Deputy Public Works Director Thompson reported to the city council this week that the city has locked in prices for gasoline and diesel for March through December of 2010. Including tax, we will pay $2.42 per gallon for gas and $2.30 per gallon for diesel. While not as good as the $1.87 (gas) and $2.04 (diesel) that we were able to get in 2009, these contract prices are lower than what the 2010 budget assumes. The result will be savings of about $20,000.

We'll see the actual contracts included for council approval on the consent agenda in March.

Labels: finance, public works

Posted by John Nephew at 2/19/2010 07:49:00 AM | Permalink | Comments

This is a somewhat belated update on the progress of the bonding bill, but Minnesota's House of Representatives passed the bonding bill on Monday, after the Senate did last week. In both chambers it had bipartisan support (though Republicans who supported it are apparently coming under attack from their own party). The bill now goes to conference committee to iron out differences between the two versions. Last I heard, the East Metro Regional Fire Training Facility was included in both versions, so it should make it out of conference. Whether it will survive the threatened vetoes from the governor, line item or otherwise, remains to be seen ...

Labels: finance, media, public safety

Posted by John Nephew at 2/18/2010 07:59:00 AM | Permalink | Comments

The Sunday Pioneer Press includes an article about a petition seeking signatures to ask the State Auditor to examine Maplewood's books. Leading the petition drive is Elizabeth Sletten, one of former Mayor Diana Longrie's most devoted fans (you may also remember her as one of the candidates in last year's city council primary), and Longrie herself.

Long-time readers of my blog may recall that we've talked about this before. As my term began in 2008, I seriously considered whether we should ask the State Auditor to look at our books, after the mismanagement and incompetence of the Longrie-Copeland era. You can read my entry on the topic from April 7, 2008.

Then-Mayor Longrie wrote an April 8, 2008 opinion article in the Pioneer Press about her wish to see an audit; she ran the same text as her article in the May 2008 city newsletter. Longrie's laundry list of concerns focused not on Copeland's time at the city's helm — rather, she wanted an inquiry to focus on policy disagreements such as the amount of city debt, and bizarre personal obsessions like someone joking about naming a street after Will Rossbach. (Perhaps Longrie thinks "Comedy Police" is part of the state auditor's job description.)

In the new Pioneer Press article, Sletten claims to have obtained more than 400 signatures so far — roughly the same number as votes she received in last year's primary. To meet the required 20% of registered Maplewood voters, she'll need about 4,200. Even then, the scope of the audit is determined by the auditors, not the petitioners. To quote the State Auditor's website:

If a petition audit is certified by the county auditor, staff from the Office of the State Auditor would then meet with a committee of petitioners to review the petitioners' concerns. The audit staff then would review the concerns to determine the scope of the audit. The audit might not include all the concerns identified by the petitioners if the audit staff determined that the concerns were based on decisions within the discretion of the governing body.

I believe the State Auditor would duplicate the work already done by our independent auditors every year — which, let's be clear, has included a lot of clean-up of issues from the Longrie-Copeland era. But staff and auditors have repeatedly told us that there's no evidence of wrongdoing, just errors that we can reasonably believe came as a result of the loss of most of the accounting department, who were driven away by the toxic environment created in City Hall by Copeland and his masters. To emphasize the point once again, a state audit would not just duplicate our independent auditors' work, but the city's taxpayers would have to pay for the cost of the audit in a year when the budget is already stretched thin.

I don't believe that this money would be well spent, especially in these lean budgetary times. Still, if 20% of Maplewood voters want it, we'll indulge the personal obsessions of the former mayor and her cronies on the taxpayers' dime once again. I don't expect anything shocking will turn up, but I do still have my own list of questions, as I wrote in May 2008, that I will happily submit to the auditors if they're going to be examining the city's affairs anyhow.

Labels: council politics, finance, media

Posted by John Nephew at 1/17/2010 10:49:00 AM | Permalink | Comments

This week's online newsletter from the League of Minnesota Cities includes an article about Judge Gearin's decision to overturn the unallotment of funding to the Minnesota Supplemental Aid Special Diet Program. It provides a good explanation of the ruling and some of its impact, especially as relates to cities -- the main impact being "more uncertainty". It also says that the League board will discuss what if anything to do, in light of the decision, at its upcoming meeting on January 21st.

I've decided that I'm not eager to see the LMC and other entities join in a flurry of lawsuits to overturn the unallotments. I think it is vital to have a test case like the Special Diet Program to work through the constitutional issues, so I'm pleased with both Gearin's ruling and the Governor's decision to appeal it. This case ought to go to the Minnesota Supreme Court, either to clarify the statute's interpretation or to make the legislature rewrite it to pass constitutional muster.

But overturning Pawlenty's actions last year won't cause money to appear in the state coffers to restore those cuts. Any 2009 funding restored in court is only going to increase the cuts that will have to be made by the legislature and governor to balance the remainder of the biennial budget. It would be a zero-sum game, except for the legal fees that make it less-than-zero.

Partisan Angles
Many commentators seem to have taken Gearin's decision as a major blow to Governor Pawlenty and the Republicans, and some conservative partisans have gone further to suggest that it represents liberal judicial bias (a claim that doesn't really hold up in light of the many rulings in Gearin's career on the bench).

Sarah Janacek at Politics in Minnesota takes a different view than many of her colleagues on the right, calling the ruling "Good for the state and spectacular for Pawlenty and the Republicans." Janacek seems to accept the basic separation-of-powers argument in Gearin's ruling, without jumping to conclude that it was biased and wrong just because it was not the ruling the Republican governor had sought. The way she sees it playing out, the court decision may bring us back to legislative-executive gridlock, but she sees that situation as benefitting Republicans because Pawlenty will have nothing to lose. If he lets the government shut down for lack of a budget deal, it will only increase the national attention and anti-tax reputation that he seeks for his presidential aspirations. For his presidential run, the national reputation matters more than his popularity in Minnesota, where he won election and reelection with less than 50% of the vote.

Janacek's analysis is intriguing, though I'm not sure it will work out that way. What I do think is important is to realize that what politicians and parties want in the short term doesn't always play out the way they imagine it will. Republicans should not revile this decision just because it is a tactical setback for Pawlenty, and Democrats should not be too satisfied or mistakenly think that this represents a seismic shift of the budget negotiating terrain to their advantage. As Janacek points out, the governor still has the veto (and line-item veto), and as a lame duck official with aspirations for a higher office, he probably has less to lose than do DFL legislators if he decides to take a hard line and refuse compromise.

Maplewood's Bottom Line
No doubt there will be a lot of drama in the coming legislative session as state leaders wrestle with the budget. Unfortunately, I think the end result for Maplewood is pretty much the same in any scenario -- our Market Value Homestead Credit is gone, and I don't see it being restored. There's a lot of focus on the short-term forecasts and budgets, but the long term picture for state finances is even more challenging. I believe Maplewood has to plan for the future with the assumption that our MVHC, like Local Government Aid, is gone for good. If we do happen to get some in a future year, we should treat it as a windfall for one-time uses, such as capital expenses or debt reduction, rather than part of the operating budget.

Labels: finance, media

Posted by John Nephew at 1/08/2010 08:47:00 AM | Permalink | Comments

The judicial branch has weighed in on the issue of unallotments as exercised this past year by Governor Pawlenty. In the first of what is likely to be numerous rulings, the court issued a temporary restraining order enjoining the state government from reducing its allotment of funding to the Minnesota Supplemental Aid Special Diet Program. The Governor has announced that he will appeal the ruling. Given the constitutional issues at stake — the executive branch usurping the powers of the legislative, the governor abusing the unallotment statute as a way to get his way without having to negotiate or compromise with legislators — I have to assume that this will go up to the supreme court.

The practical effect is less certain. The state's budget forecast is now worse than it was when Pawlenty signed those spending bills whose funding he planned to veto. Any reprieve for the MSA Special Diet Program or anyone else (like Maplewood) subjected to unallotment is likely to be temporary; even if a legislative-executive budget compromise in the coming session includes tax increases, it will no doubt include substantial cuts too, that may well be more than the Pawlenty's 2009-2010 unallotments.

Judge Gearin's memorandum recognizes the worsening budget situation, and asks the rhetorical question, "Why then should the courts bother to enjoin this unallotment? Is the separation of powers part of our constitution that important?" Her answer is an emphatic "yes." She writes:

The revenue bill that the governor vetoed would have balanced the budget based on the anticipated receives forecast in February 2009. The governor used unallotment rather than calling a special session of the legislature or vetoing the appropriations bill to balance the budget. He did this after signing numerous spending bills which taken together, he knew would not balance the budget unless revenues were raised. He used the unallotment statute to address a situation that was neither unknown nor unanticipated when the appropriations bills became law . . .

