I probably should have titled this one, “be careful what you ask for”. Alderman Nancy Schnell asked for another workshop to try and cut more spending and council walked out with a water/sewer rate increase and an extra $97k in reserve spending. Not counting the extra $42k deficit spending due to the reduction in property tax revenue that wasn’t listed on the revised budget that City Administrator Stall gave council.
Quite honestly, I don’t even want to write about this one. All I’m doing is making enemies of these guys when all they are doing is trying to do what they think is the right thing for the city. But I started down this road when I committed to attend every council meeting this year, so it’s too late to stop now. I simply do not understand how or why they think that spending substantially more money than the city is taking in is good public policy. It isn’t personal, I don’t even know these guys on a social basis. But nonetheless, I’ve become enemy number one for a couple of them. And now my wife wants to move before potential home buyers and real estate agents figure out what a bind the city is in financially. Are you sure you want to be a political blogger?
Additional Capital Spending
If you look at the agenda for the meeting, the first item was discussion approving an ordinance allowing the mayor to execute a contract with a low bidder for $110k to install a new water line. I’ve no idea if it is legal or not to vote on a spending ordinance at a meeting where no public comment is allowed but it seems odd. Regardless, after a lengthy discussion, they voted unanimously for it. The council members were clearly frustrated that Stall sprung this on them when there was no mention of it in previous budget meetings. Stall said that was because it was a “rollover” project and pointed out that if they looked at the projected spending in that account by year end (September 30, 2013), there was an amount listed as $125k which was for this project. That explanation doesn’t pass the smell test – the last budget workshop was September 30th at 6 pm – clearly Stall knew that project didn’t happen and should have brought it up.
The $110k turned into $121k with a 10{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} contingency added. Interestingly, the city engineer, who was present, recommended going with the low bidder on the project even though he pointed out, under questioning, that the company is a new LLC and the letters of recommendation came from relatives. The city engineer relied on his conversations with the principles of the company, telling council that they knew what they were doing and had 27 years experience in the business.
Budget workshop
Alderman Schnell asked for the meeting so it was up to her to provide specific cuts. The other council members said that they were satisfied with the cuts they had done at t he September 30th meeting. Schnell offered several suggestions, including personnel cuts, but clearly the council wasn’t interested. The only thing that she was able to achieve was eliminating the 2{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} Cost of Living Adjustments, which Stall calculated to be $16,562 total across all departments.
Alderman Steve Jones, who had in previous meetings voiced opposition to deficit spending, went the other way this round. He asked Stall about the reserve fund and Stall advised that it was almost one million dollars. Jones then asked about how much we needed to survive three to six months, and Stall said $600k. After that, Jones focused on keeping $600k in the fund and was willing to spend down the fund to that level, as long as the spending is “smart” and not like it was “before”. He also said that we needed to start saving money in anticipation of replacing the city’s water tower.
The council took $4,900 from their allotted $10,000 for paving the public works parking lot and added it to the police budget to purchase software. There was no net increase or decrease on this exchange.
During the discussion about the Utility Fund, council decided to raise the water/sewer rate by 5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} after Stall urged them to, saying that the rate was due to be raised before Hurricane Ike. He estimated that this hike would result in an average bill being raised $3.35 per month, to which Alderman Mike Wheeler said, “they won’t even notice it on their bill”. The hike was agreed to unanimously but must be presented at a regular council meeting for a vote.
Net effects of the meeting
I’m not going to try and recreate a budget from last night’s meeting. I’ve already spent far more time on this as a citizen that I should have, especially when the majority of citizens don’t seem to care – only one other citizen was at the meeting last night with me. But I will recap what they did:
Commentary
The surprise $121k water line had to be funded, as does the water line that was already budgeted for $75k. No two ways around it. Public safety must be addressed. The problem is that four members of council seem to think that the welfare of the employees of the city comes before the solvency of the city and refuse to even consider eliminating positions or bringing salaries in line with the average rates in our region. There is nothing that can be done to correct the over-spending if they continue with this mindset. At the current rate of over-spending, we will have eliminated our reserve fund in a year and a half. As Alderman Schnell stated, there is no magic property tax fairy that is going to swoop in and save the day. Our property tax rate would have to be raised roughly 175{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} to cover the spending that council is proposing.
