Population Growth

The Census Bureau released updated population numbers today and the Austin Statesman provides some analysis for central Texas.

"Similarly, Georgetown, which fell to No. 5 from its top rank last year as fastest-growing U.S. city above 50,000, is still seeing a large influx with an added 3,501 people, or 5.5 percent growth, in 2016.

Real estate broker Carol Fahnestock, who owns 29 West Realty Group, pointed to a large stack of papers she had in a binder Wednesday from people interested in moving to Georgetown.

Fahnestock’s customers — many of them coming from the San Francisco area — tell her they like feeling close to Austin but being in a more laid-back town that is less expensive and has less traffic, she said.

“A house that we sell here for $400,000 to $500,000 would be triple that in California,” she said."

Two observations; One, Georgetown's growth rate is slowing and is now about 5.5% year over year. With annual inflation running at 2.2%, the sum of population growth plus inflation is 7.7%. The Georgetown budget is growing at a rate far exceeding 7.7% and inquiring minds want to hear the justification for this excessive budget growth.

Two, the influx of people from the San Francisco region is very worrisome. They bring their morals and values with them and for many they are antithetical to those of long time residents of Georgetown. The culture of San Francisco looks to government to solve all of societies problems by extracting more and more money from the citizens and incrementally restricting personal freedoms. All in all, this is not a positive development for Georgetown!

Proposed Fire Stations

The Chief  made a presentation to the City Council at its workshop last night. The presentation purported to review the department budget, but, there was very little budget information and the analysis of profitability since the city assumed responsibility for EMS was completely lacking.

The locations and a rough timeline for adding fire stations was presented and is shown in the following graphic.

Click chart to enlarge

As the budget process unfolds over the next several months, the revenue and costs for the EMS since inception will be pursued and illuminated for public scrutiny and accountability.

Georgetown Development Plans

The following is courtesy of Councilman Fought:

The Development Pipeline Most of us recognize that the driving force behind many of the issues we face in our community, especially on the City Council, is growth. The general situation is that if we don't get sufficiently ahead of the growth it can overrun us and we lose control of our destiny. But if we overshoot and build too much infrastructure we can accrue a tax burden that will deter the very growth for which we are planning. The focus has to be on building a bridge to the future, not a plank we walk to our financial ruin. While that's an accurate assessment of the situation, it's still a rather sterile set of statements. In fact, even acknowledging "We're the fastest growing city, over 50,000 population, in the United States" doesn't convey the magnitude of the issues involved, or the sense of urgency for crafting sensible policies. Fortunately the City Staff took the time to create a "big picture" for us. Please click here to see the map.* [The font size on the map is small because there is so much "growth" to fit onto the map, so you'll have to use whatever "enlarge" feature you have on your computer to be able to read it. Take a moment to study it before reading further along.] As shown on the map, and as of 1 March 2017, there are 23,716 units in the planning stage, 3,725 units in the development stage, and 652 building starts this fiscal year-to-date (i.e, since 1 October 2016). These are breathtaking numbers, especially when you consider they do not include the commercial, Planned Unit Development, or multi-family developments that already exist throughout the City. Keep in mind that this is just a snapshot and there is more coming down the pike on the west side of IH-35, in particular in the Ronald Reagan and Williams Drive corridors, and on the east side in the vicinity of Longhorn Junction. The City Council and Staff have a long list of items which we watch closely, and attempt to shape, as we grow.  Among these are: ·        Maintaining the high-level of public safety services to which we in Georgetown have become accustomed, especially for Police, Fire and EMS; ·        Maintaining the high-level of quality of life which brought us to this area in the first place; ·        Maintaining the character of Georgetown, especially "The Square"; ·        Keeping the City property tax rate low; ·        Making growth pay for growth through impact fees, utility rates, and so forth; ·        Shifting the City tax base away from residential property and toward commercial, especially retail property and activity. I believe we've done a pretty good job on these issues, especially given the level of growth we have experienced. I'll do my best to keep you informed about issues under the headings listed above and seek your opinions as we move ahead, beginning with the next two articles in this newsletter. __________ *  My personal thanks to the City Staff members who compiled this map -- that was a lot of intricate work.  These development plans raise many questions that will be explored in future posts, one of which is; why are there no new road projects in these developing areas?

Why Does the City Pay Business to Relocate to Georgetown?

There is an excellent opinion piece in the Wilco Sun today (5-10-17) that asks the question; why does the city subsidize development?

"If Georgetown is so great, and if people are clamoring to come here, then why are we subsidizing builders and businesses to make that happen? When you have something that’s in high demand, then people should pay extra for it, not receive a bonus for taking it. That’s like having a party that turns out to be wildly popular and over-attended, then mysteriously deciding to actually pay certain people to come, with full knowledge that they’ll also be dragging along a whole new gaggle of revelers. 

