• 04Dec

    I anticipate a very frustrating budget process which may leave me unable to support the proposed budget. Right now as I review the budget, the tax levy increase is at about 9% which is about the same as the valuation increase of the city. This means that if your property value is flat your taxes will probably be pretty flat. If you saw a tax increase it is probably because This masks some serious underlying issues. I still have many questions so if my analysis is incorrect. I have many more thoughts, but these are some highlights.

    As always I have an open ended question, if you want to see cuts let me know what you have in mind…

    Problems:

    1. We continue to ignore actual maintenance costs. Streets which are the most serious issues require $22.9M in annual maintenance. It looks like we are putting in maybe $5 million. Worse yet I believe a fair amount of the funding is coming from one time moneys. This will catch up with us. To fix the current situation with taxes would require an enormous tax increase. Further this is only streets, we also have similar issues with sewer, buildings, parks, and other municipal entities. In short, we have more infrastructure to maintain than we have resources to maintain it. Not only are we not properly funding maintenance, we don’t even have a plan to phase this in!
    2. While the proposed reduction in the levy is nice we are failing to fund a few priorities that I see as key. In particular, public safety both in terms is law enforcement and safe infrastructure lacks the improvements I would like to see. Further many of the issues resulting from a lack of focus on sustainability will not be addressed if we have no staff to focus on that sustainability.
    3. The lack of action from the PASC has left us with a huge hole in the planning department 2017. The group seldom meets and has taken no action to address the serious issues raised in the Stantec Report. As a city, we need a fully staffed planning department, but the responsibility for that staffing currently lies in the county. We currently have a significantly understaffed department lacking key skills like urban design & architecture. We also lack the necessary communications between planning, building inspections, and public works. The pay scale in the department also appears to be unrealistic in attracting top talent. We are lucky to have devoted experienced employees that help mask the issues. As of a completely worthless meeting last week, there was still no decisions made. Rochester pays 76% of Olmsted County taxes. Olmsted County benefits greatly from planning in Rochester, but wants the city to fund the needed positions. The system is completely broken and the PASC has neither the desire or drive to address these issues. In the budget we need to know if we need to create a city planning department. We do not have the information we need to make an informed decision.
    4. Basically this budget does not consider broadband or the steps to get there. Rochester lacks the technology to remain competitive and a lack of competition results in high rates and poor service. Our kids that could most benefit from broadband often can’t afford it. We already have an independently verified business case showing that municipal broadband is viable in Rochester. The next step will be to do a market study to make sure the utility could sustain itself without taxpayer subsidy (just like Longmont Co.). However this budget doesn’t seem to realize this as a priority despite overwhelming support.

    Solutions:

    There are solutions, but an unwillingness by some council members to make the changes that are necessary to put us on solid financial footing. Here are a few, some that are being done already in Rochester.

    1. Utility basis budgeting – RPU already is pursuing this with both the water & electric utility. What this basically means is that for every asset the utility owns we make annual payments to ensure we always have the funds to maintain or replace major assets. If this seems like common sense, it is…
    2. Financial analysis – I believe that we should not accept any new infrastructure as a public asset unless taxes / value available for maintenance exceeds the cost of maintenance. In other words, stop building money losing infrastructure. Now this infrastructure may still be built, but it should then be privately owned and maintained. This is not intended to affect public amenities like parks, library, arts, etc. If this seems like common sense, it is…
    3. Foolish subsidies – We have to stop this. We charge a substantial fee (sewer customer charge) to every single household in Rochester to subsidize new development. We seriously charge people barely making it in Rochester extra so we can subsidize million dollar homes. This is madness, but it continues year after year. We need to end these types of subsidies. If this seems like common sense, it is…
    4. 5 year finance plan – We need stop kicking the can down the road year after year. We need to seriously address the structural failings of our current finances. And yet every year we meet and take no meaningful action. A longer term horizon would force us to stop gaming the system, exhausting one time monies, and failing to properly prepare to deliver services. We have made progress in planning for staff, and then subsequently ignore that plan in order to push needed staff into the next year. We need a longer term plan that the community can proactively weigh in on. If this seems like common sense, it is…

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  • 13Sep

    Edit: Fixed Link

    This is certainly in my list of positions to support in 2017. Our EDF Fellow Matus Muron presents a tremendous case for funding an office of sustainability.

