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California Rising Catches Pennsylvania at Bond Crossroad.

California and Pennsylvania are equal in the eyes of Moody’s Investors Service. Yet bondholders are rewarding the Western state as it turns years of deficits into a record surplus, while demanding higher yields from Pennsylvania as it fails to tackle pension costs.

The extra interest rate buyers demand to own 10-year California obligations reached 0.25 percentage point this month, the lowest since at least January 2013, when Bloomberg data begin, while 0.33 percentage point is required for comparable-maturity Pennsylvania securities.

The difference is that California lawmakers led by Governor Jerry Brown, buoyed by tax revenue from technology workers, won the state an Aa3 grade last month from Moody’s, the fourth-highest mark and the state’s best since 2001. Pennsylvania, meanwhile, had its score cut to that level last week by Moody’s, which cited one-time revenue fixes in this year’s budget. It’s the state’s lowest grade since 2000.

“California has recovered from a deeper hole and is viewed as more fiscally responsible under Governor Brown,” Craig Brothers, an asset manager in Los Angeles at Bel Air Investment Advisors LLC, which oversees $7 billion, said by e-mail. “Investors view California as an improving credit with strong demand, and Pennsylvania as a stable or weakening credit with less demand.”

This is the first time the states have shared a Moody’s rating since 2001, when both were graded Aa2, third-highest. California’s rank fell two levels by the end of that year to A1. Pennsylvania’s remained unchanged for a decade. Connecticut has the same Moody’s rank as California and Pennsylvania. New Jersey is graded one level lower, at A1, and Illinois is two steps below that, at A3, for the lowest mark among states.

California, the most-populous state, became more attractive to investors after Brown, a 76-year-old Democrat, persuaded voters to approve temporary increases in income and sales taxes in 2012, yielding an extra $6 billion a year for schools, said Brothers.

The Golden State’s resurgent technology industry has helped make it a stronger bet than Pennsylvania, which is counting on natural gas-yielding shale deposits to revive an economy historically rooted in coal and heavy manufacturing.

Tech Fuel

“The recovery is uneven across California, but in general it’s been good, whereas in Pennsylvania the economy post-recession has kind of lagged the past couple of years,” said Alan Schankel, a managing director at Janney Montgomery Scott LLC in Philadelphia. “Pennsylvania is more of a rust-belt state, whereas California has more of a tech industry that can help fuel good performance.”

California ranked fourth in the Bloomberg Economic Evaluation of States index of economic improvement in the year through March, while Pennsylvania, the sixth-most-populous, placed No. 42.

California’s June unemployment rate of 7.4 percent eclipses Pennsylvania’s 5.6 percent, according to the Bureau of Labor Statistics. Yet economic trends favor California. Its state gross domestic product increased 2 percent last year, compared with a gain of 0.7 percent in Pennsylvania, the Bureau of Economic Analysis reported.

Net Leader

California is in a “solid and sustainable” recovery led by information services, which includes the Internet and motion pictures, Steve Levy, director of the Center for Continuing Study of the California Economy in Palo Alto, said in a July 18 report.

In the home state of Google Inc. and Twitter Inc., employment in information services grew 5.1 percent in the year that ended in June, making it the fastest-growing part of the economy, he said.

Pennsylvania has trailed the U.S. in most areas, including employment growth, economic output and home construction, JPMorgan Chase & Co. said last month in a report. The state will probably catch up in the second half of the year, led by drilling for gas in shale formations that put the state “on the front lines of new energy developments,” according to the report.

Shale Play

Charles Zogby, Pennsylvania’s budget secretary, said investors have overreacted to the state’s downgrade.

“We may not be growing as fast as some of the other states in the nation, but as the ratings agencies recognize, we’ve got a fairly diverse and stable economic base,” he said by telephone from Harrisburg, the capital. “We have a wealth of resources, especially when you look at the shale play. I find it hard to imagine that the market views Pennsylvania as a more risky place to do business than California.”

California’s state pension funds are also healthier than Pennsylvania’s, with 76 percent of assets needed to cover obligations in 2012, compared with 63.9 percent in Pennsylvania, Morningstar Inc. said in a September report. The U.S. average was 72.4 percent.

In Pennsylvania, lawmakers recessed for the summer without voting on a bill backed by Republican Governor Tom Corbett that would shift some of the burden of funding retirement benefits to new state and school workers. The 65-year-old, who’s running for re-election in November, has called the issue the state’s “biggest fiscal challenge.”

Tax Increases

Standard & Poor’s and Fitch Ratings may raise California from its current A rank, sixth-highest, in the next six months, said Burt Mulford, who helps oversee about $2 billion of municipal bonds at Eagle Asset Management in St. Petersburg, Florida. The companies grade California two steps lower than Moody’s.

The state’s borrowing costs may sink below yields on top-rated munis as rating increases combine with an inadequate supply of new tax-exempt bonds to sate the wealthiest Californians, he said. California’s top earners pay a 13.3 percent state income-tax rate, the highest in the U.S. Pennsylvania’s rate is 3.07 percent for all incomes.

“The trend is there — there’s going to be another upgrade soon,” Mulford said. “Cal is going to start trading through the AAA scale, just because of demand.”

By James Nash and Brian Chappatta
Jul 28, 2014

To contact the reporters on this story: James Nash in Los Angeles at jnash24@bloomberg.net; Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Pete Young, Mark Tannenbaum



Judge Rules Boulder County Lacked Legal Authority to Create Subdivision Paving District.

Formation of district and imposition of assessments ‘invalidated’ by ruling

Boulder County commissioners didn’t have the legal authority to establish a Local Improvement District created to charge rural residential subdivision property owners the bulk of the costs of rehabilitating those subdivisions’ paved county roads, according to a Friday Boulder County District Court ruling.

The Board of County Commissioners “exceeded its jurisdiction and abused its discretion in authorizing and forming the Subdivision Paving Local Improvement District and imposing assessments on properties within the District,” Senior District Court Judge J. Robert Lowenbach wrote.

Lowenbach said in his ruling that the authorization and formation of the road paving district the commissioners formed last year — and the county’s imposition of millions of dollars of assessments on the owners of about 10,900 properties in nearly 120 subdivisions — “are invalidated.”

The judge further ordered Boulder County to “promptly return the assessments and/or installments collected, with interest, and remove any and all liens” imposed as part of the funding mechanism intended to help pay the costs of rehabilitating and reconstructing about 150 miles of paved roads in the county’s unincorporated residential subdivisions over the coming 15 years.

