Category: Data Analysis

Another Project for the McKinney Suckers

.Reading time 11 minutes.

This is the way it starts out. Unfortunately, the story sounds good:

Resort hotel coming to McKinney?

By Marthe Rennels
Community Impact
April 20, 2016

Craig Ranch could soon be home to a new resort hotel if David Craig’s plans come to pass.

Craig of Craig International and developer of Craig Ranch presented a plan to McKinney City Council during a work session April 18 that included plans for a 250-room resort hotel.

The proposed resort-hotel would include 15,000 square-feet of indoor meeting space and an additional 3,000 square-feet of available meeting space at the TPC clubhouse. Plans also include two ballrooms, two or three breakout rooms and one boardroom.

“We desperately need hospitality near the McKinney Corporate Center,” Craig said. “This is an opportunity to bring one of the essential developments and attractors to the corporate center in the form of a hotel that brings many of the amenities required by corporate America: meeting space, dining and overnight stays on campus.”

Craig said the occupants of the hotel would have access to the TPC Golf Course in Craig Ranch, an added bonus that he said would encourage weekend stays and help provide additional sales tax revenue in McKinney. On-site restaurants are included in preliminary plans, and the hotel’s future management firm, Aimbridge Hospitality, said it is open to amenity requests from the city and public.

According to the presentation, the estimated construction cost is roughly $68.75 million. Craig requested the city council allow the city manager’s office to speak with Aimbridge Hospitality in hopes of establishing some type of partnership with the city in terms of McKinney Community Development Corp. or McKinney Economic Development Corp. funds.

“I do think this is an opportunity for all concerned,” Mayor Pro Tem Travis Ussery said.

The timing is uncanny. There are two enormous projects in McKinney that have turned into a money pit. The first and most significant is Craig Ranch. The second is known as the Gateway Project. The Gateway Project has been a series of nightmares with lawsuits, project delays and investors jumping in and pulling out.

I have made a Open Records Request to try to obtain documents that would allow me pull together the total dollars the City of McKinney has spent on both. There has been cash, infrastructure improvements, impact fees and other fees waived and … well, that’s just it, I don’t know just how much more. That’s what I wanted to find out. You can ask for records, but the first thing you are told is that the law doesn’t require the City to answer questions. How interesting.

On April 1, 2016, I made a request for two things:

  1. “I would like to request records that would show the total costs incurred by the City for the Gateway Land and All Related Projects, irrespective the name of the project or payee.
  2. I would also like to request records that will show the total costs incurred by the City for any aspect of the Craig Ranch project, irrespective of the name of the project of payee.”

Anticipating a clarification letter I often get, I try to add some explanation to my request:

  1. “I am seeking to determine the entire financial investment the City of McKinney has made in the ‘Gateway Project’ as well as the ‘Craig Ranch Property’ irrespective of the names of the payees or conduits. For instance, if money was paid for a parcel of land but was wired through an attorney, then those items would be included in [the] ORRs.
  2. While I emphasize ‘total costs’ this is meant to convey all costs. However, I am requesting detail check payments, wires or any kind of transfers of money by fund: Capital Projects, Bond Funds, General Funds, Utility Funds, MEDC/MCDC funds.
  3. The definition of ‘total costs’ includes any direct or indirect payments, reimbursements, infrastructure expenditures, land purchase, and any waivers of building permits, impact fees or other waivers. It should also include any city in-kind payments or services other than administrative costs. For instance if the city paid for any surveying costs related to a land transaction, those are costs that should be included in my ORR.”

I guess I failed in trying to be explicit. I received a clarification letter anyway. I didn’t explain the term “All Related Projects” in my first request. Okay, mea culpa. These projects have boundaries. Money Pit 1 and Money Pit 2 have lines on maps encircling the projects. How much has the City put into those two Money Pits? I’ll try to rephrase and improve on my ORR later today.

The second clarification has to do with the specific documents I am asking for that reaches into development agreements, contracts and a litany of things. I am forewarned that these documents may be voluminous and entail significant staff time to locate and compile. Okay, I’ll work on that one today, also. I think know I am convinced that I want everything. I was told before I requested the information that the City won’t be very happy to dig into the amount of money that has been spent just on the Gateway land.

However, this brings me to a complaint I have made to both the Mayor and Interim City Manager as well as the City Council. Everything I am asking for is what THEY should be asking to see. Maybe not detailed documents. But as of April 22, 2016, do THEY even have a clue how many dollars have gone into these two projects since they pulled up to the City’s Money Pumps?

Why am I the one having to ask? THEY are telling me this information hasn’t been asked before! If so, you would just point me to the link on the City’s Web site where that information has been compiled and made public already. Oops! Apparently that’s not what they mean by transparency.

So, here’s the deal. I want to know, but THEY don’t apparently. So THEY are going to make me pay to get some of the most profound information that has ever come out of the City of McKinney! Information that would likely be a citizen’s first question to ask when David Craig came calling yet AGAIN!

Mayor Pro-Tem Ussery thinks this may be a good opportunity for “all concerned,” but I’m not so sure. And some others may be wanting to get a little better educated before making that bold statement. There is no doubt in the world that this is a good opportunity for David Craig.

Mr. Mayor and City Council, at one point in time, the City had invested zero on these two projects. How much has been invested as of April 22, 2016? You say you treat the City’s money like it was your own in an attempt to convey stewardship and fiduciary responsibility. Why aren’t the new council members asking for an independent forensic audit? Would someone go in an shake the members of the City’s audit committee and tell them to wake up. Oh wait, I think it is chaired by Mayor Pro-Tem Ussery.

Any project works as long as there are sufficient subsidies to build it and make a profit for the developer.

By the way, what is the capacity and the utilization rate of the Gateway Hotel? Where is the demand study for a resort hotel in Craig Ranch? What will the room rates have to be? Or do you plan to pump $millions into another project and just hope it works out? An investor using their own funds would never put money into something so large without an independent study showing there is a demand. Well, a smart investor.

Speaking of smart investors. According to the news media, the money behind Craig Ranch appears to be from the Van Tuyl Group, one of the largest auto dealerships in the country. Warren Buffett has now purchased the Van Tuyl Group. Ask Mr. Buffett what the Craig Ranch development is worth at this point and how much more money he is willing to invest in it.

The City of McKinney has put $millions into Craig Ranch. Don’t put another penny into this developer’s pocket. LFM

 

 

 

The Burglar Bar Issue That Got Overlooked

.Reading time 10 minutes.

It’s tragic. A person dies in a house fire because they couldn’t get out the window that had intractable burglar bars on it. The newspaper is all over it. I wait for this story to pop up someone in Texas ever so often, at least once every 5-10 years. I’ve written about an aspect of this story several times over the years.

The public is outraged. Elected officials go on high alert. Got to do something. And fast. Between the event and literally the next council meeting a good MPA student intern can research, find and adapt an ordinance from another city in days to meet the agenda deadline. Standard operating procedure – make it illegal to have intractable burglar bars. Require a permit. And inspect to make sure it is installed properly.

Done! Leadership in action. Conscience cleared. Maybe even an attaboy or attagirl from the public and press.