. . . [T]he Governor crossed the line between legitimate exercise of his authority to unallot and interference with the Legislative power to make laws, including statutes allocating resources and raising revenues. The authority of the Governor to unallot is an authority intended to save the state in times of a previously unforeseen budget crisis, it is not meant to be used as a weapon by the executive branch to break a stalemate in budget negotiations with the legislature or to rewrite the appropriations bill.

I think it is essential that the judicial branch rule on this constitutional issue. Were it to go unchallenged, this way of using unallotment would represent a major increase of the power of the executive — something that even Pawlenty's devoted fans might not appreciate so much in future years when the office is occupied by other parties.

Labels: finance, media

Posted by John Nephew at 1/01/2010 09:23:00 AM | Permalink | Comments

This week's Maplewood Review includes an article about our special meeting held on December 7th, which included a public hearing on the proposed 2010 budget and votes on the final levy and the budget itself.

Labels: finance, media

Posted by John Nephew at 12/16/2009 09:10:00 PM | Permalink | Comments

According to an e-mail from the League of Minnesota Cities, Governor Pawlenty in a letter to the league has "announced that he would not use unallotment to further reduce or delay the December local government aid (LGA) and market value homestead credit (MVHC) payments scheduled for cities and counties."

This is good news for Minnesota cities in general. However, it appears not to make a difference for Maplewood. The governor's decision to reduce LGA/MVHC by $64 million back in June, which this announcement does not undo, already took away all of our MVHC. Further reductions to December payments, that were expected as a response the increased state deficit announced last week, could not have come at Maplewood's expense because we were already at $0.

The governor is not rolling back the 2009 and 2010 cuts that were already determined earlier this year (which would increase the state's deficit even more) -- he's just decided not to cut even further for now. He makes no such guarantee for 2010 -- though again, since our 2010 payments are already at $0, it makes no difference to Maplewood. For some of our neighbors who get LGA or MVHC even after this summer's cuts, this is good news, but it won't put any money back in Maplewood's coffers, this year or next.

Nonetheless, Councilmember Erik Hjelle, showing off both his typically poor reading comprehension and his habitual disregard for the Open Meeting Law, dashed off an e-mail to the entire city council as soon as he (mis-)heard the news, saying he "cannot wait to see how you liberals spend this" and that we should "give the money BACK to the taxpayers." Rushing to judgement and insults based on his own misunderstanding is vintage Erik, something I'm sure we'll all miss in a few weeks when Jim Llanas replaces him on the council.

Labels: council politics, finance

Posted by John Nephew at 12/08/2009 01:47:00 PM | Permalink | Comments

As the State of Minnesota faces more red ink, Governor Pawlenty has stated he will "strive to be more business and job friendly" while planning "to address the deficit through spending cuts alone."

The effect of his budget policy, however, has been to punish small businesses, especially the ones that are hanging on the edge during this recession. When Pawlenty's further shifting of the tax burden from state to local governments forces even more businesses to close their doors, the result will be more job losses, a longer economic downturn, and even more budget woes for the whole state in the future.

Here's a flowchart of cause and effect to explain what I mean:

A business pays income taxes based on profit. If times are lean, a corporation is not paying these taxes. In contrast, regardless of the health of a company, its property taxes are a fixed dollar amount. So Pawlenty's supposedly "pro-business" policies — refusing to raise taxes at the state level, and cutting payments to local government — have the effect of preserving the profits of the healthiest companies (those paying income taxes) at the expense of the small business at the margin (the ones who might only be breaking even or swallowing a loss this year).

If you're a fan of bigger, more consolidated businesses (who are happy to buy up the shells of their former competitors on the cheap) and less competition and diversity in the marketplace, maybe you see this as a good thing. Economic cataclysms do, after all, create incredible money-making opportunities for those in a position to take Baron Rothschild's advice and "buy when there's blood in the streets."

However, I think it's terrible policy for everyone in the long run. Already-profitable businesses can be more profitable if they have more customers — in the form of other surviving businesses with money to spend on operations and invest in growth, and consumers with jobs and income to spend.

The answer to the state's budget crisis is not to rely only on increases in personal and corporate income taxes, of course, but it needs to be part of the mix in a pragmatic strategy for recovery. Unfortunately, our governor appears unwilling to substitute a little political courage for his presidential ambitions.

As it stands, the governor's "pass the buck" tax policy consists of taking from those in need for the benefit of those who have plenty — whether we're talking about his cuts to medical assistance, or LGA/MVHC cuts that have the effect of shifting tax burdens from thriving (income tax-paying) companies to those that are struggling.

His policy is neither just nor sound for the health of Minnesota's economy.

Labels: finance

Posted by John Nephew at 12/06/2009 05:01:00 PM | Permalink | Comments

On the agenda for Monday's special council meeting, after the staff's budget presentation and before public comment, is an alternate budget proposal from Mayor Longrie. The meeting packet is finalized and available online, yet the mayor's proposed budget is not in it.

My recollection from our budget discussion in September is that Mayor Longrie suggested that she had already worked out the budget cuts necessary to pay for the tax cut she proposed (in addition to the city's loss of state funds), but merely declined to share those with the rest of the council at that time. So I'm not sure why she has not yet provided that information, almost three months later.

Surely she does not expect the council to vote on her budget, without even giving us some time in advance of the meeting to review it? Or is the whole thing just another stunt, to create a campaign issue if, as she has threatened, she runs for office again in the future?

Labels: campaign 2010, council politics, finance

Posted by John Nephew at 12/03/2009 10:35:00 PM | Permalink | Comments

Anyone who owns a home or other real estate in Minnesota probably has noticed that property taxes have skyrocketed in the past decade. Minnesota 2020 has just put out a paper analyzing the trend in more detail. Researcher Jeff Van Wychen looks at property taxes in real terms (adjusting for inflation) on a per capita basis. The numbers show what we've all felt in our wallets: property taxes have shot up in real terms since 2002, and homestead property taxes even moreso.

But here's a surprising fact that goes with it: "While the average Minnesota homestead property tax has increased by 30 percent from 2002 to 2009, per capita county, city, and township revenue has fallen." In other words, even while charging more in property taxes to their residents, local governments have had less money with which to pay for the services those residents need.

The reason is simple enough -- funding from the state has been slashed. (Funny how the mandates from the state, which require local governments to spend money on various things, have not vanished as well.) The paper concludes, "Since 2002, the rapid growth in property taxes in general and homestead property taxes in particular is primarily the result of state policies, not local spending decisions."

For years now, the state of Minnesota has patched up the holes in its budget with duct tape billed to local government. Our governor, with aspirations for higher office, clings to his campaign promise never to increase taxes, while forcing local governments to do just that time and again, even while cutting their operating budgets. As bad as this is, it has utterly failed to address the underlying structural issues of the state budget for the coming years. The state can't milk local government units forever -- as more cities, like Maplewood, no longer have any state money to be taken back. While they have any to lose, this will mean even bigger future cuts for the cities that do get any Local Government Aid/Market Value Homestead Credit.

Labels: finance

Posted by John Nephew at 12/01/2009 12:04:00 PM | Permalink | Comments

The packet for our November 23rd workshop included a spreadsheet of the proposed 2010 levy increases in numerous metro cities. At the meeting, Finance Director Bob Mittet gave us an expanded version of that document with the proposed levies of more nearby communities.

Here's a summary of our immediate neighbors:

North Saint Paul	19.54%
Vadnais Heights	17.38%
Roseville	8.84%
Saint Paul	6%
Little Canada	4.98%
Woodbury	3.22%
White Bear Lake	2.40%
Oakdale	0.62%

State-wide, the average proposed property tax increase for cities is 5.4%, according to a press release from Minnesota Revenue. Because the levy limit for 2010 is 0.8%, almost all of the property tax increases are special levies to make up for the state money taken away by Governor Pawlenty's unallotments of Local Government Aid and Market Value Homestead Credit.

At a 5% proposed levy increase, Maplewood is below the state average. This was true for the 2009 levy as well; our final increase was 2.1%, versus 4.3% average among all the cities in the state.

Labels: finance

Posted by John Nephew at 11/25/2009 08:42:00 AM | Permalink | Comments

To better visualize our budget and property tax decisions, this is a graph I've been interested in seeing:


Rather than focusing on the total budget expenditures of each city department, what this graph illustrates is how much of your property taxes go as funding to each, using 2009 budget data.

