Wednesday, July 5, 2017

City Manager Gabriel Engeland's Special Edition Message on Sierra Madre's Debt Woes

Link here.
I don't want you to think that the new City Manager's attempt at transparency is an awful thing. It is not. This all appears to be an honest attempt at revealing Sierra Madre's debt problems to its largely oblivious taxpayers, people who bear as much responsibility for this dilemma as anyone else. After all, if the majority of residents here had actually involved themselves with this city's affairs, rather than smoking the fruit flavored Civility Crack being so generously handed out by City Hall over the last decade and a half, things might be different now.

It really is an attempt at transparency, and you'll have to go all the way back to the administration of Mayor MaryAnn MacGillivray to find something similar to what Engeland is attempting. After which MaryAnn was roundly vilified and smeared by some of those actually responsible for getting the city into the financial peril it faces now, and then voted out of office.

The responsible individuals do take this stuff seriously. They have been working to cover their butts for years. Thankfully Engeland has a contract.

But there are problems with City Manager Engeland's approach, and I thought I should point out a few of them. The first is the timing. Sierra Madre's debt problems are amongst the most severe difficulties it has ever faced. Why would you want to reveal them by social media alone, and right before the four day 4th of July weekend? Most people in town are oblivious enough as it is, why would you want to reveal something this important while the intended audience is all off celebrating itself through eating barbecue and getting drunk on craft brew and expensive wine?

Below is a screen shot taken yesterday at around 2:30 in the afternoon. Which was a few hours before I was scheduled to go off and eat barbecue and drink some of Upland's finest craft brew. I'm assuming I had a good time. As you can see, Engeland's bombshell report gets a mere 10 "likes" on the City's Facebook page, plus a single rather lonely "share." Which turned out to be from the Sierra Madre Police Department's Facebook page. You have to wonder why the cops would have done that. After all, they are a major source of the city's financial problems.


Not one single comment, either. This is not a thunderclap of response, even from Sierra Madre's infamously other-directed citizenry. But perhaps that is the point.

Which brings us to the next problem. Why wasn't this information presented as a stand-alone public hearing item at a City Council meeting? Where people, should they be moved to do so, might have actually been able to ask questions? Or express appreciation, or doubts, about the City Manager's findings? They could also have found out where the City Councilmembers actually stand on this matter. Sending all of this out as part of an e-mailed newsletter, one that does not invite comment or speculation, does look like an attempt at suppressing debate. That is, assuming there would have ever been one.

The final gripe I have with this report is it in no way communicates how Sierra Madre got to this financially precarious point in its history. Who are the unhappy individuals responsible for setting this city up with interest-only payments on a $6.75 million dollar water bond for a decade and a half? In the process blowing that entire debt up to just under $15 million resident dollars?

What was their motivation for doing so? Could it have something to do with the demise of the Downtown Specific Plan and the loss of the income it might have produced? Was this water bond money obtained to build infrastructure for that failed development, one that would have only profited a selfish few? Including some of those who actually arranged for this bond in the first place?

And then, which City Council signed on for turning Sierra Madre into a CalPERS city? Was this unfortunate blunder committed by short-sighted local politicians in order to curry the political favor of this city's municipal employee unions? A bribe, as it were? Paid for by increasing utility tax rates? With absolutely no regard for the long term financial consequences, all of which are coming due right about now?

My concern here is this "special edition message" is merely checking off a box in a public relations process that will inevitably lead to another tax increase. The debt news has been shared, so now you have to pay for it. No further questions asked, please.

The new City Manager's report only deals with the numbers, unfortunately. I guess that is better than the nothing we've been getting up until now.

We'll discuss those numbers tomorrow.

sierramadretattler.blogspot.com

44 comments:

  1. So tell us all again, what is the blue blazes can anyone do about the poorly run city government of Sierra Madre California? Other than sucking it all up and moving on to another day?