Hold on a second. You blew past the part that always concerns me. When budget time rolls around and there is a request for more inspectors to monitor and enforce the program created on a few pages of an ordinance, what is going to be the response from the governing body? The Tea Party will be there to say, OMG here comes some more bloated bureaucracy. You, reckless council, YOU must be ‘fer Big Gov-ment. What unpatriotic scum you are!

Why do public safety, public works and other staffers usually sit in attendance at council meetings even if they have nothing on the agenda? It is to watch out for well meaning initiatives to come from the elected body that is going to cost a ton of money and place a big workload on them. Oh, it is not the workload. It is the expectations that everything can be done without additional resources.

It is possible that they have worried about burglar bars way before it blew up in a newspaper story. Yes. They worry all the time about loss of life and property that could have been prevented. And themselves being thrown under the bus by the council or public wanting to find someone to blame. But they think it through. Who is going to pay for the purchase and installation of a higher quality, escape-capable set of burglar bars on, say 8-15 windows per house? When installed, how much time is it going to take to check that they work? Do you leave it at that or make sure that every house member knows how to use the release mechanisms?

And what about the ongoing monitoring? If this particular house in question had internal breakaway burglar bars installed 20 years ago, what would be their condition today? Rusty or weathered non-functioning burglar bars today would be the same as no burglar bars. Not to mention repairs required after an inspection means a re-inspection.

To just play with numbers, if the City of Dallas has a population of 1.3 million people at 3 per household, that would be 433,333 living units. Many of those are multi-family, but let’s just say there are only 2.5% with burglar bars. That would be over 10,000 potential units with burglar bars. Or 70,000 windows averaging 7 windows per unit. Pick your own numbers. I’m trying trying to push people to think through the practical realities of potentially huge workloads produced by few words in an ordinance.

At 2 minutes per window and an 1,800 hour work year for a standard employee, that would be just under 40 employees needed to do annual inspections. At a full-loaded cost of $50,000 per year, that’s a potential $2 million of new costs. Yes, I know. I could cut that in half by reducing the frequency of the inspections. I could also triple it if the real time spent is 6 minutes per window due to getting to the actual window to inspect, fighting off the pitbull in the backyard and dealing with a Tea Party property rights tenant or occupant who wants to shoot anybody not invited to stand on their front porch.

Argue with my numbers if you want, but please don’t miss my point. Was there any kind of fiscal analysis done? Or did a current council not want to know? Do-gooders love to spend money the next council has to raise. By the way, $2,000,000 of costs divided by 10,000 living units would be $200 per year. Anybody going to pay those levels of fees? Nope! Coming out of taxes.

Also, what is the administrative and billing mechanism that is going to be required to keep track of all this? Who is going to make anybody take out a permit or to go after somebody who didn’t pay? Take a look at unpaid traffic fines, ambulance billings and high-weed mowing liens! There is an entire cottage industry of lawyers we have created billing for things almost impossible to collect.

Not to mention the risk factor. Is there a potential lawsuit when the city requires a permit and an inspection – and then lets something slip through the cracks? Do you really think 10,000 houses with burglar bars are going to be added to a staff’s workload and nothing fall through the cracks? A few years go by, and a fire-related death is due to burglar bars that were not inspected – or at least a record can’t be found. Now get ready to write the really big check that comes out of the taxpayers’ pockets.

Here’s the deal. Call in key city officials and use the burglar bar example to set the stage for the meeting. And then ask this question: how many potentially similar “burglar bar” events do you think about every day that might occur once every year or two? They WILL eventually happen over a decade, perhaps. What keeps you awake at night? Where are we exposed and won’t realize it until the news media makes us look like uncaring, reckless city workers?

You will be disturbed by the answer. You will not rest well for many days. I promise.

Or another way to put this particular issue into perspective, how many burglar bar fire related deaths have there been for these 10,000 living units over the past decade? Things do happen. We have had 100-year floods three years in a row. There will be spikes in the crime rate that has little to do with anything the police department controls.

I fully understand the “value of just one life” issue. But even if the levels of government services were raised many rungs higher than exist now, would we be able to eliminate all deaths in all circumstances where they might be classified as “preventable?” Absolutely not.

I just get tired of the news media that go out of their way to stick the ugliest of the uglies in our faces and then don’t stand ready to support paying for the most effective and efficient ways those issues can be addressed. Governments can always improve at least a little in the way they provide services to do more with less – the mantra at just about every conference I have ever attended in my career. But there comes a time when you have to pay more to get more. Or agree that you are willing to do without and risk the consequences.

Or let me turn this around in a way we can discuss this as intelligently as possible. Spend not a penny more in total, but for every $million you add, decide where you are going to subtract a $million in services elsewhere. You. Meaning the news media. You. Meaning the Tea Party. You are a big talker with no skin in the game. LFM

 

McKinney Numbers Not Published Until There Is A Problem

.Reading time 9 minutes.

Utility systems have fascinated me my entire career. Water, wastewater, stormwater drainage, electric, gas. Roadways are usually not referred to as a utility system, but they actually are part of utility family as I view it. All of them are expensive investments. Ginormous to use a word from my grandchildren’s vocabulary. A huge part of these assets are visible. However, the majority are not. They are underground. Even a roadway is thought to be visible, but it is the base material and conditions beneath the surface that is where the problems usually start.

The Water System.

There are two numbers I have been urging cities to place in the primary financial disclosure documents, mainly the Comprehensive Annual Financial Reports (CAFRs), for many years. The first is the Water Loss & Unaccounted For. This sounds like an awkward label and bad grammar. It is actually an officially recognized description by the American Water Works Association.

The “Loss” part is mainly referring to leaks in the water system. You can often pinpoint a leak with clarity. That is when the water is spewing 50 feet high from a breakage, and the news cameras are out for the photo-op. Or when water is leaking underground and creating rivulets that call your attention to a leak. Like a sprinkler system leaking, although usually larger. However, there are many leaks where the hole is on the bottom of the big water line creating a cavity that may not be detected until the street cracks open to reveal a huge cavern has been created over time and has swallowed a car.

The “Unaccounted For” includes many of the gallons of true lost water. But it is a bigger and more complicated issues. Water is brought into a city in huge transmission lines. The entry point is usually metered. However, the meter must be checked for accuracy and re-calibrated at times. McKinney receives about 25.3 million gallons every single day from the North Texas Municipal Water District to serve 51,636 connections. Those are published numbers available online.

Interestingly, the numbers not published are the ones most important to me – and they should be to you. The average per water customer use per day is 490 gpd. To put it in context, ten years ago that metric was 673 gpd. What can we make of it? Conservation? Inaccurate data? Actually, to be totally fair, we just start with that number, fill in the middle years and examine more closely to see the trends. There are many significant weather factors that can wreck those numbers. The water intake meters from NTMWD are read on the first of the month. The consumer meters are read on a cycle throughout the month, so one has to do a computation to get a good estimate of the water metered to the customer that matches the calendar month.

But the missing number is this: what is the Water Loss & Unaccounted For number?