For example, despite the large size of the Community Center in the city budget, it only takes about a penny from each dollar of your city property taxes. The rest of its funding comes from member fees, room rentals, advertising revenue, and the like. The Fire Department slice of the tax pie is considerably smaller than its budgeted expenditures, because so much of its operations are the ambulance service, paid for by charges to its users.

In contrast, the Police Department has only a small percentage of alternative revenues sources -- such as fines, forfeitures, grants. Police are a big part of the city's spending budget, but an even bigger part of the property tax pie because of this.

In most budget areas, cut on the expenditure side also bring cuts to revenue, and only a fraction of the apparent savings could actually translate into property tax reduction. Take the Community Center again. If you eliminated entire operation, cutting all of its payroll and other expenses out of the city budget, the net effect would only be about a 1% reduction in property taxes. Our staff continues to work to reduce the subsidy to the Community Center, but it's wishful thinking to suppose that just eliminating it would mean big tax savings.

Labels: finance

Posted by John Nephew at 10/26/2009 09:16:00 AM | Permalink | Comments

This week's Maplewood Review includes an article with the headline "Council member calls for maintaining police and firefighter levels."

On September 14th, the city council debated the maximum property tax levy for 2010. One option was a zero levy increase. Each department laid out the implications of that budget scenario, given the loss of more than half a million dollars in Market Value Homestead Credit from the state. For the police department, which uses a very large percentage of our property taxes and spends most of their budget on payroll, the impact included not hiring two new officers to fill vacancies created by recent retirements.

Even knowing the impact that a zero levy increase would have, Erik Hjelle and Diana Longrie proposed going even further in the revenue cuts, by offering a motion to cut more than $1/2 million more from the property tax levy. Had their motion passed, the city would need to consider a lot more than just leaving two officer positions vacant in order to balance the budget.

Two weeks after voting with Mayor Longrie against the funding needed to maintain Maplewood police and fire (and other property-tax-funded city services -- if you like having your streets plowed in the winter, for example), Erik brought forward his motion "that the city council support not cutting any police officer or fire staffing levels in the 2010 budget."

This was my response to his original motion:



In the end, we agreed on language to say that it is a priority of the council not to make cuts to police and fire, something that all five of us agreed on. It remains to be seen whether the whole council will step forward and take responsibility for paying for it as well when the final levy decision comes before us. In the meantime, Councilmember Hjelle and Mayor Longrie seem determined to have their cake and eat it too, taking symbolic votes in support of public safety while voting against the taxes that pay for them.

Labels: council politics, finance, media, public safety, video

Posted by John Nephew at 10/16/2009 01:07:00 PM | Permalink | Comments

If you haven't seen it already, this past week's Maplewood Review includes a lengthy article about the City Council discussion about the budget and setting the maximum tax levy at our September 14th meeting.

Labels: finance, media

Posted by John Nephew at 10/03/2009 08:26:00 PM | Permalink | Comments

Here's a message worth watching, from the Coalition of Greater Minnesota Cities:



Outstate cities, which rely on Local Government Aid (LGA) for a significant part of their budgets, are especially hard hit by Governor Pawlenty's cuts.

Maplewood lost its LGA years ago, and so the Governor has gone after our Market Value Homestead Credit (MVHC), a program designed to give homeowners property tax relief. We are expecting that Maplewood will lose more than $1/2 million this year from the Governor's unallotment of MVHC, and a similar amount again in 2010 -- the entire amounts we were supposed to receive from MVHC. It's worth keeping this in mind as we consider increasing our tax levy in 2010 (or, alternatively, cutting back on city services). Even if we go with the 5% maximum increase we passed on September 14th, that won't be enough to balance the money taken away from us by the Governor.

(h/t to the Minnesota Independent.)

Labels: finance, media, video

Posted by John Nephew at 9/30/2009 09:12:00 AM | Permalink | Comments

At our last city council meeting, there was a moment that I thought was a pretty revealing snapshot of Mayor Longrie's character.

Soon after I joined the council, we changed the discretionary spending limit for the city manager from $5,000 to $10,000. For expenditures over that amount, the city manager has to obtain prior approval from the city council. Two meetings ago, it came to light that we did this as a policy change in 2008, but the previous change (reducing it to $5,000 in 2006) had been done by means of an ordinance.

Given staff changes in relevant positions (city manager, finance director, city attorney) since the ordinance was passed, and the strangeness of doing it by ordinance in the first place, it's not too surprising that the current occupants of those positions were blindsided. Still, everyone but me on the council was there when it passed and voted on it, for or against, and they all seem to have forgotten too. Or did they?



How does one interpret this? Is Diana saying that she knew all along it was an ordinance, and was just hanging on to that knowledge as an "ace in the hole" to spring on the council at a politically opportune time (like this election season)? Or is it just pride, not wanting to admit an imperfect memory like everyone else?

Labels: campaign 2009, council politics, finance, video

Posted by John Nephew at 9/12/2009 11:47:00 AM | Permalink | Comments

Can the team of Dave Hafner, DelRay Rokke, and Ken Smart be trusted to responsibly steward the city's finances, or even to discuss them honestly? Setting aside their apparent difficulties with their own campaign finance reports, let's consider Dave Hafner's past public statements.

Despite his recent claim to have been unhappy with Maplewood elected officials for the past 18 years, Hafner was full of praise for the team of Longrie, Cave and Hjelle in 2007. In fact, he came forward in visitor presentations on March 26, 2007, to compliment that council majority for, among other things, raising his taxes. (As you may recall, the 2007 city levy increase was one of the largest in recent history.)



The 2007 levy had a 10.2% increase, passed by Diana Longrie, Rebecca Cave, and Erik Hjelle. For Mr. Hafner personally, this meant an increase of 3.57% for his home's city taxes ($24.39 -- more than his $22 total increase), according to Ramsey County property tax records that are publicly available online. In comparison, the previous year -- under a budget passed by the "old regime" that Hafner reviled -- his city tax bill had increased just 1.41%.

Looking at his comments and the facts, it appears that Mr. Hafner's tax policy views are determined by whether or not he likes the people proposing a tax increase, not how big it is or whether it is necessary in the balance between taxes collected and services provided to our residents.

As a caveat, I should note that the above really can only be ascribed to Mr. Hafner, not to his running mates Rokke and Smart. It's possible that they did not vet him very well, or familiarize themselves with his past statements and positions, before signing on to run a joint campaign with him.

Labels: campaign 2009, Dave Hafner, finance, video

Posted by John Nephew at 9/10/2009 07:25:00 AM | Permalink | Comments

In our last audit, one issue that was of great concern to me and other council members was a discrepancy between the city's books and our bank balances to the tune of about $93,000. On Friday we heard from Assistant City Manager Chuck Ahl that the accounting errors had been tracked down by the Finance Department and the accounts are now balanced.

He explained in an e-mail to the City Council:

The memo report provides an explanation of the $93,000 issue that was raised as part of the 2008 audit. In summary, it reveals that an accounting error [or actually accounting errors] explain the discrepancy between the cash that the banks report is available for the City and the cash that our accounting system indicates that we should have.

In very rough terms, a major accounting error involved the receipt of funds from the Republican National Convention for the Police overtime services. In effect, it was double counted as cash received and an accounts receivable. That payment was for over $126K, but after the other adjustment calculations, it amounted to the $93,000+ issue.

I'm very pleased to know that this has been resolved. We had assumed that it amounted to a data-entry error like this, but it's still good to have it tracked down definitively.

In the bigger picture, this is an example of the ways the city is still recovering from the damage done in the disastrous period of Copeland's mismanagement, at the behest of Longrie, Cave and Hjelle. That triumvirate came into office with a hit list of people they wanted to see fired -- Erik Hjelle notoriously listed his personal targets in an April 8, 2006 Pioneer Press article. After the city's finance director (one of the people Erik was quoted as wanting to see driven out) resigned in late 2006, the assistant finance director did not stay for very many months longer before she took a job offer from another city. Ultimately I believe we lost something like 75% of the employees in Finance, and as this reconciliation demonstrates, this department is still in the process of recovering.

This is something to keep in mind when you hear about would-be mayors and councilmembers who, like Erik, seem to be assembling their own hit lists of employees they would like to get rid of, should they be elected. Besides the institutional damage, it's also of course worth remembering the costs of legal fees, settlements, judgements, and insurance increases that Erik's hit list brought upon the city.

Labels: campaign 2009, council politics, finance

Posted by John Nephew at 9/09/2009 11:27:00 AM | Permalink | Comments

This week's Maplewood Review covers a number of city topics, including the candidates for the primary election that is now just two weeks away. Our printed copy hasn't arrived in the mail yet, but I can see quite a few new articles on the Lillie newspaper's website.