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  2. It's far easier for City Council members to kick problems down the road for future City Councils to handle. They keep giving extravagant salaries, benefits and pensions to City Employees because either they don't want trouble with the unions during their tenure on the City Council or they were elected with union money and need to return the favor. Either way, the residents are stuck with getting our services cut or a big tax increase. Meanwhile our public servants continue on the gravy train. We all have to work longer hours and retire later so that they can "retire" as young as 50 with a big pension for the rest of their lives and free medical benefits. But as we all know, even the public employees recognize they are too young to retire so they often get another job to supplement their pension they received for "retiring". While public employees should never have been allowed to unionize in the first place because the public is too dependant in them for vital and sometimes life and death services, the least we can do is raise the retirement age to 65 like the rest of us and change their pensions away from defined benefit pensions to 401k style pensions like the rest of us.

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    1. That well kicked can just hit the wall. After next year the city can no longer pay only the interest on its water bonds and must begin paying down the principle as well. CalPERS investments continue to tank, and nobody really knows how many millions of dollars Sierra Madre's taxpayers are going to be asked to cough up. These were serious errors, committed by city councils that figured they'd never be held responsible. We need to hold them responsible. If people are going to be asked for more money, they deserve to know why.

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  3. The city should go BK and start over. Get the county for police and fire. Close the library and lower the UUT.

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    1. Agreed but like the 12 Step procedure, first you have to admit the Truth.
      It seems that the City Management is taking the same passive approach as previous ones. Wait for a crisis to give cover for the increasingly severe response required to resolve the problem. What will provoke the crisis ? Our creditors.Who caused it? Greedy City Employees and Police. But particularly their enablers and pandering politicians.Those Politicians 'bought' their positions by promising to rob the taxpayers and give the proceeds to Public Employee Unions in bloated wages and outrageous benefits.
      Wethe taxpayers were complicit in this - guilty of acquiescence. An the bill is coming due soon !

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    2. The City already went through the process to examine contracting for police services from the Sheriff. The completely self-absorbed and totally naive (but very loudmouthed) residents had a fit that their little niche PD would be replaced with better-trained—and less costly—deputy sheriffs. Result? Because of raises granted immediately after the last UUT measure passed has made the PD even more expensive than it was.

      Thirty-odd years ago, the City could have opted into the county consolidated fire district, which would have resulted in ZERO budget costs for fire service. But, again, the koolaid of the day kept things at the FD on a volunteer basis because it "didn't cost that much." Today, the county district is closed to new entry. Contracting with them would likely cost more that the boutique outfit they want to ramp up to full-time, professional personnel.

      This town is overflowing with narcissistic elitists who think they have all the answers (as long as someone else pays for it). The idea that the city can tax its way out of this mess is utter fantasy. No one would accept the amounts that would be necessary (something on the order of $500 per person, per year, to catch up and overtake the growing mountain of debt).

      What future Sierra Madre has as an incorporated city is likely coming to its tragic but inevitable close.

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  4. How many times must we discuss the same problems? Yet the wonderful citizens of Sierra Madre cry and moan the moment they might have to give up something. Most of them aren't even engaged. Same thing different day.

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    1. Without the water bond and CalPERS debt load nothing would have to be given up.

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  5. We could rename or city Duarte also 7:47.

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  6. Sierra Madre citizens are responsible for the city debth.
    "You", vote a council member into office and then; for the most part, because of "leading busy lives", check out.
    The "stand alone" public meeting, was about one month ago.
    The debts the town carries, have been well known.
    Past councils, in hindsight, made poor decisions; but these were open public meetings, any resident is free to voice their thoughts. Depending on who "you" voted into that position on council; depends on how well "they" hear "your" concerns.
    CalPERS is here to stay; phone Gov. Jerry Brown with "your" complaints; "you" voted him into office.
    This council has re-worked the "retirements" on new hires, as much is "allowed" under the Union
    Iron clad contract; most cities entered into. With little to zero, public input or re agendized for further discussion from that particular council.
    Any way...this is where the city stands...how do "we" move forward; and hold future councils responcible for working for the citizens of this town?

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  7. Engeland's report is only half the story.