It does not get published annually and for all to see. It is the most revealing number I can think of to grasp an understanding of the condition of the water distribution system. A newspaper account reports the City had a 28% loss in 2014. Are you kidding me? That would be about 2.5 billion gallons! That’s 12,500 elevated storage tanks the size on Virginia near Hardin!

Hold on. Let’s try to get a perspective. What was that WL&UF number over the last 10 years. Hmm! We don’t know. If it is calculated, it is not published in a report I can find online. It is generally believed that about the best that value can get for a city is about 7%. The paper reports 12% is the norm.

It depends on the age of the system, soil conditions and, of course, weather conditions. There can be unmetered water for street medians or even ballfields. In most cases, cities have either metered or have good estimating measures for those. Tell me the size of the meter and the water pressure, and I can tell you how many gallons per minute can go through the line. All I need is the hours the sprinklers have been on for the month.

There can be theft. However, I feel quite confident that this 2.5 billion gallons is not about theft. I do know that residential water meters tend to start under-reading when they get into the range of 7-10 years of age or about a million gallons. It would be nice to know the average age of the 51,636 connections. Let’s usage 12 years as an average to be generous. We would be fairly safe in expecting that about 4,300 meters per year are being replaced if we are keeping up with the necessary life-cycle plan. Is that happening?

In fact, what is the average age of 826 miles of water lines, 628 miles of sewer lines and 430 miles of storm drainage system? Most of those items last about 20-35 years, but do the math. Gee, “brand new” Stonebridge, at least the early sections of the 6,250 acres, is in that zone now. Infrastructure deterioration is an exponential curve, not a straight line.

Wastewater.

The key metric here is Inflow & Infiltration. (I&I). Inflow is when manhole covers have popped off from water just pouring into the sewer system. Infiltration is when roots and breaks underground are causing underground water to seep in. Together they make up millions of gallons (gee, I hope it is not billions of gallons!) that McKinney pays to treat that unnecessary part of rainwater. Same same factors discussed apply as with water except wastewater is not metered for all but the largest commercial customers as well as the city as a whole. It is an estimate based on the water usage. But even with estimates, it can be calculated with a fair degree of accuracy.

What we can guess is that the condition of the sewer system tends to be worse than the water system due to the content of the flow and the fact the flow is by gravity more than a forced flow under pressure. Roots don’t generally get into a pressurized water line and could get detected if they did. There are 51,636 checkers of the water quality as we turn on our faucets every day. Not so with the sewer system.

Conclusion.

I’m going to save roadways and other components of the infrastructure for future blogs.

I have a real problem with cities not showing these key statistics on a 10-year trend:

Water Loss & Unaccounted For.

Wastewater Inflow & Infiltration.

Average Age of Roadway Street Miles; Water and Sewer miles; and Water Meters.

In the name of transparency, I challenge the City of McKinney to publish these vital statistics in their next CAFR. Also, the CAFR will have 10-years of annual data. The Web site should show these calculations on a monthly basis as well as the linear feet of replacement or breakage repairs.

No business would operate a $Billion enterprise and not know these numbers and the trends. LFM

McKinney: What Have We Gotten For Our Quarter-Billion Dollars?

.Reading time 7 minutes.

The City of McKinney is not having such a good week in the economic development department. First Lincoln Properties pulls out of the celebrated Gateway Project. This is particularly disappointing since the hotel component didn’t happen without lawsuits and  $millions spent before this more recent phase moved into the forefront. So in early 2014 we think something is finally going to happen on the remainder of the Gateway property. And by early 2016 it is stalled again as the developers walk away.

Now comes Barclays Bank. In September 2014, we hear that 500 jobs are coming with a $4 million investment on the City’s part. And now in April 2016, Barclays is leaving before fulfilling their mission. The City says none of the $4 million was spent because Barclays had not met their threshold for jobs. Not to Barclays, maybe, but not a penny paid to the property developer?

Are we just that unfortunate here in McKinney? Yes, things happen. And there is much not within our control. I suppose.

However, this opens a door. I’ve walked through it before when I have questioned how the money is being spent for both the McKinney Economic Development Corporation (MEDC) as well as the McKinney Community Development Corporation (MCDC). The City Council did give a nod to a gigantic step when they indicated it would be a good thing to move the MEDC/MCDC Board meetings to the Council Chambers and video record those meetings. I greatly appreciate that move when it happens.

I have harped on this subject before, but I think it is imperative that the citizens of McKinney really get the full picture of where the MEDC/MCDC (4A & 4B) money has been used over the years. Between the two Money Boards, $250,955,609 of sales tax money has been collected for MEDC and MCDC operations and projects. For all the scrutiny the Council and public would give on the General Fund budget, is the same attention being paid to the Money Boards?

In just the past 12 months, $21,718,989 has been collected for the two funds. You may recall that I urged the MISD to show us the cost of the football stadium in terms of the Tax Rate Equivalent (TRE). So what is the TRE on the sales taxes going into the Money Boards? That’s very easy to determine. The taxable value is currently $15,200,173,814. If the City did not have sales taxes at all, and the same amount of money was spent in the City budget, it would take a property TRE of 28.58 cents to generate that much in funds.

Since the General Fund gets 1-penny while the other 1 penny is split evenly between the MEDC and MCDC, then we can see that these two Money Boards are getting the TRE of 14.29 cents.  That’s a lot of money!

So, what are we getting for that money? Let’s just focus on the MEDC right now or about 7.145 cents and $123 million since it started being a revenue source in 1996. What is the return on our investment?

Just how closely would you personally monitor every dollar if it was your $123 million? That’s the deal. It is our money. We elected the City Council, and they have appointed a City Manager and Boards to watch over it like it was their own checkbook.

In fact, when you go over the 75/SRT flyover and look down at Gateway, if you can see it, just exactly how much of OUR tax money has gone into that project? And after you head west on SRT and glance over at the Craig Ranch property you can partially see, how much money has been given to that developer? And what have we received in return?

In addition to cash, how much has been given by the City putting in infrastructure the benefited Craig Ranch? Or how many dollars have been waived that would have been paid in other parts of the City by developers for roadway and utility impact fees?

There is an exact amount. I have sent an Open Records Request asking for documents that will let me compile that number for my readers. It think it is going to be a shocking number. Later, I will hope to answer another question I am curious to learn more about. How many people were on the MEDC Board (and City Council) that were working for Craig Ranch, directly or indirectly, when decisions were made to give money to that project as well as to the Gateway Project?

How is it that this information isn’t more readily available on the City’s Web site in the holy name of Transparency? Maybe we can all learn soon. LFM

BTW, if you like to study charts, and I hope a few of you do, you will notice that the Rolling 12 Month totals spiked for a period started in September 2011 due to favorable audit adjustments that benefited the City to the tune of $5,345,794. State law protects the specifics from being revealed, but it is an anomaly that skews the data. Otherwise, you can actually see the exact months the City has headed into a recessionary period and recovered. Many cities are peaking in their sales tax collections at the current time.

MCKSalesTax

 

MISD: Give Us The Tax Rate Equivalent!

.Reading time 12 minutes.

