The Professional Tea Party Distortionists Keep on Distorting!

Well, only one person took me up on my offer! It was for a school district. I started off thinking there was a discovery to be made that would be at odds with my expectations, but that was not the case.

Meanwhile, the Tea Party churned out a handful of distorted articles this week such as this one about Tarrant County. The headline reads “Tarrant County Proposes 9 Percent Tax Hike” while the sub-header reads “Tarrant County Commissioner’s proposed property tax rate would raise their average property tax bill 35 percent from just five years ago.”

Don’t miss the picture of the fat hog in the story. How elegant. And inflammatory. And intellectually dishonest. I can just hear the Tea Party Faithful slobbering a joyful yelp of approval. We now know where carnival barkers go when they retire.

Then comes their aha moment. The Average Tax Bill has gone from $348.38 to $512.11 as the Average Taxable Single Family Value has grown from $131,962 to $218,850 in 2019. Woo-hoo! Isn’t that criminal?

Wait a minute! Let’s be fair. I don’t work for Tarrant County nor do I know anybody in government there as far as I know. I just want to look at facts and encourage you to do the same. Here’s my take from the table below. Most of the data is from the statistical section of their FY 2018 CAFR.

Population drives everything! I see that Tarrant County’s population has grown from 1,807,750 to 2,057,926 from FY 2009-2018. That’s 250,176 more people to serve. That’s huge by any yardstick you want to use. But instead of showing off with the total 13.84% like the Tea Party is prone to do, the Compounded Annual Growth Rate (CAGR) of 1.45% is a more fair way to provide a perspective.

Personal Income (2018 values weren’t available) shows an increase of 2.98%, over double the population growth. That’s good. Bond rating agencies look for both ability to pay and willingness to pay. Only the Tea Party could take a healthy financial statistic and turn it into a demonic story. And few even know or acknowledge that the voters are very important, but so are the invisible bondholders (you really don’t want them to become visible!) that have invested over $300 million in TC bonds and over $9 billion for all local government entities in TC.

The Tax Base has grown by 3.61% and the Tax Rate has decreased, but the most important number is the combination of the two, the Tax Levy. That metric has grown at 2.56%. Given that the CPI has grown at 1.75%, the 2.56% appears fairly reasonable. More on that later.

TC has grown from 4,209 employees to 4,385 for the period I’m analyzing. Even in total numbers, that seems reasonable, but it will look even better when put in the proper perspective as I will do shortly.

Total spending (“Tax & Spend, Tax & Spend” in Tea Party jargon), rose from $524,959,000.00 to $640,685,000.00 (add the pennies to make it look scarier) boils down to a CAGR of 2.23%. Again, when adjusted for CPI of 1.75%, what is your conclusion? If you want to be fair.

Now let’s hone in on some of these key metrics when placed on a per 1,000 population basis. The Tax Levy has grown at a CAGR of 1.10%. The number of employees have actually dropped from 2.328 to 2.131. Imagine that! The total expenses have only risen by 0.77%, which means it has actually declined when adjusted for CPI.

I don’t see a single mention of any of these facts in the Tea Party story. It’s being portrayed as journalism. Yeah, I know. Just wanted to get a laugh out of you.

TC2

Oh wait, you thought I had forgotten about those outrageous Average Home Values. No way.

That statistic has risen by 54.25% or 4.93% CAGR. Big? Yes. Distorted? Yes, too. Let me explain why.

While CPI averages 1.75%, the more appropriate construction index is significantly higher at 2.41% annually. But that’s only part of the story.

What isn’t shown is the average size of the single family home. I don’t know that square footage number, but I do know that it has grown over the years.

But the bigger untold story is that these numbers tend to grow because new homes are being added to an existing base. I’m pretty sure that the average TC single family home was built somewhere in the 1970s or early 1980s at best. Yes, this makes the existing homes more valuable, but not to the level of new construction.

In other words, the more TC grows, the more the average single family home value is going to grow since each year adds then-current values to an older base. Look far enough into the future, and you will conclude that the average home will be $300,000 before long, and then $400,000.

And with the North Texas Area growing by 1,000,000 people every 7-8 years, the Tea Party, unable to grasp big numbers as anything other than bad, will have a field day. It’s kind of sad when incendiary statements can be fabricated from nothing more than the size of numbers that may be difficult to place into perspective.

Most people would view that increasing value as good. But the Tea Party makes it look as bad as they possibly can, completely ignorant to natural (and desired) growth in value. I don’t hear anybody complaining that they bought a house at $50,000 some time ago, and now it can be sold for $150,000.