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  8. NPR's Declaration of Independence Tweetstorm Confuses Some Trumptards

    https://www.usnews.com/news/entertainment/articles/2017-07-05/nprs-declaration-of-independence-tweetstorm-confuses-some

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    1. Everyone knows where NPR stands...shut down the public funding.

      Stay on topic Hillary.

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    2. We also know where Trump's favorite news outlets stand. Don't get too close to that burning cross.

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  9. Anybody who has been following this city's affairs has know this day was coming. Rather than the city revealing anything new, they're just trying to spin old news.

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  10. “In Sierra Madre the deeds were done and done again as my life is done in Sierra Madre”

    “Je reste des heures entières debout au même endroit, presque sans bouger (j’ai même vu le vent s’arrêter dans ma main)”

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  11. Engleland just re-sent the e-mail notice.

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    1. Good to know he's listening.

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    2. Boy, did he inherit a mess.

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  12. Gabriel EngelandJuly 5, 2017 at 10:15 AM

    Hi John,

    Engaging the public can be difficult. After I completed the review of City finances and current and future debt obligations, we wanted to provide the information to Sierra Madre residents. Rather than simply check a box on a communication plan, I worked to get the message out to the community by giving multiple public presentations and allowing people to ask any questions or give any comment they desired.

    Prior to posting the message on Facebook I gave presentations to the Chamber of Commerce, Kiwanis, and Rotary. The item was discussed in-depth at the May 9th Council meeting, where public comment was taken, and then it was discussed again at the Council meeting on May 23rd (though admittedly, this discussion was not as in depth as the previous). The last link in the Village View takes you directly to the public presentation from the May 9th meeting.

    After the public presentations were complete we sent out a special Village View. The subscriber list for the Village View is about 1,200 people, and though not all of the people who receive the Village View are Sierra Madre residents, most are. The special Village View was released last Friday as you note, but it is also set to be sent out again to the subscriber list this morning and then again as part of the regular Village View this Friday--meaning subscribers will receive it 3 times in 7 days.

    We are providing the information repeatedly and leaving it up on the City's website to allow people to access the information when they are able and at a time they choose. In addition to using multiple traditional formats to spread the message, we also posted on Facebook, shared it on the Sierra Madre PD Facebook, and I posted it on a Sierra Madre group with over 3,000 members. We are using every avenue we can to provide this information to the public in an attempt at transparency and engagement. I've received a lot of comments and questions since this process started so I know the information is finding a home.

    I would be happy to talk with you about any of these topics, or we could discuss any issue(s) you choose. I am happy to meet with you at your convenience. I will make a commitment to not dodge any questions you ask related to Sierra Madre. I think further information on the bond debt or infrastructure performance would be helpful for your readers, but we can also talk about the UUT, SMPD, or the future options for Library and Fire service. All of these issues will play an important role in how Sierra Madre shapes its future--and a transparent and open government is critical to these conversations.

    Please feel free to contact me at 626.355.7135 or at GEngeland@CityofSierraMadre.com

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    1. Thanks Gabe. While it is a good thing that you are acknowledging that Sierra Madre has a debt problem, and the numbers provided are helpful, I think what a lot of people are asking is how this all came to be. As an example, Sierra Madre obligated itself to $6.75 million in water bond debt in the early 2000s. By deciding to pay only the interest on these bonds through 2018, that overall debt has now blown up to nearly $15 million. Most of which remains to be paid. How did that come to be? There must be some reasons. The numbers themselves are old news to people who have been following this stuff. What nobody has ever heard from the city is why this all came to be. Both with the water bonds and CalPERS debt. That would be real transparency.

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    2. Kudos to Mr. Engelund for trying to engage in multiple ways and for directly responding to the post on this blog.

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    3. Wow. I'm not sure what to do with this level of honesty and transparency. Looks like we have a very different city manager.

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    4. Gabriel EngelandJuly 5, 2017 at 12:04 PM

      This is a fair question. I'll respond with two separate pots.

