Todd Gottel, Mayor, talked at length about Council not being informed about many city approved project's progress and budget problems, if any. He is exactly right. This is true about any of the city's capital projects or any private enterprise projects. Council needs input. Let me give you an example.
Any major large real estate development lender must absolutely remain informed about what their portfolio is doing. If they ever fail to know the health and production status of their collateral, bankruptcy is not far behind. They accomplish this by sending out their own people to report back. They call them "bank inspectors" but that's the wrong word. They are more like project "auditors." Cities, architects, and engineers provide plenty of inspections. Bank "inspectors" are different. They are certainly aware of construction disciplines, however they know much more. They are budget people. They are marketing people. They know the construction business and can report on markets, values, budgets, production. They also know the business of finance and risk calculations. They are mini-project managers.........on everything from land development to home building to shopping centers, distribution centers, and apartment projects. They have access to everything! Nothing is denied them. They have no bosses except top management and loan committee. They are the SWAT Teams of loan administration.........on a national scale.
When I was at Lomas and Nettleton Real Estate Investment Trust, the company had about $2 billion committed and about $1 billion outstanding. With that kind of money being managed, one had better know what's going on. Lomas did the field "inspections" with four administrators, three executive assistants, and one auditor. There was one layer of management between the administrators and the loan committee and President of the company. Any loan committee member could pick up the phone and talk intelligently to a borrower anywhere in the USA and have up to date information about the borrower's project and performance.
The above is the type of reporting the City Council needs. They need an administrator to constantly review and observe ALL projects, whether capital improvements initiated by the city, or private investment projects proposed by developers. This administrator should be hired by, and answer only to City Council. There should be no bosses within Staff. This administrator should report warts, and all. By doing this, there should be no $2 million or $3 million surprises. Unavoidable surprises can be discovered early and steps taken to mitigate them. Then, one can study how the surprises happened, and future planning should take such "surprises" into account.
In addition to the above, there should be a Contingency allocation for every capital project. Certainly developers know how to do it. Anytime an unplanned expense occurs, pay for the hiccup out of Contingency. Anytime some money is saved out of the various cost catagories, put the money into the Contingency and replenish the account. It becomes the job of the above administrator to watch the Contingency account closely, and to study the usage of the account. If the administrator reports that the Contingency allocation is used up with no hope of replenishment, someone has some serious explaining to do. Administrators also follow construction progress very closely. If there is an abnormal slow down, they want to know why. If there are some budget problems, they will discover it.
How do I know all this bank "administrator" stuff? I used to be one.
Another good feature of the City Council having their own administrator(s) is the survival of information. City mayors and council members have term limits. Administrators don't. The information that the administrator(s) collect survive the term limits. The information passes on to the the next council members. There are many tricks in the administrator's knap sack.
Another topic on the agenda was the creation of TIRZ taxing zone and how it was to be funded. To cut through a lot of details, the thrust of the discussion was how much of the taxes collected should be allocated to funding the TIRZ zone. Some percentages discussed were 25%, 50%, 75%, or 100%. The most mentioned were 50% and 75%. It is assumed any tax revenue not directed to the TIRZ zone, would go to the general fund.
Let me put my lender hat back on. Let's assume we're not tax payers, but lenders. How many times have you ever heard of a developer coming into the development lending division of a large bank and say, "I want to build something and I want you to finance it. I think $75 million should be enough, but if that's too much, $50 million should do it."
Do you think there's anything missing in the above presentation? Well, there's a lot of things missing, but for discussion purposes, I will keep it easy. First, there is no scope of work. What is going to be built with the money? The best I heard or saw in the meeting was "stuff." As a taxpayer, I want to know a little bit more than "stuff." What streets are to be repaired? What buildings to be built, and to serve what purpose? Water & sewer improvements? Parking garage? I would like to know what improvements are being discussed in a little more detail. Are any downtown merchants paying anything? There was just no serious scope of work discussed. If you have no scope of work, you can not possibly produce a budget of any kind.
I am very, very, familiar with development costs. Half of my business day is working on costs. I know, without any reservation, that you cannot produce costs with any pretension of accuracy 20 years in the future. However, I'll bet I can find documentation that would say that a $20,000 item now would cost about $40,000, or more, in 20 years. Granted, it would not be accurate, but it would be an educated guess. With a little time, an HP 12-C, a legal pad and a scope of work, I would suggest that the TIRZ plan could generously expand information for the benefit of the taxpayer. How do you know how much money you need until you know what you're going to spend it on? I guess, to quote a famous movie, "build it and they will come."
Perhaps one of the more entertaining segments of the evening was watching two different ends of the table. One end was a council person saying that she was once for the creation of the HFC, and now she wasn't so sure. On the other end of the table was a staff member that was saying that there would all kinds of problems and time constraints in setting up an HFC, and was sounding like an HFC wasn't worth the effort.
I could not miss the comedy of the situation. A council member, who I consider a control freak, was setting at one end of the table expressing disdain for an HFC because she apparently wasn't going to manage it. At the other end of the table was a staff member expressing disdain for an HFC because it would appear he was going to have to manage it. Folks, I ain't making this up. It's on film.
The City Council member wants to develop an in-depth plan and policy on creating an HFC. I think a policy and plan is fine. What I object to is re-inventing the wheel. Why risk screwing it up? I have personally delivered to all of City Council and Staff upper management all the experts I have contacted during my push for an HFC. I have talked to management of HFC experts in Austin, lawyers in Chicago, and financial planners in Austin. They are the best in the business and all have volunteered to come to Rowlett to answer any questions regarding the formation of a Housing Finance Corporation. Yet, one council person wants to sail off into uncharted waters and create her own brand new rules. That makes no sense, unless you consider that that particular council member would control her own creation. Then, it make sense.
The staff member that seemed to be concerned that he would be strapped with managing the HFC, had a novel approach. He strangled it to death with gobbly gook. He accurately talked for several minutes and I swear I didn't know what he said. Some people might say I'm pretty good with words. Well, I'm not good enough to figure out what he said. It had something to do with a lot of work and not much control.......or something like that.
First of all, the wrong staff member was working on the HFC program. The City Manager placed duties in the hands of Planning & Development instead of the Economic Development offices. HFC's have absolutely nothing to do with Planning and Development. It is a residential financing vehicle, not a subdivision development. I have always been a fan of the City Manager, but he fumbled this football.
Folks, it wasn't all bad. The mayor is "dead on" about getting better reports from staff. Some Council members are really working hard at learning the details of HFCs. Bruce Hargrave has even made a trip to Austin to visit with one of the experts. Bruce and Debby Bobbit have engaged in conference calls with the experts. Robbert is bugging me every week about new details of the HFC work. All are in favor of a much more lengthy meeting in which the experts can be brought in to answer questions. This will be set up soon, per the mayor. Ya gotta give credit where credit is due. However, I'm watching. The meter is running.
Well, the above was probably a little lengthy. But, I reckon it's about time for the mayor, Council, and Citizens to adjust some dials. Some things need "fixin."