Chuck Wibby, one of the subdivision homeowners who sued the county last November, said he and the other plaintiffs learned of the judge’s ruling on Sunday.

“We’re obviously very pleased,” said Wibby, who’s also chairman of Boulder County Fairness in Road Maintenance, an organization formed by some of the subdivision homeowners to fight the county’s efforts to assess property owners for the costs of the road rehabilitation work that Boulder County FIRM said was the county’s responsibility.

Boulder County FIRM said in a Sunday night statement that barring a county appeal of the judge’s ruling, it “effectively ends the county’s Subdivision Paving Local Improvement District for all 10,900 property owners.”

The organization said its goal “has always been to get our subdivision roads fixed without new taxes.”

This week, Boulder County FIRM said in its statement, it will present recommendations to the county commissioners and a subdivision paving advisory committee about how that might be accomplished “without new taxes or assessments.”

Barb Halpin, a spokeswoman for the Boulder County commissioners, said on Sunday night that the commissioners are expected to meet with deputy county attorney David Hughes on Monday to review the ruling.

“We’re obviously disappointed,” Commissioner Deb Gardner said later Sunday night. “We felt we were on the right side of the law with what we’ve done.”

Gardner said she and her fellow commissioners would probably meet in executive session on Monday to review the judge’s ruling and discuss the county’s options.

“It’s all up for grabs, at the moment,” Gardner said.

Judge Lowenbach agreed with the lawsuit’s plaintiffs that the work of the repairing and reconstructing and rehabilitating crumbling county roads was a form of “maintenance” that didn’t fit within state law’s provisions allowing the creation of Local Improvement Districts for “improvements.”

“It is clear that the county faced difficult financial issues that caused the neglect of its dedicated subdivision roads,” Lowenbach wrote.

“Roads that are not chip sealed and resurfaced will deteriorate. If deterioration is severe enough, the road will have to be reconstructed. These maintenance activities are necessary to the upkeep of the roads and to keep them operative, and are included in the term ‘maintenance,” the judge said.

Lowenbach wrote that “property owners whose roads were accepted for maintenance by the county understood that term to include all activities necessary for upkeep of roads. While it clearly had the duty to maintain those roads, the county did not perform that duty.”

The judge said he’d concluded that the term “improvement” — which the county contended it was planning with its Subdivision Paving LID, rather than “maintenance” — “means the building of something that is either entirely new or constitutes an appendage or addition to an existing item of public property. None of the intended uses of the funds to be raised by the LID fall into this category.”

Last year, county officials projected that the 15-year cost of rehabilitating paved subdivision roads would total about $72 million, with Boulder County covering about $14.4 million of that expense from its own budgets and subdivision property ownrs to be assessed the remaining $57.6 million.

Earlier this month, the commissioners approved awarding a $4.4 million contract for the first year’s work, which is to include reconstructing about 5.5 miles of roads and applying asphalt overlays to another 7.7 miles.

By John Fryar
Times-Call staff writer

POSTED: 07/27/2014 07:19:42 PM MDT
UPDATED: 07/28/2014 07:51:25 AM MDT

Contact Times-Call staff writer John Fryar at 303-684-5211 or jfryar@times-call.com



Court Case Could Challenge Houston's Hands-Off Approach.

America’s fourth-largest city has never had a zoning code.

A few weeks ago, business leaders in Houston introduced a new slogan aimed at helping to attract more corporations to town. It’s a simple slogan: “Houston: The City With No Limits.”

Like almost any good civic slogan or motto, this one can be interpreted in many different ways. But to quite a few outsiders, it will signal one overriding idea about the nation’s fourth-largest city: There is no zoning. Houston, they believe, is a place where you can build anything you want next to practically anything you can think of — a greasy garage on a pristine residential street, a convenience store in the midst of expensive single-family houses, a noisy bar next to a nursing home.

That’s only partly true. Houston does, in fact, operate without the benefit of a city zoning code, and in the last 70 years, it has voted against having one three different times. The garage owner who wants to set up shop in between private homes does not have to worry about any comprehensive city code that might forbid it.

That doesn’t mean, however, there are no obstacles to building that garage. In many residential neighborhoods, there are enforceable private deed restrictions that determine what can be built. There are rules governing lot subdivision, building setbacks and parking permits. There are preservation and landscaping laws. All of these contribute to making development in Houston a little more orderly than most people on the outside tend to imagine it.

Even so, the stereotype about Houston being a wide-open development town has some validity to it. If your goal in life is to operate a nightclub in the vicinity of a Baptist church, you’re much better off trying it in Houston than in Boston or San Francisco. The absence of general zoning is in fact a major reason why first-time visitors notice a haphazard or unpredictable quality to Houston’s neighborhoods.

Whatever views one may hold about a city without zoning, it’s hard to deny that Houston has done pretty well for itself over the past generation or so. Its population has grown faster than that of almost any other American city. Its unemployment rate is among the lowest. It continues to attract new businesses no matter what slogan it chooses to adopt for itself. And a growing number of scholars, notably the urbanologist Edward Glaeser, have argued that Houston has done well precisely because it imposes so few restrictions on development.

But will a developmental free-for-all bring Houston the same heady results in the coming decades that it brought in the preceding ones? Or is it, at long last, time to impose a little more order on the unwieldy metropolis? Those are questions that Houston’s development community has spent the past couple of years trying to puzzle out, as it has negotiated the twists and turns of a legal event known to just about everybody as the Ashby case.

The focus of the case is a 1.6-acre lot near Rice University that for decades was home to a nondescript two-story apartment building known as Maryland Manor. This building, set among single-family homes worth a million dollars and more, didn’t do much to enhance the appeal of the surrounding properties, but it didn’t especially bother anyone either.

In 2007, however, Buckhead Investment Partners announced that it had acquired Maryland Manor and planned to tear it down and construct a 23-story luxury apartment complex with 228 residential units. No matter how it was designed, this new building would be out of place in an area consisting almost entirely of one- and two-story homes. And scarcely anyone, besides the developers, tried to argue that it fit the neighborhood.