Under the headline "Seven vie for Maplewood mayor," the newspaper's managing editor, Holly Wenzel, offers profiles of six candidates, drawn from questionnaires filled out by the candidates. One candidate, Fran Grant, did not submit a questionnaire.

All eleven city council candidates did fill out their questionnaires, and the result is another article, "11 file for 2 Maplewood council seats." Candidates Julie Binko and DelRay Rokke also make an appearance on the letters to the editor page. Rokke observes that "Maplewood’s elected leadership has been sorely lacking in the eyes of the entire metropolitan community for a number of years," a chord similar to the "not been proud of our government" comment from running mate Dave Hafner in the Review two weeks ago. Binko, whose small claims suit and its failure have gotten her attention in recent newspapers, expresses her outrage that our legislators introduced bills to fund acquisition of land for conservation in Fish Creek, and that Peter Fischer and I testified in favor of one such bill earlier this year. Another letter that touches on the election appears from resident Christeen Stone.

"Applewood trail construction reaching conclusion" discusses the sustainable trail at Applewood Park, which was the topic of an informational presentation from city staff at our August 24 council meeting. Other article topics include the city manager's spending authority and when or if issues involving councilmembers should be referred to outside agencies for investigation.

Labels: campaign 2009, council politics, finance, media, parks

Posted by John Nephew at 9/03/2009 06:57:00 AM | Permalink | Comments

While unsuccessfully seeking the support of the local DFL last Thursday, Diana Longrie mentioned a report from the League of Minnesota Cities Insurance Trust which seemed in her mind to minimize the gravity of the insured losses incurred in the Copeland-Longrie era. It's not so bad if you just spread those losses out over 5 or 10 years rather than looking at a one-year period when Longrie's majority and their henchman, Copeland, ran the city, she argued.

She invited residents to submit data practices requests to get a copy of the report for themselves. As it happens, the report was shared with the entire council, so I figured I'd put it online for anyone who is curious, and save our city staff time in fulfilling data practices requests.

I'm not sure why Longrie thinks the report puts Maplewood in a good light. Grouping Maplewood with the eight other Minnesota cities in the 30,000-40,000 population size, our one city of the nine constitutes a whopping 27% of the total losses over a 10-year period and 36% of the losses over a 5-year period. If we were just average, you'd expect us to be about 1/9 of the losses, or 11%. And remember, this is the effect of taking that horrible Copeland-Longrie year of litigation and averaging it with 4 or 9 more normal years.

In any case, I'd encourage residents to read the report and judge its meaning for themselves.

Labels: finance

Posted by John Nephew at 8/04/2009 07:36:00 AM | Permalink | Comments

Mayoral candidate Ken Smart addressed the city council during our truth-in-taxation hearing on December 8, 2008. He expressed concern that the city was not cutting taxes in response to the poor economy, and suggested that one way to reduce the city's budget would be to sell the Maplewood Community Center. I am told that he repeated this idea at the DFL meeting last Thursday.



Ken Smart is running as a team with city council candidates Delray Rokke and Dave Hafner.

Labels: campaign 2009, finance, parks, video

Posted by John Nephew at 8/03/2009 08:42:00 AM | Permalink | Comments

At our July 13 meeting, the city council voted 4-1 to move forward with the Holloway/Stanich Highlands project. This is a project that we are accelerating -- the economic downturn has meant low prices on construction work, as many contractors are desperate for work and their bids show it. Federal monetary policy and record-low interest rates have also meant amazingly low interest rates this year for a highly rated government borrower like Maplewood, even while many private sector borrowers continue to face difficulty borrowing money from skittish banks and lenders.

The same economic conditions that make borrowing and building attractive for the city right now are making more residents than usual anxious about assessments. The city staff and council have taken a couple of steps to alleviate these concerns.

The first has been that on two accelerated projects we are deferring assessments for all residents for two years, interest free. With the low interest rates and low construction bids, we'll be saving more than enough to carry the interest on the assessments. The result will be that the streets are done a little sooner than originally planned, homeowners won't be paying assessments any sooner than they would have on the original CIP schedule (unless they choose to) and will actually pay this year's assessment rate rather than higher future assessment rates, and the savings mean that the ultimate long-term debt of the city will be lower than projected.

The second step we took was to adjust the interest rate charged on assessments this year. In the recent past it was 6%, but given the lower interest rates from our bond sale earlier this year, we unanimously approved a resolution at our May 28 meeting to reduce the assessment interest rate on 2009 projects to 5.4%. The same resolution sets a policy going forward of tying assessment rates to the city's actual borrowing costs plus 2% for administrative expenses.

Labels: finance, public works

Posted by John Nephew at 7/19/2009 01:46:00 PM | Permalink | Comments

Item E1 on the tonight's (June 22) workshop agenda:

1. Receipt and Presentation of Comprehensive Annual Financial Report (CAFR) for 2008 and Report by Auditor HLB Tautges, Redpath, LTD

I think it's worth comparing the timing for the 2008 report versus 2007. Last year we acknowledged receipt of the CAFR and report on August 11th, and formally accepted it at the August 28th continuation of the August 25th council meeting. As our auditors dryly explained in their "communication with those charged with governance," the 2007 audit "was completed later than anticipated due to a variety of factors, including an increased level of testing in response to identified risks, assistance provided with reconciling various accounts and delays in receiving the trial balance and other audit documentation."

The audit being completed a good seven weeks earlier is one measure of how the city's operations have been recovering from the damage suffered under the previous regime.

Labels: finance

Posted by John Nephew at 6/22/2009 09:59:00 AM | Permalink | Comments

The governor has announced his "unallotment" cuts, taking back money from cities and other state budget areas in order to balance the spending bills he signed (while not signing the revenue bills the legislature also passed). The League of Minnesota Cities reports on the basics: "The 2009 cut will be computed as 3.31 percent of each city’s levy plus aid. For 2010, the percentage reduction will be increased to 7.64 percent."

According to the city-by-city information put together by the League, Maplewood will lose all of its $514,877 in expected 2009 Market Value Homestead Credit. We have no LGA to lose. For 2010, his plan is to take away all of our MVHC again, which otherwise was expected to be $566,817.

I guess the silver lining of how little aid/credits Maplewood has been getting from the state is that the governor can't take it away from us now. If you look at it on a per capita basis, the governor is taking away $14.04 per Maplewood resident this year, and $15.46 in 2010. In comparison, some our neighbors who get considerably more state aid (and whose MVHC isn't being touched because they have LGA for the governor to go after) are seeing numbers like:

North St Paul: $14.36 per capita in 2009, $33.14 in 2010
Oakdale: $11.71 in 2009, $19.54 in 2010
White Bear Lake: $8.81 in 2009, $20.34 in 2010
Saint Paul: $17.49 in 2009, $40.35 in 2010

Were I an official in some of these cities, I'd be nervous. The governor's plan cuts Oakdale's MVHC to zero, like ours, in 2010. But even with these cuts, North St Paul has another $1.7 million in Local Government Aid coming to it in 2010 ($145.75 per resident!), and their MVHC is as yet untouched. White Bear Lake will still be due more than $1.5 million in LGA ($61.81 per resident). What's to stop the state from raiding those funds if there are further declines in the state's revenue projections?

(Here's an interesting comparison, while I'm crunching these various numbers: The current per capita property tax in Maplewood averages out to $433.03, excluding MVHC. In North Saint Paul, it's $254.64. If North Saint Paul had to overnight hike its property tax to replace all of its LGA and MVHC, they would need to levy $444.64 per capita. I understand they are also a net recipient of fiscal disparities, whereas Maplewood is a net payer -- of $53.65 per resident, according to what we projected in the 2009 budget.)

Labels: finance

Posted by John Nephew at 6/16/2009 04:02:00 PM | Permalink | Comments

It looks like the governor and legislature failed to reach any agreement on the budget last night. The governor has said he will not call a special session, but will use vetoes to block tax increases and then line item vetoes and unallotment to balance the budget unilaterally. As with the unallotment that happened at the end of last year, this will have an impact on Maplewood as the state will not deliver the previously budgeted Market Value Homestead Credit. At this point the details of MVHC unallotment are not know. I would not be surprised if, like in December, we lose it all.

The silver lining of this cloud for Maplewood is that, compared to many other cities, we get relatively little money from the state. We don't have any LGA (local government aid) to lose, for example. Still, losing MVHC is going to have a significant impact.

Labels: finance

Posted by John Nephew at 5/19/2009 08:19:00 AM | Permalink | Comments

Last year, the governor and legislature passed levy limits on Minnesota cities. In simple terms, the law stated that cities could increase their tax levies by a maximum of 3.9% or the implicit price deflator (a measure of inflation for state and local governments), whichever is less. (There are other complications allowing a certain amount for population growth, exceptions for debt levies, etc.)

