Category: Management

City of McKinney Makes Quantum Leap in True Transparency

.Reading time 11 minutes.

In mid-March, Mayor Brian Loughmiller urged the City Council to have the McKinney Economic Development Corporation (MEDC) and the McKinney Community Development Corporation (MCDC) meet in the Council Chambers instead of their small conference room in a bank building where they now office. All of the councilmembers agreed. Or at least nobody disagreed. And it happened!

What a difference it makes. A small conference room with only translucent windows inside a suite of offices inside a bank office building miles from City Hall was not very inviting. The Council Chambers inside City Hall are accessible as soon as you walk in the door. It’s inviting with the openness and clear glass walls making it quite a different experience. The meetings are also videotaped. You can go and watch live, sit at home and watch live or you can go back to see the recording after the meeting if you cannot attend.

I wish McKinney had a better City Hall that incorporated all of the city departments and made a more complete statement about the seat of government, its openness to citizens and anyone desiring to go to one place the public owns to see with their own eyes where the business of government is conducted. The current City Hall is, in fact, an old bank building. You can’t approach it or even see it until you are in front of it. There is no curb appeal, so to speak. For a city our size, it is a little bit of an embarrassment. However, I’ll save structure for a future blog. It isn’t the house but rather the home that this blog is focused.

What’s Different?

Reading through minutes of a meeting is a cold and clinical process. In fact, most minutes are just sterile, skeletal representations that a meeting event occurred, that certain topics were discussed and that votes were recorded. A video recording of the meeting allows one to see which board members have done their homework. There is a joke in city government about the sound of council packets that were delivered days before being opened just as a meeting starts. I watched the most recent MCDC meeting. I was so impressed with the constructive and deep level of questioning as groups made their pitch for money to support their projects. Board members asked about O&M costs beyond the initial funding. They asked about repair and replacement reserves. They asked questions about their financial statements – including their balance sheets! And the observer got to hear the answers. One can see, on record, whether the proposer had done their homework. Now that is a giant step toward transparency. You don’t get that from reading

I watched the most recent MCDC meeting. I was so impressed with the constructive and deep level of questioning as groups made their pitch for money to support their projects. Board members asked about O&M costs beyond the initial funding. They asked about repair and replacement reserves. They asked questions about their financial statements – including their balance sheets! And the observer got to hear the answers. One can see, on record, whether the proposer had done their homework. Now that is a giant step toward transparency. You don’t get that level of understanding from reading minutes, because it’s not in a typical set of minutes.

You also get to hear the tone of voice and see the facial expressions. That’s important. I once emailed the City Council about a meeting the night before where the words coming out of their mouths didn’t match the expressions on their faces. Those are important signals to understand the basis for a vote or even an effort to cloak an approval or a denial of a request in political babbletalk. Once a developer who generally got his way on any request started getting some hard questions from a couple of councilmembers. It was almost funny for the developer’s cronies on the council to sit up straight, pull up to the microphone and tried to rescue the vote they thought was another slam dunk.

You can also see the potential of future leaders headed toward council elections. There is an unwritten rule, it seems, that you need to pay your dues on some boards and committees before you are qualified for being on the City Council. I don’t fully embrace that concept, but it makes sense to show the commitment and to gain the experience. I’m always amazed at council candidates with a burning desire to serve a city who then disappear after an election until the next one come up timed with their burning desire to serve.

Experience is good as long as one is not co-opted into the McKinney culture where certain people are just rotated over the years and become desensitized to the duties of independence and ethical judgment. As I have written about before, I sincerely believe that some actions have been taken by board members who, in their mind, have acted no differently than those before them and those beside them. A question I don’t think is ever asked of a council candidate or a board applicant is this: how many meetings have you attended or videos of meetings have you watched or minutes of meetings have you read from the most recent 12 months? If the answer is none, that is not consistent with burning desire nor a signal the candidate will do their homework.

The Educational Value.

I have taught MPA graduate courses at SMU and UNT in past years. And, as I have mentioned before, I am still a student in what I consider the most wonderful laboratory in the world – local government. Earlier this week, there was a strategic planning workshop for the MEDC Board. I am about a quarter way through the 6-hour video. It is rich with instruction about economic development issues. It is facilitated by an expert, but the Board participation and dialogue are invaluable if one is interested in learning about core municipal issues. Surprisingly and pleasingly, the Board is brutally honest about the strengths and weaknesses of McKinney. There isn’t a better classroom. There isn’t a better laboratory. You can be in the physician’s gallery overlooking real open-heart surgery while in the comfort of your home. Thank you, City of McKinney City Council!

In fact, if you considered every council meeting, MEDC/MCDC meeting and P&Z meeting to be one graduate course class night, one could be equipped in one year to be the most knowledgeable elected official or candidate for City Council who ever walked the earth. Even for a citizen not interested in being on the council or a board or committee, this is great Civics 101 on steroids. An added benefit is the professional input from staff and consultants. One of the saddest observations I’ve made in my lifetime is how the vast majority of citizens cannot articulate the most basic issues and processes of the municipal world that is wholly devoted to making their lives the safest and highest quality possible.

Conclusion.

The City has made a heavy investment in information and materials on their Web site. Our Web site. There are years of financial documents and hours of meeting videos. Some people enjoy book clubs, gardening clubs other study groups for many reasons. One is to simply enjoy that treasured reward that comes from learning something new; to be able to converse about topics not previously explored. If you were to examine the rewards, they would include being able to understand the vernacular of newly discovered areas. They include concepts and philosophical foundations for community life. But they also include or could include real basics. Interesting basics. Just exactly how are water and sewer lines tested for leaks? What are the unintended consequences of a landscape ordinance passed last year? What is happening at today’s council and committee meetings that are shaping our future – or better or worse? LFM

 

 

Heaping Praise & Sending Insults Simultaneously

.Reading time 9 minutes.

Please consider my last blog about the McKinney City Council’s consideration of a private firm taking over our biggest ballpark.

I have never seen a city council go out of their way to thank the staff for what they do. In fact, it is sometimes entertaining to watch each council member compete to be the first to praise the staff. It gets gushy. And it is a pleasure to watch the gratitude and appreciation. It is genuine.