    EDF Fellow Report

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  • 07Dec

    Here is what is not happening and what needs to happen. (Updates coming as I can populate this with data). Here are the actual tax changes in the city of Rochester. 2016 Property Tax Changes

    1. Bring back LGA – After promising to not harm Local Government Aid (LGA) in budget cuts Tim Pawlenty devastated LGA in his time as governor. If we received the same amount of LGA as 2000 per capita that would lower everyones city property taxes by about 18%. Our 2016 allocation of $10.2 million would become $20.3 and the total city levy would be reduced by that same $10.1 million
    2. Stop wasting TIF – Every dollar of TIF is a dollar that increases everyone-elses taxes. The 501 building failed to meet our basic requirements, and in my opinion did not provide a truthful accounting of their property acquisition costs. Despite this we gave them millions in TIF.
    3. Aggressively redevelop surface parking lots in the city core – All you need to do is take a look at the map of downtown Rochester to see how much high value property is not helping pay community bills. By replacing this with productive (taxpaying) mixes of uses everyone benefits by diversifying the tax base.
    4. Prohibit underdevelopment – We had a proposal to place a surface parking lot and suburban drive through on a prime downtown urban riverfront lot. Besides for the terrible urban design this also limits the tax capacity of the development and forever passes tax costs onto its neighbors.
    5. Implement Street Utilities – This is huge, most of our budgetary increase in the future are going to be driven by infrastructure, especially street infrastructure. As it stands we have hundreds of miles of roadways where the adjacent uses don’t come close to covering the major maintenance and replacement costs. The latest data suggest that the annual cost for major maintenance and eventual replacement is $12 million. The 2016 budget has about $2 million for those costs. (verification coming). A utility will mean that the adjacent property owners (including non-profits) will be largely responsible for their infrastructure, the current system will pile onto existing businesses.
    6. View infrastructure investments like a business would – Before the city ever agrees to accept a roadway or any other major piece of infrastructure, we should require the applicant, ourselves included to verify that the adjacent uses provide sufficient revenues to cover ongoing costs.
    7. Be a good corporate citizen – If you are paying poverty level wages or manipulating hours to deny employees benefits, you are part of the structure that causes public expenditures to be higher.

    Since 2000, the city has expanded services while reducing per capita staff by 9.5%. The real growth in the city’s operating budget is under 1% annually.

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  • 23Nov

    While I suspect the publishers would never admit it, poor decision making by the Rochester City Council likely led to the creation of this educational video. The firm that created this video, Stonebrooke Engineering, was the same firm that recommended a round about at the intersection of 16th street and Mayowood Road. Many of the 10 myths debunked here were the talking points from Mayor Brede and Councilmember Ed Hruska who led the decision to ignore the professional recommendation. They actually show our intersection in the video.

    The council voted 6-1 to pander to neighbors spouting these myths. WE voted to build an intersection that was significantly more expensive to build (and getting worse), more expensive to maintain and less safe for pedestrians, bikes, transit users, and cars. Since that vote Nick Campion has replaced Bruce Snyder; so a responsible decision would have lost 5-2.

    Bottom line: we are building an intersection that makes us less safe and raises our taxes.

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  • 21Nov

    Rochester is not broke, actually far from it, but we will be facing tremendous tax increases if we don’t clean up our act. Small businesses will continue to get smacked with disproportionate tax increases if city leaders continue to allow and even subsidize sprawl. Right now Rochester’s fiscal policy when it comes to housing development is: “lose money on every one and make it up in volume…”

    http://www.citylab.com/work/2012/03/simple-math-can-save-cities-bankruptcy/1629/

    We tend to think that broke cities have two options: raise taxes, or cut services. Minicozzi, though, is trying to point to the basic but long-buried math of our tax system that cities should be exploiting instead: Per-acre, our downtowns have the potential to generate so much more public wealth than low-density subdivisions or massive malls by the highway. And for all that revenue they bring in, downtowns cost considerably less to maintain in public services and infrastructure.

