• 20Jan

    Here is a memo that I asked administration to distribute to community leaders including DMC. I am very concerned about the trajectory of TIF on the Heart of the City North project. As such I seek to inform my colleagues and the community.

    In the spirit of collaboration I am happy to meet with any community to discuss these findings and conclusions. I see this as part of being a fiscal steward in the community.

    Memo to community leaders

    Edit: corrected formatting error.

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  • 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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  • 11Aug

    Here is a map of the roadways in Rochester that are at a point that they will need major reconstruction.

     

     

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  • 10Aug

    Sprawl is really expensive as it turns out. We are close to the geographical size of Minneapolis with less than 1/3 of the population. Who do we expect is going to pay for all that infrastructure?

    After 8 years of prodding, staff finally reported on how far we are behind in maintaining our road infrastructure. While I am a passionate environmentalist (this is my favorite planet), sustainability is equally about financial responsibility.

    If we do nothing (which has been what the city has done for the last 8 years) we will lose our ability to fund public safety, transit, parks, library, arts, and everything else that the city does.

    Here is that report.

    What it says that is that we built roads that require 31.9 million annually to maintain. We currently pay $9 million annually, leaving a $22.9 million gap. Further we have built up maintenance needs of about $235 million. Using some basic finance to calculate our current unfunded liability over 50 years, I calculate an unfunded liability of about $1.4 Billion dollars.

    What does this mean? Over the next 50 years we have $1.4 Billion more in expenses than revenues to pay for it (in today’s dollars).

    If we were to immediately close the annual gap that would mean a 40% tax increase for all tax paying properties in Rochester. Ouch..

    NPV Streets Liability photo Screen Shot 2016-08-10 at 1.47.58 PM_zpsig6riccl.png

    What do we have to do to fix this? Probably many things.

    1. Quit digging the hole bigger. Do not accept new roads as public infrastructure unless we are relatively certain they will generate more in tax revenues than costs. This is actually pretty easy, just look at Fox Hill Villas, 30 new singly family homes but the road is private. We have a few leaders in particular have kept digging the hole bigger.
    2. Start chipping away at the costs. While I don’t want a 40% tax increase we need to put more money into maintaining what we already have. I suggested a longer term plan of increasing road funding by a couple million a year over 10 years. That is still a big tax increase, but it is spread out over time and hopefully over more payers.
    3. Smart Growth. Do Projects like the uptown project that increases property values, density, and tax collections. There will be a future post on just how successful the Uptown project has been in terms of increasing values beyond what is happening elsewhere in the community. The means more revenue coming in to maintain that same quantity of road (even after figuring in the added costs that made that area so attractive).
    4. Stop unnecessary degradation. A top state expert on road maintenance explained to the city council on Monday how reducing the number of garbage haulers in the roads would reduce premature road expenses to the city by millions of dollars annually. A similar move in Bloomington is projected to save residents an addition $13 million over the next 5 years just on their bills. But do we have the courage to do it?
    5. Street Utilities. Nonprofits don’t pay property taxes and don’t help pay for roads. Further commercial properties pay excess taxes to help subsidize residential properties in Minnesota. A utility would allow us to pay for some or all of road maintenance with a fee on adjacent properties. This is far more fair & equitable, but requires state action. This option is supported by the League of Minnesota Cities & Coalition of Greater Minnesota Cities.

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  • 27May

    So about the Post Bulletin Coverage of Elk Run…

    …it was wrong, or in the words of the Answerman “That’s so absolutely not true, it’s hilarious.”

    Here is the Q&A in the Post Bulletin from April 12, 2016:

    Dear Answer Man, I read something recently — I think it was in the Post-Bulletin, but now I can’t find it — that said because MnDOT stuck so much money into the Elk Run interchange on U.S. 52, the city of Rochester had to pay for construction of the 65th Street interchange. Is that true?

    That’s so absolutely not true, it’s hilarious.

    Except actually it is true. I know this because I took the time to do the research that no one else was willing to do.

    I checked with Mark Bilderback and he also remembered that Rochester lost out on funding because of the insanity of Elk Run. Using the Minnesota Data Practices Act; I requested the scoring for Chapter 152 funds that were used.