Conclusion

The Tea Party is capitalizing on fear and distorted numbers that make them lock into a “gotcha” mode to inflame their followers. They are doing a disservice to society. They take no responsibility for having any other value in life. Cloaked in self-righteous patriotic armor, they are misleading the public as they validate their purpose by misrepresenting the perspective that more responsible government officials know is simply wrong.

I’ll renew my offer to the Tea Party. Let’s sit down and deal with all the facts with the goal of telling the most accurate and complete story possible. You claim to be all about transparency while demonstrating an obvious opaqueness. I’m calling you out and hope others will do the same. LFM

The Tea Party Distortionists & An Invitation to Same

It occurred to me the other day that the Tea Party carries no responsibility for providing services to citizens. The only thing they do is distort and inflame.

City Councils get elected to serve the wishes of citizens. They look around. They listen to citizens on phone calls, at the grocery store and at council meetings.

The Tea Party caters to whiners and moaners – most of which make use of city services but don’t want to pay for the services they use or are provided for their use.

Local governments evaluate needs and wants of the citizens plus they have to prioritize to fit with the means of the budget as resources are never sufficient to do everything. They make decisions based on their best knowledge and skills, always within a sense of fairness across generations, geography and social strata.

The Tea Party could care less about the citizens. They have no interest in listening unless it’s someone wanting to complain about paying for services. They only want to step in to play Whack-a-Mole.

It’s easy to destroy rather than to build. It’s easier to lob a grenade than it is to enter into an honest dialogue.

City Council and staffs make great efforts to tell the municipal story accurately and fairly.

The Tea Party consists of Quintessential Distortionists.

Let me provide an example:

Tea Party: “OMG, look at this wasteful spending. The General Fund has doubled in just the last 10 years!”

Local Government: “Yes, but the population has gone up 78% and Inflation has increased to make up 20% of that change. The 2% difference is mostly due to

  • New or expanded programs requested by the citizens and blessed by the council,
  •  Unfunded mandates.
  •  Big-ticket items such as public safety body cameras and similar things approved by the council.
  • Things that didn’t exist 10 years ago, such as investments in IT security to address ransomware attacks.

An Open Invitation to Tea Party Distortionists

Let’s make a deal. How about you and I sit down and analyze a city of your choice. I hope it is one I know little or nothing about so we will be on level ground or maybe I will be disadvantaged.

We will be civil and look only at the facts. You will allow me to analyze historical data through the adopted FY 2020 year budget. We will use audited financial data from FY 2018 backward.

We will both discover, at the same time, the number of employees, the property tax revenues and the total General Fund expenditures that have been when adjusted for population and inflation.

If we cannot tell from public documents, we will then ask city management about any anomalies or jumps or drops to explain what may appear to be deviations from trends. For instance, if there has been the opening of a fire station or recreation center during the study period, we will have an answer to better understand the data.

In addition, and in the same spirit, we will ask the city officials to tell us how growth over a decade came about? How did programs get added or expanded? Who asked for them to be included in the budget, and why did the elected official say yes?

Were any of the budget additions in the past decade due to unfunded mandates? Do you know what those are and how they were imposed on local governments?

Then I will ask you to tell me what part of the budget growth you find wasteful or not of your liking. What part of the city services would you cut? It is unfair for you to blob me or the city with no more than a judgment on the dollar increase over a period of time. We can’t easily respond to blobs. Help us by specifically pointing to the underlying element(s) of your complaint.

Do you attend council meetings, and especially workshops, to learn about the evolution of city services? Tell me how you gain insights that enable you to make statements or draw conclusions about budget growth. That sounds like a critical statement, and I don’t mean for it to be so. I’m simply wanting to understand how you evaluate what a city needs or wants and how you arrive at findings and conclusions.

That is, if you will agree to enter into a dialogue with me so that we can arrive at a reasonable position.

BTW, do you even live in the city for which you are criticizing or making a judgement?

LFM

 

The Whack-a-Mole Citizen

Imagine a Whack-a-Mole game with the sides removed so you can see the innards. Oh, I know the connotation of a mole, but hang with me for a minute, please.

This is the image I get when I read or see yet another story of the right and self-righteous folks appearing before the City Councils with only one mission in life: to not pay.

The Whackers don’t really have any interest in looking at the workings of government. It would be completely against their nature to listen to citizen requests for services. They don’t have the guts to be there to shout down an elderly citizen asking for their sidewalks to be fixed. They could care less about the wishes of the youth sports representatives wanting more ballfields and for them to be maintained properly.

Nope! Not in their DNA. What they want to do is stand above the responsibilities of governance and simply take the mallet to crack the noggins of the elected body and staff wanting to deal with the most basic of questions. How are we going to pay for all the things our citizens want?