I’ve been told by some MISD officials that I simply don’t understand the difference between an Operating & Maintenance Tax Rate (General Fund) and the Interest & Sinking Tax Rate (Debt Service Fund). After working with government financial information for over 43 years, I think I do. I’ve been told that I am ignorant or just making the decision on my own to disregard the facts. I don’t think I have. I think the MISD is doing just that.

I do know this: the audited financial statements available on the MISD Web site are very helpful, but they are also not easy to discern certain critical pieces of information. And the posted budget? It is simply horrible. High level and without the most critical pieces of data to assess certain trends, ratios and key factors, especially as it relates to debt. So where do you go to find that information?

The Bond Holder.

In general, the MISD Board is dependent on the story and the spin on the story provided by the professional staff. The bond holder is a quite different. If you think Jane & Joe Citizen have a stake in MISD because they pay taxes, what about those holding $485,660,000 in tax supported bonds? There are a few individuals holding these precious bonds, but mostly banks and insurance companies hold these bonds. Smart individuals. They don’t accept “trust me” as an answer. They know the vernacular, the concepts and the downright hard dollar issues. And they ask a lot of questions.

In fact, the there is an entire array of financial disclosures MISD makes to the bond holder. MISD is not only obligated to disclosure a lot of data, but they sign an agreement that they will continually update and disclosure key datasets. The Official Statements and obligatory Continuing Disclosure statements are rich with meaningful data. Especially for the MISD Board and Finance Committee. Since these documents are prepared for bondholders and their “representatives” such as the bond rating agencies, these documents are generally presented in very clear tables and footnotes.

What Can We Learn?

I would be happy to spend several blogs breaking down and analyzing the data that MISD discloses to the bond buying public yet probably not even to its own taxpayers. But let’s just pick a few points to answer the question that is not being addressed in the current discussion regarding the football stadium. Let’s start with the Continuing Disclosure statement filed by Jason Bird, MISD Chief Financial Officer, on December 17, 2015, exactly three months ago. That’s pretty fresh data!

The Taxable Assessed Valuation has increased from $8.787 billion to $11.555 billion from fiscal year 2012 through FY 2016 (the year we are in). That’s a nice improvement and gives the bond holder a nice sense of security with assurances there is the ability to repay them through the I&S Tax Rate of $0.50. The math is easy. The tax base x the tax rate per $100 results in a levy of $192.972 million at the full rate of $1.67 (the one my checkbook cares about), with $0.50 or $57.776 million going to the I&S Fund to be spent only on debt service.

So, is the Debt Service payments for FY 2016 $57.776 million? No, another schedule shows us that number to be $55.838 million. Why the difference? It should be closer, but it is usually because an allowance is made in case some taxes are not collected. Some taxes that are levied are not collected? Yes, but it is a small portion. We can find that MISD collects about 98.7% of the current levy plus past delinquent amounts that adds up to darn near 100%. MISD even collected more than 100% in one year.

We can also learn that Debt Service (DS) obligations drop off significantly unless more debt is issued. In FY 2017 the DS will drop to $48.388 million. Payment levels hold in that general range for three years and then drops to $43.854 million by FY 2020. Then the DS drops off in a rapid fashion.

So, that is how MISD is going to be able to sell more bonds in the $200 million election and not have to raise the tax rate – in fact even drop the I&S rate by 2-cents? That is correct. The MISD has been conservative (that’s a good thing!) in its debt issuance strategies to allow for future debt capacity.

So what’s the beef you have with the football stadium, Lewis?

The Intellectual Dishonesty: Tax Rate Equivalent (TRE)

There is one sure way to understand the magnitude of  local government and school spending. MISD already states much of the budget on a per pupil basis. What is missing is the perspective that gives the MISD Board and, in return, the public the ability to assess the fiscal impact of MISD decisions.

Somebody at MISD has a Debt Service payout schedule associated with the football stadium. In total, between the $50.3+ million to be voted on plus the $12.5 million authorized but unsold from the 2000 authorization, there is close to $63 million of debt likely to be issued. So the question that should be asked and answered is this: what is the Debt Service going to be on $63+/- million in new bonds just for the football stadium?

I am 100% positive that MISD has that debt schedule internally. To not have it would be reckless. In a bond election such as we have in front of us, it is likely they have several DS scenarios that vary to some degree based on the staging of the issues, interest rates and the length of the bond issue – likely to be 25 years. The bond committee and finance committee know the numbers. Again, for them not to have asked or for them not to be presented the numbers without having to ask for it is an oversight.

The Numerator & Denominator.

I am pretty sure I could get extremely close to the Debt Service number on my own. It is likely to be between $5-6 million in the first few years and then drop off, depending on how the payout is structured. That’s the numerator.

The denominator is the tax base. We already know the assessed valuation is currently $11.55 billion and is likely to increase in the near future. Not by double-digit levels as we saw in FY 2016. But for an average over the next few years, let’s use a generous $14 billion.

At $5 million of DS to cover with a $14 billion dollar base, we can get within a range of the tax rate impact equal to about $0.0357 for the football stadium. So, I believe I’m in safe territory saying the fiscal impact, the Tax Rate Equivalent of the football stadium is between 3 and 4 cents – and maybe as high as 5 cents.

There likely would be a stampede at the City of McKinney if the City Council even suggested a fraction of one penny TRE for something. Therefore, the range I am talking about (but MISD isn’t) is a gigantic taxpayer hit being disguised as no impact.

So, does that mean that if the football stadium is not built and the $60+/- million is not issued, that the increment of 3-5 cents could be reduced from the current $0.50 I&S tax rate? Yes, that is exactly what I am saying.

Bad-Faith Bundling.

I received the most interesting response from a knowledgeable MISD person after I sent my blog out on Tuesday. After going back and forth with him about my “errors and ignorance in my blog,” I was not told of anything specifically I said in error. Let me say now that I am always willing to stand ready to be corrected if I have goofed. But after pressing the person and not finding anything specific where I was wrong, I asked about the elephant in the room. He had not said anything about the biggest blast I had made.

He had not mentioned I was wrong about the Ballot Bundling where the MISD is planning to not separate the football stadium but rather to make it all or none bond proposition. If you want the HVAC to keep working, give us a football stadium! But then I was shocked with his response when pressed on this biggest issue of all:

“I realize you don’t like it, but if it is legal, then they (MISD) can use it as a mechanism.”

OMG, that was the opening line of my blog played back to me! How arrogant! How intellectually dishonest could one get? I suspect he was puppeting the very words of the MISD staff pumping up the bond committee in a bond speaking points pep rally.

Bottom Line:

Unbundle the football stadium and tell me it is the Tax Rate Equivalent of 3-5 cents (they know the exact number), and I will vote YES.

Deceive the public, and my grandchildren will not have the HVAC fixed in their schools. I won’t be blackmailed. LFM

Bond Disclosure Materials.

Go to http://www.emma.msrb.org. Type in McKinney TX, and you will get a list of the Official Statements for both the City of McKinney and McKinney ISD. Click on the 2014 bond issue. You can then download the Official Statement as well as the Continuing Disclosure statement. LFM

On Pensions & Promises

.Reading time 13 minutes.