The neighbors set to work to determine what they could do to derail the new project in a town where there were no zoning laws to help them. They beseeched the city, which did not particularly like the project either, to use any available legal means to stop it. Then-Mayor Bill White wrote in a letter to area civic groups that he would use “any appropriate power under law” to alter the development. The city continued to deny building permits during five years of negotiation. Finally, in 2012, city officials decided they were out of options. They concluded the city had no legal grounds for blocking the project and reached a settlement with Buckhead granting it the legal right to build, in exchange for steps to mitigate light and noise from the building and a promise to create a physical buffer between the high-rise and the neighborhood.

That appeared to be the end of the story. But actually, it was only the beginning. The homeowners regrouped and filed suit in the Houston District court, arguing that even at 21 stories, the new proposed height, the Ashby project was a public nuisance and subject to a court injunction preventing its construction. They also asked the court to award damages to the residents living closest to the project, on the grounds that it would decrease their property values, damage their homes and create serious traffic problems. The plaintiffs argued that 10 existing homes near the site could suffer cracked slabs, buckled walls and burst pipes just from the construction process.

This was a novel, if not an unprecedented, employment of the nuisance concept in a civil action. Judges apply the nuisance standard to obnoxious sights, smells or clearly offensive activities that create hardship for the community in which they are located. To declare a building yet unbuilt to be a nuisance mostly on the basis of its planned size was to make an argument that no court anywhere had ever bought. It was, in effect, to impose a nuisance standard on the basis of aesthetics. “This is really breaking new ground,” law professor Josh Blackman told a local reporter. “This is the furthest that any residents have tried to challenge something in Houston history.” Blackman described the prospect of an injunction against the developers as “backdoor zoning for the wealthy.”

Still, it wasn’t a crazy challenge. The case was sent to a jury, and there was always the possibility that a jury would feel more sympathy for the homeowners than for the development company. In fact, that was pretty much what happened. In December, the Houston jury awarded 20 homeowners a total of $1.7 million in damages on the grounds that a 21-story tower in their vicinity would indeed constitute a nuisance to the conduct of their everyday lives. The jury returned the case to Judge Randy Wilson to determine whether he should issue a permanent injunction blocking the building from being built at all.

At this point, high-priced legal talent and substantial media attention were focused on the case. And the arguments zeroed in on what the ultimate importance of Ashby was: It stood to determine whether Houston’s free-for-all development system would remain intact or would be made subject to an unpredictable judicial review process. “If a permanent injunction is granted,” one pro-development organization wrote in a friend-of-the-court brief, “it throws all the rules out the window.”

The developers argued that the Ashby opponents were trying to circumvent established city law. They said the homeowners considered themselves “special” and more sensitive to petty annoyances than other residents of the city.

The homeowners responded that money wasn’t the issue. “It’s about homes; it’s about community,” plaintiffs’ attorney Jean Frizzell insisted. “They want to call these people special; they are fighting for their homes and their community.”

As the case proceeded in Judge Wilson’s court, the city of Houston found itself in a rather unusual position. On the one hand, it agreed with the plaintiffs that the Ashby project was indeed a nuisance. Mayor Annise Parker called it “the wrong project in the wrong place.” But she opposed the idea of an injunction forbidding construction, agreeing with the defendants that it could bring chaos to development citywide.

In the end, that was about where the judge came down. He agreed the project would be a nuisance to its neighbors and granted them $1.2 million in damages. But he refused to prevent the building from being built. “If an injunction is granted,” Wilson wrote, “it will have a chilling effect on other developments in Houston.”

Then he honed in on the big issue. “As Houston becomes more and more urbanized and denser, perhaps Houston should reconsider whether zoning is appropriate for this city.”

That is unlikely to happen. At a minimum, a comprehensive zoning code would dramatically revalue properties all over the city, amounting to a substantial redistribution of private wealth. No elected city leader, not even an outspokenly progressive one like Parker, is going to advocate that.

But neither would it be correct to suggest that free-for-all development will proceed in the future as it did in pre-Ashby times. A precedent for awarding nuisance damages has been set, assuming it is not reversed on appeal. The concessions offered by the Ashby developers over the past seven years seem certain to place pressure on others building where there is significant local opposition. The city government, while backing away from zoning, will be asked to impose new regulations on future projects. One such rule, allowing neighborhood groups to apply for minimum lot size restrictions, has already become law.

But the most interesting question emerging from the case may be whether it will lead to more large infill projects in the central areas of the city. On the one hand, the court and the city government have made it clear that Houston’s build-it-anywhere legal structure will remain more or less intact. On the other hand, the sheer amount of time and effort required of the developers on the Ashby project may send a signal that it remains easier and cheaper to build in the exurbs where they do not have to deal with entrenched community feeling.

Or, still another possibility — developers might draw the lesson that there is plenty of useful work to do in creating urban density, but they have to go about it in a more sensitive and appropriate way than they did on Ashby. That might be the best outcome of all.

GOVERNING.COM
BY ALAN EHRENHALT | AUGUST 2014



Can Grad Schools Bridge the Divide Between Policy and Public Finance?

New survey data shows the gap between policy wonks and finance geeks could be shrinking.

The perception of public finance’s place in government operations is changing. A new survey shows that the divide between the policy wonks and the number crunchers could be narrowing.

For many years, public finance topics in policy schools generally referred to larger economic issues. Budgets are indeed policy-setting documents, but the math part of it was better left to the experts. And an analogous view was often taken by those (like accountants or CFOs) studying the numbers – their role was to report the numbers, not comment on policy.

In fact, a recent response by a treasurer to a Governing survey question about whether respondents preferred to hire policy school graduates belies that idea: “As treasurer,” the respondent wrote, “my department is more concerned with accounting and cash management than public policy.”

But that same survey, conducted between June 30 and July 17, indicated that overall attitudes about the importance and usefulness of a public finance education in policy school may be changing. According to respondents, their public finance course (or courses) was one of the top three most helpful in their careers. Still, budgeting as a skill didn’t crack the top three in terms career of importance.

The survey results come from a systematic random sample of 189 senior state, county and city officials who have graduate degrees and represent a mix of high level elected, appointed and civil service positions. The main findings of the survey were a ringing endorsement of policy school as a whole – 88 percent said their coursework prepared them for their current careers in government and, separately, nine in 10 said they would prefer to hire someone with a graduate degree in a government-related field.

Over the last decade, many policy schools have started to emphasize that the budget and financial stability is everyone’s responsibility. That is likely why in the survey, in which most respondents had at least 10 years of experience in government, indicated that public finance was important but budgeting (as a professional skill) was less important.