Last year the IPD was 6.1%, driven by factors like skyrocketing prices on petroleum, so cities were limited to 3.9% levy increases, less than the rate of inflation. But this year, the IPD has been calculated as only 0.76%, this time reflecting the falling prices of commodities and services in the global economic slowdown.

Cities could see this coming last year; inflation numbers come out every month, so it was obvious in the fall that the upcoming IPD calculation was going to be much lower than it was a year before. This set up a perverse incentive for cities -- knowing that they were not going to be allowed to keep up with inflation in their 2009 levies (to say nothing of how they knew state aid and credits would be cut as the state faced its own budgetary woes), and then that the decline in the IPD would mean even lower levy limits for the 2010 levy, the rational course of action for cities across Minnesota was to raise their levies right to the limit as a way to hedge against the future limits, especially if they didn't need to. Thus, in some cities the levy limit law may have delivered the exact opposite of its intended result -- it encouraged cities to focus on maximizing their levy increases, rather than minimizing them.

Labels: finance

Posted by John Nephew at 5/14/2009 11:44:00 AM | Permalink | Comments

Yesterday morning Peter Fischer, Dewey Konewko, and I testified in favor of H.F. 2055 at the legislature. Audio of the entire meeting is available on the House web site, but it's a huge file, so I excerpted just the twenty minutes that was spent with our testimony and then follow-up questions and discussions of the committee.



I felt like it was a positive reception on the whole. The bill was “laid over for possible inclusion,” which I guess means it's moving forward and at this point still has a shot at getting Maplewood a share of the Legacy Amendment sales tax revenues that are dedicated for conservation.

Labels: environment, finance, parks

Posted by John Nephew at 4/01/2009 11:39:00 AM | Permalink | Comments

Tomorrow one of the Fish Creek bills gets it first committee hearing. The bill, HF 2055, will be heard most likely sometime between 9:30 and 10:00 AM by the Environment and Natural Resources Finance Division. I've been told that it should take less than 10 minutes.

Labels: environment, finance

Posted by John Nephew at 3/30/2009 01:12:00 PM | Permalink | Comments

Last night at our regular council meeting we talked about progress in the legislature on funding for land acquisition in the Fish Creek corridor. This afternoon the city council (and other interested parties) received an e-mail from Senator Wiger, who wrote:

Hi Everyone,

I wanted to let you know that I enjoyed the conversation the City Council had about Fish Creek during its meeting last night. I was able to watch the show on TV after getting home.

As you know, Rep. Slawik, Rep. Lillie and I have been working on legislation to purchase land along Fish Creek so that it can be preserved for future generations. We have introduced two bills that request funding in the amount of $2.4 million to purchase the land. One of the bills (SF 1821/HF 2055) requests funding from the Parks and Trails fund, while the other bill (SF 1822/HF 2054) requests funding from the Outdoor Heritage Fund. Since we received some mixed feedback on which funding route to pursue, and since the proposal could potentially be funded through either route, we introduced both proposals in the hopes that one will be considered for funding.

I will be sure to keep you updated on the status of this legislation in the Senate.

Warm Regards,

Chuck

Here are links to the status pages of the bills that Sen. Wiger mentions: SF 1821, HF 2055; SF 1822, HF 2054.

Labels: environment, finance, parks

Posted by John Nephew at 3/24/2009 04:53:00 PM | Permalink | Comments

Many residents identify Maplewood's parks, trails, and open spaces as key to our community's attractiveness. Besides their inherent benefits, a well-maintained system of these assets increases the appeal and value of property in our city as a whole.

Last August the city council held a joint workshop with the Parks & Recreation Commission. A major topic of that meeting was the challenge of funding our parks.

Changing Needs

Historically, as a growing suburb, Maplewood has relied upon the Park Availability Charge, or PAC, which is charged on each unit of new development in the city. Collection of this charge is authorized by Minnesota Statutes 462.358 Subdivisions 2b and 2c. As explained by a League of Minnesota Cities brief on the subject, the statutes authorizing park dedication charges like our PAC “are premised on the assumption that new development (and not existing taxpayers) ought to pay for the additional park and recreation facilities needed to accommodate the demands created by the new development.” The statute limits the use of the funds, which “may not be used for ongoing operation or maintenance.”

As Maplewood nears full development, there are fewer opportunities for new park and recreation facilities. However, the aging of our existing facilities means a growing need to fund their repair and replacement. In the future we can expect the need for funding to grow, when the parks and trails that we have been expanding in recent years reach the point in their life when they require repair or reconstruction. Thus the nature of our park funding needs is changing, and the trend will continue. Now and in the future the city council will be worrying less about acquiring land or building new park facilities, and more about replacing deteriorated playground equipment, sports fields, and trail segments.

This growing need must be set against the realities of the budget process each year. I believe many residents would support increased funding for our parks, trails, and open space; but as our city sets its short-term priorities, it is very easy to short-change our parks when their funding is part of the general tax levy. Unlike capital projects such as street improvements that can be assessed and bonded with relative ease, capital improvements to our parks and open spaces generally must be paid for from funds on hand.

I believe Maplewood needs to look for a dedicated funding source for the maintenance and repair/replacement needs of Maplewood parks, trails, and open space.

EFF as Potential Dedicated Funding

One option we can consider is to dedicate the Electric Franchise Fee as this funding source. I think there are several reasons the EFF may be appropriate.

The EFF is collected from every electric utility customer in the city. This includes entities that are exempt from property taxes (such as private and public schools, churches, and government facilities) but that do benefit from city parks, trails and open space. The EFF is thus an existing mechanism for collecting fees from a broad base of individuals and institutions that benefit directly or indirectly from our parks, trails and open space.

There several possible ways to dedicate this funding. It could be a whole or partial dedication of the current EFF, which is 50 cents per month on residential electric customers. The EFF could be increased, with the increase (with our without part of the current EFF) being dedicated to a park, trail, and open space maintenance fund.

From the standpoint of building community support, I think the EFF would make it easier for residents to see a direct relationship between what they pay and what they receive – for example, 25 cents per month on a residential household would equate to something over $90,000 per year that would go directly to needed capital improvements to our parks system.

Using the EFF has its downside. It has been controversial in the past. It can be seen as a regressive tax: unlike property taxes, it does not have any implicit relationship to the assets of the payer or their ability to pay. It is not tax deductible as property taxes are. I opposed an increase in the EFF three years ago, when it appeared to be proposed as a way to hold down property taxes on the most valuable homes in the city and shift the burden to renters and owners of less valuable houses. In that case, however, the money was going into general city operations (it was proposed to be used for energy purposes, but that umbrella covered things like the heating bill at the community center).

Of course, every funding mechanism has its drawbacks. For example, due to fiscal disparities contributions, in order to fund parks through property taxes we actually have to levy more taxes than would actually go to parks, in order to account for the program that redistributes a portion of our property tax receipts to neighboring communities.

Next Steps

I bought this proposal to the Parks & Recreation Commission as a Visitor Presentation on March 18th in an effort to move our discussion about parks, trails and open space funding forward. The City Council and Parks Commission have already identified the need for dedicated funding for our parks system; we need to move on to explore specific ideas of how to accomplish the goal.

If the parks commission is willing to explore this idea, my hope is that they will develop a policy recommendation for the city council. I am also hoping that discussion of this idea may bring forth additional ideas of practical funding mechanisms to help us assure a safe and healthy park system that will serve our residents today and in generations to come.

Labels: finance, parks

Posted by John Nephew at 3/21/2009 10:19:00 PM | Permalink | Comments

The February city newsletter has been arriving in households, and this month I wrote the "Council Corner." (That link will get you to a PDF of just my article's page; the entire booklet is available on the city's website.)

My article focuses on the topic of city debt and the capital improvement plan that we approved last summer. That was a while ago, but the topic of debt and fiscal responsibility is timely amidst the news of state budget deficits and cuts to local governments. It was also an issue where the council came together and found consensus.

(If you're wondering about the article's postscript, I refer you to a blog entry from last month.)

Labels: finance

Posted by John Nephew at 2/04/2009 09:51:00 PM | Permalink | Comments

The word has come down on unallotments. Rather than only cutting from cities that get Local Government Aid, the governor has decided to also take money from cities that get Market Value Homestead Credit to offset property taxes.

Information is available on the Department of Revenue web page, including a PDF with a list of Minnesota cities and how much of their funding is being taken away this month.