      The bond funding was used to build the water reservoirs in town. The construction of the reservoirs is a great benefit to the City, and at the time was actually forward looking. The reservoirs themselves helped to improve the functioning or our water infrastructure and should make the city more self-reliant in emergencies or disasters. At the time of construction the Federal Government provided dollar for dollar matching funds for this project. The deal was if the City spent $6M on this project, it would receive $6M in matching funds. Accepting these funds was a sound decision considering the Federal match would pay for 50% of all costs--and the costs were significant.

      The tragedy of this project was how it was paid for. In order to accept the funding the City decided to borrow $6.75M. To do this, the City issued an interest only bond, over 30 years, at 5%. We agreed to spend $9M to borrow $6M. This was, obviously, not a good decision. To make matters worse, at the height of the great recession, and for several years after when the economy was recovering, the market gave clear opportunity, with incentives, to refinance this bond--which would have saved taxpayers significant money.

      As you know, in the years that followed this bond issuance, the credit rating of the City on a previous bond issuance has been downgraded significantly. This means when we do attempt to refinance the bond issuance the market will take the City's past performance into account and our rate will be set accordingly.

      Staff is currently working to refinance the bond in an attempt to reduce the amount of years left on the loan and also lower the annual payments while making payments to the principal. We are fairly late in the game at this point, as interest rates may increase again, but I am hopeful we can provide a plan to the Council which is a more responsible use of taxpayer dollars. With that said, a City with a large amount of water debt, poor infrastructure, and a low credit rating on a previous bond issuance, will have to pay the price the market demands.

      The project itself was, and remains, greatly beneficial to the city. In my opinion the type of bond the City sought was a mistake, and the mistake was compounded by not taking proactive steps to reduce the debt when the opportunity existed (over several years). I won't make an excuse for these decisions, governments make mistakes, and this one is costly.

      With that said, in 2019 when we are required to start making payments on the principal, our 1998 bond issuance will be retired, meaning our overall debt obligation in Water will be reduced by $200,000 annually. The water fund itself will still have very little flexibility as 18% of all expenditures will go towards debt payments (if we can't change the payment structure). For Water operations, this means we will have to reduce the cost to operate in order to invest in our infrastructure. The good news is we have a path forward to sustainable operations, at a lower cost, it will just take time to work through some of the decisions we have made in the past.

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    5. Gabriel EngelandJuly 5, 2017 at 12:04 PM

      Post 2:

      With regards to CalPERS debt that is a completely different story. The CalPERS board has not been providing realistic expectations for some time. When a fund this large goes negative the consequence are quick and will be brutal for local governments. For Sierra Madre we will see a dramatic increase in pension payments that are outside of our control. Payments to CalPERS are more similar to a bill than which has to be paid, than a cost that you can control locally. I applaud the CalPERS board for making a move towards more realistic investment returns, but the increased costs will be incredibly challenging for local governments in California.

      Sierra Madre, as I stated in the letter, is about 75% funded. We were able to provide a balanced budget to Council this year, and did not ask for a tax increase. This budget takes into account what we know about future year obligations to CalPERS as well. Staff is already working at reducing the cost of government operations to take into account increased pension payments.

      I think the idea of public pension payments in California in general needs more public discussion, particularly around the type and amount of benefits provided, but my opinion on this topic is likely not of interest to the State. I believe another round of pension reform is likely, but that won't change obligations owed to current and past employees. In short, CalPERS is going to get more expensive, more quickly, than most people are aware of. Some cities, like San Diego, have already made dramatic changes to their retirement scheme, and without additional pension reform, more municipalities are likely to follow. Local governments will have to determine the appropriate benefits for their employees and retirees, and the CalPERS decision will likely accelerate these discussions.

      Even with the water debt and CalPERS obligations the City of Sierra Madre is not facing bankruptcy. I know that is an area of concern for some residents. Also, I have not seen any evidence of theft or fraud. Poor decisions were made on the bond debt, and these decisions were exacerbated but not dealing with the issue, but mistakes are not malice. The employees we have in Sierra Madre are dedicated and really do work hard with the best of intentions for our residents.

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  13. City Council Member Kurt Zimmerman asked for a forensic audid and did not get a third CC member's supporting vote. Don Watts voted for his request (it was MaryAnn MacGillivray who wavered on this) so the possibility of addressing this about 10 years ago fell apart.