That dichotomy, said Justin Marlowe, who teaches budgeting and financial management at the Evans School of Public Affairs at the University of Washington, reflects the generational divide between the old way of teaching things and the new way. And the new way, he said, is that “everyone has a role to play. It’s not enough for everyone to just play the budget game and hope there will be enough money. The contemporary perspective is that good budgeting, cost analysis – these are really crucial.”

The Evans School, for example, launched the Public Financial Leadership Academy in 2012. Geared toward those already holding a position in government finance, the academy gives enrollees a week-long deep dive in management leadership skills and techniques. The program emphasizes that it’s not enough for people to understand numbers — they have to be able to take financial statements and make them come alive to audiences. Similar programs exist at schools across the country and are in high demand. The University of North Carolina’s Introduction to Local Government Finance course is not only full, its wait list has been closed because of the backlog of eager enrollees.

Still, even if policy schools are making the attempts to bridge the gap, there’s still the plain fact that many students enter graduate school because they want to effect change and are focused on big picture topics. (Public speaking and teamwork were the top two skills respondents said they learned in school.) With that mindset, the basics of public finance can seem like minutia. Relmond Van Daniker, CEO of the Association of Government Accountants, saw that often during his 31 years of teaching undergraduate and graduate students. “Debit and credits, putting a budget together, how to control costs – really an awful lot of them just weren’t interested,” he said.

But the overall idea that government finance experts should be put in the proverbial corner (with no objection on their part), is giving way with the help of some higher-profile accounts. “We’re in the middle of a transformational change,” said Marlowe, who is also a Governing contributor. He pointed to Chicago CFO Lois Scott, who has been vocal not only about the financial problems of the city, but how to fix them. “Yeah, you’re a CPA,” he said. “But you have to think like a leader.”

GOVERNING.COM
BY LIZ FARMER | JULY 29, 2014



Municipalities Ask the FCC to Consider Preemption of State Restrictions on Municipal Broadband.

On July 24, 2014, the Electric Power Board of Chattanooga, Tennessee, and the City of Wilson, North Carolina, filed separate petitions asking the FCC to consider whether their states’ laws prohibit the deployment of high-speed broadband services in a reasonable and timely manner. FCC Chairman Tom Wheeler has spoken repeatedly about his desire to address state laws that prohibit or restrict municipal broadband networks. These petitions provide the chairman the opportunity to take action. On July 28, 2014, the FCC published a public notice about the two petitions (available here and here), which specifically ask the SEC to act in accordance with Section 706 of the Telecommunications Act of 1996 to preempt portions of their respective state laws that restrict their ability to provide broadband services. Interested parties may file comments with the FCC through August 29, 2014.

Thursday, July 31, 2014



Oyster Bay Plans $170 Million Sale as Ratings Slide: Muni Credit.

Long Island’s Oyster Bay, whose household income is almost double the New York median, had to borrow $30 million this month to meet payroll. A downgrade to two steps above junk followed, and the rating may go lower.

The former home of U.S. President Theodore Roosevelt, Oyster Bay is depending on cash that may not come to fix its budget for a second straight year. Nassau County is withholding $14 million in sales taxes due the town in a dispute over college tuition reimbursement.

The town, which has had its credit rating cut eight steps by Standard & Poor’s since 2011, plans to sell $170 million in tax-exempt general obligations today to refinance bonds. Evercore Wealth Management LLC’s Howard Cure is among investors who say they’re tired of the town’s fiscal woes.

“I’m still hesitant about being convinced they have everything under control,” said Cure, head of municipal research at New York-based Evercore, which has already sold its Oyster Bay debt. “It has all this wealth and they can’t figure out how to balance their budget.”

A collection of 18 independently governed villages, Oyster Bay is home to 293,000 residents about 34 miles (55 kilometers) east of New York City. It had a median household income of $107,620 in 2012, compared with the statewide level of $57,683, Census data show.

Pension Costs

Its wealth hasn’t prevented eight straight years of deficits. Oyster Bay joins municipalities across the nation in being squeezed by rising pension costs and revenue that hasn’t recovered from the 18-month recession that ended in 2009.

From 2007 to 2011, Oyster Bay’s pension and health-care obligations climbed 21 percent, according to data from state Comptroller Thomas DiNapoli. By contrast, mortgage-tax revenue fell by two-thirds, according to Town Supervisor John Venditto, a Republican.

To maintain services and improve infrastructure, Venditto increased Oyster Bay’s debt to $751 million in 2011 from $410 million in 2007, making it the state’s fifth-largest issuer other than New York City, according to DiNapoli’s data. The town’s population makes it bigger than Buffalo, New York’s second-largest city.

Wider Spreads

Oyster Bay’s general obligations have been punished in the $3.7 trillion municipal market since S&P on July 11 dropped the town two levels to BBB, the second-lowest investment grade. Its rating may go down further if it can’t balance its budget, S&P said.

Bonds maturing in March 2017 traded July 21 at a yield 0.65 percentage point more than AAA munis, the widest since the offering, data compiled by Bloomberg show. Debt due in November 2023 changed hands July 16 with an average spread of 1.34 percentage points, the largest since November.

The town has used bond insurance in the past year to boost ratings. Debt from an April general-obligation sale was backed by Build America Mutual Assurance Co. and securities from February and October offers had insurance from Assured Guaranty Municipal Corp.

Oyster Bay is “not alone in having a wealthy tax base, but not having structurally balanced operations,” Lindsay Wilhelm, an S&P analyst, said in a telephone interview. She cited Nassau County, the state’s wealthiest, as an example.

Nassau’s Woes

A state control board took over the county’s finances in 2011. In the first half of 2014, Nassau had an 8.3 percent drop in sales-tax collections from the prior year, the biggest decrease for any county in the state, Moody’s Investors Service said July 21.

Oyster Bay’s fight with Nassau over payments to the Fashion Institute of Technology in Manhattan shows the county’s fiscal woes trickling down, said Venditto.

“There’s no way the county would owe us this money if they were on proper footing,” Venditto, 65, said by phone.

Tim Sullivan, deputy county executive for finance, said in an e-mail message that Oyster Bay is owed $14 million from sales-tax revenue. The town could get almost half of the amount by agreeing to pay for its residents who attend FIT.

In New York, counties must pick up a portion of the cost for residents who attend community colleges beyond their borders, and counties are allowed to pass the bill on to their localities. FIT is the only community college that offers four-year and graduate degrees, which makes it more expensive than others.