Yet this video clip referenced in the blog is an illustration of how the City Council insults the staff in the very meeting projectile praise is offered. This is a council that has pretty much ignored the Council-Manager form of government for a very long time. Some Council members meet privately with developers in the name of just wanting to be better informed about issues coming before the Council. The only problem is that you often see both the P&Z and staff being overridden without much explanation. The very forum where the public could learn details about an issue, including pros and cons, gets cheated out of a teaching moment.

The first tip off that something is not right in the meeting I have highlighted is that a private company is making a pitch, and the pitch is introduced by a councilmember, Chuck Branch. One of the reasons to have a staff is to vet these kinds of pitches. And everybody knows the danger of indicating a favoritism of a company wanting to do business with the City. Unfortunately, the first worry is criticism from competitors.

In fact, if the staff determines there is merit to a new service or product, the first thing the proposer hears from staff is that the City will have to develop a Request for Proposal (RFP) or Request for Qualifications (RFQ) to see who else might be able to serve the City. Also, there is an obligation for the City to evaluate the best and lowest price for the said service or product.

In this case, you can see on the video where the Parks & Recreation Director is called on to comment on the presentation in the live meeting. It makes you wonder, did Councilman Branch even talk to the PARD director before the meeting? In the agenda packet you find a copy of the Letter of Intent as well as the presentation. In most cases, like with P&Z, you usually find a staff report and probably a recommendation. Not here. It’s all a one-sided pitch.

Except there is usually an obligation to give consideration to a P&Z item. There is no obligation to take up at least 20-25 staff/council hours in one meeting to hear a pitch. Does Mr. Branch have any idea how many pitches compete for staff and purchasing attention every single year? I’m assuming he has no vested interest in this particular company and is only wanting to bring something to the table that he thinks might help the City. However, has he ever been to a TML conference where there are literally hundreds of exhibitors who would love to have 20-25 staff/council hours to make a pitch for something?

There is absolute disregard for the Council-Manager form of government here. Why is the member of a governing and policy board out hustling for something new for the City to do? And is there no sense of bad timing obvious here when the City just completed a comprehensive parks plan? Is there no respect for staff input? Can you imagine the workload on the council and staff Councilman Branch just initiated?

This is where the meeting went sideways. There was serious discussion about – get this – developing an RFP/RFQ to consider a consultant to evaluate the proposal. Holy Cow! This is where the mayor or mayor pro-tem should have shown some leadership and stopped the whole thing in its tracks. It never should have gotten this far in the first place, but by the time a huge investment was made in listening to the pitch, the PARD director and the audience, a council appreciative of the staff should have driven a wooden stake into the heart of this deal. And, on the side in private, somebody on the council should have told the freshman councilmember what a dumb thing he had just done. I would have considered it an imposition on me as a councilmember.

But then that is where the culture of McKinney Governance is to do just that. Way too much involvement in daily operations and details. This should have been handled with nothing more than a paragraph in a City Manager’s weekly memo to the council, at best. One paragraph. We’ve been approached. We looked at it. It doesn’t fit and here is why. We recommend saying no in a polite letter unless you want to pursue it. And by the way, this is one of six items we have been approached on this week (300 in the last year!) as explained in the next five paragraphs. Actually, I’m not sure it qualifies as to be in a weekly report.

Has Mr. Branch even asked how many vendors currently serve the City? And for every one of them there are several more companies that want to have the City of McKinney as a client. And most importantly, for every vendor selected, there were probably six that were told they didn’t get it. For every one of those six, there is a probability that a protest was registered even in a mild form. Can I see all of the proposals? Why didn’t you give me more weighting in this evaluation criteria? My bid was lower than the awardee. Why did you give it to them? I want to challenge you on your definition of “best bid.”

As I have already said, this is insane. I also cautioned the Council months ago that a good City Manager candidate was going to be interviewing them as hard as they were going to be interviewing the candidate. The basic questions were 1) do you as a council understand the Council-Manager form of government and 2) do you respect and adhere to it?  Not in McKinneyLand!

It is clear that Mr. Branch has no clue. It is equally clear that nobody else on the Council does either. Especially to have let this unsolicited pitch get this far and then promoted by a councilmember. God help us if this doesn’t change and we continue the city manager revolving door episodes of the past. Red flag! Red flag! LFM

 

Sometimes The Process Starts With NO!

.Reading time 6 minutes.

Listen up, MPA students and future council candidates! The City of McKinney has just given you a wonderful case study. First, you need to invest a little time to watch this presentation to the City Council and how the meeting played out. Here’s my take:

A group wants to take the City’s best and biggest sports park, Gabe Nesbitt, and investment money to upgrade the fields so they can be used for tournament leagues and bring more out of town teams to play on our fields. They also want to control and collect all of the money, including concessions. They also want the City to continue paying for much of the maintenance costs.

Oops! That becomes unclear right the very beginning. What the company is saying in their presentation doesn’t exactly jive with the materials they already had in the Council packets. They do the typical, “let me blind you with dreams of massive economic benefits” and show a very large $30 million tag. Except the Council isn’t so blind. In fact, they almost compete to ask good professional questions. The company’s answers aren’t so good. They have a good ole’ boy speaker who doesn’t impress the City Council.

But the Council is playing nice. You can tell by their tone that they are trying to be fair and hear the full pitch. Then they ask the Rhoda Savage, the Parks & Rec Director to comment. She is polished and makes some very good points. Her credility is sky high with the Council. You can sense her skepticism, but she is all professional.

Then an original McKinney good ole’ boy speaks. He is not polished, but he is powerful. He calls out 50 years of memories with the good ole’ boys on the Council. While being polite, he delivers a sledge hammer plea. He’s repeats more than once that he is not smart enough to figure this out, but you know very well he is smart as a whip.

But then comes the polished and well thought out speech from Lonea, head of one of the McKinney baseball leagues. She raises questions that nobody in the room would have thought to consider. Bang, bang, bang. You could sense that the Council probably has seen her stern professional demeanor, but they know there is a fire that they surely want to contain.

At this point you know this pitch is not going to fly. But then the bureaucratic (from the Council, not staff) agony overcomes the meeting, like a thick cloud of goo. Oh my goodness, here comes the process. We’re going to study it to death. A park master plan has just be done. It is so new that it hasn’t been presented to the council. Undo? Redo? How to scope another study? Who should do it and who should pay for it? Can’t be staff. Too busy. It will have to have tons of community input, from the same people who were just asked for input on the park master plan.

