Which Political Subdivisions Are At Risk for Bankruptcy?

I've been getting a lot of questions and comments lately about municipalities and bankruptcy. As some readers may recall, in 2010, I pressed our then-finance director to please address just what bankruptcy in a municipal setting is all about (I should add that there was extreme reluctance from pretty much all corners to entertain such a question but that's another story - my point was that people needed to be aware of what we were looking at when we looked over the cliff). I never believed that I would contribute to any decisions that would in fact lead Pepper Pike into bankruptcy, but as a former director of risk management, this is what you do - you need to know.

My responses, this year, have all been that there are many circumstances that must exist for bankruptcy to end up being the option chosen by (or forced on) a municipality and that the examples we're seeing in the news are not comparable to Pepper Pike, for many reasons, despite any similarities people may seem to recognize. This article which I just read today, "Surviving California Municipal Bankruptcies," is a good primer on just how it happens, and how it can be prevented.  And I've kept an eye on this community for a while - San Carlos - because I listened into a shared services webinar they did a few months ago about all the steps they've taken to maintain service provision and not go near bankrupt.

With the switch to Beachwood for Pepper Pike dispatch starting yesterday, we're well on our way to learning from examples like San Carlos - and that's a good thing.

Listen: Economic Pressures on Local Governments

I know a few local folks who might have a few things to say about that topic, featured this morning on the Diane Rehm show. You can listen there once the podcast is up or now if it's not yet 11am on Tuesday morning.

And if they really want to get provocative, how about asking the guests how many local electeds will call the fines and fees they're imposing or increasing, whether the service is provided by a private contractor or not, a new tax, given the Supreme Court's health care act ruling last week. 

Here's the description:

Stockton, Calif., is the largest U.S. city to declare bankruptcy, and others could follow. A panel joins Diane to discuss economic pressures on local governments and the push for privatizing public services.

Guests

Michael Nadol, managing director, Public Financial Management, former deputy Mayor, Philadelphia, adjunct professor of competitive government, University of Pennsylvania Fels Institute of Government.

Kim Rueben, public finance economist, The Urban Institute, Washington, D.C.

Harris Kenny, policy analyst, Reason Foundation

Kerry Korpi, director of research and collective bargaining, American Federation of State, County and Municipal Employees.

The changing role of government supports new mayor's emphasis on IT

No surprise, that headline, coming from anyone who has known me even just since I ran for Pepper Pike City Council, but Mayor Bain, at last week's Road & Safety meeting, made it clear that he aspires to bring the City into the 21st century, if not the second decade of it as well, too.

This article, "The changing role of government," backs up this prioritization. An excerpt:

In Governing’s November 2011 edition (p 20), there was an article entitled “Full-Service Government Comes to an End,” by Paul W. Taylor. The article focused on the many requests that come through for government employees to resolve. In particular, he noted that in Longmont, CO, “an internal analysis showed that up to 38% of the police departments calls for service did not need a uniformed officer – they needed a neighbor.”

This is only one example, but it raises a large question: Should government become an “information clearinghouse,” helping citizens find and act on information, as well as be a service provider? Should local government become a significant information and services hub, linking citizens to the most appropriate community resources for their needs?

If you received a robo-call from the City informing you about this week's garbage pick-up and that the City Hall is open today, then you know that the mayor is already trying to make good on the above.

What more should be done? But also - where do you draw the line?

PD Editorial: "Costs and benefits all point unmistakably to need for regionalization of municipal services"

Goodness knows I spend a lot of time on this in my day job, but a few words of caution: when capital needs total in the tens of millions, overselling regionalization as a panacea may cause frustration and disappointment.

I see the effort here as one that involves re-setting the default, permanently, so that when a public entity is faced with an identified need they want to fulfill, the first response is not automatically: how do we do this ourselves (including how to get the money from their taxpayers).  Rather, the default becomes to ask, think, consider: who else is doing this, how are they getting it done, can we do it together and if so, is that going to preserve our finances and fulfill the need?

Regionalism is about willpower and culture and mindset. It doesn't happen overnight, it shouldn't be overglorified, and it also shouldn't be demonized.  What it should be is given a chance - that includes succeeding and failing, because it does not always turn out to be the best thing. But you never know until you try, and there's not been that much of that going on either.

Here's the PD's piece.

BREAKING: Plain Dealer publishes info from, link to county-wide dispatch study

Here's the article and here's the study. I have not read the study yet (and don't actually recall knowing about it but maybe?), so I can't say much yet re: how its finding compare and contrast with anything we already know or think we know about the City's dispatch situation. But here are two interesting charts from the article and I'm sure the study's information will be looked at.