College Dispute

From 1995 to 2001, the state was picking up the tab. When it stopped, the bill reverted to the counties. Nassau started billing its municipalities for FIT payments in 2010. Oyster Bay says FIT shouldn’t be considered a community college, it doesn’t owe the county for the tuition and it wants its portion of the sales-tax revenue.

“If not for the Nassau County delinquency, we wouldn’t have to borrow at all,” Rob Darienzo, Oyster Bay’s finance director, said in a telephone interview.

In 2012, Oyster Bay sold $13 million in one-year notes to close a deficit. The same year, it approved a plan to raise property taxes, offer a retirement incentive and implement a wage freeze.

The town’s 2013 budget included $17 million it expected from a land sale that effectively blocked a mall development to cover the 2012 debt. Though the property was sold for $32 million after a referendum, Oyster Bay ended 2013 with a deficit, according to S&P.

Venditto said that as long as Nassau County turns over the sales tax cash, “we will be fine.”

By Freeman Klopott
Jul 23, 2014 5:00 PM PT

To contact the reporter on this story: Freeman Klopott in Albany at fklopott@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet, Mark Tannenbaum



Illinois Outlook Cut to Negative by S&P on Deficit Concerns: Bloomberg.

Illinois, the lowest-rated U.S. state, had its outlook dropped to negative by Standard & Poor’s, which cited the prospect of budget deficits and questions over whether pension overhaul measures will survive legal challenges.

S&P changed its outlook on the fifth-most-populous state to developing from negative in December after lawmakers broke through decades of political gridlock to pass a measure aimed at fixing the worst-funded U.S. state pensions. Illinois’s A-rating is four steps above junk.

The Illinois Supreme Court ruled this month that the state can’t cut contributions to government retirees’ health-insurance premiums, potentially jeopardizing the pension legislation. Lawmakers on May 31 approved a spending plan for this fiscal year that will require further action to keep the government operating. In the meantime, the state will forgo paying vendors, borrow and delay payments.

The fiscal 2015 budget “in our view is not structurally balanced and will contribute to growing deficits and payables that will likely pressure the state’s liquidity,” wrote Robin Prunty, S&P analyst.

“The outlook also reflects the implementation risk associated with recent reforms related to post-retirement benefits,” she wrote.

Market Penalty

Illinois bonds have been penalized by investors in the $3.7 trillion municipal market. The extra yield investors demand to own 10-year Illinois bonds rather than benchmark munis surged to 1.46 percentage points yesterday, the highest since January, data compiled by Bloomberg show.

Moody’s Investors Service and Fitch Ratings also have Illinois four levels above speculative grade, the worst among states, with negative outlooks.

Democratic Governor Pat Quinn “was clear with legislators this year that bond rating agencies would look with disfavor on a budget that did not contain enough revenue to cover a full year of the state’s needs,” Abdon Pallasch, the state’s assistant budget director, said in a statement.

“The legislature passed an incomplete budget and this is the predictable result,” he said.

By Brian Chappatta
Jul 23, 2014 12:51 PM PT

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum



MAC Licensed to Insure California Municipal Bonds.

Bond insurer Municipal Assurance Corp. (MAC), a member of the Assured Guaranty group of companies (Assured Guaranty), announced that the California Department of Insurance has licensed MAC to write financial guaranty insurance in the State of California. MAC joins its affiliates Assured Guaranty Municipal Corp. (AGM) and Assured Guaranty Corp. (AGC), which were already licensed to write policies in California.

“We are pleased that we will be able to offer MAC’s AA/AA+ bond insurance to California issuers seeking the most cost-effective financing solutions for their government operations and essential public services,” said Dominic Frederico, President and CEO of Assured Guaranty. “Investors seeking insured bonds in California’s municipal bond market have a new, U.S. muni-only alternative with two double-A ratings.” MAC’s financial strength is rated AA by Standard & Poor’s Ratings Services and AA+ by Kroll Bond Rating Agency. Both ratings have stable outlooks.

Mr. Frederico further stated, “Municipal bonds of California issuers represented 15% of the total par issued in the U.S. public finance market in 2013; we look forward to MAC being able to serve that significant market, especially the small to medium-size bond transactions that MAC was designed to support. Assured Guaranty has maintained an office in San Francisco for almost 20 years to provide superior service to issuers and bankers in California and the western states.”

With its California license, MAC is now licensed to insure municipal bonds in forty-eight states plus the District of Columbia, and it has applied for licensing in the two remaining states, Alabama and New Mexico.

MAC was launched on July 22, 2013 to guarantee only U.S. municipal bonds in the most well-understood bond sectors such as general obligations and tax-backed issues for cities, counties and school districts, and public electric, water, sewer and transportation revenue bonds. At March 31, 2014, MAC had $1.95 billion of claims-paying resources and a $101 billion direct and assumed insured portfolio. Its highly diversified insured portfolio generates predictable future revenue from its embedded $635 million unearned premium reserve, which is part of MAC’s $1.5 billion investment portfolio.

As of June 30, 2014, MAC had directly insured $623 million of par in the new issue market, representing transactions brought to market by 19 national and regional lead managers. Since July 2013, the combined Assured Guaranty companies have insured approximately $9.3 billion par of municipal bonds in the primary and secondary markets.

MAC is owned jointly by AGM and AGC, the only two companies that have been able to write financial guaranty insurance before, during and since the Great Recession. As another member of the Assured Guaranty group, MAC benefits from the group’s management, underwriting discipline, experience in surveillance and remediation and established accounting, legal and information technology infrastructure, in addition to Assured Guaranty’s proven track record of almost 30 years.

Along with publishing detailed financial statements, MAC posts a list of every credit it insures on its website, MACmunibonds.com, and provides Credit Summaries on the new-issue transactions it insures. MAC is committed to transparency and is a subsidiary of a public company listed on the New York Stock Exchange (NYSE), which is held to high standards of disclosure and oversight.

Assured Guaranty Ltd., the ultimate holding company for the group, including MAC, AGM and AGC, is a NYSE-listed, Bermuda-based holding company the common shares of which trade under the ticker symbol AGO. Its operating subsidiaries provide credit enhancement products for the U.S. and international public finance, infrastructure and structured finance markets. More information on Assured Guaranty Ltd. and its subsidiaries can be found at AssuredGuaranty.com and MACmunibonds.com.