In Maplewood's case -- if I am reading the chart right... they are taking it all. The entire payment of $244,473 that was supposed to be paid by December 26th, 2008. This was part of the 2008 budget approved back in 2007 -- but now it will never be paid at all. It's not even two weeks until the end of the year, and we will have to account for the loss of almost a quarter million dollars of money from the current year's budget.

Labels: finance

Posted by John Nephew at 12/19/2008 09:21:00 PM | Permalink | Comments

I wanted to return to the details of the final levy decision from Monday night's long meeting.

Using the staff-recommended 3.0% increase as a starting point, the council discussed further cuts and cost savings to achieve a lower levy. The motion passed 3-2, but as its details were discussed, it did seem to me that input of the entire council influenced the motion, even if it did not win everyone's approval in the end.

These additional cuts were passed:

• $18,000 from Public Works. The expected result of this cut will be somewhat slower plowing of city-owned sidewalks and trails, as there will be less money available for overtime.
• $5,000 from Information Technology. This amounts to putting off for a year the replacement of five computers owned by the city.
• $9,500 from Citizen Services. This will reduce some service at city hall -- possibly at the information desk, possibly at the service window where people get passports, licenses, etc.
• $7,400 from the Fire Department. We will spend less on uniforms and will replace 10 sets of turn out gear rather than 12.
• $43,000 from Police. We will not buy a hybrid SUV ($26,000 savings). We also can account for $17,000 in savings from a recent change of provider for youth diversion services (the budget was written before we had finalized that deal and locked in the savings).
• $50,000 from the fuel budget city-wide. Mr. Ahl indicated that he would get to work on a contract to lock in fuel prices for the first six months of the year. The budget had assumed more expensive gasoline and diesel prices -- again, this was a prudent expectation earlier this year when oil was through the roof.
• $5,000 from the travel and training budget for the City Manager, Council and Mayor. This cuts in half the funding we have to attend things like the League of Minnesota Cities annual meeting or regional meetings, or the National League of Cities conferences that the mayor has attended in the past two years. It seemed fair, as we were cutting other departments, to give up something of the council's as well.

Total cuts: $137,900 from the city's operating levy and budget.

If we take these changes and use them to adjust the figures on page 28 of the draft budget, we get the following:

	2008 Levy	2009 Levy	$Change	%Change
Operations:
General Fund	$11,644,525	$11,546,895	($97,630)	-0.84%
Community Center Operations Fund	230,000	300,000	70,000	30.4%
Recreation Programs Fund	250,000	250,000	0	0.0%
Debt Service:
Debt Service Fund	3,421,925	3,779,340	357,415	10.2%
Totals - All Funds	$15,546,450	$15,876,235	$329,785	2.12%

Under the state's levy limits, we could have increased our operating levy by 3.9% (plus an allowance for new construction). Instead, we reduced it.

What we can't reduce are the city's debt service obligations -- we have to make payments on those bonds for past street projects and the like. Even including those bond payments, the final levy increase of 2.12% is well below the rate of inflation, whether you measure that by the Consumer Price Index or the Implicit Price Deflator for State and Local Government Consumption.

Labels: finance

Posted by John Nephew at 12/14/2008 10:43:00 AM | Permalink | Comments

Just a short note. We didn't get out of city hall until something like 1:30 AM, in order to take care of the things that really needed to be taken care of last night. The rest of the agenda will continue next Monday, after the public hearing on White Bear Ave. improvements and the special closed meeting for reviewing the initial field of city manager candidates.

A key thing that residents are probably wondering about is the final tax levy and budget. Without going into all the details, we came up with a list of cuts that reduced the final levy increase to 2.2%.

Labels: finance

Posted by John Nephew at 12/09/2008 10:34:00 AM | Permalink | Comments

As we move toward finalizing the city's 2009 budget, the city council and staff have been looking at options for reducing the increase in the tax levy. Some broad options were discussed back in September when we set the maximum levy (the 6% potential increase that shows up on your truth-in-taxation statement). At our November 3rd workshop, staff presented a number of more detailed scenarios, from the full 6% down to a zero percent increase, with the manager's recommendation being a 3% increase. I've extracted the relevant portion of that meeting packet, so you can see the details.

The council asked for more details on the impact on a department-by-department basis if we went with the zero percent increase scenario. That information has been provided in the packet for the upcoming Monday council meeting; again, I've extracted the relevant pages, for folks who don't want to download the full 152-page meeting packet from the city website.

If you have thoughts about these budget options, now is a good time to share your views with the city council (you can e-mail us all at once at CityCouncil@ci.maplewood.mn.us). I take it as a given that nobody likes higher taxes per se -- what is much more helpful is to know what people are willing to give up, in terms of level of service, in order to see lower taxes.

Labels: finance

Posted by John Nephew at 11/20/2008 12:09:00 PM | Permalink | Comments

Truth in taxation notices are starting to arrive in local mailboxes, and ours was here today. I've been very curious to see this, the first time I've gotten one since joining the council, to see what our potential maximum tax levy works out to on the bottom line for a homeowner.

In September we set our maximum levy at a 6% increase. We can reduce this further, but we can't increase it, in our final budget meetings in December. At our last budget workshop, staff indicated that they were recommending cuts that would lower the increase to 3%.

The levy has a complicated relationship to an individual property owner's tax bill. We actually set a dollar figure as the levy, and then a state-determined formula is used to apportion those total taxes among property owners, according to classes of property (businesses, homes) and individual property values as assessed by the county (some may increase in value one year while others decrease).

For our home's taxes, the assessed value of our property declined 5.5%. This is pretty well in line with what we heard was typical across Maplewood -- declines in value of about 6% for residential properties. If the city went with the maximum levy (as the truth in taxation notice assumes), the city portion of our property taxes would rise just 1.6%, which already is less than inflation. If we go with the staff recommendation of a 3% levy increase (or lower) versus the maximum 6%, I'm betting it will mean our final city tax bill will be lower in 2009 than 2008, and that would be true for most Maplewood homeowners.

Labels: finance

Posted by John Nephew at 11/13/2008 08:31:00 PM | Permalink | Comments

The upcoming Sept. 8th council meeting may have the shortest agenda yet for a regular meeting since I've been on the council. However, it has a particularly important item of business: a resolution setting the maximum tax levy for 2009.

At our last council-manager workshop, we discussed the 2009 budget and the possible levy increase. Staff told us that, under the levy limits set by the legislature and governor earlier this year, Maplewood's maximum possible total levy increase would be 9.2%. From the visitor presentations in our subsequent council meeting, it seems that some residents and commentators thought the staff was proposing a 9.2% increase in the levy. Actually, they were telling us what was the ceiling under the new law, and looking for direction from the council on where to go from there. (I think the council was unified in saying “go lower than 9.2%, please.”)

Be that as it may, you'll notice that this is a much higher number than the 3.9% cap set by the state. The reason is that the new levy limit law sets out various modifiers and exceptions. For example, debt service is outside of the limits, so we need to collect taxes to make payments on the bonds issued in the past two years. For another example, there is a modifier to account for growth in the city's tax base from new construction.

The law says that we must set our maximum levy by September 15th. In December, we will set the final levy, after the Truth in Taxation hearing. The final levy number can be lower than the one we set at our meeting on Monday, but not higher. As we move further along in the budget process, the council will be able to weigh its priorities in terms of spending for 2009 and balancing those needs against taxes and fees.

As you can see from the relevant item in the council packet, the staff took our input at the workshop and came up with a proposed maximum levy of $16,481,820, which in total represents a 6.0% increase over the 2008 levy.

Labels: finance, process

Posted by John Nephew at 9/07/2008 09:41:00 AM | Permalink | Comments

I sure have dropped off in how much I've written in the blog lately. It's been a busy summer, but as I think about it, there has been no shortage of topics that I could have been writing about -- important council issues such as the Gethsemane Senior Housing project (which passed the council 5-0 for its approvals and also for its TIF application), the direction to staff to complete negotiations to buy the remaining 4 acres of Gethsemane Park (3-2 vote there), the dynamic sign ordinance, and the approval of the 2009-2013 capital improvement plan (we amended it to space out some road projects, in order to reduce the future impact of debt service on the city's tax levy; and passed the revised CIP 5-0 this past Thursday).

In meetings this week we received news on a couple of budget-related topics that I think are worth mentioning. One is that while residential property values in Maplewood declined by 6%, the commercial properties increased by 13%, and the net taxable value of the city in total did increase slightly. This is good news for homeowners, since it makes it less likely that one home will see both declining property value and rising taxes. It's not as good news for businesses, whose rising property values will mean that all else being equal, tax burden will shift from homes to commercial properties. Later in the budget process we'll get more detailed information on what this means (e.g., what a change of a given percent in the levy would mean for the median-value Maplewood home's city taxes).