Draft 2012 Budget and Five-Year Forecast Now Online

Many thanks to the City's Finance Director, Loren Sengstock, for having the draft 2012 budget and five-year forecast posted before I asked!  AND - it's OCTOBER. See? Things can change.

Enjoy.

Ohio featured in "As States Cut Aid, Localities Learn to do Less with Less"

I strongly recommend you read the entire article but here are two particularly pertinent parts (but seriously, read the whole thing):

About the Ohio state budget's provision for a Local Government Innovation Program intended to encourage collaboration, sharing and merging:

This is not to say that the states where the most notable cuts have taken place this year are entirely dismissing localities’ needs. Legislators in Ohio, for instance, created a $45 million “Local Government Innovation Program” aimed at encouraging local governments to pursue cost-saving efficiencies. It came with scanty operating instructions, however, and doesn’t take effect until next year. “We’re in limbo,” says Jon Honeck, director of public policy and advocacy at the Center for Community Solutions, a Cleveland-based research and planning organization for surrounding Cuyahoga County. “There’s a lot of rhetoric about reaching greater efficiencies and collaboration, but that in itself is not going to keep cities from service cuts.”

And a reality check:

Perhaps the best indication of what lies in store comes from Michigan, where towns and cities have had years to get accustomed to state budget cuts. “There’s lots of bad parts of being in a recession seven or eight years ahead of everyone else,” says Dan Gilmartin, executive director of the Michigan Municipal League, “but you do get ahead and start reinventing.”

So, for instance, the city of Troy, an upscale suburb of Detroit, has taken $16 million in cuts from the state over the past decade, which amounts to two-thirds of its police budget and more than its entire road maintenance budget. After much public discussion, the town’s community center raised its fees to become self-supporting; other services were handed off to volunteer organizations; and its library just won a ballot measure to raise taxes to fund its activities. Robin Beltramini, Troy’s mayor, expects this sort of public debate over which services ought to remain part of the city’s portfolio — and which can be picked up by nonprofits, businesses, and others — to continue.

“Our citizens expect us to have a police department that catches purse snatchers at the mall and catches speeders through our subdivisions. Our fire department still has to have trucks and training. We have hundreds of miles of roads that must be repaired and maintained,” she says. “When you try to keep those services as whole as possible but you’ve lost millions in state shared revenue and your property values have dropped, you simply can’t keep doing everything you did.”

The Pension Pick-up Picture for Pepper Pike

I wasn't around when Pepper Pike agreed to a 2% pension pick-up arrangement with its employees rather than a 2% wage increase, but it's an item in the Finance Review Committee Report (which you can read here, see pg. 7) and was cited by a candidate for Council in a Chagrin Valley Times article last week as something that the City could have eliminated already as a benefit (the FRC report says that instead, "...the amount should be used for base wages").

At least twice in public session (4/20/11, 6/9/11), I've advocated for moving forward on this FRC recommendation regarding the penion pick-up, but I also specifically emphasized the necessity of examining the switch's financial impact on base wages, if any, as Council considered what to do and how to do it.

Now, this article from last week's Chillocothe Gazette does an excellent job exploring the good, the bad and the ugly of the pension pick-up idea. I recommend reading the entire article.

What do you think?

UPDATE: Please note, an early version of the state budget actually had the 2% pension pick up for state employees being eliminated and shifted to the state public employees.  Both the Ohio House and the Ohio Senate stripped that elimination from the bill.  Why, you may ask? Well - I don't know, but I will tell you that the electeds who voted on the state's budget? They are state employees who would have been affected by that shift. 

So, one might ask, if one were an asking kind of person, if it's good enough for the local governments to eliminate the pick up, why isn't it good enough for the state?

TONIGHT! FORUM ON SCHOOLS OPERATING LEVY, and other City Updates

From an email I sent out this afternoon:

Good afternoon! Right to them:

1. TONIGHT - Residents are invited to attend a Community Forum at 7 p.m. at the Pepper Pike Learning Center on the upcoming Operating Levy that will be on the November 8th ballot to support the Orange City Schools District. Orange Schools administrators and Orange Schools Levy 2011 Committee Co-Chairs will be on hand to share information and answer questions.