Introduction.

Today is when I make a lot of people mad. My preference would be just the opposite. I treasure my municipal family. I am also a taxpayer, as are we all. But mostly I’m a realist – or at least I try to be. In the end, however, I simply respect arithmetic.

From 1973 to 1980, I was an employee of local government, almost five years in the City of Garland and two years at Dallas County. While in Garland, I was part of the Texas Municipal Retirement System (TMRS). The last thing on my mind at that time was retirement. We received a printout each year of our projected retirement pay under TMRS. All I remember is how large the numbers were. To be honest, I didn’t believe them.

It would be years before I would be fully aware of the story behind those numbers. The Governmental Accounting Standards Board (GASB) imposed on governments the obligation to disclosure unfunded liabilities. GASB was formed in that era due to the great embarrassment when the bankruptcy of New York City got largely blamed on the accounting profession.

In recent years here in Texas, Bob Scott, ACM/CFO of the City of Carrollton dug into what everybody considered to be the most conservative and most secure pension fund of them all, TMRS. Bob found a number of things that did not make sense. He inquired, then challenged and before long he was the voice of truth in the eyes of his peers, the finance directors in Texas. However, he stepped on some toes. His city manager, Leonard Martin, was getting some calls from his peer level and some HR directors wanting Bob to keep his mouth shut. If you know Leonard and Bob, you know full well that was not going to happen.

Before long the executive director of TMRS was gone. And so were the actuaries that had been advising for a half-century.

The Arithmetic.

The concept behind the complicated actuarial math is not too hard to understand. Contribute money into a pot that can be invested in things that earn money. And then subtract the payouts to retirees based on the health of the fund. Lastly, stay whole. By that I mean stay up with the current value of those payouts.

Each city in TMRS has their own plan, and plans vary widely. So, let’s tinker with the City of Fiscal Bliss, my imaginary city I’ve used since I taught MPA classes at SMU back in the 1970s. None of the cities started out this way, but let’s assume that the Contribution side was the employee only. The payout wouldn’t be too impressive but, hey, any annuity at a decent earnings rate rolls up into a nice sum of money given several years of dollars contributed.

Now, let’s add a contribution from the city. Let’s start with a 1:1 match, then 1.5:1 match and round out with a 2:1 match. Whoa! Look at that payout. Put the payout on steroids by assuming the future investment rate of return is 5%, 7%, 9%. Hey, it will NEVER be less than 5%, so why not build a minimum guaranteed earnings rate into the plan? Wait, we can do better than that by adding a feature that says the payout will be automatically adjusted for big portion of CPI. And the payout will be until you die. Or your spouse dies.

Lastly, let’s take the retirement age and conditions down. Instead of being eligible after 25 years of service, let’s make that 20 years. No, let’s make vesting at 15 years, then 10 years! Let’s do better than that. Let’s be a little more generous on how we count the years with credit given for other kinds of service.

Now, why would anybody agree to all of those pension features?

First, many of those increases in benefits were vouched for by actuaries in financial models nobody but they understood.

Second, in tough times when a city can’t give pay raises, there are efforts to give something else – something that doesn’t reveal its full impact for years later. Even things like giving all employees an extra day off seem like it doesn’t cost much. However, taking the City of Dallas as an example, one extra day off is the equivalent of the loss of productive for 52 full-time employees! In this case, some benefits were motivated by trying to substitute for other compensation that wouldn’t fly politically.

A third reason involves faulty assumptions. When you promise a 5% investment earnings minimum when a bank CD yields more than that level, it sounds good. But what if the best and safest investment instruments earn virtually zero like they have for several years now? You might be tempted to invest in riskier things that could yield 10-15%. But they could lose by that same magnitude. Maybe even 100%! Also, what happens when you start to slow in population and city employment growth while the number of retirees continues to grow?

Where Are The Risky Pension Funds?

There are 8 State Plans in Texas with an Unfunded Liability of $47.9 billion covering 2.13 million employees or about $22,488 per employee. TMRS is at $20,636 per employee and has a high funded ratio of 85.79%. Also, they have a very good (short) Amortization Period of 17.10 years. The state, county and teachers retirement systems are also relatively under control. These aren’t likely to collapse.

The story is quite different with the 85 Local Plans. You can regularly read negative news stories about the biggest ones in this group. The Unfunded Liability for the Dallas Police & Fire Pension Plan is $213,712 per member and is only 63.80% funded. The Amortization Period is … get this … Infinite. I’ll let you review the spreadsheet recap on your own.

Red Flag. Red Flag. Red Flag.

Out of the 85 Local Plans, there are 12 called Title 109 Plans. They were created under a different state legislation than the other 73 Local Plans. Why is this important to know? Yesterday, the State Attorney General revealed a request for a formal opinion from the Chair of the Texas House of Representatives Committee on Ways and Means.

March 8, 2016

Dear General Paxton,

I am writing to request your formal opinion on a question related to those municipal retirement systems of which some or all of their pension plans have been put into state statute.

As of 2015, Texas has thirteen local retirement systems specifically enabled by state statute, with their provisions located in Article 6243, Vernon’s Civil Statutes (also known as Title 109). Local retirement systems established in Title 109 have “their contribution rates, benefit levels and the composition of their board of trustees set in state statute,” according to the Texas Pension Review Board.

Rising pension and healthcare costs, unpredictable revenues, aging infrastructure, high debt load, and increasing costs for the delivery of city services threaten municipalities’ ability to balance budgets and maintain strong credit ratings. When these challenges put municipalities at risk for defaulting, does the oversight role played by title State Legislature in these specific municipal retirement systems cause the State to assume some or all of the liability? Should one of these specific municipal retirement systems fail to meet its obligation, is the State responsible for ensuring that agreed upon payments are made?

With respect to the size of these pension systems and their impact on city budgets, and the role played by the State Legislature in their creation and maintenance, it is imperative that the Legislature have a clear understanding of the consequences of decisions made in regards to these municipal retirement systems.

Thank you in advance for your consideration of this matter. Please contact me if you need any additional information regarding this request.

Best regards,
Representative Jim Murphy

I could only find 12 of the 12 plans or funds mentioned in the letter to the AG. They are:

Austin Employees’ Retirement System
Austin Fire Fighters Relief & Retirement Fund
Austin Police Retirement System
Dallas Police & Fire Pension System
El Paso Firemen’s Pension Fund
El Paso Police Pension Fund
Fort Worth Employees’ Retirement Fund
Galveston Employees’ Retirement Plan for Police
Houston Firefighters’ Relief & Retirement Fund
Houston Municipal Employees Pension System
Houston Police Officers Pension System
San Antonio Fire & Police Pension Fund

What does this sound like to you? Good luck with cities trying to tell the state these bad boys are their fault. Or maybe it is the state hearing about what is coming and wanting to go ahead and knock out this legal path before the next legislative session.

In Closing.