Stop. Stop. Stop. Every councilmember either doesn’t want this or shouldn’t want it in light of the lousy presentation from the business and the multiple questions raised by the baseball league representatives. Nobody even asks if this is such a good deal, and the business is going to make sufficient money to make a profit or perhaps just break even after they put $millions into it and set fees to cover their costs, then McKinney only has literally tens of thousands of undeveloped acres, so why not do their own thing?

This is insane. The Council is going to allow this to go several steps through the process just so they can say they went through a process in order to say no. NO is the correct answer RIGHT NOW. Why waste staff time? Why get the baseball family in an uproar? The Council knows the little leaguers can fill the council chambers 10x over – and will.

Or they could write a polite letter:

Dear Company:

Thank you for your interest in McKinney. We believe that all of our current resources going mostly to the advantage of recreational baseball is the will of the Council reflecting the will of the people. We believe there is plenty of land in McKinney for you to create a tournament league complex in McKinney, invest your money and set your own fees. By the way, you happened to mention in your answers to some questions that there was some legal action being taken in some adjacent communities where tournament leagues were not being given the same status as recreational teams. We would have to tell you that making that statement was not a very smart thing to do. We wish you well in your future endeavors.

Respectfully,

McKinney City Council

 

Improper Teacher-Student Relationships Are Happening Right Now

.Reading time 14 minutes.

As many of you know, one of my businesses is an electronic news clipping service. I read newspapers from the viewpoint of a mayor or city manager – interested in anything that affects local governments in Texas. I poll and read from 168 newspapers in Texas and about 56 other news sources at the national level. It is simply fascinating to see stories as they pop up all over the state that become “heads up” material. Part of this bubbling up of similar stories is that reporters read other newspapers. An event in the Rio Grande Valley will result in a reporter asking a city in North Texas how they deal with this or that.

But some of the similarities have to do with a wave of events in our state that are, in fact, truly societal. I pick up hints by also reading from the national level. Sometimes I am baffled. How is it that black mold was like swarming locusts just a few years ago and now there isn’t a story to be found? Did it pop up overnight and is now cured? I doubt it. It is my guess that a 1,000-year-old problem got the spotlight placed on it, and much has been cured. But has it disappeared? Doubt it.

One of the trends I’ve mentioned a lot over the past few years has never gone away and is, in fact, growing at alarming rates. I don’t keep counts, but I’m guessing there are 4-5 reported on just about any given week. I actually don’t send most of those stories even though I often mention how many I’ve found on a particular day. I had just made that point a few days ago when a more comprehensive story came out four days ago in the Austin American Statesman. Please take time to read below.

But don’t stop there. Ask your school boards and administrations to explain how they are dealing with this issue? There should be some policies, and here’s why. It is happening in your ISD. Another consideration has to do with a police statistic. Every police department knows that for every reported incidence, there are usually multiple incidences of the same type that are not being reported – in this case by the student.

Yet the critical issue is prevention. What is being done to prevent these incidences from happening? Everybody would probably agree that 100% prevention is not realistic. The key is to make sure that there is an proactive preventative program in place. Is there regular emphases placed on improper teacher-student relationships through teacher meetings? If there is a known flirtatious student being noticed, is there a confrontation and counseling? If you follow these stories, you realize that many do involve female teachers as well as men. Are all teachers and employees asked perhaps a couple of times a year, in private, if there have been any incidences or temptations and how the teacher handled it? Is there a policy that an unreported incident, no matter how small, is grounds for termination?

Again, an improper teacher-student relationship is happening in your ISD right now as you read this blog. As I am prone to do, this is another example where I would urge everyone to work it backwards. Imagine a major scandal sufficient to rock the ISD and cost hundreds of hours and thousands of dollars dealing with an improper relationship. Now go back to how it started. What could be done at that moment to head it off? Who knew something didn’t look or seem right and had been suspicious all along? LFM