Do you think these things come free? Answer: Whack!

Are you listening to what I am asking? Whack!

Do you have any sense of fairness about you? Whack! Whack!

Would you consider sitting on this side of our jobs and … Whack! Whack!

Are you a robot? Whack!

Have you ever been responsible for running any kind of business? Whack!

Is it your plan to do anything other than wield a mallet? Whack!

Have you ever asked the city to fix a problem?

Have you ever needed the police, fire or EMS?

Do you children participate in any of our recreation programs?

You’re being awfully silent. Are you reconsidering your position? Whack! Whack!

I see.

LFM

 

Putting Opioids in Perspective

It is imperative that you read the recent story published by the Washington Post. Actually, it is just one of a dozen stories I’ve read in a period of a few weeks. Therefore, I know that opioid abuse is rapidly moving to the forefront as it should. But I’m really burdened by this story. Why? Because of a number. The metric is 5,432,109,644.

What’s that mean? In our society, we see big numbers all the time. In fact, I’m convinced that we don’t grasp the magnitude of the difference between millions and billions any longer. And in many cases we have become numb to what trillions translate to.

There were 5,432,109,644 opioid pills sold between 2006 and 2012. Wow! That’s a big number for the U.S., right? No, no, no! That’s in Texas alone!

It is interesting that the Washington Post had to sue the Drug & Enforcement Agency (DEA) to get the data. And there is still another lawsuit to get more recent data. That’s simply amazing.

Tell Me More

These ugly Texas numbers totaled 602,064,872 for 2006. They climbed to 870,722,919 in 2012 for a compounded annual rate of 6.34%, about 3x the population growth.

Whenever you want numbers to look big, you add up several years. When you want them to look small, you divide by a big denominator. Okay, let’s do that. This billion-pill number equals about 53.75 pills per year for every Texan 18 years and older. Let that sink in for a minute. Do you consider that small?

Gee, Lewis, I’m sure glad you aren’t going to put the spotlight on individual cities!

Oh, but I am. It’s in the database. By city and even right down to the pharmacy or doc buying them from the suppliers.

I lied. I’m not going to show you. Why? Because you will look to see if you are better than average and gleam to know other cities are worse. Or else you will try to make up excuses or even find flaws in the data interpretation. I’ve already done that. Many cities don’t have pharmacies in their towns, making them go to an adjacent city. Interestingly, many of the pills go to veterinarians.

As you can guess, the total number of pills by city is somewhat correlated to the population. But the pills per capita for those over 18 does vary significantly. You will be gravely alarmed by some of the high numbers.

You are welcome to download the database. It’s got 12,108,468 records just for Texas. It won’t fit into Excel. Your IT folks can help you get it downloaded and summarized.

Example: My City

I live in McKinney. The total opioid pills purchased from 2006-2012 were 28,711,325! I almost choked when I saw that number. We are below average on a per capita basis, but that’s nothing we can really brag about. I don’t see a city in Texas that has any boasting rights. Rather, we have everything to fear about the threatening stories embedded in these numbers. We could talk to our school officials, hospitals, social services, police and EMS departments to discover exactly how 28.7 million opioid pills in McKinney translated into headaches, heartaches and costs.

What Are Today’s Counts?

Now, you’re getting my concern. If Texas accounts for 5.4 billion opioid pills in 2006-2012, what do those numbers look like for 2013-now? I have a guess based on the past trends plus population growth, but enough with the numbers. If 5.4 billion won’t get your attention, then you will also be numb when (not if) we go beyond double-digit billions.

Hmmm! Is that why the DEA doesn’t want to release more recent data?

Recommendation

There seems to be plenty of talk, talk, talk. And fortunately, the situation is so deeply into the critical stage that “epidemic” won’t capture the scale. It’s a pandemic. I’m guessing opioids have touched everybody reading this blog. They scare me to death.

How many of your employees are struggling with opioid addiction? Find out! Offer an employee assistance program.

Are there other implications? A prominent Texas City Manager got involved in taking a $25,000 land advisory fee years ago that ended his municipal career. Why did he do this? The answer was he needed to help his brother who had gotten addicted to opioids.

For every story I might have, I bet you have 5-10 or more. Strained relationships. Loss of productivity. Life-threatening situations. They are all around us. Let’s act now. LFM

 

 

Why Should I Apologize for Serving the Citizens’ Needs & Desires?