California issuers and their advisors and bankers may direct MAC transaction inquiries to Jason Kissane, Managing Director, Western Region in Assured Guaranty’s San Francisco office, 415.995.8023 or jkissane@assuredguaranty.com.

July 24, 2014



Where Have All the Bonds Gone?

With a sizable portion of the municipal bond ­market focused on the August bankruptcy trial of the city of Detroit, many municipal bond investors are bumping up against a problem much closer to home: The supply of bonds is way down, driving prices up and yields down.

The municipal bond ­market is driven by new supply. While many bonds trade regularly, the vast majority are purchased and held to maturity — “put away,” in the parlance of the trade.

Normally, that’s OK. But the supply of newly issued bonds is down significantly this year, and demand is up, driven by investors, many of them hit with higher taxes, hungry for tax-advantaged investments. Supply Down. Demand Up.

On the supply side, municipalities nationwide through mid-June sold about $123 billion of long-term, fixed-rate bonds, down 20 percent from the comparable period in 2013. When combined with bonds that have matured or been called, the municipal market has actually contracted by approximately $111 billion since 2010, the biggest decline (peak to trough) since records began in 1945, according to Federal Reserve data.

Minnesota reflects the national trend, with the outstanding amount of muni debt down year-over-year. We are, however, bucking the trend in new issues, with supply up by $600 million vs. the comparable period in 2013, to approximately $2.8 billion.

That sum, however, includes the roughly $460 million of debt sold for the new Vikings stadium; back out those bonds, and our total was up only about 6.4 percent over 2013.

What gives?

By all accounts, elected officials nationwide are still reluctant to incur debt. Things aren’t so bad here in Minnesota. As our economy, one of the strongest in the United States, has improved, so have credit conditions for municipal bond issuers.

Consequently, credit rating upgrades, which lower borrowing costs, have outpaced downgrades through the first quarter this year vs. the last year, according to Moody’s.

While some municipalities are still coping with strained finances, tax receipts for many municipalities, including the state of Minnesota, are up, and overall conditions are better.

Opinions about future supply vary widely, but the need for infrastructure spending at all levels of government — expenditures typically financed by municipal bonds — is clear. The question is when, and to what extent, will that take place?

One important result of this tight market has been higher bond prices, which pushes down yields to investors. On a capital gains basis, that has helped drive up the face value of bonds that trade, resulting in investment gains of nearly 6 percent on this class of assets in the first six months of 2014.

Lower Treasury bond rates also fed into this performance.

We do not expect these returns to be repeated in the second half of the year, but municipal bonds continue to look attractive relative to many fixed-income alternatives.

Beware of the potholes

That said, investors need to navigate carefully. Bargain hunters may be tempted to look hard, for example, at the bonds issued by cities such as Detroit, which has declared bankruptcy, and Puerto Rico. Be careful.

Detroit’s bankruptcy trial starts Aug. 14. Early negotiations suggest some preliminary adjustments, but the trial could change all that.

As things now stand, Detroit’s general obligation bondholders, who sit at the top of the credit ladder, are looking at about 74 cents on the dollar, while other bondholders stand to take a beating, some recovering as little as 11 percent of the face value of their bonds.

Meanwhile, the holders of Puerto Rico bonds look to be in for a wild ride. Puerto Rico is a big, big issue in the municipal bond market, although its problems have been known for quite a while.

This little island is carrying an enormous debt load — more than $70 billion — and it’s burdened by a very weak economy, rampant crime and a declining population, which is only about 3 million.

Puerto Rico does not have bankruptcy laws like the United States. But a new law has just been enacted that would provide for a restructuring mechanism for the power, water and transportation authorities. Legal challenges have already been filed.

We counsel folks to avoid reaching for yield by taking on what can turn out to be an inordinate amount of risk. As the saying goes, let the trend be your friend. The general state of municipal finance has improved. Stick with quality issues. The wind is at your back.

MINNEAPOLIS STAR TRIBUNE
TERRENCE M. FETTIG
Updated: July 27, 2014 – 2:00 AM



Wall Street Job Boom Fades as Puerto Rico Convulses: Muni Credit.

Money managers in the municipal market are adding analysts at the slowest pace since before the financial crisis, a sign research staffs are able to manage the volatility stemming from beleaguered Puerto Rico.

AllianceBernstein Holding LP, Nuveen Asset Management, T. Rowe Price Group Inc. and Vanguard Group Inc. — which combined have 59 researchers and oversee about $270 billion in munis — haven’t added analysts in the past year-and-a-half. Neither have banks such as Barclays Plc. (BARC) Morningstar Inc. in Chicago stopped providing muni research as of June 30.

The hiring freeze coincides with a slowdown in issuance that’s leaving the $3.7 trillion market poised to contract for an unprecedented fourth straight year. The scarcity is driving a rally in 2014, led by riskier credits. That shows investors have the analytical power to separate financial woes in Puerto Rico and Detroit from other localities.

“The boom time for analyst employment has come to at least a temporary end,” said Matt Fabian, managing director at Concord, Massachusetts-based research firm Municipal Market Advisors. “You have to be more careful about how you allocate resources.”

Research Reluctance

Membership in the National Federation of Municipal Analysts has risen 2 percent in the past 18 months to 1,348, said Lisa Good, the group’s executive director. That compares with an average 5.3 percent annual increase in the five years after 2008, which was the fastest growth since at least 1990.

The trend reflects a pattern across Wall Street where companies are evaluating staffing costs since the financial crisis, said Jeanne Branthover, managing partner in New York at Boyden Global Executive Search. While investors always need research, it’s a segment that doesn’t generate revenue and is vulnerable during slowdowns, she said.

“When a business stands still or a market shrinks, we’ve seen companies really pay attention to not continuing to hire,” Branthover said. “Research analysts are very much the backbone and support, but they don’t need more of them than the money the group is generating.”

Even in equities, where hiring has picked up as the Standard & Poor’s 500 Index (SPX) sets record highs, new research jobs are minimal, she said.

Finance Oasis

The years after 2008 proved a boom time for muni employment even as other parts of the financial markets faced firings. Subprime-mortgage-backed debt guarantees pummeled bond insurers’ top grades, removing a swath of munis from the AAA universe and prompting a hiring spree for credit research.

The collapse of bond insurance created “the full employment act for analysts,” said Bill Delahunty, head of muni research in Boston at Eaton Vance Management.