Improper teacher-student cases on track to break Texas record

By Julie Chang – American-Statesman Staff
Posted: 5:27 p.m. Tuesday, May 10, 2016
Highlights
Social media and text messaging continue to be main drivers of the increase in such cases, official says.
Between Sept. 1 and March 31, 114 cases were opened, up from 85 during the same period last year.
Texas Education Agency wants more access to investigative documents.
————————————————–
The number of Texas teachers accused of developing romantic relationships with students this year is on course to outstrip last year’s record total, even as quashing such misconduct remains a priority for lawmakers and education officials.
Between Sept. 1 and March 31, the Texas Education Agency opened investigations into 114 teachers who were accused of acting improperly with students — up from 85 teachers during the same period last year — with behavior ranging from sending personal text messages to having sex with multiple students.
Last fiscal year, the education agency opened 188 such cases, the seventh consecutive year of growth.
Related
Report of improper teacher-student relationship at Ann Richards School
Surge in improper student-teacher relationships prompts state inquiry
Texas sees rising number of improper teacher-student relationships
Social media has continued to fuel this year’s rise, said Doug Phillips, director of investigations at the Texas Education Agency, who will testify Wednesday before the Texas House Public Education Committee about improper teacher-student relationships. The state Senate held a similar hearing in December.
Phillips’ wish list from lawmakers for the 2017 legislative session will include tightening school district requirements on reporting teacher misconduct; requiring school districts to develop policies to rein in unsupervised contact between teachers and students; and forcing school districts to hand over teacher evaluations, which are typically protected by privacy laws.
“We are here to protect the kids. School districts are here to protect the kids,” Phillips said. “We all have the same interest. We have to deal with this issue of giving teachers this direct unsupervised contact.”
Four local cases
Of the 118 investigations the Texas Education Agency has launched since the fiscal year began in September, at least four were in Central Texas school districts:
• Westlake High School math teacher Haeli Noelle Wey was arrested in December after police said she had sex with a 17-year-old student and kissed and touched another 17-year-old student.
• Vandegrift High School communication applications teacher and coach Je’ron Curtis resigned in December after the school district said he was in a relationship with a student in another school district.
• Math teachers Austin Locklear from Crockett High School and Keith Marquez from McCallum High School resigned this year after the Austin school district launched separate investigations into allegations of improper teacher-student relationships, according to documents the district sent to the Texas Education Agency.
The Austin school district reported that Marquez’s actions weren’t criminal, but documents the Texas Education Agency provided to the American-Statesman didn’t describe the types of text messages that he allegedly sent to a student. The documents also didn’t detail the accusations against Locklear.
Although an improper teacher-student relationship is narrowly defined in the penal code as involving sexual contact or online solicitation of a minor, the education agency can sanction teachers or revoke teaching certificates based on misconduct that falls short of a crime, including exchanging flirtatious text messages with a student.
Superintendents are required to report misconduct to the state within seven days if it has led to the termination or resignation of a teacher.
Policing e-messages
Phillips said most of the improper teacher-student relationships his office investigates stem from social media or text messaging — types of communication that provide opportunities to push professional and personal boundaries with students while creating a record of exchanges that can be used later as evidence.
Experts suggest that some school districts fail to adequately train teachers on communications boundaries because they assume teachers know what they shouldn’t do.
Some districts also tend to perceive frequent and candid training on improper relationships as admitting to a problem, said Phillip S. Rogers, head of the National Association of State Directors of Teacher Education and Certification. The association has co-developed a model code of ethics for educators, including in the proper use of technology.
“One of the things we find with superintendents when we start talking about the model code, they’re a little standoffish. Why? Because people are going to think that ‘we have a problem,’” Rogers said.
Phillips said more training will help, but he also suggests that school districts require teachers to copy parents on any electronic messages sent to students or to use a district email or messaging system to communicate with students.
“If it takes legislation to compel districts to implement policies about use of electronic media and any communication, in my opinion it should be that you don’t communicate with a student one-on-one. It has to be transparent,” he said.
More investigative power
For years, Phillips’ investigators have faced resistance from some school officials who withheld teacher documents because they feared lawsuits or wanted to protect district reputations.
Lawmakers ­granted the TEA subpoena ­power Sept. 1 after the ­agency complained that some school districts were redacting names of key witnesses and sometimes entire pages of a teacher’s personnel records.
Phillips said the subpoena power has helped the state get information and close cases quicker, but there are still some loopholes available to districts.
One weakness is that the law requires only superintendents to report a termination or resignation due to teacher misconduct, if they know about it. Phillips said the language should be tightened so all school district officials have a responsibility to report teacher misconduct.
Another loophole, he said, is that school districts can hide information about educator misconduct in teacher evaluations, which are protected by privacy laws and aren’t obtainable through subpoenas. Phillips said he will ask legislators for such authority.
“We have to get away from worrying about the teachers. We have victims who are kids,” Phillips said.
The Texas Association of Professional Educators said it supports making teacher information available as long as the accused educator has the right to review the information that is provided to investigators.
What we’ve reported
The American-Statesman first reported in May 2015 that some Texas school districts, worried about lawsuits and their reputations, were refusing to give information to state officials about teachers accused of improper relationships with students. That lack of information made it more difficult for state education officials to sanction teachers who had left school districts for alleged misconduct. Later that year, the Legislature granted subpoena power to Texas Education Agency investigators.

Texas Local Government Sales Taxes Are Flat

.Reading time 11 minutes.

One always has to remember that you can drown in a pond that only averages being 6-inches deep. I’ll get back to you on that one.

For the most part, local governments (cities, counties, transit authorities and special districts) take advantage of the maximum sales tax rate of 2-cents. That amounts to just over $8 billion each year. The state collects their 6.25%, so it is easy to see how significant this revenue source is in Texas. They also collect on auto and boat sales while the locals get none of that slice. Sales taxes are one of the major ways we keep from having an income tax in Texas. It is usually either the number one or number two largest revenue sources for the cities’ General Fund, often trading places with Property Taxes. Sales taxes are the Property Tax Rate Equivalent of about $0.35-$0.45.

When you look at sales tax data that is seasonal, while also being tied to the economic cycles (two different factors), it is hard to make sense of it unless you view the data on a Rolling 12-Month basis (R12). That way you are always looking at a year’s worth of data. As you can see in the chart below, the trend has always been to the upside except temporarily during recessions. Texas is not immune from hurting badly when the consumers (70% of the economy) decide to slow down their spending, willingly or unwillingly. There is also a significant amount of business-to-business (B2B) sales and use taxes that make up this important revenue base.

Interestingly, you can use this data to identify the exact month that it was clear to the chart reader that we were entering into the Dot Com recession as well as the Great Recession. We can also see the exact month we had a confirmed bottom. The depth and length of the recessions and the rate of the recoveries are also critical to understand. Part of the understanding of recessions is simple: they happen! Economic cycles are treated as an injury that demands all kinds of rescue efforts and major surgery. Hence the Federal Reserve as well as the Political Machinery jump into action and sometimes do dumb things to prevent a natural economic cycle from playing out as it should.

As a whole, the local governments in Texas have collected $8,040,691,221 in sales taxes for the 12 months ending May 2016. However, the amount collected for the 12 months ending May 2015 totals $7,966,819,038! That’s almost perfectly flat. In fact, we are in our 15th month (it really went flat in March 2015) of almost zero growth.

Even more revealing than the absolute dollars is the R12% growth rate, the red lines. This is a more sensitive indicator and announces a slowing and changing of a trend quicker than can be seen just looking at the blue dollar bars. There are several stories in the red lines. Since 1992, the average has been 6.14%. That is a very robust number that takes into consideration 1) population and business growth; 2) inflation; and 3) a “wealth/debt” factor. We are a relatively wealthy state, but we have also been as foolish as the rest of the nation with consumers spending more than we have via HELOC loans, credit cards and any other kind of money we could borrow.

As a rule, as the historical data proves it, any time the R12% growth rate has even approached 9-10%, a recoil soon follows. The recoils can be ugly and as deep as the preceding rises were steep. This makes sense in that the third factor listed above cannot be sustained for a long period of time without bursting. If the consumer lived with their means, there would not be as many booms and busts. Also, full-employment has the unwanted and unsustainable pay increase pressures that breakdown at some point.

So, where are we? The most recent R12% peak was at 8.02% in March 2015. If you are studying the chart below carefully, you should be asking about the previous recent spike that declined to the average and then rose again before the current roller-coaster dip started. The answer is that we were recovering from the Great Recession just fine, peaked and then were pulling back when something happened. Gasoline prices plunged giving the consumer a few extra bucks to spend. Wal-Mart keeps metrics and can actually tell when tax laws change or some event gives or takes away $20 per week of people’s spending money.