Every citizen is going to have to put themselves in the shoes of their LOCAL elected governing bodies. Here’s the deal as I slip into those combat boots:

“Dear Citizen:

I was elected to listen to your needs and to your wants. You come before this governing body asking for things at every council meeting. We evaluate those requests. We know about most of them because we walk and drive the community. We attend luncheons and all kinds of meetings. We talk to you on the phone. We ask you for advice, such as priorities and urgency. We can’t do everything you ask, but we would if we could. We try our best.

We know that you are intelligent and don’t truly think for a minute that there is a free lunch. We’d give services and utilities away for free if that were possible, but no responsible person would ever entertain that foolish notion. None of us are fools. And name one service we provide that was dreamed up only by local elected officials. Just about everything we do is because 1) you asked for it; or 2) because the state or federal government imposed it on us.

Now comes state government that thinks they know you better than we do. But wait. I’m not going down that road. To bash the Lege and the Gov is not constructive. You know what? Let’s just deal with what we are handed. You, the citizens, and we, the council. Don’t make any mistake about it. We’ve been handcuffed by the state without regard to our pledge to serve you.

And here’s a glimpse of the future. It is highly likely that we may have to hold an election every year for you to approve to pay what you have asked for us to provide. Representative government has been partially tossed out the window. That’s okay. We will put your wants and needs into the budget, but you will likely have to give direct approval as a separate step.

That’s the deal now. Let’s be honest. Holding an election each year is not all that expensive in the grand scheme of things. It’s simply a nuisance and will cause fatigue. Gird up! We didn’t ask for this, but it’s the law of the land. And we will follow the law.

We hope that part of the election routine will be coupled so that capital project approval will be married to the cost of operations. That has actually always been implied. You don’t expect us or anyone else to build a fire station, recreation center, ball fields or swimming pools and then expect the staffing, equipment and programming that goes inside to not cost something, right?

Did you know that the Operating & Mainteance costs, at least over time, are about 2-pennies for every 1-penny of the O&M tax rate? If permitted, we will start including this dual-approval on the ballots: “Approval for $____________ in Project X along with the companion O&M Costs that will mostly be paid for out of Ad Valorem Taxes.”

We may even have to go back and re-vote for some past project approvals or at least to explicitly approve the O&M that you implicitly approved into past bond elections.

The weird part of this onerous requirement on us and you is that we may be asking you to vote annually just because your values went up. We fully understand that our property tax revenues are the results of both taxable values and tax rates. Thanks to the new legal constraints, we may be asking for voter approval only because inflation has outpaced our property tax values. It’s complicated. We’re all for disclosure and being fair, but our Truth-In-Taxation laws are gravitating toward IRS-like hoops when all we are trying to do is to pay for the services you requested.

What we do know is that we won’t stop listening to your needs and wants. If you are willing to pay for these things, we will service your requests. It just might have to be in two steps.

We ask for your patience. We wouldn’t wish this imposition on anyone in the business of helping citizens. However, we are confident that you can wear our shoes at two critical times in our future: 1) when you ask for new services or for us to continue existing services that meet the needs of our community; and 2) be there for the companion decision to pay for those services.

No matter who is wearing the shoes, you can’t have one without the other.

Thank you!

Your Local Elected Official”

Who Owns Your Population Data?

That obnoxious screeching sound is coming from my fingernails going down the chalk board to get your attention.

You must understand the value I place on population data. Just about everything in local government current operations and forecasting is driven by population. Employment population is important, too, but residential population takes the front seat.

I also place great value on the data in your CAFRs, Official Statements for debt issuance and the multitude of expert studies and master plans that lead to decisions for future infrastructure and public facilities.

But here’s my problem. Rarely do I find the same historical numbers in all these documents. The tip off is when I see the same population numbers for multiple years, all rounded to even thousands or hundreds.

Then the difference is forecasted numbers is all over the board, the one I am scratching.

I realize this is a difficult issue and that there are dozens of federal, state and local agencies producing forecasts. And they vary so greatly that the red flag is glaring. I also know that there are pop estimates as of a calendar year, a fiscal year, and the federal numbers are often as of July except for the census as of April. Good grief!

Don’t bring me another problem, Lewis, unless you have a solution!

I do.