2. October Meetings:

Planning & Zoning, Monday, October 3, 7:30pm

Road & Safety, Wednesday, October 12, 7:30pm

City Council, Wednesday, October 19, 7:30pm

3. On the City website now: another Dispatch report commissioned by Mayor Akers.  Click here to read.

4. Attached for your reference is a mailing dated 9/23/11 which was from the Mayor and is an update to residents regarding the Finance Review Committee Report recommendations.  Please contact City Hall (831-8500) if you have any trouble viewing it and have not already received it in either electronic or hard copy format.

5. The draft 2012 budget and draft five year forecasts were distributed at the Finance Oversight Comm. meeting where they began to review the documents and agreed that Council should receive them as soon as possible (I made a particular plea to be sure that Council gets them ASAP). If you are interested in this process, I would suggest you plan on attending the October meetings when Council is expected to start reviewing these documents and numbers. I will be requesting that these documents be placed online as soon as Council begins public deliberations.  Until that time, you should feel free to call the finance director to view the documents.

6. Absentee ballot applications can be requested here.  The "opening date" for voting by absentee (mail-in) ballot appears to still be October 4, 2011, according to the 9/13/11 document on the county BOE's website. I make no promises though - there seems to still be confusion over this until after September 30.  Regardless, if you want a mail-in ballot, it would not hurt to just send in your application.

As always, if you have any comments, questions or concerns, please contact me at your convenience.

All the best and thank you for letting me serve,

Jill

Released Today: National League of Cities City Fiscal Conditions Report

You can read the report here.  You can read many reports about the report just by searching on "National League of Cities survey." I'll spare you all the links I could give you.  From the NLC (but read the whole thing):

The report reveals that general city revenues are continuing to fall, with a projected -2.3% decrease by the end of 2011. This is the fifth straight year of declines in revenue with probable further declines in 2012.

The revenue decline is mainly due to the suppressed property market that is negatively impacting property tax revenue. Property tax collections are expected to decline by -3.7% with further declines likely in 2012 and 2013.

Income tax receipts are also experiencing a decrease of -1.6%. Sales tax receipts remained largely flat, but this is at last year's level which saw the worst decrease in sales tax revenue in 15 years.

Cities are responding by cutting personnel (72%), delaying infrastructure projects (60%) and increasing service fees (41%). One in three (36%) cities report modifications to employee health care benefits.

There is a wealth of information on this page, also from the NLC, especially if you want to get the sense of just how not alone we are, no matter who is mayor. 

What choices do you want your elected officials to make? Which ones don't you want your elected officials to make? Don't be shy.

In PD: Kasich Administration Seeks to Move Local Income Tax Collection to Columbus

From Wednesday's print version but online now.  Would you like to see RITA disappear and have the state centralize the $4 billion collected by local municipalities in local income taxes?

The article includes this quote from a state taxation department spokesman, Gary Gudmundson:

"The concern with the municipal income tax is it's so widespread and so varied from city to town to village that it's a burden on business taxpayers who are functioning in many different locales," said Gudmundson.

And it also included this information regarding Lt. Governor Mary Taylor's interest in the change:

Earlier this month, Taylor told a panel beginning talks on cutting red tape for small businesses that a state governmental program she heads called the Common Sense Initiative is looking at the centralization idea.

Taylor reportedly told the panelists that centralizing collections would be "a great step forward in helping ease the burden" on businesses that cross jurisdictional lines or have multiple returns in different municipalities.

The Ohio Municipal League, to which the City of Pepper Pike does belong, has this statement in the article:

"This indicates to us that central collection is at the top of the list for the next round of wholesale changes in store for Ohio municipalities," said the newsletter, referring to Testa's public comments about the plan at the tax seminar. "We believe this radical proposal would be a tremendous financial blow to Ohio's municipalities, would be impractical in a wide range of areas from enforcement to fair application."

The concerns include an additional decrease in revenue flowing to municipalities, a less responsive tax administration and the creation of a new and unneeded level of bureaucracy that would require additional fees. The article says, "...regional tax authorities take about 1.5 percent in administrative fees to handle local tax collections, while other municipalities let their own departments handle it."

Well - what do you think?

Tonight's Band Concert, Rubbish Survey & More Updates & Information

From the email I sent out this morning:

Greetings!

Knowing that it's summer and it's August (how did that happen!?), I will again work to be succinct. First, a reminder about making sure you give the City your input on rubbish fees, then a list of upcoming dates/events.