But in Texas, cheap oil and gasoline is a double-edged sword. Hence, the downward pressure of the economy overwhelmed the state. An extra $20 per week for the majority can’t offset $30,000 to $100,000 jobs being lost by the thousands. The interconnectedness of our state started showing up in a big way 15 months ago.

The R12% growth rate peaked and has declined in 14 of the 15 past months. That statistic dropped to a brutal low of +0.93% in May 2016. It is possible that it could stay near-flat for months, but there would be every reason to believe we could go negative in the R12 and the R12% as early as next month.Yes, it is possible the sales tax levels could rise again. But I’ll let you make the call.

Today there were several stories in the news about some of the major bellwether retail companies suffering big declines. The job market has been softening for several months at both the national and state level. Fitch came out today with a report that housing prices in the North Texas were 15-20% too high. My goodness, we have learned absolutely zero from the causes of the Great Recession!

So if this is statewide information, how are individual regions, sub-regions and cities doing? Well, that’s why the 6-inch drowning comment was made in the introduction. While the state as a whole is grinding to a stop, some cities are getting killed. Mostly in the oil patches and where local economies heavily support the oil & gas industries.

See the TML Regional Map following the chart. Most of the regions have been falling steeply for months and have been negative for at least a few months. As of May 2016, these are the following R12% results:

TML Region 02: -2.10%. (Amarillo area)
TML Region 03: +0.65%. (Lubbock area)
TML Region 04:-5.90%. (Midland-Odessa area)
TML Region 05: -1.58%. (Wichita Falls area)
TML Region 06: +3.88%. (Abilene area)
TML Region 07: +0.40%. (San Antonio area)
TML Region 08: +12.28%. (Fort Worth area)
TML Region 09: +4.53%. (Waco area)
TML Region 10: +7.24%. (Austin area)
TML Region 11: -2.97%. (Corpus Christi area)
TML Region 12: +4.62%. (Rio Grande Valley area)
TML Region 13: +17.96%. (Dallas area)
TML Region 14: +18.29%. (Houston area)
TML Region 15: +8.13%. (Tyler-Longview area)
TML Region 16: -1.39%. (Beaumont area)

Yes, North Texas and a few other regions of the state don’t know what everybody is talking about regarding slow growth. There have been some huge corporate moves in motion that don’t stop until  done. And remember that these TML Regions are quite large. Region 14 is doing well, but Houst0n itself is down -2.71%.

Here is what I do every month, and I invite you to dive in and see for yourself. First, look at the state as a whole. Then look at the 15 Regions. Appreciate the economic diversity across the state. Then look at any of the 1,600+ individual entities.

You can train your eyes fairly quickly to just look at the shapes and directions. Then with the roll of the wheel on your mouse, you can spend just a few seconds on each chart to size up the magnitude and direction of sales taxes. A dozen people looking at 50 charts are highly likely to arrive at the same conclusion regarding the overall direction and health of this key metric.

Appreciate the fact that sales taxes are just about as early of a warning system as we could have. The sales tax checks we received last Friday are for the actual business activity through March 31, 2016. Imagine that. Buy an iPhone on March 31, and the sales tax is in the local government’s bank account about 40 days later. That is dang near real time.

The collection of charts can be found at this link. It is a large file that may take a few minutes to download. I can download on my iphone and iPad, but it is best downloaded to your laptop or desktop. For those of us who like real data in addition to charts, a recap of the last 25 months can be found at this location.

Let me know if you have any questions. LFM

ScreenHunter_03 May. 12 16.40

TMLREGIONSmap

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More Proof That McKinney ISD Lacks Transparency

.Reading time 4 minutes.

Even if you are not inclined to dig into financial documents, please take a quick look at some key pages of the following documents:

McKinney ISD Financial Report for FY 2015. (93 pages).

Plano ISD Comprehensive Annual Financial Report (CAFR) for FY 2015. (163 pages).

Frisco ISD Comprehensive Annual Financial Report (CAFR) for FY 2015. (146 pages).

Allen ISD Comprehensive Annual Financial Report (CAFR) for FY 2015. (196 pages).

To make this easy, first look at the cover page to give you a clue to the differences in professionalism. MISD doesn’t really have one. In fact, they do not produce a comprehensive audited report. To have a CAFR, you are required to have much more managerial and analytical information to help the layperson understand the contents. MUCH MORE.

Now go toward the back of the reports. The last three will have an entire section of statistical data: several schedules showing ten years of comparative data. I am a finance person and I simply can’t see the story in the numbers without comparative data. I spent a considerable amount of time for my last two blogs just to get some select data compared for the last five years. The CAFRs contain ten years of very helpful information.

In all fairness, many of these districts have moved from the basic required audited financial reports to CAFRs only in recent years. Perhaps we will see a MISD CAFR someday. But based on the efforts I’ve seen in recent months to be transparent, I’m guessing they are in no hurry.

Here’s the interesting part, you don’t tell the bondholders that you are sorry you don’t have comparative data and that you promise that you will be more forthcoming and helpful in the future. No! You produce much comparative data and ratios for at least the most recent five years. If you issue bonds regularly, which they do, then you already have a ton of the ten-year historical data. The work to produce a CAFR is lessened.

But, there is a part that takes a little work the first time. It is the MD&A, which stands for Management Discussion & Analysis. A little work and a willingness to interpret complex financial documents.

In fact, MISD just refunded bonds. The Official Statement is dated a month ago. This document is filled with legal language. Skip those parts for now and just look at the tables. It is rich with good information.

MISD may have a Sheep-Board and even an abundance of Sheep-Citizens. What you won’t ever find is a Sheep-Bondholder and the cast of players watching out for the bondholder, such as the bond rating agencies. As a side note, you would be amazed at the additional information in a modern O/S compared to the 1970s and earlier. They were very thin on analytical information. But after being asked repeatedly for certain information, the Finance Advisors realized they need to assemble the information that was going to be requested time and again. Also regulatory agencies have beefed up requirements all in the name of protecting the bondholder.

However, the bondholder just wants to make sure they get their interest paid and their principal back.

As a taxpayer, I want to see more comparative numbers without having to mine the data from multiple sources. There are plenty of examples of how the more truly transparent ISDs provide their information. Or just look at what the City of McKinney has been doing for years! Can MISD spell C-O-O-K-B-O-O-K? LFM

 

 

 

McKinney ISD Physical Assets Are Depreciating $44,109 Every Single Day

.Reading time 8 minutes.

Introduction.