Recommendation

  • First, appoint someone in the City to be the official keeper of both historical and future population estimates. Probably the City Planner or the Public Works Department.
  • Reconcile all of your official documents with population and employment history to show the same numbers – and change them!
  • Have your Pop Keeper to be the only official source for future forecasts. Who can be more accurate than the City staffers keeping track of building permit data, utility connections and occupancy rates? Who else can track and see the future coming than those dealing with annexations, zoning, platting,  land use, densities and the remainder of the pipeline?
  • Have your staff delve into forecasting methodologies from your COG and all federal and state agencies. But don’t have them spend much time there. Instead, send your official history and forecasts to them, along with your methodology and implore them to use your numbers.
  • Have an annual review of pop forecasts with a presentation to your govering body AND have them adopt your forecasts.
  • State in your RFPs, Engineering and Consulting agreements that only your official forecasts should be used.
  • Change the organizational vocabulary such that you speak of revenues and expenses as well as workload measures on a per capita basis with the same zeal as a manufacturer talks of those items on a per unit or gallon basis. Dollars may go up. Big deal. That means little in light of the dollars per capita that might even be going down.

In summary, treat the population forecasts as sacred and have every internal and external player use your numbers for consistency and accuracy. Own the data! LFM

 

What is the House Value Needed to “Breakeven” in Your City?

Dear Lewis:

My mayor wants to know the value of a single-family residential home necessary to “breakeven,” meaning for residential to pay its own way?

Dear Colleague:

Thank you for asking me my least favorite question. However, it is an important question, and I will try to answer. But be forewarned, I’m going to give you my shortest answer or at least one you can work through on a cafe napkin. There is a reason.

This is a tough one. The answer has to be understood in the context of mix. If you had nothing but property taxes and nothing but residential, then the answer would be easier. It would be exactly the average value of a single family home available from your appraisal district. I know I can’t satisfy you with that answer that fits into a non-existent world. Yet it is instructive to frame your response starting with a pure single family residential community. Undertanding this one point makes the remainder of the explanation easier to digest.

Yet when the mix of all General Fund revenues is considered, and the tax base internal mix is considered, then the portion paid by the residential class forms the basis for saying the average home value is paying their share – and higher than average value is paying more than their share of their pie with the opposite also being true.

That sounds like circular thinking, but there you have it.

Try Harder, Lewis!

A better way of looking at the cost question is to ignore revenues for a minute and look only at the expenditure side initially.

If you are spending $36 million in the General Fund budget, and you have a population of 50,000, then the services equate to $720 per capita. If you have 3 people per household, then you need $2,160 per household. You can conclude the need for an AVERAGE house value of $540,000 ($2,160 / $0.40 O&M Rate * 100) to carry the costs before other revenues help lower the property tax requirement.

If you have a revenue base that yields 40% from other sources, then you only need an average house value of $324,000 ($540,000 * 60%), net of exemptions.

So, what is your average home value on the tax rolls?

It is $200,000, you say. Hmm! That’s a respectable amount. Let’s dig deeper to understand $540,000 on one end of the spectrum and $200,000 on the other end.

I expected your average home value to be considerably less since we’ve left out a million things, most notably the non-residential tax base. And here’s the deal. Some cities have little and some have much.

Here’s the way I would answer the question with necessary generalities included:

“If City of Fiscal Bliss had only property taxes (and then only a residential tax base) to cover the cost of general government services, it would require an average house value of about $540,000 to cover costs or else a very sizable tax rate increase applied to our average house value of $200,000 currently. Fortunately, we do have a respectable commercial tax that lowers the burden on the homeowner. We also have sales taxes, franchise taxes and some user fees to help lower the property tax burden. Therefore, we conclude that our average house value times our General Fund tax rate of $0.40 per $100 or $800 is our net breakeven cost even though property taxes alone would not cover the true service cost of $2,160 per home.”

Oh my! You aren’t going to like my answer, are you?

As I said, it’s complicated. The clue that this was not an easy question was when the  Mayor said average. That was the signal that the Mayor’s field of view was going to be too narrow. Here is the trap. You want to explain, but the Mayor wants the time, not how a watch is made. So, blurt out $540,000 and then ask if you can explain. I’m pretty sure you will have the Mayor’s attention with the obligatory pregnant pause following your incredulous number.

If you have an average home value of $200,000 in your community, then that should mean you are striving to add house values much greater than the average. It is a fact that the true cost is $2,160 per home, and it is also true that it would take a $540,000 at an O&M Rate of $0.40 per $100 to generate the true cost of service.

But thank goodness you have other revenue sources. Your citizens pay a sizeable amount cost recovery in the form of sales taxes and franchise taxes. You also have direct fees for some services. Otherwise, your average SF value would have to be $540,000 or else your tax rate on an average of $200,000 would have to be $1.08! ($2,160 / $200,000).

Did I just blow your ears back?

But We Paid a High-Priced Consultant for Another Answer

A more elaborate analysis would be necessary to offer much more help here. And while the calculations could get more sophisticated, and the wording much more verbose, I’m not sure the accuracy would be better or the conditional wording more understandable.

Does this help?

Lewis