[Bboa-members] Finance Sub committee meeting

[Keith Samse]

Hi All,

 

I attended the finance sub committee meeting on Wed night, but had to leave
after an hour & 45 minutes.  It lasted another 30 minutes or so.

 

I found the meeting to be very open and mostly non political.  The committee
members seemed genuinely interested in reducing costs - in fact, the entire
time I was there they only mentioned increasing fees twice.  The
sub-committee chair (Brad Smith) was more than accommodating in taking
questions from the public (only 4 were there - I was the only BBOA member (I
think) until Tom Jeremiason came a little later).  

 

The agenda ran around a bit, but it generally revolved around the
replacement of docks, possible materials to be used, the rearrangement of
docks, and the multi-year fiscal projections.  While several good ideas
surfaced, and the energy was clearly focused on minimizing costs, I felt
there was a bit of wheel-spinning happening.  The committee is trying to
develop a recommendation to the waterfront commission on "what to do".
However, like most municipalities - and, unfortunately most sub committees
formed largely by volunteers - I didn't feel that the real expertise was
present to say what would be the best material to use to provide the best
long-term cost/performance/longevity picture.  Wood, concrete and aluminum
were discussed.  An idea was raised to make the RFP (request for proposal)
to include design.in other words, have the potential contractors "educate"
the city on what was the best long term solution.  I really felt this was a
good idea.  Waterfront commission manager Cliff (didn't get last name) said
the city generally didn't do that.  However, I feel it might be a good idea
because of the quantity of "new-age" building material being developed
today.  It might be a mistake for the city to spec "concrete docks" for
example, when there might be a new material out there that would ultimately
save the city (and berthers) money.

 

This was the wheel-spinning part.  I've been City Finance Officer for 3
cities over the past 16 years - and I fully understand that sometimes city
staff doesn't have all the best answers.  In this case, I feel that the
sub-committee cannot make a qualified recommendation to the waterfront
commission unless some serious homework is done, or they get a consultant to
do the homework for them.

 

In the budget that was available as a handout, I had a couple questions.  It
showed a multi-year timeline with beginning fund balances for each year,
added in projected revenues, subtracted out projected expenditures, and came
up with a resulting ending fund balance - which was used as the following
year's beginning balance.  Makes sense.  However on this "budget forecast"
it listed debt principal payments as reductions to the fund balance each
year.  Debt interest payments are indeed expenses and reduce the fund
balance as diagrammed above.  However, when the debt principal is paid down
or reduced (remember that debt is a liability, not an expense), there is a
reduction in liabilities.  The cash that is given to reduce the debt
principal is an asset - so assets are reduced the same amount as the
liabilities.  Net effect on the fund balance is zero.  I asked Cliff about
this when I ran into him in the parking lot after the meeting but didn't
have time to fully discuss.  Anyway, the effect of presenting a budget
forecast which includes debt principal payments is to overstate
expenditures, and show a "loss" that is higher than actual.  I didn't feel
that this was being used to intentionally overstate the grimness of the
picture - I think it was a mistake in the spreadsheet.  However, it
represents several hundred thousand dollars - and should be made clear.  

 

A bigger issue for me concerned replacement versus repair of the docks.  A
question was asked if the 88 docks that need to be replaced were in their
condition due to neglect.  The answer was "no".  Another question was "are
you proposing to replace all the docks or repair some?".  The answer was
that repairs aren't worth it - they last only a couple years.  The
combination of those two answers really concerns me.  To replace a dock
costs (numbers quoted last night) $7,500 each.  I have cracks in my concrete
finger at my dock (L-Dock) that could easily be repaired - which would
prevent further deteriorization.  I figure cost of labor & materials would
be less than $300.  Do the math.  I don't think it is fiscally responsible
to claim that "repairs don't last, it is a waste to do them - it is better
to replace them".  If a repair lasts 3 or 4 years at $300, and a replacement
that lasts 40 years costs $7,500 it is cheaper to do the repair.  This only
makes sense.  Yes, it is "cleaner" to get brand new docks, but I felt the
discussion on the decision to replace versus repair - which lasted about 2
minutes - was not looked at nearly closely enough.

 

Effective communication is the ultimate path to positive conclusion.  I felt
strongly that every person there was interested in communicating with each
other - and, more importantly - with the public that was represented there.
To simply rattle off that "we won't stand for raised fees!!" is not the
solution.  A better solution is to get involved with these public meetings
and ask good questions, and participate in the information sharing.  Last
night a woman present suggested that the city talk to someone she knows that
has new information on new cheaper, stronger concrete.  Boom - suggestion
was taken and it will happen.  I'll meet with Cliff and look into not only
the debt principal issue, but also the issue of what the city is charging
the Marina for its overhead expenses.  All cities do this - because the
State continues to reduce money given to cities.  So the city councils (and
finance officers - yep, I've been guilty) do everything in their power to
protect the general fund.  All cities charge the enterprise funds (water,
sewer, marina, etc) fees to cover what they claim are "related and
reasonable" costs incurred.  That will be interesting to be on the other
side of the fence this time.

 

Anyway - let's keep moving forward.  Emails about apathy do nothing.  And
when Tom and Lori bring us together again, hopefully energy won't go into
the topic of apathy.  Rather, we can continue with an energy that can make a
difference.  

 

Longwindedly yours,

 

Keith Samse

 

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