer board. They have a Superintendent and a number of workers. They do not appear to pay more than $300,000 to bill rate payers six times a year.
Sebastopol rate payers pay significant overhead cost of a board (city council), a superintendent (Public Works Operations Supervisor) who is supervised (according to the ClearSource model) by ½ of the city manager’s time. In addition to billing services, there is a substantial overhead charge for accounting. Water districts typically spend about $10,000 in legal expense, not $185,000.
The challenge is for years the city has been using these rate payer funds to, in your words, “buoy the bottom line of the city’s general fund”. It may be difficult for the city council to face the stark reality that they must do the right thing.
Proposition 218 was passed back in 1996 to address the issue of city’s using fees to plug budget gaps created by the restrictions Proposition 13 created on increasing property tax revenue. Prop 218 states that any allocation of cost by a city must be actual expenses incurred by the water/wastewater provider for serving that particular provider.
Terry Madsen of ClearSource argued, “The allocation of those costs is really a rational, reasonable allocation based on industry standards”. The standard would seem to be Proposition 218 (the law) that rates should reflect the actual expenses incurred by the water provider for serving that particular property.