Wednesday, October 22, 2008

Group gives advice on city's capital project backlog


Nine months ago, a group of local financial experts put their heads together in an attempt to figure out how the city of Santa Barbara can deal with millions of dollars in necessary capital improvements that are currently unfunded.
Yesterday, that same group of experts appeared before the City Council with a roadmap they hope will at least move the city in the right direction toward building new police facilities, updating fire stations, renovating recreation buildings and handling a medley of other unmet infrastructure needs.

“Capital is easy to forget,” said Richard W. Jensen, a retired University of California executive who chaired the city’s Infrastructure Financing Taskforce. “Nobody is going to come up and beat on the podium when you’re in tight times.”
But the city is facing a similar problem to municipalities across the country — aging facilities that need to be renovated or replaced.
Nearly $150 million in unfunded projects has been identified, City Administrator Jim Armstrong said, and that number is considered conservative, as many department leaders might have dropped projects they believe are hopeless.
“We are not unique in this regard,” Armstrong said, noting trillions of dollars in unfunded infrastructure work throughout the country. “…But we’re talking about it, we’re identifying the problem.”
Those who have been tackling the problem during the past nine months are members of a seven-person taskforce appointed by the council, made up of local citizens with extensive backgrounds in finance and infrastructure.
Their proposals include directing more cash from the city’s general fund toward capital projects, committing to a “culture of efficiency” within city operations and educating the public about how taxes are used on critical infrastructure work.
“There is no silver bullet,” said Dudley Morris, a management consultant and former vice president of Computer Sciences Corp. “…Given the reluctance that people have around the state of California to tax themselves for anything, there is only one simple solution.”
That solution — to reduce costs or raise revenues — is admittedly “bread and butter,” he said, but opting for more exotic financial tools is a shaky move, particularly in the current economic climate.
Among its specific recommendations, the taskforce urged the council to direct at least 10 percent of its general fund budget toward capital projects annually, compared to the $2 million reportedly earmarked for that purpose now.
At the same time, the city should bump up cash being spent on deferred maintenance, to $2 million from $1.4 million.
Doing so, Jensen said, would allow the city to avoid future costs by maintaining what it has now.
The former UC exec also pointed out a discrepancy between the city’s enterprise funds — such as waterfront or streets funds — and its general fund when it comes to funded infrastructure projects.
Enterprise funds are doing well, Jensen said, with cash already identified for two-thirds of needed facility upgrades or capital projects.
“But our general fund is lagging,” he said, noting only 17 percent of necessary capital improvements have dedicated funding. “…We think the imbalance has to be corrected for the future financial health of the city.”
He also touched on several measures on the November ballot specifically related to infrastructure funding, Measure A and Measure G.
“We think it’s essential for the voters to approve those,” Jensen said. “Once streets start going downhill, everything starts going downhill.”
Streets maintenance draws half of its funding from the half-cent sales tax and the city’s utility user’s tax, both of which will be renewed or updated by the aforementioned measures.
Morris lauded city officials for their use of credit, noting the city’s high credit rating has left them with pretty much any financial tool at their disposal. One he feels the city has perhaps not used enough is general obligation bonds.
“That is the type of financing … that we were turned down on for the police station a couple of years ago,” he said, “but we think you need to keep that in your back pocket.”
Councilmember Grant House questioned that position, wondering aloud where the city would find cash to pay off that debt during the long term.
“We don’t have that kind of an income stream,” he said. “…Where do we get the money to service that debt over 30 years?”
Jensen took that opportunity to reemphasize the recommendation that city leaders direct more general funds toward capital projects so they can “pay as you go.”
Councilmember Das Williams said he appreciated the group’s examination of the unpleasant aspects of reality, adding that there are enough suggestions in the report to ensure everyone is upset.
“When we’re talking about taking care of the needs of our city’s future, we can’t be concerned about what happens to one of our pet projects,” he said. “We need to be concerned about the whole.”
The council agreed unanimously to send the report to the city’s Finance Committee for in-depth analysis and to develop a plan for implementation.

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