Citizen Input
If you’ve been reading these posts on Shoreacres, you will note that two citizens, Ron Hoskins and Gerry Victor, have put out caution flags on spending and have suggested ways to get the spending in control. Obviously these two men have more expertise than I do regarding the Shoreacres budget. Here are a couple of charts that I created from data in Hoskins’ comments:
As Hoskins demonstrates, personnel costs have risen dramatically in the past six years. He also took the time to develop his own proposed budget – like mine, he didn’t quite make it to balanced but came very close:
Ron Hoskins’ Proposed Shoreacres Budget 2013-2014
Unfortunately, Ron’s work, along with Gerry’s, Nancy’s, and mine is for naught. The proposed budget as revised by council will be presented to citizens on Monday, 10-14, at the regularly scheduled council meeting and voted into law. You can’t say we didn’t try.
All I can say is “doveryai, no proveryai,” my favorite quote from Ronald Reagan.
David, at first I thought you had misquoted when you said:
“During the discussion about the Utility Fund, council decided to raise the water/sewer rate by 5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} after Stall urged them to, saying that the rate was due to be raised before Hurricane Ike.”
What Stall actually said and a direct transcription from the recording:
“We were due for one when Ike came along then we went the other direction.”
Alderman Wheeler asked about what that increase was that we were due in 2008 before Ike:
“What was the rate of the, you said we were due a utility fund … increase? What percentage were we looking at back then?”
Stall’s reply was:
“We were due to do the calculation but the calculation was not done. So, the new rate had not been calculated.”
DOVERYAI NO PROVERYAI!!!!
The city council agenda for Sept. 8th, 5 days before Ike hit, has this agenda item:
“5.4 Consideration and action to approve an Ordinance providing for changes in rates and charges for water and sewer services; providing for late charges; providing for deposits for new and reinstated utility service; and providing for discontinuance of service for non-payment. (Stall)”
http://www.cityofshoreacres.us/documents/ca080908.pdf
The approval and actions of those city meeting minutes was never posted to the website because, well, … just because.
Ordinance number 2008-15 states:
“Effective October 1, 2008, water rates for the City of Shoreacres shall be as follows: …..”
http://cityofshoreacres.us/documents/O-2008-15{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}20Water{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}20and{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}20Sewer{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}20Rates{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}20[signed].pdf
Go to the city code site and look up Section 66-184 – Water Rates. Ordinance 2008-15 was passed and adopted on September 8, 2008, 5 days before Ike hit.
I can only gather that city council was planning on increasing the water and sewer rates further between Sept 8, when they raised the rates, and Sept 13th when Ike hit, for Stall’s version to be correct. Where is Harry Truman, when you need him, to provide the proper wording to accurately describe this situation?
I’m going to do more research about the water and sewer subsidy from cities that have more commercial accounts. I’ll write more later.
David,
I always look forward to your overview of the council meetings and I appreciate your commitment to attend all council meetings- it should prove to be eye-opening- I wish more citizens of Shoreacres shared your interest.
I would like to reiterate what I can be heard saying in the recorded meeting, with this mentality we (council) will be in the same place next year facing cuts; only it will be far worse as we have deficit funded yet another budget.
I do not understand when the City of Shoreacres became a branch of The Texas Workforce Commission, or a” your job is guaranteed even to the fiscal detriment to the city” type of city?
This council, like others past, has single-handedly done an excellent job in reducing the property values of the citizens we were sworn to serve. Deficit spending at this rate is the kiss of death, especially when we have very limited revenue sources other than on the backs of our residents.
Alderwoman Nancy Schnell
618 Baywood St.
713-842-0897
The real problem is that the majority of this city council makes a California Liberal, look like a right wing tea party conservative. They don’t want to put the effort out to fix the problems in one year’s budget. Now why would that be? It is not because they can’t do it, because they can, if only they would make the hard choices.
The only difference between this year and next year, is that we will be making the same choices with about $600K less in reserves.
As far as, last night’s discussion about a water and sewer increase, I do have a better solution that is more in line with what our neighboring cities are doing.
Alderman Wheeler stated that no one will notice the 5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} proposed increase. I disagree. His neighbor, living a few doors down from him, is a widow on a fixed income. She will notice. If she doesn’t water her lawn daily, then given a daily shower, washes her dishes and does 10 loads of laundry per month, she probably uses less than 1500 gallons of water per month. The current cost for water is $14.50 per month for 3000 gallons or less, at a fixed rate.