If you have a bunch of folks wanting to join the fun, wouldn’t it be more prudent to ask them to pitch in on the beer? Maybe they could bring along an extra keg."

Yet, the city has a wholly owned corporation that uses sales tax money to subsidize development (Georgetown Economic Development Corp). This entity has 1/8% sales tax dedicated for its use and its budget this year is $1.47M.

Another city owned corporation, Georgetown Transportation Enhancement Corporation (GTEC) also uses sales tax money to build and improve roads for developers. GTEC has 0.5% sales tax revenue dedicated for its use and its budget this year is $5.9M.

Couldn't this $7.4M be better used to provide core services to the citizens of Georgetown? Or, how about reducing the tax burden?

As the author of the opinion piece asks; if Georgetown is in such high demand as a place to live and do business, why not let the developers pay for the installation of the infrastructure as property is developed?

This blogger has personal knowledge and experience in living in a city where there is very little long term debt and the developers pay for all the infrastructure, including providing land for schools and parks. This has been going on for 30 years and it works for a city that now is about twice the size of Georgetown.

One Chart Shows Major School Issue

Lessons From the Round Rock ISD Bond Election Defeat

Should the city of Georgetown and the Georgetown ISD learn a lesson from the defeat of Round Rock ISD school bond elections this past weekend?

Here is an analysis of the Round Rock ISD bond election defeat by KEYE TV.

The opposition managed to brand the bonds as waste. Zimmerman says, “I think people are upset with the wastefulness and the extravagance and they don’t agree with the strategic vision of subsidizing Round Rock city development.”

And at the top of their waste list was Prop 3 which included a new district swimming facility. Zimmerman says, “Swimming pools don’t educate kids. Then when the truth came out the pool was part of Round Rock’s city economic development and part of their strategic vision for growing the city of Round Rock, we said why are school taxpayers subsidizing Round Rock city growth?”

Tucked away in Georgetown's FY 2017 Mid Year Budget Amendment is the following: $40,000 for the study of aquatics in partnership with Georgetown ISD with the cost split 50/50. 

If the city and the school district want to jointly fund an aquatics center, they better be upfront with the taxpayers of the city and the school district!

Texas Municipal League Working Against Georgetown Citizens Interest

The Texas Municipal League, which Georgetown pays an annual membership fee, is mobilizing opposition to three legislative bills that would benefit Georgetown and surrounding area citizens. From their website:

"Call your House members right now and urge them to oppose S.B. 2 (Bettencourt)."

"Call your House members right now and urge them to oppose H.B. 424 (Huberty) and S.B. 715 (Campbell). Each of these bills would end city annexation by allowing a vote only of people being annexed, instead of the entire region."

The first call is mis-reported by TML as a "revenue cap", which is totally false. It only requires an automatic election if the property tax extracted from the citizens exceeds 5%. There is no revenue cap! This is the ultimate in "local control", which TML purports to support.

The second call would give property owners in the proposed annexation area the right to vote as to whether or not they want to be annexed. This is a basic property rights issue. It certainly does not "end city annexation"! This lets the affected property owners decide if the city services they would receive are worth the increased tax burden.

Let your city council person know that you don't support paying TML to lobby the state legislature against your interest.

Texas Municipal Retirement System Update

While TMRS is increasing their investments in private equity, and absolute return,, the Harvard Endowment is reducing their investments by $2.5B in these sectors plus real estate.

"So with this major overhaul taking place, it is hardly a surprise that the Harvard Endowment is quietly seeking to liquidate some $2.5 billion in private equity, venture capital and real estate investments, as Axios reported on Monday. The website notes that the secondary offerings include just under $1 billion of PE/VC partnership positions plus around $1.6 billion of real estate positions."

As noted in a prior post, the large retirement/endowment systems are exiting the higher risk investments while TMRS is increasing their exposure. It should be noted that TMRS has done well with investments in real estate, but, there are troubling signs that the risk is increasing.

Mean while, Gabriel, Roeder, Smith & Company, consultants and acturaries to TMRS, have posted their latest analysis on the investment performance as shown in the following chart.

Click chart to enlarge

This chart succinctly shows one of the main issues with the management of TMRS. They assume an annual investment return of 6.75% while they have earned 5.91% on average over the last ten years.

At the 6.75% rate TMRS calculates the fund is more than 80% funded and "all is well". At 5.91%, the fund is estimated to be 68% funded.

So the question is: Why do they assume a 6.75% return when historically they have earned 5.91% over the last ten years?

The answer is: At the lower rate the cities would have to increase their contributions, which is anathema to politicians.