One of the things I thought I would never see and hear in my career is the decision for a state or local government to declare bankruptcy. Now it is happening all over the country. In my mind, the last state that could possibly declare bankruptcy or to break a promise on a pension is Texas. Now here is what blows me away. We’ve got this Texas Swagger ad nauseam about how robust things are at the same time we FINALLY have some signs like this letter that somebody is trying to figure out how to get out of their financial problems. The City of Dallas recently lost the cherished AAA bond rating. Why? The pension funds. The CFO has lost her job (moved over to another position) and she isn’t even directly responsible for the pension funds.

The reality is that promises were made based on faulty arithmetic. And when confronted with correct math, those in charge of solving the problem are beneficiaries of the numbers that don’t work.

Ah, but the can has been kicked down the road for decades and has finally hit a wall. LFM

Dear City Council: About Your Request for Input Regarding Our Next City Manager

.Reading time 8 minutes.

Dear City Council: About Your Request for Input Regarding Our Next City Manager

By Lewis F. McLain, Jr

Community survey for City Manager search

Mayor Brian Loughmiller and City Council invite citizens to provide input on the search criteria for the City Manager position via an online survey. Earlier this month, the city held a public input meeting aimed at giving city leaders insight into what residents hope to find in a permanent City Manager. The survey is an additional opportunity to provide feedback, and will remain open until March 28.

Dear City Council:

This may be coming as bad news for you, but the best City Manager Candidates are going to be interviewing YOU. Not the other way around. A magazine that hardly knows anything about McKinney may say we are Number One, but that’s not the way the city management profession may see the City Council. You haven’t done very well for about two decades, although your current Interim City Manager is a model. However, he doesn’t count. You needed him more than he needed you, and everybody has known that he could check out whenever he wanted to since he was already retired when he came in to save your butts.

I think you need to be asking for public input on how the council is going to persuade the best candidates to apply. Oh, you will get plenty of candidates who would take the job even if you promised them every day was going to be a living hell. The compensation is good, and the ability to relocate to the DFW area is a magnet. Plus they may be wanting to get out of their own Dodge City for a variety of reasons. Getting people to apply is not the issue. Getting them on board is not the issue. Keeping them long enough for their efforts to come to fruition and to be successful in every way is THE ISSUE.

Potential Interview Questions for the Council to Answer

If I were a candidate, here are my interview questions for you.

• Is McKinney a Council-Manager form of government?

• Do you know what that means?

• Are you going to allow the City Manager to operate as our City Charter outlines?

• Do you have an Underground Government here in McKinney? By that I mean several things.

     o Does the staff leak information to select council members, developers or community leaders?

     o Does the council allow vendors, developers and community leaders to have private meetings with council members with the intention of being persuaded of positions that will result in favorable council decisions without public discussion or knowledge that the Council has been lobbied?

    o Is the answer a quick Yes followed by “I do it for the education benefit and to be prepared for meetings?”

o And, if so, do you allow the proponent to tell you in those private meetings which other council members they may have talked to and whether they are in favor of the proposition or not?

o Have developers, realtors and builders outside McKinney found it difficult to get projects approved here in McKinney compared to Insiders?

o Have any of these Insiders ever tried to hi-jack a project that was in process by an Outsider?

o Do City Manager, Staff and Board/Commission recommendations consistently get overruled by the Council even when trying to follow Council policy?

o Does the City Council influence the Money Boards (MEDC/MCDC) to play favorites and direct money to pet projects or things the Council itself would be challenged on if spent out of the General Fund and competed with other needs in the City’s budget process?

o Do the Money Board recipients tend to become campaign contributors for Council Members or Candidates?

o Have your Money Boards ever been heavily weighted by board members employed by or closely associated with large amounts of funds given to any company?

o Are there any Council Members, Money Board Members or Staff Members that have been employed by firms (before, during or after) working for the City or that were beneficiaries of Money Board funds?

o Is there a Good Ole Boy Network that is slanted toward longtime friends that are constantly rotated around various boards and commissions?

o Are things that should be known publicly deliberated routed through the City Attorney in order to claim attorney-client privilege and keep out of the public’s view?

o Is there evidence of Walking Quorums, in all the many forms we all know can exist?

o Is there evidence of Jump-In-Front real estate deals where knowledge of City plans leak from Money Boards, Council or the P&Z Commission such that real estate professionals and developers quickly acquire the property in order to make a profit by selling property to the City at higher prices?

o Are discussions in Executive Sessions (whether Council or the Money Boards) ever leaked to persons who should not be privy to those discussions?

o Has the council or any member every gotten involved in a staff issue that resulted in an FBI inquiry?

• Is there anybody on the City staff who cannot be terminated by the new City Manager if he or she concludes that person does not fit within the organization the City Manager wants to build?

• Is there enough transparency and honesty among the Council Members to answer these questions among yourselves as well as to the public?

I have about a dozen more questions and a few hypothetical case studies I may be sending you, all of which may be topics of my future blogs. However, I will wait to see if any of you will provide my blog readers an honest response to these questions. There is a good chance I may have a City Manager Candidate reading this blog and anxious to know whether or not to apply. In fact, many of these questions came indirectly from City Managers in discussions I’ve had with them over the years.

Thanks!
Lewis

Dear City Council: What About Those Legal Fees

.Reading time 4 minutes.

Dear City Council:

Yesterday I included you on my blog mail out even though only one of you accepted my invitation to receive my blog a couple of weeks ago. A large number of my blogs will be letters to you.

I am interested in knowing if you found that particular blog of value to you? The reason I ask is that I have already heard from some of my readers wondering why the legal fees to the City Attorney’s firm are so large and are growing so rapidly? Legal advice and representation is understandably expensive, but $7.4 million from FY 2010 through FY 2015 does raise some eyebrows.

It seems that I do recall that the level of money paid for legal services came into question a few years back and it appeared, to me, that there was some momentum growing to question those costs. Questioning included asking if taxpayer money would be saved if many of those services were brought in-house? Or if there were other qualified firms that might find ways to save the City some money after the current firm searched for savings and presented them to you? I do acknowledge that law firms perhaps don’t quite fit the same criteria as other professional firms, but I do know that a fresh look and new set of eyes is the rationale often used to look for staff replacement as well as outside consultants. Not because there is anything wrong necessarily – it’s just good business practices to question everything.

In fact, one of the toughest questions that reveals the level of tolerance someone has is to ask them if you fired everyone under your control today and allowed them to reapply for their jobs, would you hire them back? If your answer is anything but Yes, even if you pause for a minute, real transparency is in how you would answer that question and what you would do about a No or a Doubtful or Reluctant Yes.

You would expect a city manager to be doing that on his or her own, without being pressured by the council. But this is one of the costs that falls in your lap.

I listened to the three of you newly elected officials in front of a Tea Party audience when campaigning – talking tough on how you would be a superior councilmember. Look down my recap of the McKinney Check Register. You as a council don’t control all of those expenditures in reality. On the other hand, you directly control some of the biggest ones. I’ve got about two dozen on that list I am going to be asking you to examine in future blogs. The first is now related to these legal fees. You can fund a ton of pothole fixes and meaningful programs with just a small fraction of savings in legal fees.

I challenge all of you, especially the three puppeting the words of those who elected you to walk the walk and not just talk the talk.

Thank You!