I believe that our water cost to the city is also based on our water consumption, which is a cost to the city.
My favorite conservative, Barry Goldwater, once said “there is nothing more conservative than conservation.” Ronald Reagan has made similar statements.
Why not take a true conservative approach and charge the citizens based on a water consumption that is more in line with what our neighboring cities are charging, which promotes conservation? Those cities charge a flat fee for up to 2000 gallons, while Shoreacres charges are based on 3000 gallons. Leave the $14.50 per month, as is, and make that fee for the first 2000 gallons. That should have no impact on the retired widow on a fixed income, but would be a cost increase for those who don’t conserve.
The same is true with sewer rates. Our sewer rates are a flat $17.50 regardless. Most cities base their sewer rates on their water usage, which is understandable. LaPorte charges more for sewer when the water usage exceeds 5000 gallons. We could do the same.
It sounds to me like Shoreacres ought to pursue a merger/annexation with another city, like LaPorte, as the future seems pretty bleak. The town may be too small to be self sustaining.
Humm, the other comment made in Monday’s workshop is that commercial businesses subsidize residential water and sewer costs. Here is the exact comment, and I hope I have transcribed it accurately:
“To my knowledge, in the last decade plus, the city has always subsidized utility rates here. And the reason we have subsidized utility rates is strictly political it’s not financial. It is that the tendency is to compare what a resident pays here for residential service to what LaPorte pays for residential service. LaPorte has the advantage of having commercial users who their subsidize residential rate. We can’t get the Yacht Club to subsidize all of our residential rates.”
Let’s do a comparison between Shoreacres rates and the city of LaPorte per month. Starting with Shoreacres water rates:
Base rate $14.50 (first 3000 gallons included.)
$6 per 1000 gallons between 3001 to 5000 gallons
$6.25 per 1000 gallons between 5001 to 13000 gallons
$6.50 per 1000 gallons for 13000 gallons+
Since the argument is that commercial users are subsidizing residential rates in LaPorte, let me just compare LaPorte commercial rates with Shoreacres residential rates.
Assuming a ¾ inch water meter (more on that later,) the commercial rates in LaPorte are:
Base rate $9.35 (first 2000 gallons included.)
$3 per 1000 gallons after the first 2000 gallons
A homeowner in Shoreacres that uses 2999 gallons in a month would pay $14.50. A commercial user in LaPorte that uses the same gallons would pay $12.35. I have to wonder how the city of Shoreacres is subsidizing a resident for water at $14.50, while the commercial user in Laporte is subsidizing their residential user at $12.35.
Let’s bump the water usage up to 3999 gallons. A Shoreacres resident would pay $20.50, while a LaPorte commercial user would pay $15.35.
At 4999 gallons, a Shoreacres resident would pay $26.50, while a LaPorte commercial user would pay $18.35.
I can go further, but I think you get the point and it doesn’t get better with more gallon usage.
Back to what the ¾ inch water meter means. That is pretty much a standard water meter for residential homes and most commercial businesses. It has to do with the gallons per minute that the meter will output. A ¾ inch water meter will supply about 20 gallons per minute(GPM.) 20 GPM is sufficient to supply a residential home and the majority of businesses. While a restaurant may consume more gallons of water per month, 20 GPM is sufficient for the restaurant. As a frame of reference, by International Building Code, shower heads cannot be over about 3 GPM. So, it would take 7 showers going simultaneously to exceed the 20 GPM before the water pressure drops. How many gas stations, real estate offices, restaurants, retail stores, etc. would really require more than 20 GPM? They would be at the ¾ inch rate of $9.35 for the first 2000 gallons.
The next rate increase based on water meter size is at a 1” water meter for commercial use with at rate of $12.85 per month including 2000 gallons, and all addition gallons being charged at the same $3 per 1000 gallons thereafter. A 1” water meter will provide 50 GPM max flow rate. That is more than enough for most businesses in Laporte. Using this commercial rate for the city of LaPorte, it would cost $15.85 per month for 3000 gallons with significant increased water flow. The price at 3999 gallons is $18.85 for a commercial rate with a 1” meter in Laporte vs a lower meter in Shoreacres with a cost of $20.50.
The higher the water meter is in terms of inches, the higher the monthly charge from LaPorte is, but the first 2000 gallons is included and the price is still $3 per 1000 additional gallons unlimited.