Another important data point came in a side comment this week -- apparently we are anticipating an 18% rise in the cost of the city's health insurance. Let's be clear, this is a frightening number. However, earlier in the year we were told the increase could be over 40%. So while an 18% premium hike isn't much to celebrate in itself, it's a lot easier on the 2009 budget than a potential increase more than twice as high.

Labels: finance

Posted by John Nephew at 8/30/2008 10:02:00 AM | Permalink | Comments

A city council sets many rules for itself, but a lot of what we have to deal with are the laws and regulations imposed by higher levels of government. This is why the League of Minnesota Cities employs lobbyists, to encourage our state legislators to pass laws beneficial to our cities and to oppose ones that make city governance more difficult.

In the recently ended legislative session, one part of the budget compromise is sure to play a big role in our city's planning for the next year: levy limits. Under the agreement worked out between the legislature and the governor, cities and counties will be limited in how much they can increase their revenue from property taxes. The LMC has put together a short document to help cities understand how the levy limits will be applied. The basic limit is a 3.9% increase, adjusted by increases in population and new commercial property construction. There are exceptions for things like levies for bonds approved by taxpayer referendum. (Local Government Aid is also part of the calculations, but Maplewood doesn't currently get any so it doesn't apply to us.)

I don't have a problem with the idea of keeping our city's levy increase under this limit. I'd be aiming for that kind of fiscal restraint in any case. But we do have some unique risks in Maplewood -- for example, with our new insurance terms, which subject us to higher per-incident deductibles and no aggregate deductible for certain types of claims. If we get another wave of litigation like the kind that hit us in early 2007, the result would almost certainly be cuts to city services. We also face other challenges, such as skyrocketing health insurance premiums for city employees. (I hear rumors of a potential 44% increase if we don't change providers or coverage.) The 2009 budget process is going to require tough decisions and honest negotiations, and a willingness of everyone to come together to share the burden, in order to navigate through the present situation while doing our best to maintain a strong city in the long run.

Labels: finance

Posted by John Nephew at 5/22/2008 12:38:00 PM | Permalink | Comments

The League of Minnesota Cities Insurance Trust board met on April 8th, and one of the topics before them was whether and on what terms to renew insurance coverage of the City of Maplewood. As the Pioneer Press reported on April 9th, the LMCIT did decide to continue our coverage, but with some harsh consequences for past behavior.

Late this week the Council and City received a letter from the LMCIT laying out those consequences in more detail. It states:

The Board approved offering Maplewood continued coverage, subject to a $200,000 per occurrence deductible for any employment liability claims, and any claims made by any City officer, employee, or volunteer against the City or another officer, employee, or volunteer. These claims will not be counted towards the City's aggregate deductible. In addition to the higher deductibles, the City can also expect a sizable increase in insurance premiums as a direct result of its loss experience.

In other words, if we get into future litigation similar to the kind that arose from the December 2006 reorganization plan, we can expect a substantial portion of the expenses and any settlement costs to come directly out of the pockets of Maplewood taxpayers.

Even if we stay out of trouble going forward, it appears that we still run the risk that future claims stemming from past incidents (say, if someone filed a suit this summer that was the result of alleged actions of the city in 2006 or 2007) will be subject to these new deductibles as well. This is because, as I understand it, our LMCIT policy is the "claims made" variety. An article on Claims Made vs. Occurrence notes, "If coverage terms ever become more restrictive on subsequent renewal of a 'claims-made' policy, the new terms apply retroactively to the original retroactive or inception date."

It's clear that Maplewood is on probation going forward. The letter stresses that the LMCIT is "only committing to offer coverage to Maplewood for the coming year. Whether the LMCIT will be willing to renew Maplewood's coverage again in 2009 will depend entirely on what happens over the next year."

Labels: finance

Posted by John Nephew at 4/20/2008 01:21:00 PM | Permalink | Comments

Last night the city council held a sobering workshop with representatives of our insurance brokers, Arthur J. Gallagher Risk Management Services, Inc. They informed us that the League of Minnesota Cities Insurance Trust board would be deciding at a meeting today whether or not to renew our city's insurance policy, and if so under what terms. They communicated the LMCIT's serious concerns about the litigation risk posed by Maplewood, particularly in light of the net losses from the 7/1/06-7/1/07 insurance period. Those losses substantially exceed the total of the previous twenty years' losses combined.

We were told that, were it not for recent developments in Maplewood (such as "positive changes, staffing-wise," an apparent reference to the removal of Mr. Copeland), our coverage with the LMCIT would have been cancelled. As it stands the LMCIT is willing to continue, but with higher premiums and higher deductibles. The deductible for employment lawsuits, for example, seems likely to rise from $50,000 per incident to $200,000 per incident.

Our brokers asked if some individual councilmembers could write to the LMCIT board to make it clear that their message had been received. I volunteered to write a letter last night (here it is as a PDF) that could be delivered to the board in advance of their meeting today, as did Mayor Longrie. I welcomed the chance to acknowledge the gravity and legitimacy of the LMCIT's concerns, call attention to corrective steps already taken, and make clear that the council as a body and the city staff share the goal of working closely with the League to continue to reduce claims in the future.

Labels: finance

Posted by John Nephew at 4/08/2008 02:41:00 PM | Permalink | Comments

The front page of the Maplewood website has an open letter to residents from Acting City Manager Chuck Ahl, addressing concerns about the city's finances. It will also be printed in the next city newsletter that is mailed to residents each month.

The key message in the letter is to reassure residents that no evidence of misappropriation or wrongdoing has been found. Rather, the underlying problem is that the city's accounting has not been kept up to date. This is understandable, given that the finance department was seriously short-staffed at various times last year. I believe we went from a full complement of eight employees in 2006 down to a low of just two people in the finance department for one portion of 2007. A lack of timely accounting has a ripple effect on planning and budgeting city-wide (remember the erroneous claims from certain elected officials and their supporters that the Community Center was "in the black" last year?), so this is not a situation we want to have going forward. Fortunately, our city staff has made fixing this problem a top priority.

What about an audit? The Pioneer Press called for the State Auditor to get involved with Maplewood's situation, and Councilmember Erik Hjelle has written that he "will be requesting a forensic audit of the city by an outside body."

After last fall's election, I paid a visit to the State Auditor's offices. I happened to stop by on an afternoon when Rebecca Otto had an opening in her schedule, and I was able to learn directly from her about her office's role in relation to local governments like Maplewood. The State Auditor is charged with directly auditing a number of government entities, such as the counties and the three first-class cities (Minneapolis, St. Paul, and Duluth). Normally a city like Maplewood hires a private auditing firm to review its books. However, our city council could request that the State Auditor audit our books as well, and I wondered if this might be a good idea, given the concerns I had about Maplewood's financial management under last year's leadership.

There are a couple of things to keep in mind at this point. One is that our auditors review the books once each year, so they have not yet looked at the 2007 records that are of concern. The second is that requesting the State Auditor to perform our 2007 audit would probably cost us taxpayers more (the city would be paying for the audit either way), since those auditors don't have the familiarity with our books and past practices that our current auditors do.

The State Auditor also is charged with special investigations of local governments -- for example, if someone finds evidence of missing property or funds. As Mr. Ahl's letter indicates, we have found no indication of such misdeeds. If we did, we would be required by law to notify the State Auditor.

After the meeting, my conclusion was that the best course of action was to let the normal auditing process play out. If anything suspicious was uncovered, then we would turn to the State Auditor for investigation and forensic auditing as appropriate. In the meantime, at the January 14th city council meeting, I proposed that the council name a liaison to our auditors, and received that appointment.

Labels: finance, process

Posted by John Nephew at 4/07/2008 11:05:00 PM | Permalink | Comments

This afternoon we will be meeting at City Hall for a "City Council - City Manager Goal Setting Session." One of the topics on the agenda is the city's long-term debt.

This is a topic of particular interest to me. In preparation for our conversation, I put together a simple spreadsheet comparing the road projects I am aware of from 2007 and the ones we have approved or are considering for 2008. Consider this spreadsheet a work-in-progress -- for the 2007 projects I note which meeting minutes I got the numbers from, but in general those numbers were from around the time of the public hearing or feasibility study, and the final numbers for each project may have changed along the way. Likewise, for this year I have included the most recent numbers I'm aware of (many of them from the council packet for tonight's regular council meeting); in the case of the Upper Afton Road project, we will be discussing its feasibility study tonight. We have yet to see how close the engineers' estimates are to the actual bids we will receive. I also omitted projects that were fully assessed (e.g., new streets that a developer paid for in their entirety).