    Read more…

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  • 18Nov

    I think the city has been lacking in oversize and analysis of DMC so I am trying to do it myself. At least at a high level. I can’t emphasize enough how rough this analysis is… I would also add that this is not cause to panic, we understood that we faced up front costs and only recouped our investment AFTER significant projects were done.

    I am trying to quantify local contributions and returns from investment in DMC. To date we have spent / committed / are likely to spend $38 million (2014-2017). The number is rough, but this analysis seems better than anything else that is public. Here is where that $38 million figure is coming from. It include 4 years of operating budgets and some projects costs.

    DMC 38 Million photo Screen Shot 2015-11-18 at 11.16.13 AM_zpszogzchf6.png

    The payback that the city receives is by way of new property taxes which have not yet happened. In addition, I am looking at projects in the DMC area and trying to determine if they are caused by DMC or were likely to happen regardless. In the case of the housing projects there is nothing that has come forward that was not already happening after the renewed interest in downtown and success of the Food Coop / Metropolitan Marketplace. I really point to 3 projects as being related to DMC and only 1 of those pays property taxes.

    DMC Area Projects photo Screen Shot 2015-11-18 at 11.16.50 AM_zpsvj8voqbv.png

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  • 28Oct

    I wrote a letter to the editor of the Post Bulletin in support of the levy referendum. You can read that article here.

    Here is some back of the envelop math, keep in mind that this is complex, but the figures below are reasonable:

    As expected I did get some questions as to why an 8% increase (the max possible) would not lead to an 8% increase in household property taxes. Here is why. This is based on my own 2014 percentages, so it will vary from house to house. County was 40.5% City was 35.7% and Schools were 23.7%. The max county levy is a 6.8% increase (including HRA) the school districts NON-REFERENDUM levy increase is slightly negative so lets call it 0%.

    Put it in the blender and that comes out to about a 5.6% overall, but wait there is more. The city is seeing growth so some of that increase in the levy is taken up by new property tax payers. It is hard to know exactly how much of the increase will be eaten up by new taxpayers, but I will guess 2% which is at least reasonable. Now your levy increase is at about 3.6%.

    But wait there is more. Because of how taxes are put against different building classes it also impacts homeowners. In Minnesota the laws are favorable to homes under $400k. Further business property values are soaring relative to single family detached homes. As such they will eat more of that growth. As such I suspect that the typical levy increase before a referendum will be less that 3% or about the rate of long term inflation. The the referendum would be added to that.

    So why are city taxes projected to increase? 2 things more than 100% of the projected increase is due to public safety costs. This is because the council hired some officers last year that they did not pay for and are hiring more next year. 2) is infrastructure. The city has decided to develop in a suburban sprawl pattern. in 1966 we were nearly 50k people relying on 11 square miles of infrastructure, now our population has little more than doubled, but we are at 55 square miles. We are deliberately building a less efficient city. All that infrastructure is terrible expensive to maintain. If we wanted to get on a solid maintenance schedule that would require at least a 30% tax increase next year. Unless we decide to embrace smart growth, infrastructure costs will lead to massive tax increased for a generation to come.

    Real per person spending on libraries, parks, and the arts continues to decline. The number of employees per capita continue to decline. The city budget per person is basically flat since 2000. The increases people are seeing come from a decrease in state aid and failure to ensure that new infrastructure can actually pay for itself in taxes.

    I get to make people doubly mad because I vote against the dumb growth when it is in front of us, and then after others build it I vote for the taxes to maintain it. Responsibility sucks.

    If you really want to fight something, vote for the referendum and then fight the fact that the Rochester City Council adds millions of dollars every year to sewer bills so that they can subsidize expensive homes that most can’t afford. Is that fair?