Lewis

See http://www.citybase.net/downloads/mckinneycheckregisters.xlsx

Understanding Data & That Misleading Word, Transparency

.Reading time 11 minutes.

I will be talking a lot about Transparency in my blogs, a word that is overused and even misused and abused in government. Yes, there are efforts made by governments and businesses to be transparent. Even the Texas State Comptroller awards programs are designed to promote transparency. Many of those efforts produce translucency more than transparency. I will try to explain and give examples in this blog and in many more to come. However, I must tell you something. I was handed a gift just a few days ago. While the current and past state comptrollers have promoted transparency in local government for many years, a new program has been launched called “Transparency Stars: Recognizing Local Transparency Achievements.”

The Texas Comptroller of Public Accounts is proud to announce the upcoming Transparency Stars program, recognizing local governments for going above and beyond in their transparency efforts. Our office will recognize government entities that accomplish the following:

• open their books not only in their traditional finances, but also in the areas of contracts and procurement, economic development, public pensions and debt obligations.

• provide clear and meaningful financial information not only by posting financial documents, but also through summaries, visualizations, downloadable data and other relevant information.

The emphasis on the last few words is mine. I would have to look, but I am pretty sure my writings and presentations on aspects of this subject started 20-25 years ago. Local governments are good at generating data. Operating data. But only in recent years have there been tools and efforts to turn operating data into management data. Some will recall that in addition to 1) summaries and 2) visualizations, I have emphasized 3) exceptions, 4) comparisons, 5) rankings, 6) drilldowns, 7) trends and 8) written explanations.
And even with data presentation improvements, the real test is to determine if the critical message is delivered and understood such as when the Mayor of Dallas pierces through the data and staff babble to declare, and I paraphrase, “the condition of our roadway system STINKS!”

An Example of Transparency Efforts: The Check Register

Many cities now publish an online listing of all of their checks. On July 19, 2015 I went online at the City of McKinney’s Web site and found they had a listing of checks back to 2011. Each year was in a separate file, with 2011 in a PDF format and the other years in Excel. Then I found that over $8 million were written to the bank card company handling the purchasing card program for the City. Of more concern than that to me were a number of vendor payments that were redacted. I expressed my concerns in an email letter to the Interim City Manager and Finance Director attached on that date.

To their credit, they now have an Interactive Financial Reporting Tool that came online in August 2015. As of a couple of weeks ago, they had the old version I was using and have now taken it down. Please note the new check registers and even the payroll register found at https://www.mckinneytexas.org/index.aspx?NID=213. The capability to see more information is truly impressive. They have broken down the PCard spending! They have also UN-redacted many (but not all) of the vendor purchases I had questioned. My compliments to the City of McKinney staff efforts to improve Transparency.

But Does This Effort Accomplish Transparency & Understandability?
The City is providing a check register that almost quadrupled the disclosure of details with over 215,000 pieces of data. I have worn out this quip, but I will continue to use it: as much as I love numbers, I cannot necessarily spot an anomaly by scanning pages of data by eye, even though the City’s sort feature makes it easier to do some ranking. One of the Comptroller’s criteria (downloadable) is of great benefit on the McKinney site. However, it is lacking in looking for the most critical areas of spending that will surface only when summarizing data, then sorting.

For operating data to become management data, somebody has to transform listings into summaries. Even then there must be an appreciation for the Pareto Principle (the 80/20 rule), which simply means I first want to examine the fewest number of (people, problems, items, etc.) that make up the largest impact (dollars, overtime, moral problems, etc). You would still want to see information portrayed for comparison purposes, such as over a number of years, to spot trends.

Excel Pivot Tables to the Rescue

To explain what I am describing, I have a link  to an Excel spreadsheet that takes the good McKinney work and addresses the Comptroller’s new program to make it better. The first tab is the DOWNLOAD of the 215,193 expenditure records from 2010 through January 2016. The second tab, PIVOT BY PAYEE, is where you can see a drilldown that includes 1) the description the City provides and 2) the Fund it was charged to. All elements are sorted from the largest to the small dollars.

Please appreciate this point, whether you are a financial analyst or a city councilmember: The pivot tables have organized (summarized) 215,193 spending elements totaling $998,454,719 into a meaningful presentation that allows you, the reader, to scan the entire $1 billion picture quickly and then to drill down into details at your desired level of information. Folks, that’s powerful. That’s a giant step toward Transparency.

What Do We Do Now?

That’s simple. Read with curiosity. Ask questions. If you are a McKinney resident, this is your money. If you are a councilmember or community leader, learn about where the money goes. There’s a huge amount of discussion in closed meetings that you can’t be privy to, but when the money goes out the door – it’s your business. I can only think of one acceptable condition when the amount and purpose of money going out the door should not be disclosed – the garnishment of wages and payments related to child support. There may be more excuses for redactions but not in my book.

I do have several questions for my city council and staff after preparing this analysis and blog. Actually, I have an Open Records Request for some of the items and should be hearing back soon. Here is my challenge to you if you are a city official: why would you wait for somebody like me to surprise you with a question or perhaps even a finding that you should have already asked and known? The reason I say this is because the dreadful fact is that city officials don’t read their own information. Raise your hand if you have actually read your CAFR in depth. Heck, most cities have been producing a check register for years. As a council, are you looking at that information? The City of McKinney is averaging $104,000 on audit fees. Are you getting more than a drive-by explanation of what’s in it? More coming in a few weeks.

The reality is that the once unavailability of tools for digesting millions of records, slicing and dicing are now available to just about everyone. If you have Excel, you can download years of check registers and create pivot tables in a matter of minutes – no exaggeration.
The Excel spreadsheet is quite large, too big to attach. Therefore, you will need to download from www.citybase.net/downloads/mckinneycheckregisters.xlsm to see the details as well as the construction of the pivot tables. However, I have attached a PDF of the spreadsheet at the vendor/payee level. Vilfredo_Pareto

Oh, and regarding Professor Pareto , you will soon learn the importance of his rule when you continue to be faced with terabytes of data, a meeting agenda that just doesn’t seem to end, or which house repair you are going to tackle first? In this age of information overload, it is the only path to control and sanity. All you have to look at in the spreadsheet is the first 448 items (11.3%) of the vendors/payees that account for 96.4% of the near $1 billion of spending. LFM

Surely You Aren’t for Growing Government, Are You?

.Reading time 14 minutes.

If you are receiving this blog twice, it is because you are on one of my lists + you signed up for my blog. I won’t be sending my blogs to you much longer unless you email me to say you want to be on it. I’m also sending from a different address. I know that many of my CityBase subscribers route my news articles into a separate folder and then don’t have time to read them until days or weeks later. If you did not get my original invitation, it is attached to this email.

Introduction

It took me three times to hear it from different people before I fully realized The question, “Let me ask you this, Lewis, are you FOR growing government?” was a baited question. By the third time, I realized it was rehearsed and work shopped, like “Lewis, if you were indicted for being a Christian, would there be enough evidence to convict you?”

The second one caused me to think when I heard it several decades ago. The first one worries me. Both can be intimidating but for different reasons. Actually, my favorite is the question released by the encyclopedia salesman visiting poor rural folk that basically conveyed, “you don’t want your children growing up as dumb as you are, do you?”