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  14. Think about it. A city official explaining things, and doing it on The Tattler. The worls had turned upside down.

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    1. ..waiting for troll to freak out

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  15. OH MY GOSH...SIERRA MADRE FINALLY HAS A CITY MANAGER....T H A N K. Y O U **************
    The council made a great selection on the hire of Mr. Englander; the future of the Village of the Foothills, has had new life restored; I for one, will do what it may take for this town to get back on good standing on it's debth.
    If this new manager listens to the voices of the public; as he has just responded to the Tattler, Sierra Madre is most fortunate to finally have MANAGEMENT.
    All those "watchdogs" of the past, I'm positive they are secure in the new direction of city management.
    Thank you Tattler/Thank you Mr. Englander.
    To bad the Tattler can't be the adjudicated city information vs. the somewhat, sometimes reliable Mt. View News.
    Could this also be a posibility?
    Anyway THANK YOU.

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    1. No, you won't even think about what it will actually take "for this town to get back on good standing on its debt." Once you see the numbers it would take, you will faint.

      It will take ludicrous amounts of money to catch up to the debt load that exists today...and it gets bigger each year.

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    2. It is called "calming the herd." Part of the job.

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  16. "Mistakes are not Malice" is only partially true. If the mistakes are made continuously and continually covered up then you have another word. Do not use alliteration as an explanation.

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  17. 11:30am. One of the few times I disagreed with Mrs. MacGillivray, was not making that third vote. I believe she thought the city could not afford paying for that type of audit, back then.
    Unlike when Mr. Hayes introduced CalPERS to the council, only one councilmen abstained from that vote.
    The reservoirs were a good idea; but the council turned a blind eye on taking on more bond debth; that particular council choose to have their eyes closed through most of their terms. Shenanigan years.
    Carter One was graded over the weekend; though the ordinance clearly stated that was not allowed. The excuse from City Hall; no one answers the phones on the weekend!
    Water main leaks/gushers - who is in charge for rapid shut off valve? Fire Dept. vs. City Maintenance; again, if on a weekend, take your time.
    Cutting down of hundred year old oaks; weekend, forget it.
    This is cathartic; I must stop, but it sure feels good.

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  18. We are going to have another tax increase. It's going to happen, so start coming to terms with it. At least City Hall is being straightforward about it.

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    1. The City Manager states that staff did not ask for a tax increase THIS YEAR. Making than an open ended statement.

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  19. Hey, if the money really goes into paying down debth; not the usual UUT lies, then let's talk "numbers" homeownership and renters percentages; toss in the business district.
    Remove incentives for alternative energy; show that the non profits are included.
    Roll up our sleves.

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    1. Ask the religious institutions in town to chip in

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    2. You totally lost me,I've no idea what you're speaking of? "homeownership and renters percentages; toss in the business district.
      Remove incentives for alternative energy; show that the non profits are included."
      Huh?

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    3. That's just the troll regurgitating
      Pay no mind

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  20. This is a first, right?
    No city manager or department head has ever posted on the Tattler, at least without using Anonymous.
    Thank you Mr. Engeland.

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  21. Thank you, Mr. England. Each time I have met you, I've been impressed. But due to having little or no faith in our CC, the present group somewhat included, I will reserve my opinion for a later time. What would be nice are some numbers. How much did it cost for the resevoirs actually cost? What if anything can be done to stop Calpers for new employees or for all employees? I have been told that nothing can be done. They should be answerable for their poor investments, not us.

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    1. I agree. It should be explained why we legally are obligated to fund Calpers. The contract that binds us should be made available to the public.

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  22. Another right-wing corrupt billionaire caught

    Hobby Lobby billionaire ordered to hand over Iraqi treasure trove of priceless artifacts... m too "moral" to provide contraceptive coverage to employees, not moral enough to refrain from illegally looting war-torn country. Or hoarding money.

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  23. Some how all the previous city council members along with each previous city manager have painted this city into a corner, just what is the next step or steps in correcting this dilemma?

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