The market was also growing at the time. The federal Build America Bonds program pushed local-debt sales to a record $408 billion in 2010. In December that year, banking analyst Meredith Whitney incorrectly predicted “hundreds of billions of dollars” of municipal defaults in the following 12 months, prompting questions about credit quality and spurring an exodus from mutual funds.

This year, supply is 27 percent below 2010, pushing yields to generational lows, and Janney Montgomery Scott forecasts declining issuance through 2017. Credit quality is also improving with the economy. The number of new issuers defaulting is set to be the lowest since at least 2009, according to MMA.

‘Plain Vanilla’

“Much of the market is fairly plain vanilla and stable types of credits,” said Joe Rosenblum, director of muni credit research at New York-based AllianceBernstein, which manages $30 billion of local debt and has eight muni analysts.

“We don’t think you need to pay a lot of attention to those,” he said. “It’s the ones that have potential problems or opportunities that are more complicated, and that’s where we want to focus our analytical time.”

High-yield bonds have gained about 9 percent this year, the best start since 2012 and better than the broad market’s 6.4 percent return, according to S&P Dow Jones Indices. Unrated deals this year include senior communities in Florida and Oregon and a facility that converts biosolids into fertilizer outside Orlando.

Yet over the past year, investors and analysts have been most transfixed by developments in Puerto Rico, which has $73 billion in debt when including its agencies.

Distress Push

Rating companies cut the island to junk in February and lowered it again this month after lawmakers passed a bill allowing some public corporations to restructure their debt. Commonwealth debt plunged 6.4 percent in the week through July 4, the largest drop since at least 1999, S&P Dow Jones Indices data show.

Demand for Puerto Rico bonds has shifted from traditional muni funds to hedge funds, potentially quelling the need for extra analysts.

Default is already a reality for holders of Detroit debt. The Motor City filed a record bankruptcy a year ago and plans to repay some bondholders as little as 11 cents on the dollar.

“There was definitely a scramble to get some analysts in place over the past couple of years — it was the downgrade of the bond insurers and credit stories in Puerto Rico, Detroit,” said Delahunty at Eaton Vance. “Now it can really be firm by firm.”

The company, which oversees $26 billion in local debt, added one muni analyst in the past year, for a total of 15.

Hiring Breakdown

Vanguard, based in Valley Forge, Pennsylvania, has 20 muni credit researchers, unchanged from the start of 2013. Chicago-based Nuveen has 23, with no additions since 2012. Baltimore-based T. Rowe has had eight muni analysts since 2008.

At Morningstar, Jeff Westergaard remained head of fixed-income data and analytics after the company discontinued muni research because of insufficient demand, said Nadine Youssef, a spokeswoman. Of the others working on the research service, one took on a new role and the other left, she said.

Barclays in January 2012 hired Tom Weyl from Eaton Vance as its head of muni research and hasn’t added muni researchers since 2013.

The NFMA says it consists primarily of research analysts from mutual funds, insurance companies, broker dealers, bond insurers, ratings companies and advisory firms.

Regional groups associated with the NFMA include the Municipal Analysts Group of New York, or Magny, which was founded in 1949. Job postings on Magny’s website include positions at Moody’s Corp. (MCO:US), MetLife Inc. and Deutsche Bank AG. (DBK)

Positions on NFMA’s website are down from two or three years ago, Delahunty said.

It’s a sign a shift may be ahead in the industry because of falling underwriter fees and subdued supply, said Fabian, who led Magny from 2010 to 2011.

In contrast with the buildup after the financial crisis, “we might even see a reverse because analysts are expensive,” he said.

By Brian Chappatta
July 28, 2014

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, Mark Schoifet



Midterm Muni ETFs Hit Sweet Spot.

Investment-grade municipal bond ETFs have now delivered nearly twice the returns relative to the broad high-grade bond market year-to-date, thanks mostly to ongoing supply/demand imbalances. But within the high-grade muni space, it’s intermediate-term munis that are proving to be one of the sweet spots.

In a broad sense, a look at two broad-based bond funds exemplifies the strong performance of the investment grade muni market relative to the aggregate U.S. investment-grade fixed-income segment. The chart below shows the $3.35 billion iShares National AMT-Free Muni Bond ETF (MUB | B-75) delivering total returns of 6.7 percent since the beginning of the year, while the $17.7 billion iShares Core U.S. Aggregate Bond ETF (AGG | A-97) has climbed nearly 4 percent in the same period.

Muni_Vs_AGG_YTD_Perf

Low Supply, Big Demand Supports Munis

The strong muni price performance, which has kept yields anchored, is tied to ongoing low issuance of high-grade municipal bonds relative to fund-industry demand for these bonds, J.R. Rieger, global head of fixed income at S&P/Dow Jones Indices, told ETF.com.

“Concerns over rising rates are offset by not enough supply, which is holding down yields,” he said. “That has been going on for some time, and there are no signs we are going back to historical issuance trends soon.”

While that’s a supportive dynamic for the overall high-grade muni market, it’s been particularly good for midterm munis, and specifically for debt in the 9- to 10-year range.

“Intermediate munis have a nice coupon and shorter duration, which offers investors a pretty significant cushion, or premium, that should soften the blow when prices come down,” Rieger noted.

The belly of the curve—the 9- to 10-year range—has outperformed the broad market with returns of 7.4 percent year-to-date, compared with 6.3 percent for the aggregate muni market, according to S&P data.

Longer Duration Not Yielding Enough To Justify Risk

For perspective, long-term high-grade munis have rallied 14 percent in the same period, but they bring with them a lot more exposure to duration risk. And investors get 2.1 percent in yield for taking on that additional duration risk, while midterm munis are yielding 1.7 percent.

“The incremental yield you get for longer-dated munis has to be valued in regard to risk,” Rieger said. “The long-dated basket will fall faster than the intermediate basket [when rates rise], and right now you are being rewarded nicely for lower-duration risk, so why not take advantage of this market?”

ITM Vs. MUNI

In the midterm high-grade muni space, there aren’t all that many ETFs to choose from, but there are two funds that stand out in our Analytics.

One fund stands out for being ETF.com’s Analyst Pick as the best in the segment thanks to the solid, liquid, and broad exposure it provides. The other fund stands out for being what we call ETF.com’s Opportunities Pick, or a fund that offers an alternative take on the segment.

ITM: ETF.com’s Analyst Pick

The Market Vectors Intermediate Municipal ETF (ITM | B-91) is our Analyst Pick.