From what I have been able to ascertain, there are about 3700 businesses in the city of LaPorte, but that number may be high given 35,000 residents and 13000 water meters per LaPorte’s 2013 budget. In any case, the vast majority of those businesses do not require a water meter more than ¾ inch or 1 inch. That only leaves a handful falling into a higher base rate, not really enough to have a significant impact on residential rates. I do know that the top water customers for LaPorte are mobile home parks and apartment companies, who pass their costs on to their residential consumers. Only 2 industrial commercial consumers made their top 10 list.
Repeating part of the above quote:
“To my knowledge, in the last decade plus, the city has always subsidized utility rates here. And the reason we have subsidized utility rates is strictly political it’s not financial.”
I don’t know about the rest of the Shoreacres residents, but I would love to be able to sign up for commercial water rates from the city of LaPorte for my home in Shoreacres, to take the burden from the city of Shoreacres of subsidizing my utility rates. I really wouldn’t mind as a commercial LaPorte utility customer, subsidizing the residents of LaPorte with the rates that LaPorte provides to commercial customers. I might even sign up for the 1” meter to increase my service.
doveryai, no proveryai
City Budget – Open letter to Mayor and Council,
I recognize you are trying your best to balance the city budget. And I also recognize you inherited a financial crisis that had been somewhat hidden by past political fluff. I believe it may help you if you had a better understanding of key decisions that occurred before your tenure, namely during the budgeting of 2011-12 fiscal year. I’d like to clarify some misconceptions about that process from my viewpoint and its impact on the deficit.
The 2011-2012 budget passed in a 3 to 2 vote by Council. The minutes of 9-26-2011 address most of the key issues of that meeting. However, some key decisions were omitted from the minutes. During that meeting significant funding changes were made, namely:
• The addition of two full-time positions.
• Excessive salary increases for City Administrator and Director of Public Works. The salary package of the City Administrator and Director Public Works combined equaled 25{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} of the total property tax revenue of the city.
• Escalation of remodeling costs of the public works building went from $40,000 to $80,000 during the budgeting process. (subsequently the costs escalated to near $200,000).
• Budgeting of $40,000 for electronic water meters (which I believe were reallocated elsewhere later).
• Budgeting of $175,000 for improvements to city’s water distribution system (I do not believe this money was ever fully utilized for water system improvements).
• Budget transfer of $500,000 reserve funds to general fund.
As a result of that meeting, in my view, the city’s fixed costs began to exceed its revenue. The increases in fixed costs associated with excessive salary increases and adding two full-time positions were a big part in the budget elevating into the recurring deficit column. In addition, the city went from a one-building operation (city hall plus police station in one building) with a garage containing a break-room with an window air conditioner (old public works building) to: a three-building complex. I suspect the operating costs of the three-building complex, albeit much nicer and more efficient, added an estimated 25{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} in utility, equipment, insurance, etc. fixed costs. The new police station was a bargain funded primarily with grant money with limited cost to Shoreacres’ taxpayers. It is an asset to the community but nevertheless it is an additional recurring fixed cost.
It appears the city’s water system will be the Achilles’ heel for years to come and will be a repeated high repair cost item. In essence, it will be another substantial annual fixed cost to the city. Also, other fixed costs such as trash pickup have increased substantially. Unfortunately, the city’s revenue has not increased substantially.
I am aware of the 2013-2014 budget cuts that have already been made by Council. Now, what is left to achieve a balanced budget? As I see it, the only significant fixed costs that are left for Council to cut are in staffing, salaries and benefits.
The audit reports provided by CPAs Pattilo, Brown & Hill contain the most accurate annual accounting information available to Council. I encourage Council to have the 2012-13 audit completed ASAP so it is available to aid Council and the Mayor in managing the finances of the city during the 2014. Also, I encourage you to reevaluate your budget early in 2014 and, if warranted, modify the budget by cutting additional expenses wherever feasible. I believe it would be helpful if the annual audit report for 2013 is available at the time of the reevaluation and suggest require the City Administrator to provide quarterly balance sheets of the General Fund and the Utility Fund for your review. I believe you need this information to fully understand the financial condition of the city.
Thanks for reducing the budget several thousands of dollars thus far and overseeing the city during this critical period. I realize this process is a burden on you and your families with limited rewards but I and many other citizens appreciate your effort.