Tax Increment Reinvestment Zones Revisited

The pros and cons of TIRZs were discussed in an earlier blog post: TIRZ

It turns out that Georgetown has at least four TIRZs; Downtown, Williams Drive, Rivery, and South Georgetown. The South Georgetown TIRZ will be reviewed at the City Council Workshop at 3pm on Tuesday, May 9, 2017. The South Georgetown TIRZ encompasses 594 acres on both sides of Westinghouse Road.

The fundamental assumption behind a TIRZ is that development of property will be accelerated if the City installs roads and utilities up-front and the costs will be paid back to the City through increased property taxes due to the development.

From the information to be discussed on Tuesday, several items are apparent.

1. The financial projections from three years ago are substantially in error.

2. Improvements in roads, sewers, water and electricity access costing $35M were approved with the up-front costs funded by Georgetown Utility System (GUS) and the Georgetown Transportation Enhancement Corporation (GTEC) with payback as development occurred.

3. Tax revenues for this TIRZ were projected to be $1,671,858 in 2017. Actual revenues will come in at less than $100,000 for 2017. Mean while the expenditures of $35M are on track!

4. Staff is now requesting $25K for a market analysis to determine the current build out time frame and update the financial payback analysis.

Bottom line; The infrastructure is being built, but, the development is way behind schedule, even though Georgetown has been growing at a fast clip over the last several years. Evidently zoning requests are being considered for the TIRZ without an understanding of the impact on the financing. The payback of funds to GUS and GTEC will take substantially longer than originally estimated.

The Secret City

Take a look at these agenda items for the City Council at their Tuesday meeting, May 9, 2017.

Personnel matters seem to be legitimate matters to keep from the public since other city employees are involved.

However, the other items are financial matters that should be available to the public as it is the publics money that is being spent!

Executive Session

	In compliance with the Open Meetings Act, Chapter 551, Government Code, Vernon's Texas Codes, Annotated, the items listed below will be discussed in closed session and are subject to action in the regular session.

	D	Sec. 551.071: Consultation with Attorney - Advice from attorney about pending or contemplated litigation and other matters on which the attorney has a duty to advise the City Council, including agenda items - Hoskins/Brown Update - PEC Agreement – Jim Briggs, General Manager of Utilities Sec. 551.074: Personnel Matters - City Manager, City Attorney, City Secretary and Municipal Judge: Consideration of the appointment, employment, evaluation, reassignment, duties, discipline, or dismissal Sec. 551.08: Competitive Matters  - Electric Utility Quarterly Financial Update -- Chris Foster, MPA, CGFO, Manager of Resource Planning and Integration - NRG Consent Agreement -- Chris Foster, MPA, CGFO, Manager of Resource Planning and Integration

It clearly is going to take citizens demanding full transparency from their government to make changes. The matters of private companies or other public organizations should never take priority over citizen's right to know.

The Biggest Lie of the 2017 Texas Legislature

The Dallas Morning News reveals the biggest lie being told is about Senate Bill 2.

"Fortunately, it's not told by any lawmaker. Unfortunately, I'm going to stamp it on the forehead of thousands of good-intentioned, mostly volunteer public servants who are elected to serve on our city councils and county commissions.

The lie being told in Austin is that the big property tax bill under consideration, Senate Bill 2, takes away local control from city and county governments back home. They say the bill also limits growth in budgets for cities, counties, community colleges and hospital districts.

Truth is, SB 2 does the opposite.

A government would still be allowed to grow 4.9 percent a year with no fuss, no muss. But if city hall or the county courthouse wants to grow 5 percent or more in one year, they have to come to you in a November general election (not off-season when voters are away on vacation) and ask your permission.

Yet most cities and all but two counties are crying about the big bad wolf at the door. There's no wolf."

Unfortunately, this message has been put forth by our city and county and through their surrogate lobbyists, Texas Municipal League, and Texas Association of Counties.

Let your legislators know that you support SB 2. It has been passed by the Senate and referred to the House Ways and Means Committee, but, it does not show up on their list of bills. 

Beware Public-Private Partnerships

When public money is not available or the public is not convinced that new programs or infrastructure are worth the projected costs, the politicians turn to public-private partnerships where government gives up control and guarantees a profit to private entities in return for "some initial funding" and management of the development.

There is a long history of failures of public-private partnerships in the United States, but, politicians continue to enter into these agreements.

A power transfers occurs from elected officials to Private Public Partnership and reduces substantially the power of the electorate.

Private-public partnerships are nothing more than government sanctioned monopolies. Privileged few businesses are granted special favors like tax breaks, free use of eminent domain, non-compete clauses in government contracts, and specific guarantees of return on their investments. That means the companies, in partnership with the government, can fix their prices, charging beyond what the market demands. They can use their relationship with government to put competition out of business.