     

     

     

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  • 24Sep

    Just remember every time you pay the city sewer charge on your RPU bill (city charge), you are subsidizing the luxury homes of others. I find this policy to be unfair and unwise. Every year we are giving away about $5 million which translates to the equivalent of 10% of city taxes… The give away to unsustainable single family detached in on the order of $3.5 – $4 million per year. Approximately 0% of these single family homes are considered affordable ($160k). Rochester has prioritized this subsidy over affordable housing, transit, and infrastructure maintenance. I disagree and will continue to fight the policy.

     photo Screen Shot 2015-09-24 at 3.49.21 PM_zpseifvzjpo.png

    Read more…

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  • 17Sep

    Decades of poor leadership from the city officials have left us in a terrible situation. Our sprawl has meant that that vast majority of our geographic expansion over the last 50 years generates no where near the amount of property taxes as is required to provide services and maintain infrastructure.


     

    The conservative figure from Public Works is that we are underfunding road maintenance by $17 million per year. In addition, staffing for basic functions have not kept pace with demands for service for more than a decade. Note only do we subsidize sprawl on an ongoing basis, we also subsidize it up front. Just in terms of sewer hook ups, we force rate payers to pay an extra $5 million a year to keep the cost of hooking up to city sewers.

    In short, today in Rochester the bottom half on the income scales is paying more to subsidize the top half. In my book that is nuts.

    Given our situation 1 or 2 things must happen.

    1. Get smarter – stop allowing development unless the associated fees and ongoing revenues can support the ongoing operating & capital costs.
    2. Better tie the costs of service and capital needs to those that cause disproportionate consumption so those that drive up costs pay their disproportionately high share.

    State property tax law explicitly forbids us from distributing costs in proportion to services demanded. We are just plain stuck there. HOWEVER, we can structure fees to better cover the driver of costs. That is why I am open, but not committed to using more fees in the future as opposed to sticking on property taxes.

    Rochester is complicated because non-profits do not pay property taxes. We have a number of huge non-profits on expensive parcels which forces everyone else to pay more. Non-profits do however have to pay fees.

    Minnesota is complicated because taxes are disproportionately assigned to business properties, meaning businesses (for-profit) carry the weight of subsiding our sprawl.

    I often hear that it is better to put the burden in property taxes as if can be deducted, but this is probably overstated or just not true. In general property tax deductions work for those with a mortgage that means that are probably pretty well off and still working. A fee would represent less of a hit for more people because it is spread over more parcels.

    Bottom line, fees probably could benefit more people and distribute costs more fairly IF they are structured right. I opposed the street light fee in the past because it was not structured right.

    Data on how tax policy favors wealthy home owners.

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  • 26Jul

    While it was not my idea originally (thank you Nick Campion), I am pushing for an independent analysis of public safety staffing and strategy. In short it is hard to come up with the dollars for public safety; especially when we face the enormous unfunded liability in infrastructure which we do.

    Here is why I think a public OR private ambulance service operating out of our FDs is better that just meeting increased demand with more fire staff.

    Chart of fire calls

    http://streets.mn/2015/05/29/53928/

    Also Ambulances are less up front, less to operate,more nimble and can be staffed with 2 people. Fire trucks require 3-4 people to operate and are more expensive in every way, require wider (thus less safe) streets and beat up the streets more.

    I am also working on a list of questions I am interested in being answered. I never got a response to the data questions I asked more than a year ago. So I am going to put them all in writing this time so it doesn’t get lost.

    Here are some of the questions I am interested in getting answered.

    Fire / EMT

    • What are the local trends in total calls, medical calls, fire calls, false alarms, and calls requiring a 4-minute response?
    • How much of the city is covered by a 4-minute response time? Why will fire not allow a coverage map to be shown to P&Z when the PD is open with that info?
    • How many calls require a fire vehicle to respond?
    • How often do 2 calls requiring a fire vehicle to respond overlap?
    • How many calls are related to unsafe driving practices, especially speeding?
    • What GPS based technology exists to ensure first response can be directed to the closes available vehicle as opposed to multiple vehicles racing to a single location?

    Police

    • How does our per capita police (exclude dispatch) compare to other Midwest regional centers?
    • How does our “per serious crime event” police staffing (exclude dispatch) compare to other Midwest regional centers?
    • I have a couple of other questions on the “safety of our officers” that I will not ask in public. My greatest concern in staffing is available back up for the safety of our officers.

    EDIT: Here is a link to a group staff is recommending we consider.

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