Let me get one point on the table. I’m not a Democrat. I’m not a Republican. And I’m not Tea Party. They are all liars, and none of them care about me or my future or my family’s future. They are all self-serving and exist to make themselves look good and their opponents look bad. So there.

This blog is mostly about the question in the subject line.

I’m for the old fashion truth. Facts. Looking for the heart behind the words. Wanting to adhere to the Athenian Oath about leaving this place better than I found it. I’m pretty simple. I don’t like labels that color me inside or outside somebody’s circle. I struggle to be a good listener, and I don’t enjoy being around those who don’t listen. I like civil conversation. Take a few minutes to view this TedTalk clip. After 68 years, 44 in local government, I am still a student. A curious student with a desire to match what I am learning and the words I am hearing with that I am seeing with my own eyes – and verify or confirm independently.

Let’s Dig In

Let’s suppose someone says, “Did you know that the City of McKinney, Texas is an empire building, tax and spend city that has mushroomed, atomic bomb style, from General Fund employees numbering 613 to 841 and with a budget leaping from $80,465,607 to $140,717,846 (that’s one-hundred and forty million, seven hundred and seventeen thousand+ dollars in just ten short years? Hell, Lewis, you live there. Are you for them GROWING THE GOVERNMENT and sucking up those tax dollars like a vacuum cleaner plugged into a 220v outlet? Are you one of those unpatriotic liberals, huh, huh?”

After I peeled all of the labels off of me, I would have this reply. Your numbers are correct yet incomplete. Your conclusion is bad and terribly misleading. I will prove that to you if you are willing to listen. But first – if you will listen and let me speak without interrupting or anticipating your next statement. Then I will allow you to speak without me talking. Is that fair?

First, how do you think all of the services McKinney provides came about? Did the bureaucrats just sit around trying to think of ways to make their staffs larger? Did the council signal to the staff that big is better, so let’s get really great and see if we can grow bigger than Plano?

Have you ever watched their public meetings – they are videoed and archived? What you will witness is a parade of citizens that start out their three minutes with “we need your help,” “please fix this or that” or some statement that is motivated by an unmet need. However, way before that meeting, the staff has fielded several hundred calls or the council several dozen calls from a variety of constituencies pointing out a need. Some are a few representatives from a youth sports league or the biggest HOA in the state explaining a need or perhaps warning of some dire consequences to the public if a health issue isn’t remedied.

Staffs and councils don’t dream up these problems and need for program expansions. Citizens do.

Before I get into some numbers, I’ll stop and let you respond to what I have said.

The Numbers

What if I told you that the City of McKinney was spending less today than 10 years ago? Yes, I said I agreed with your statement of fact that spending went from $80.4 to $140.7 million in ten years. But you left out two extremely important sets of numbers when you tried to make a statement that sounded conclusive and all-revealing with those absolute numbers.

You forgot to mention that the population grew from 104,853 to 155,142 during that exact same time period. Would you have expected McKinney to serve 50,289 more people without there being a cost increase?

The reality is that the City staff in the GF has actually decreased from 5.85 staff per 1,000 population to 5.42 in 10 years (line 14). Do you think your statement might have been accurate but misleading now?

In fact, the cost per capita based on the population growth went from $767.41 to $907.03 over the period in question. That is certainly an increase, but there would still be a missing piece to the more accurate story.

Do you think the costs of labor, material, fuel and other supplies are the same in 2015 as they were in 2006? In reality, the CPI is 18% higher than 10 years ago. Arithmetically, that is only 1.8% per year, which is very low. There have many ten-year blocks of time in the past when the CPI jump may have been 25-35% or more.

Nevertheless, if you care anything about meaningful and accurate comparisons, it is critical that the per capita numbers be adjusted for inflation. There are two ways to adjust the numbers, both with exactly the same accuracy, but with different perspectives. From college and even high school classes you will recall that indexed data can be placed on either a 2006 basis or a 2015 basis.

If you placed the per capita data on a 2015 basis, the $907.03 current value would raise the 2006 equivalent of $767.41 to $905.53. Yes, that is correct, on a 2015 basis, the CPI-adjusted cost per capital has risen from $905.53 to $907.03. A buck-fifty!

If the growth in spending for the last 10 years was restated in 2006 dollars, the change would be minuscule. Does that not amaze you? Do you see how outlandish and misleading you can make the data sound. Yes, it takes a little knowledge of proper indexing which any high school student can do. And a willingness to be fair and accurate before you make assertions.

You might ask if this method of data presentation is so much more superior and accurate then why doesn’t McKinney show the data in this proper context? My answer is that I have no clue. I have been teaching and preaching this fundamentally better presentation all across the state for years. The City of Pearland presents their data this way. Heck, the much smaller Fate, Texas does the same. To expand on this answer would require me to delve into my issues with the overused word, Transparency, which I will save for a future blog.

Other Considerations

What if the CPI-adjusted spending per capita had grown to $1,000? Quite frankly, that was the range I was expecting. There would be an answer to that. First, the real CPI is much greater than the official numbers I have used. Just look at your own personal CPI. Is it only 1.8% per year. Plus there are increased costs of trying to be more effective in municipal service delivery. For instance, more expensive technology to protect a police officer or to help them catch criminals is generally an ongoing ramp up in cost. In every area of local government, there is a desire to be more effective. To respond faster, to repair infrastructure more timely to hold off more expensive replacement and much more.

There are also new or expanded programs. Everybody knows that the most significant way to keep costs down is to never start a program. Yet that is when we cycle back to the source of the demand to expand or even create new programs? The citizens. Park lands or medians looking shabby? Mow once every 5 days instead of every 10 in certain parts of the city. If you plant color beds in the medians, you have to keep up the maintenance. Open a branch library is not just another building but rather more of everything. And new facilities whether libraries, recreation centers or fire stations generally means huge incremental increases in operating costs.

So, how did McKinney add so much and keep the comparative numbers almost flat? That requires more digging, but a mandate almost every local government department lives under is to continually become more efficient. That doesn’t always mean doing more with less but rather doing more with the same. Or doing much more without an increase of resources at the same magnitude.

Conclusion

Apparently, the way to get elected in conservative Collin County and especially McKinney is (before you know the facts), just proclaim that growing government is just as bad as treason and that you are going to just say no with your fingers in your ears no matter reality. Or else. The “else” is that even after you get elected you are going to get texted during a meeting to remind you who brought you to the party, your pledge and the price you are going to pay if you get out of line. Here’s the deal, however, it can work right now in McKinney. Decent quality growth is on steroids, especially residential. Ultra-Conservative Bating is on fire and politically effective. The City of McKinney is doing very well financially. Actually, too well. More saved for blog in the near future.

If you think this blog is going to be an apologist mouthpiece for local government, you are dead wrong. I’ve got plenty I want to share. Stay tuned. LFM

MckinneyPerCap

BTW, if you read to this point and appreciate good analysis work and would like to have a copy of this Excel template, just let me know. I would be happy to email it to you. LFM