Public Private Partnerships (P3 or PPP) known as Comprehensive Development Agreements(CDAs) in Texas differ from a completely private road/project and different from the government simply contracting work out to the private sector since a P3 involves an ownership stake or a long-term leasehold. While claiming to be built with private money and transferring the risk from the public sector to the private sector, this controversial financing mechanism virtually always involves public money and public risk through profit guarantees and taxpayers being on the hook for potential losses.

 

We all should be aware of what happened with State Highway 130.

SH 130 segments 5 & 6, Austin to Seguin (Awarded to Cintra)

Cost = $1.3 billion

Funding Sources:

Senior bank loans - $685.8 million

$430 million, TIFIA loan (a federally-backed loan that provides low interest rates and lenient repayment

schedules)

$209.8 million, private equity

$2.3 million, interest income

Notice that less than 17% of the funds used were from private entities.

We know now, 2017, that this project declared bankruptcy and thus defaulted on the loans. The lenders now own the Southern portion of SH 130, not the taxpayers.

Cintra, the same Spanish company that built SH 130 is lobbying the state legislature hard right now with HB 2861 and HB 2557 to allow them to enter into more public-private partnerships with Texas to build and operate more toll roads for up to 50 years.

Private-public partnerships continue to cause problems as reported in today's WSJ "Public-Private Road Project on the Skids". "When North Carolina brought in a private operator to add toll lanes to a 26-mile stretch of highway north of Charlotte, its goal was to reduce congestion and build a road the state couldn’t otherwise afford.

The hope was that the state’s first public-private partnership for roads would be a model of efficiency and the first of many such projects. But the expansion of Interstate 77 has hit speed bumps, with travel times lengthening and accidents increasing. Now the state is considering paying up to $300 million to get out of the deal and retake control of the roadway.

Commuters and political observers are saying the state ceded too much control to Cintra, the unit of Spanish infrastructure firm Ferrovial SA that signed the $650 million contract in 2014."

Of course the largest failed public-private partnership is Obamacare. It was reported in the July 26, 2012 issue of National Review, that hospitals, doctors and pharmaceutical companies issued the following statement: "To be successful, we must take action in a public-private partnership." The public-private partnership allowed the private sector to fleece the U.S. taxpayer while the Congress and Administration declared that the "health care problem" had been solved.

The message is: Beware public-private partnerships. They always cost more, reward crony companies, use significant public funds or guarantees, and cede control for many years. All politicans, including those in Georgetown, will resort to these scams if they believe they can convince their citizens that is a great deal for the city.

Georgetown Needs to be Frugal With Spending

Even though the central Texas economy is booming and has largely escaped the effects of lower oil prices, there are disturbing signs that the growth will not continue at the current rate.

The Federal Reserve Bank of Dallas has released their latest economic indicators for Texas.

Overall all employment growth for Texas is projected to be 2.4%, which is still a healthy rate. The Austin area employment, which includes Georgetown, grew at a 3.5% annual rate in the first quarter of 2017.

The Texas real median home-sales price was $220,244 in February—10.3 percent above year-ago levels. Austin, Dallas and Houston have median sales prices above the Texas figure, while Fort Worth and San Antonio have prices below the state median.

Georgetown's home prices have also been increasing at a high rate. Past experience has shown these rates of home appreciation are unsustainable. Can anyone say "housing bubble"?

The Dallas Fed’s Texas Manufacturing Outlook Survey indicated continued growth in April. The production index, a key measure of state manufacturing conditions, dipped but remained positive at 15.4 in April.

City Council needs to prepare for the inevitable slow-down in sales and property tax revenues by trimming the growth in spending. No one knows when the slow-down will occur, but, it is certain that it will occur.

Texas Public Pensions Continue to Worsen

An article in the Texas Tribune identifies the issues and the struggles in state and local governments to try and fix the problems.

There are primarily three different types of public pension plans in Texas: defined benefit; defined contribution, think 401K; and cash balance. The defined benefit pays benefits based on length of service and some high average salary. Defined contribution plans consist of accumulating employee and employer contributions and investing them. The payout is based on how much money was accumulated. Cash balance plans are based on employee and employer contributions to a hypothetical account that are invested and converted to an annuity at retirement.

Here is a good description of the features from the National Public Pension Coalition.

Click on chart to enlarge

Fortunately, Georgetown employees are enrolled in the Texas Municipal Retirement System, TMRS, which is a cash balance plan. Pension experts believe the cash balance plan is the best approach to providing public pensions while protecting taxpayers from run-away costs.

However, cash balance plans are funded like any other defined benefit plan, with actuarial calculations, normal costs, discount rates, and unfunded liabilities.

Therefore, Georgetown is not completely off the hook for pension liabilities.