As the spreadsheet makes clear, we have a wide range of financing sources for our road projects. Most of the money comes from dedicated sources -- Municipal State Aid funds, the Sewer fund, special assessments to property owners who benefit from the improvements, etc. As a steward of the city's finances, the number that concerns me most is the "General Tax Levy" column -- this represents borrowings that will be repaid out of the general operating budget of the city. Unlike the various dedicated funds (which must be spent on road construction or stormwater management or what have you), these monies could otherwise be spent on just about any of the services that the city provides. Too much of this kind of debt limits the future financial flexibility of the city.

The good news is that, even as Maplewood continues to do more road construction than usual (taking advantage of the weak construction market and lower costs while we can -- we may as well spend the dedicated funds now when we can get 20% more road for our money, rather than next year when the new gas tax revenues start increasing the demand for road construction all over the state), we are on track to assume far less general levy debt in 2008 than we did in 2007 -- almost 80% less.

Labels: finance

Posted by John Nephew at 3/24/2008 09:40:00 AM | Permalink | Comments

The Star Tribune has an interesting article today about a proposed ballot referendum in Eagan. That city has been embroiled in a lawsuit with a developer who wants to turn a former golf course into a housing development. The city had rejected their plans, which resulted in a lawsuit, that still grinds on in its fourth year. The referendum seems to be offering residents a third possible outcome, in addition to the previous options of giving in to the developer's wishes or rolling the dice in court.

Labels: environment, finance, media

Posted by John Nephew at 3/20/2008 10:21:00 AM | Permalink | Comments

[This is an e-mail I sent yesterday to a mailing list of commissioners, activists, and other interested citizens. Councilmember Hjelle had previously sent a message laden with inaccuracies to this list, and several of the recipients had forwarded it to me. I thought it would be good to post my message here as well, for anyone interested to see.]

Folks,

Apparently some false information is being spread around by Councilmember Hjelle.

Among other tall tales, Mr. Hjelle wrote, “The sad reality is that our new council majority has no interest in addressing the concerns of the Moratorium and the area impacted by the COPAR development. That is why the issue is efectively [sic] dead, and why the moratorium is being allowed to simply end.”

The moratorium is ending because the city council lacks legal authority to extend it further. I brought this up at the January 28th council meeting, specifically because I was concerned about development occurring between the expiration of the moratorium and the adoption of any action based on the study findings.

In case anyone needs proof, I went back to the DVD of this meeting, excerpted the relevant portion of the discussion, and put it on YouTube:


You can see me ask, and Mr. Ahl and Mr. Kantrud answer quite clearly that we have extended the moratorium as far as the law allows. You can also see on the video that Mr. Hjelle was present to receive the same information. You'd have to ask him why he would lie to you all about this.

In terms of my interest in addressing the concerns of the moratorium area, I hope it's obvious that Mr. Hjelle does not speak for me and fails to accurately depict my views.

As I learned about the issues in the moratorium study area, I became interested in ways to preserve ecologically sensitive land there, and I came to appreciate how highly valued the land is in the eyes of the members of the original open space task force as well as south leg neighbors. I also am aware of the issues of property rights, ongoing litigation, and the complexities of land use planning. Finally, I worry that the solution some favor – of keeping 2-acre minimum lots – is no solution at all for the long term, even if it is something the city could maintain. Do we really want all those septic systems uphill from Fish Creek?

The only way to really preserve the ecological value of the land around Fish Creek is public ownership. This is not something the city could pay for out of petty cash, especially with the financial situation we've inherited. The original open space referendum money, of course, was long ago spent on other land. This means that the city would have to issue bonds. A referendum would be required and a majority of voters would have to support the borrowing.

I am asking city staff for information on the process by which such a referendum could be accomplished. In the meantime, interested folks can get a start by reading a section of the Handbook for Minnesota Cities, Chapter 24: Debt and Borrowing (look at “Voter Approval” on pages 7-8 of this document).

If certain members of the council are interested in actually doing something for Fish Creek, rather than just trying to exploit it as a political wedge as they did last year, then we might get the votes in the council necessary to authorize a bond question on the ballot.

Then it's up to the citizens. The League of Minnesota Cities warns, “City officials should be careful not to endorse or campaign in favor of the bond election. Any published materials should be confined to factual statements about the project to be financed. Campaigning should be left to citizen’s groups.” (This comes from an Attorney General's opinion.) Fortunately, we may already have such a citizen's group in the form of the Fish Creek Initiative.

While bonding to buy more open space may be a tough sell with the electorate, especially in this economic downturn, we do live in a community that puts a very high value on our environment, our parks, and our neighborhood preserves. A ballot question would give citizens and activists who want to protect Fish Creek and its environs the chance to take their case directly to the voters, to persuade them that this is an investment that is worth making for Maplewood's future.

Sincerely,

John Nephew, Councilmember

Labels: environment, finance, process, video

Posted by John Nephew at 3/02/2008 11:00:00 AM | Permalink | Comments

What's going on with Gladstone and tax increment financing? The council majority is sending contradictory signals to two different groups. On the one hand, some citizens who oppose the use of TIF have been reassured at various times that it's off the table. On the other, the development plan for the Lake Phalen Estates (the former site of the Saint Paul Tourist Cabins) is structured around a significant amount of TIF money, and the council has been unwilling to come out and tell the developer to draw up plans that don't assume some public money.

Someone is being misled. Is it the citizens or the developer?

Last summer, council member Erik Hjelle voiced a clear position on TIF. He wrote (you can find this in the council packet of the 6/26/06 workshop, page 97):

Tourist cabins. I will not support any TIF for this project. A builder/developer should not need any enticements to build on lakeshore that is 10 minutes from downtown. This is not negotiable for me.

In an August 8th commentary in the Maplewood-Ramsey County Review, Hjelle rejected claims that Gladstone redevelopment was in limbo. He touted the plan for the cabins site as “a proposal to build a 150+ unit Class A development at the St. Paul Tourist Cabin site with $0 public financing.” And again Hjelle touted the no-public-subsidy aspect of the project in the City News of September 2006.

At the Mayor's Forum on February 3rd, one of the mayor's supporters asked if there would be a taxpayer subsidy for this development. Mayor Longrie said there was no tax increment financing approved for it. City Manager Copeland said an application for TIF had been received, and would be reviewed at an upcoming council workshop.

I made a data practices request to the City of Maplewood to get a copy of the audio recording, to make sure I got her words right. Here is what she said:

He can certainly apply. I mean, we haven't said that nobody can apply. I mean, anybody can apply. But one of the guiding principles of the Gladstone redevelopment plan was indeed that TIF was not encouraged or looked upon favorably. So that was one of the guiding principles that the council also voted on, so I mean that gives you an idea of, I mean, there's always, with anything there's always, you know, people can present proposals, and we look at our guiding principles that we've already enacted and what is our public policy. And certainly I can tell you that my public policy, from my perspective, is that I think being ten minutes from the capitol – gosh, that's prime land all by itself. It doesn't need my help. But that's just me.

(You can download an audio clip of the mayor saying this — it's an MP3 file, about 1 MB).

While she parsed her words very carefully, the mayor left forum attendees with a sense of reassurance that TIF was not going to be used on this project. At the least, she implied that she opposed TIF for this specific development.

Two days later, the developer in question was in front of the council for a workshop. Numerous times and in several different ways, the developer and city staff gave the council an opportunity to express their principles and public policy philosophy when it came to TIF and this project. Each time, the mayor evaded the question. She repeatedly said that the council doesn't take action at workshops, but what the developer wanted was not a decision but rather a frank discussion of the public policy values of the council members in this open meeting.

Someone is being misled. Either it is the citizens, who are being reassured that taxpayer dollars won't be spent to subsidize this project on lakefront property so close to the heart of the metro; or it's the developer, who is being asked to invest thousands in a study and much more in planning, working from a blueprint that assumes some level of assistance from TIF.

It seems to me that this is the wrong way to govern. If you have concluded, a priori, that a plan on this site should be able to succeed without TIF, why not be straight with the developer? Tell him the truth up front, and let him build his financial plan around that reality. Don't lead him to waste a whole lot of money preparing a course of action that would require you to violate your policy principles.

On the other hand, if the council majority is truly open to TIF — as opposed to just worrying that if they say no, they might scare the developer away and lose the $1.8 million Met Council grant they are so proud of, or the park fees from the development that are earmarked for the Gladstone Savannah — then they should spend some time acting like leaders, persuading the public that it's an idea worth considering. Then, if they do decide to create a TIF district, it won't come as a shock to people who have been promised that it will never happen.

Labels: development, finance, process

Posted by John Nephew at 2/23/2007 08:57:00 AM | Permalink