The problem I have with the overuse of the word “transparency” is that it really only means “we put it on the Web, but it is your job to dig through 1,000s of pages and millions of numbers to make sense of it.”

For instance, MISD puts the last several years of budgets and audited financial statements on the Web site. However, I’ll bet there aren’t collectively 10 people in the district (citizens, board members or non-financial staff) who read the audited financial statements and footnotes. That’s why real transparency would include the finance people highlighting certain key numbers and ratios at board meetings. I touched on just a few metrics in my last blog.

It is enlightening to realize that New York City defaulted on some of their bonds in 1975. It is important not only due to that single event, but something more profound happened. The governmental accounting industry ended up getting a big part of the blame. It was from that event that accounting standards got strengthened and several regulatory bodies and accounting authorities got established. That always happens with any segment of our society does not do their own policing.

To this day four decades later, the rules continue to get written. The underlying message has been “our profession is about disclosure and it won’t be us to blame if something runs amok.” The evolution has been fascinating. Many big ticket items have forced the accounting and auditing profession to take a hard look at themselves. Three of the largest have been pensions, post-employment benefits and infrastructure accounting. There have also been three stages of evolution and solution:

  • Don’t recognize an expense at all.
  • Recognize the expense but put it in a footnote.
  • Move the expense to the income statement and deal with it on the balance sheet.

I believe it was in about 1987 that I started writing about how if certain expenses were recognized on the financial statements, many cities would find themselves in a deep deficit.

Tragically, the fatal flaw in all of these efforts to improve disclosure is that you can’t force people to read. You could force knowledgeable people to interpret and explain to the layperson – meaning the councils and boards. That flat ain’t happening anywhere.

What About Infrastructure?

If you dig into the MISD financial statements, you can find some very interesting numbers. First, there were $612,513,419 in Buildings & Improvements and Furniture & Equipment. Those are assets that depreciate. This does not count $40,071,014 in Land that is not a depreciable item. The fact that $612.5 million depreciate means they can also turn into liabilities at some point in time. Also, keep in mind that $612.5 million is the number for the original costs at the time built.

We can get an idea of how fast MISD thinks they will depreciate. Buildings are recorded as depreciating over 40 years;  Building Improvements over 20 years; Vehicles over 10 years; Office Equipment over 7 years; and Computer Equipment over 5 years. That sounds fairly reasonable.

The one flaw MISD and every other governmental entity makes is that they think of depreciation as if that happens uniformly each year in a straight-line fashion. In reality, most assets depreciate in a geometric or exponential fashion. That means it is easy to get lulled into a period in the early life of an asset when the signs of deterioration are not too visible, pushing the inevitable confrontation off for a number of years. However, when signs of age and deterioration do begin to show, governments have to move swiftly to keep up.

However, it can hardly be a surprise that an expense is coming. That is when we can’t afford to skip basic maintenance that will soon turn into repair. And repair that will quickly turn into rehabilitation. And at some point there will be a total replacement likely. Done properly, replacement might be well past 40 years.

On the maintenance to replacement continuum, there is a graduation from the operating budget to the capital budget to the debt-funded options. The extremes of the continuum are easy to figure out. It’s the middle pieces that are judgment calls. However, a well-managed system has people who know the expected life of signage, roofs, HVAC systems, carpet and every other component of a building.

Okay, So What’s Your Beef?

I’ve already discussed the trickery that I think is involved in the current bond program for a stadium with a ton of basic maintenance and equipment in it so every school could show benefitting at least a little from bond money. I’m just wondering why more operating money hasn’t been spent in recent years to deal with the smaller items to keep the debt levels lower for MISD. My last blog raises the question about why is MISD sitting on $25 million more in reserves than they need?

In Note 4D found on page 30 of the FY 2015 audited finance statements,  MISD shows that there was $16,099,959 recorded as depreciation last year. The numbers are broken down nicely by 10 different categories. I am quite certain those numbers are supported by an asset inventory that goes down to the individual water fountains in the halls and desks in the classroom.

My beef is this: if they know things are wearing out to the tune of $44,109 every day, why is MISD letting needs being deferred to roll up to a level that requires $170 million in debt to take care of basics? I know a chunk of the non-stadium money is for some building expansions, but you don’t sell bonds for things like defibrillators. Well, apparently MISD does.

The budgets provided online are the least informative set of budgetary documents I’ve seen in my career. I don’t see any meaningful financial policies that include replacement strategies and funding. No fund balance policies that I can find. Is the Sheep-Board asking for this kind of information? If not, why not? If they are getting this kind of management and policy making information, why isn’t it on the Web site? Even the documents on the MISD Web site are listed in a random order. If you were going to have links for the last 10 years of audited financial statements, wouldn’t you think they would be listed in chronological order?

I just don’t undestand why the stable of credentialed officials at MISD don’t get it. MISD may be governed by a Sheep-Board, but I’m sensing the Sheep-Citizens are getting a little restless. We want more information to understand how MISD business is run. LFM

 

McKinney ISD Is Hoarding Money Big Time

.Reading time 12 minutes.

Introduction.

There is an old style kind of thinking in local government that can be overdone. It is good to have reserve funds. To have balances too low is not good management. However, to consider good management to be how big an entity can build their fund balances is where the flaw comes in. Huge balances and unmet needs are where the clashes come into play. I have rarely seen any local government that has all of their needs met due to some degree of strained resources. I would even go so far as to say that there is a healthy tension when funds are tight enough to cause an organization to set priorities and to be pressured to reallocate resources as a manner of normal business.

How Do You Determine Appropriate Fund Balance Levels?

There is a way to approach this question logically. There are many factors to consider. You look at your revenue and expenditure flows throughout the year. A worst case scenario is if your revenues are heavily weighted toward the end of the fiscal year and your expenditures weighted in the early part of the year. If revenue potential to not materialize is high, you need more reserves. If you are located in the coastal regions where hurricanes are a certainty at some level of frequency, then you need to be prepared with larger reserves. If you are in a hyper-growth situation, the demand for services precedes the tax monies coming in.

If the opposite of these items are true, then an entity could have less reserves and everything be just fine for regular annual operations.

There is also the argument of pleasing the bond holders and bond rating agencies. This argument is often misused or even abused. There are many factors taken into consideration when local governments receive a bond rating. Reserve levels are big concerns, but only one. The local economy, management controls and governing body policies are also very important. There is also a consideration as to how all of an entity’s metrics stack up with not only neighboring entities but also across the country based on size and rating grades.