RUBBISH FEE SURVEY

By now, every Pepper Pike household should have received, by regular U.S. mail or by email, a letter from Mayor Akers accompanied by a survey that seeks input regarding rubbish collection.  Please, please, please - email back your input, send it back by regular U.S. mail or drop it off at the City Hall.  We know residents care about this topic and want to achieve as high a return rate on input as possible. If you have any questions at all, please let me know or contact the Mayor directly.  Agenda minutes now posted on the City website for May and June will give you some background on the topic (see here) but again, please let us know if you have any questions and send in your input! THANK YOU.

Dates/Events:

1. TONIGHT, Pepper Pike Community Band Concert, rain or shine, 7:30pm, Pepper Pike Park or the Fire Station. You can read more here.

2. TONIGHT, Planning & Zoning meeting, 7:30pm, you can read the agenda here or see the attachment.

3. Wednesday, August 10, Road & Safety/Finance & Planning Meeting, 7:30pm, open to the public, at City Hall, no agenda yet available

Tomorrow Night: Finance Oversight Committee Quarterly Meeting

Last year, Mayor Akers agreed to create a Finance Oversight Subcommittee. Though we often refer to it as a committee, it's a subcommittee of the Finance Committee, which is chaired this year by Council Member Rick Taft.  Council member Gail Mayland chaired it and Scott Newell and I were the other two council members on the committee. 

As noted within the last few months, since Council received recommendations from the Finance Review Committee, it was the Oversight Committee that first discussed the need to examine and possibly modify policies related to sick days and sick pay, vacation, longevity, part-time versus full-time employment and pension pick-up. 

Mayor Akers had envisioned that the council members on this committee would rotate and so now it's comprised of Paulette Morganstern (Chair), Cleve Svetlik and Rick Taft. The resident members are Don Jacobson, Kevin McGinty, Dave Shinebart and Michael Shore. The frequency of the committee's meetings has been changed to quarterly (from monthly) and the second quarter's meeting is tomorrow evening, July 19, at 7:00pm in City Hall. It is open to the public, as always. 

If you want to understand the City's budget - and its budget's strengths and weaknesses, this committee is an excellent place to start.

Saturday, July 23: Special School Board Meeting For Discussion of Budget Cuts, Tax Levy Millage

The Chagrin Solon Sun ran two lengthy articles yesterday about how the approved Ohio state budget will affect the communities in our area.  One article deals with the municipalities (you can read that one here) and the other, which you can read here, discussed input from school districts.

Regarding the Orange schools:

The Orange School District has not discussed its final budget cuts publicly yet, but has scheduled a special Board of Education meeting at 8 a.m. July 23 to discuss them in advance of its regular meeting July 25.

...


Voters last approved a new levy in 2004, when the board promised to come back to them at four-year intervals only. The district stretched that three more years with budget-cutting and the use of some cash reserves, Slemons said.

He had said he expects the size of the new levy to be 5 or 6 mills, but that statement was prior to passage of the final state budget.

I plan on attending.

Trash Talkin' in Pepper Pike

It's nothing new - from learning in the fall of 2009 that the refuse collection system would be reshaped and involve scooters, to the question now regarding a fee for service structure in order to protect the continuation of rear-yard pick up.

In fact, the issue of fee for services has been raised multiple times in the 18 months I've been on Council, starting well over a year ago when City Council Member, Gail Mayland, introduced the idea of exploring this in regard to garbage pick-up.  Then, last summer, resident, former City Council member and potential mayoral candidate Rick Bain, listed fees for service as an alternative revenue stream (alternative to an increase in the City's income tax rate) in this letter to the editor.  (For those who've been following City doings closely, the April 2011 Financial Review Committee Report is silent on fees for service related to rubbish removal - that document was signed off on by seven residents, including potential City Council candidate Jim LeMay.)

During the June 2011 City Council Meeting, the mayor raised the issue again.  His remarks in support of the need to implement a $25 per month fee for all Pepper Pike residents will of course be in that meeting's minutes.  But the discussion resulted in a desire by some Council members to survey the residents to determine the preference: if you had to pay an additional $25 per month to preserve rear-yard garbage pick-up, would you pay the fee to keep that service?

Read, Offer Feedback on Financial Review Committee Report

I sent out the following email this morning. Please share the Financial Review Committee's report with other Pepper Pike residents   The Committee's report includes many recommendations, including one for a road levy of 2.6 mills. One ordinance, among the many that will be introduced at tomorrow evening's Council meeting in response to the Committee's report, would move the City toward placing a property tax levy on the August ballot.  Please consider providing feedback to the Mayor and Council through phone calls, emails, regular mail or face to face visits in regard to this recommendation as well as any other questions, comments or concerns you may have.