    Chapter 152 Greater Minnesota Interchange Program

     photo Screen Shot 2016-05-27 at 9.41.40 PM_zps8kwklaun.png

    The results were slightly different that I recalled but show how exaggerated and unreasonable development assumptions at Elk Run changed the results and prevented an award to the 65th street interchange.

    An interchange in Sterns County was the top scorer regardless of scoring. That project requested and received $10 million.

    There were 3 projects that tied for 2nd place:

    1. CSAH 19 & I-94 requested and received $5.44 million
    2. CSAH 12 & TH 52 (Elk Run) requested $20 million and received 100% of the remaining funds, $14.56 million
    3. 65th Street NW & TH 52 requested $10 million and received $0

    If Elk Run had been evaluated fairly it would have scored far lower, 65th street would have received $10 million, and the remaining $4.46 million would have gone CSAH 24 & TH 52 at Goodhue.

    As I have stated for years: the Elk Run scam cost Rochester taxpayers $10 million dollars. Those millions were later funded by our local option sales tax at the same time the Library was cut out by Greg Davids.

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  • 24Apr

    My personal sense is that this article written in the PB reads like a hit piece:

    Council Travel Expenses

    The information in the article is seemingly correct, but the Post-Bulletin had access to significant pieces of information that they chose to omit. Here are a few:

    1. The 2015 Total City General Fund finished $2.8 million under budget.
    2. The 2015 Total Mayor Council Budget finished $19,300 under budget.
    3. I estimate that the current council returns more than $100k in entitled but unused benefits to the city annually. In 2015, I personally was entitled to $19,435.44 in benefits that I gave back to the city. In short I alway give back more in benefits than my total expenses.
    4. I publish my travel expense for the world to see: 2015 Travel Expenses
    5. Because of my training I once caught a financial transaction which saved the city more than $40k in sales taxes by delaying a purchase 1 month. That one simple find has paid for every travel expense I have had in 8 years…

    All of these were known to the PB or public information but omitted from the article. If you want someone that doesn’t strive for competence, I’m the wrong candidate for you.

     

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  • 15Feb

    Our City Charter recognizes 3 needs that are so critical to our community that it “constitutionally” created boards to over see them. They are Public Utilities, Parks, and the Library. The library remains critical to our community and usage continues to surge every single year. 20 years ago the library was built too small as a result of cost saving measures. Now we have a chance to address it. Unlike other levels of government we actually have to pay for the things we get, as such there will be a cost associated with the expansion. As always, I subscribe to the belief that we do it right the first time, and this means a significant investment. Read more…

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  • 22Dec

    Many small communities in Southeastern Minnesota are happy to have economies like Rochester pay disproportionate taxes to sustain their quality of life but oppose infrastructure investments to keep our economy growing.

    Link to MPR report: rochester-twin-cities-rail-line-rural-opposition

    Here is some actual data on population and net taxes paid to the state showing the contrast between counties supporting and opposed to zip rail. The data is from 2010. Additionally the rural counties represented by Greg Davids are shown as he has not been a supporter. His 2 counties require a $30 million per year subsidy from the rest of the state. My belief is that the tail should not wag the dog. Minnesota’s #2 economy should have low energy, high capacity, high speed connections to Minnesota’s #1 economy. Further because MSP is landlocked the greatest return on investment my be the future use of the RST airport as a 3rd terminal rather than spending $15 billion to build a new metro airport.

     photo Screen Shot 2015-12-22 at 8.40.30 AM_zpsmfugijci.png

     photo Screen Shot 2015-12-22 at 8.40.08 AM_zpszodk7azs.png

    That is hard to see so let’s look at per capita data:

     photo Screen Shot 2015-12-22 at 8.57.03 AM_zpsvukj6o9c.png

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  • 17Dec

    If you are concerned about taxes on businesses or the Rochester tax levy you should watch this video. Rep. Paul Marquart lays out a number of facts on how LGA increases reduced property taxes. LGA is critical for Rochester and Rochester businesses because we are actually in the bottom half of tax capacity per capita in the state.

    He also talks about investments in broadband and job training.

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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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