However, a red flag should go up when you hear locals wanting to shut down a conversation or question by using the rating agency club. Club as in wooden bat, not a fraternity. Twice in the past I have heard the same phrase used by different councils in Texas: “we are so tired of bowing to the altar of the AAA bond rating when we have needs going unmet.”

Let’s Take a Stab at It

Is MISD experiencing rampant growth? I was shocked to learn that the student level for MISD is virtually the same as it was five years ago. That is as far back as I had time to look, but I will be adding an additional five years to my database when I  have time. From FY 2011 through the current FY 2016, the student load has been 24,422; 24,733; 24,382; 24,565; 24,715; and 24,915. That is relatively low and stable growth of about 0.40% on an average annual growth rate basis.

BTW, most of the ISDs will publish in their budget and or audited financial statements the total capacity and level of usage by every school in their district. I find it strange that MISD fails to disclose these critical metrics that anybody can understand. We know that the absorption rate in total is about a low of 99 students per year. What is that level by grade and school? What is the capacity and utilization rate by grade and school? Does the Sheep-Board ask these questions? And if they do and know, why wouldn’t they share that great information with us?

During this same time period, the expenditures per student have gone up 2.22% annually. When inflation is taken into consideration, this means to me that spending levels have been flat. We need a new stadium, they say, but not a dime more is being spent on academics on a per student, CPI adjusted basis? Something is wrong with that logic.

At the same time, the revenue base has gone up 3.00%. Due the shifting of state funds to local support with the controversial TRE election and adjustment, property taxes have actually gone up an average of 7.06% annually.

What About Reserve Levels?

This is where resources have shifted, and our attention is needed. The average growth rate of the Fund Balance has grown by 10.84% annually!

So, what is the level that is really needed? One of the ways almost every governmental entity shows this is by the number of days of operating expenditures in the Fund Balance. Some use a percentage, but all you have to do is multiply by 365 to get the statistic that is a little more relatble. For instance, if you knew that the FY 2011 budget projected a fund balance of $45,163,432, all you would know is that the number sure sounds big. However, if you knew that was about 25% of a year’s worth of spending, you get a better perspective. Multiply by 365 to get 90 days worth and now most of us could grasp the degree of reasonableness. Most policies would state a number like 60-90 days, meaning 16-25%.

So, 90 days was good enough for the FY 2011 budget, but how did that year end up regarding fund balances? The answer is 118.7 days. MISD typically budgets conservatively. Then the excesses that could go into the classroom go into Fund Balance. And it is all labeled as good management. If teachers have to go into their own pockets for classroom supplies they think is necessary, and fund balances get bloated, what’s wrong with this picture?

What  happened after FY 2011? Glad you asked. Hold on. The Fund Balances have mushroomed. MISD went from 118.7 days (FY 2011) to 135.46 days (FY 2012); 113.38 days (FY 2013 the year of the drawdown before the TRE); 120.53 days (FY 2014); 140.64 days (FY 2015) and is headed toward 134.96 days for FY 2016.

What is the dollar value of Fund Balance projected to be in FY 2016 at 134.96 days of operations? The answer is $74,924,235.

What would that Fund Balance be at the end of FY 2016 if it was at 90 days? The answer is $49,964,294 or $24,959,941 less than projected.

What could it be used for? For operations, but there would need to be controls. You wouldn’t spend $25 million on pay raises, because then you would need another $25+ million for each subsequent year. But there are easily $25 million in the bond program that are actually discretionary items like defibilltors that could have reduced the bond programs.

Could taxes be reduced? Sure could. The fact is that MISD did not need the full 17-cent tax rate in the TRE from two years ago. They were heavy by at least 3-4 cents. Maybe more. Let’s do some math. If MISD gave back to the taxpayers. $25 million over the next five years, how much would the tax rate go down? The answer is 4-cents, almost exactly. The 2016 preliminary tax base is $12.52 billion dollars. MISD is going to generate $17,019,482 more in FY 2017 than in FY 2016 at their $1.67 per $100 tax rate.

More Findings & Conclusion.

MISD is hoarding money. It’s nice to have a cushion, but MISD cannot justify one as large as they have. It could be reduced with little repercussions. They have been intellectually dishonest again, which continues to be confirmed when you dig into their numbers and listen to their yak-yak. Their Sheep-Board should know every piece of information mentioned in this blog. They are either complicit by not asking the questions or already knowing the answers and not establishing policy to cover needs.

The perception that the City of McKinney is growing in leaps and bounds does not translate to MISD since apparently much of the growth has been in the Frisco ISD.

Another trouble spot is that even though MISD has an 8.86% growth in the FY 2017 tax base in the making, 6.98% is coming from revaluations and only 2.14% from new construction. Those same numbers for the City of McKinney’s 10.34% growth are 6.97% revaluations and 3.51% new growth. Neither are very impressive on the new growth part. Revaluation means the same taxpayers paying more unless the tax rate is decreased.

The Certified Tax Roll for FY 2017 will not be finalized until July 25, 2016, so these numbers will change slightly. However, it appears the Appraisal District has adjusted the preliminary numbers to account for some losses through the appeals process.

The numbers I have not seen from MISD is the operating costs of the new stadium. It is a basic tenet in capital projects management that all CIP projects should reveal the operating costs the citizens are buying into. They already confirmed the tax rate equivalent of the “free” stadium to be 4-cents after I pushed for them to disclose it. What is the operating impact going to be? LFM

 

 

How Many People Can Fit On A Bus at McKinney ISD?

.Reading time 4 minutes.

McKinney ISD approached the McKinney Zoning Board of Adjustment this week to request a reduction in the required parking spaces. Whoa! That was the single biggest argument for needing a huge multi-million dollar stadium. How did they come up with that rationale?

I was asleep at the wheel and didn’t notice this item on the ZBA agenda until I passed the bulletin board while in city hall yesterday. I assume it passed, but I could not confirm.

Later I read the agenda item and the explanation provided by MISD to the ZBA. I’m not a very smart person, but I do have to rely on my 7th grade math. Also, I am haunted by physics, the time and space stuff.

First the requirement for 3,000 spaces comes from a 12,000 stadium capacity adjusted for at 1:4 parking space requirement. That would mean in gross terms that a stadium filled with 12,000 people all driving in cars would have to have 4 people per vehicle. My logic tells me that there will be many cars with 4 people, but it sure won’t be the average.