Good morning,

Three quick notes:

1. As you may recall, the mayor convened a committee of seven citizens last fall, the Financial Review Committee.  Their final report was given to Council last Wednesday. It is now available online.  You can read it here or open the corresponding attachment in this email [no attachment to this post though].  If you have trouble opening the document, please contact the Clerk of Council, Sheila O'Connor, at 216-896-6128.

2. The monthly City Council meeting will occur tomorrow, Wednesday, April 20 at 8pm in City Hall. It is, as always, open to the public.  You can see the agenda here, but I've also attached it [again, not attached to this post]. It is in a pdf format.  If you are unable to open it, please contact Sheila for that as well.

3. The Pepper Pike Civic League's Town Hall Meeting is Wednesday, April 27, 2011 at Brady Middle School, 7:00-8:30 PM. The focus is on getting to know our new Cuyahoga County Council.  The featured speaker will be Jack Schron, our 6th District Representative. You can see the flyer for more information here.

Thank you as always for letting me serve and for living in Pepper Pike.

Best,
Jill

Learning from other's mistakes

The salient statements are so often found in the last words of even the longest pieces.  From today's New York Times Magazine article, "Broke Town, USA":

Until voters can agree on what government services they want and will pay for, it is possible that bondholders will bank the profits while taxpayers, employees and citizens share the losses.

It is this issue of voters agreeing on what government services they want and will pay for that most resonates for me, and why, for more than a year, I've wanted a resident survey to assist us in aligning our revenues with our expenditures.

Tom Suddes on the SB5 endgame's effect on Ohio's local government funding

From today's Plain Dealer:

...if (and it's a big if) Senate Bill 5 does slow the growth in cities', counties', libraries' and school boards' personnel spending, that would give Kasich's administration and the Republican-run General Assembly an opening to prune state aid to local governments. [emphasis added]

You must read Tom's entire column for the complete argument he makes, but this is not news and anyone who suggests that it is, hasn't been paying attention.

What's this mean to someone like a local city mayor or council member?

It means that

1) the local government dollars the political subdivisions receive are, as we've been saying, endangered but, in Suddes' argument, they are being justified as endangered by the speculation that the political subdivisions can make up the loss for the local government fund money by cutting the personnel-related items they'd be allowed to cut - without any bargaining be allowed anymore - courtesy of SB5)

and

2) the estate tax dollars likewise remain endangered - although I checked the status of HB 3 yesterday and it appears that it's somewhat stalled for now - and a similar argument might be made to justify the loss of those dollars (because with SB5, local governments can make up the loss by cutting personnel-related items that SB5 would let them cut without having to go to bargaining).

Politifact Declares Ohio State Rep's Anti-Estate Tax Assertion "Pants on Fire" Lie

From today's Plain Dealer, "Did Wendy's founder Dave Thomas really flee Ohio's estate tax on his death bed?" as asserted by Ohio House Representative Jay Hottinger (R, 71st District), leader of the drive to repeal the tax from the House side:

Hottinger’s statement isn’t just inaccurate, it’s also ridiculous. On the Truth-O-Meter, it’s worthy of flame broiling. That’s why we rate it Pants On Fire. 

Please read the entire piece for the full context and the research gathered by the PD's Politifact folks.

Ohio House Bill 3 Introduced Today to Eliminate Estate Tax

Lots of news coverage of it from today. First, from WCPN:

Republicans who now control the entire Ohio legislature hope to move quickly on a bill to wipe out the estate tax.

Any amounts ABOVE 338-thousand dollars are taxed at a rate of 6 to 7 per cent.

Pro-business activists and farmers are applauding the move….but officials of Ohio cities are worried because they would lose out on REVENUE from the estate tax.

You can listen to the details in the radio report by Statehouse correspondent Bill Cohen here.

You can also read an article about it in the Newark Advocate and watch video of the Ohio representatives who are sponsoring the bill here.

This past Sunday, the Plain Dealer published Tom Suddes' column, "GOP's first target is Ohio's estate taxes," which argues the pure political nature of a move which Suddes seems to feel will reap little benefit for most Ohioans and great pain for many cities.

Our state representative is now Marlene Anielski and our state senator is still Tom Patton. If you've got something to say to them about this bill, those links will take you to their statehouse websites and emails and phone numbers.

You can read the text and provisions of the bill after the jump or at the legislature's website, here.

From what I can tell, it looks as though it would in fact go into affect starting with the estates of Ohioans otherwise subject to the estate tax whose deaths occur on or after January 1, 2011. As in, this year.