But that’s gross. Mathematical gross, not ugly gross. That comes later.

MISD points out that the 42 bus parking spots are not taken into account. I agree. About taking buses into consideration.

Yet here is where it gets ugly gross. MISD wants to subtract 3,402 seats that will be filled by people coming on buses. In my mind, 42 buses seems like a lot, but I’ll take them at their word.

Now here comes the interesting arithmetic. MISD is assuming that each of the 42 buses will have 81 people on it!

Wow! That seems like a lot even if the seats were filled by elementary kids. But football players, band members and equipment as well as cheerleaders and drill team with all of their accoutrements?

How many people can fit into a phone booth? The number for a college fraternity initiation and for the normal use are way different.

Did the ZBA ask any questions or do any kind of logic test on this pitch? I don’t know yet. I wasn’t there, and that is all my fault. Mea culpa again. I hope the ZBA minutes will reflect the Q&A.

Here is what I would like to know. In this particular case, I don’t care squat about any other school districts. We’ve got real life data right here in McKinney.

  • What is the average number of people per parking space at the McKinney high school games right now?
  • What is a real close estimate of the number of people on MISD school buses when we go out of town to a football game? Do we take 21 buses at 81 people per bus? What is the most we have ever packed on to buses and what is the largest number of buses we have ever taken to a football game?
  • BTW, why is this being brought up six days before the election?
  • If the ZBA let this one get by without heavily questioning the data, what else do they approve without scrutiny?
  • Did the MISD Sheep-Board get briefed on this item, the timing and, if so, what comments did they have? Did any of them attend the ZBA meeting?
  • Did the McKinney City Council have any level of curiosity at all and ask any questions? Did any of them attend the ZBA meeting?
  • Also, where is any kind of staff recommendation like is usually found in Council and P&Z agenda packets? LFM

 

Will The Real Population Numbers Please Stand Up!

.Reading time 8 minutes.

Dear Santa:

All I want for Christmas is a good clean set of official population estimates by year. From one official source. I know. I said by year, but it’s not that easy. Population numbers “by year” come in at least four flavors. As of April for Census purposes. As of July for intra-census years. By fiscal year that usually begins in October. And let’s not forgot the good old calendar year! Oh my. I just don’t care. Just make all of the “years” be consistent, please.

Is there a way, Santa, for it to be against the law for any agency to put out population estimates except for the one designated and blessed by you, and only you, to be the official estimator? Also, is there any way that you could require that central agency to let the city officials see the estimates first. Or better yet, have the city submit their estimates and the basis for their estimates to the official high order of population estimators that report only to you? If there is a difference, one party or the other has to agree to one number. If you have to be called in to be the sole arbiter, then so be it.

If the numbers that become the official estimate are averages, please do me a favor. Don’t footnote that it was averaged or that the median was used. I don’t want to know. The official number must be the official number. Yes, it must take into consideration that there is a vacancy rate assumed. Until satellite imagery tools are available to compute an exact vacancy rate, then make one up. But don’t footnote what it is. If it’s from your anointed pop estimating laboratory, then keep it secret. I don’t want to know. It won’t matter, because there can be only one number.

One last favor, Santa, would you please check over my compilation of all Texas cities since 1990 that can be found at this safe and secure Adobe site? I worked very hard to combine all of these files.

I have some other questions, but I don’t want to distract you until you have time:

  • Why was Uncertain, TX uncertain about the name they wanted to give themselves? That one is really bugging me.
  • Also, once a city has a name, is there any way you could make it illegal for another city to put North, East, South or West in front of it and them claim it as their own? That’s just not right and makes it so confusing. Make everybody be original.
  • I believe in the punishment fitting the crime, Santa, so would you permit a public flogging of the person who allowed a city to have the same name as another city in another part of the state? That’s just wrong! Putting the county name in parenthesis is not a fix. I want my pound of flesh on that goof.
  • Does the Town of DISH regret they changed their name for free TV service? Is that like a tattoo that you just have to live with for the rest of your life? Did they think that one through and realize it had to be all caps? Do they yell DISH when someone asked them where they are from?
  • Why did Tool, TX let that happen? Was that a positive term at some time in the past or was there a Mr. Tool who decided to gather all of the little Tools and start a town? I’ll bet it never gets misspelled like Balmorhea.
  • Could Cut and Shoot not decide, so they used used both suggestions? I’ll have to look that one up in the Texas Almanac. Perhaps there was a tentative name until they had their first council meeting that didn’t go so well.

It looks like things are going fairly well in Texas, Santa. There were 26,956,958 of us as of July 2014. Adding about 400,000 to 450,000 a year is pretty impressive! I estimated the numbers for 2015 and 2016 using the most recent five-year average. I could get 2015 from another source, but then I would have to worry about reconciling numbers, and I’m flat worn out from putting together what I have now sent you.

Oh, I forgot to mention something else, Santa. I know you are expecting us to provide services to an additional near-half-mil people every year at no additional cost. Sorry Santa, that ain’t gonna happen. However, most are coming with jobs and equity from their California homes, so we will be okay. Just in case you belong to that Tea Party, Santa, I couldn’t resist.

I am about to release this compilation of population numbers to my blog and CityBase readers, Santa. I’ll let you know when I get a landslide of mail telling me the numbers I am showing for them are wrong. Some will use colorful Texas adjectives about how wrong they are.  That’s why I put the source on the bottom of my report. I hope they don’t go probing around the Web to learn there are only about a dozen “official” state and federal agency population numbers available. Most are not sufficiently generous to include much history. The more history, the greater the potential for arguments. We don’t talk to each other here in Texas, Santa. It’s not in our DNA. We’re flexible. We are also optimistic. Our population would be 100 million by now if it weren’t for those dang Census folks.

There are also several agencies that provide future estimates, way past 2050. The problem with some of those official sources, even those used to forecast water demand, is that they apparently don’t have logic checks built into them. Some state agencies estimate cities to have a certain population by 2050. The only problem is that a few of those cities were at those population levels 10 years ago. Others are projected to be way larger than they are now even though they are nearing build-out and are landlocked. Guess we will see some 100 story housing units in Texas someday.

Anything you can do to help is greatly appreciated, Santa.

Your Faithful Analyst,

Lewis