It tracks a market-weighted index of tax-exempt municipal bonds dated with nominal maturities of 6 to 17 years. The 705-holding portfolio has current effective duration of 7.4 years and a 30-day yield of 2.3 percent.

ITM is the largest in the segment, with more than $687 million in assets, and it’s also relatively cheap, with a 0.24 percent expense ratio. It’s a liquid fund, but it still trades with an average spread of 8 basis points, which means investors are shelling out roughly $32 per $10,000 invested to own it.

“ITM’s strong Fit to the market and ample liquidity makes it a solid choice for investors and earns it our Analyst Pick ribbon,” ETF.com Analytics says of the fund.

However, that “endorsement” comes with a warning. Investors need to be aware that ITM often lags its benchmark. Tracking difference can translate into higher costs to investors over time. What’s more, in the past 24 months, ITM lagged its underlying index by as much 100 basis points at times—a difference that often meant the fund was underperforming its benchmark by that much.

MUNI: ETF.com’s Opportunities Pick

The Pimco Intermediate Municipal Bond Strategy (MUNI | B-54) is an actively managed fund that serves up tax-exempt income by investing in high-credit-quality municipal bonds with maturities of 1 to 17 years.

The 169-holding fund essentially plays in the same playground as passively managed ITM, but enjoys the freedom to tilt any way it sees fit based on a portfolio manager’s discretion. That active approach is what makes this fund a unique opportunity in the space.

In MUNI’s case, the active decision-making currently translates into a midterm muni portfolio that’s shorter in duration than counterpart ITM. MUNI’s effective duration currently sits at 4.7 years, for a lower 30-day yield of 1.35 percent.

Active management also means a higher price tag: MUNI carries a 0.35 percent expense ratio—more than ITM’s price tag, but to be fair, a relatively cheap cost for an active fund.

Liquidity is another issue. MUNI trades with an average spread of 11 basis points—a wide enough spread that calls for the use of limit orders for protection, and one that bumps up its overall cost of ownership to about $46 per $10,000 invested.

Revenue vs. General Obligation Bonds

ITM and MUNI are also different in terms of allocation.

MUNI underweights general obligation bonds in favor of revenue bonds and some Treasurys. Only 15 percent of the portfolio is tied to GO bonds—less than half the allocation seen in the broad segment benchmark. Revenue bonds represent 65 percent of the portfolio.

That’s important because GO bonds are perceived as lower risk than revenue bonds due to their method of repayment to creditors. GOs are essentially backed by the full credit of the issuer, and can rely on any type of revenue including taxation—think property taxes, sales taxes, etc.—in order to repay investors.

Revenue bonds, on the other hand, count on revenues that are generated from the project being financed by the bonds themselves in order to repay creditors. If these bonds are being sold to fund a new transportation system, for instance, the issuer will rely on revenues from ticket sales to pay back creditors.

ITM allocates about 56 percent to revenue bonds, and 42 percent to GO bonds, according to our data. That heavier allocation to the “safer” GO bonds could help drive down yields for the overall portfolio.

Passive Trumping Active In YTD Performance

Year-to-date, ITM’s passive approach to midterm high-grade munis is paying off relative to the active MUNI, with a performance that’s nearly double that of its competitor, as the chart below shows.

MUNI_ITM_YTD_Perf

ETF.COM
By Cinthia Murphy | July 28, 2014

Charts courtesy of StockCharts.com



Puerto Rico Default Risk Defied With Rally: Muni Credit.

A potential restructuring of junk-rated Puerto Rico power bonds has failed to end the best rally in two years for the riskiest part of the $3.7 trillion municipal market.

With benchmark interest rates on city and state obligations close to the lowest in a generation, munis rated below investment grade are getting a boost from a 50 percent drop in issuance and the debt’s additional yield compared with corporate securities.

The shortage of high-yield bonds is overshadowing Puerto Rico’s move last month to allow some public corporations to cut their debt load by negotiating with investors. The junk-rated U.S. territory and its agencies have $73 billion of debt, giving them outsize influence on high-yield munis. The self-governing island of 3.6 million is the municipal market’s third-largest debtor, behind California and New York.

“There’s so little high-yield supply,” said Daniel Solender, who helps oversee $15.5 billion of munis at Jersey City, New Jersey-based Lord Abbett & Co. “And the yields compared to other markets are still attractive too, so all of that could support it going forward.”

Power Candidate

The Puerto Rico Electric Power Authority, which supplies most of the island’s electricity, is the leading candidate to ask bondholders to take a loss under the new law, passed June 28. With $8.6 billion of debt, it would be the largest muni restructuring ever, surpassing the $8 billion of general obligations and water and sewer debt in Detroit’s historic bankruptcy filing. The Motor City has continued to pay its water and sewer debt, although the securities are considered distressed because of the bankruptcy.

Governor Alejandro Garcia Padilla, who took office in January 2013, proposed the debt-restructuring bill June 25, igniting losses in Puerto Rico and high-yield local-government debt. Munis rated below investment grade lost 1.7 percent in the week ending July 4, the worst performance in a year, according to S&P Dow Jones Indices.

Since then, the securities have rebounded, for an 8.5 percent advance in 2014 through July 21, the most since 2012, and beating the 6.2 percent gain in the broader market. Puerto Rico bonds, which are tax-exempt nationwide, have recovered to levels from before June 25.

Prepa Rebound

Uninsured Prepa bonds maturing in July 2026 traded yesterday at an average price of 46.74 cents on the dollar, the highest since June 24, data compiled by Bloomberg show. The debt traded as low as 36.68 cents July 2. Yesterday’s 14.95 percent yield was equivalent to a taxable rate of 24.75 percent for top earners.

High-yield securities are those rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s and Fitch Ratings.

Investors such as hedge funds and nontraditional buyers of munis took advantage of the cheapening in Puerto Rico, said Mark Paris, who helps manage the $6.8 billion Invesco High Yield Municipal Fund (ACTHX) in New York. The third-largest U.S. mutual fund focused on that segment of munis will close to new investors Aug. 1 because of the debt shortage.

Puerto Rico officials want to reduce the island’s debt load as the commonwealth’s economy struggles to grow. An index that tracks Puerto Rico’s economic activity has contracted 18 percent since 2005, according to the Government Development Bank, which handles the island’s debt sales. While the 13.1 percent jobless rate is the lowest in almost six years, it’s more than double the U.S. average.

Broader Impact

The fallout from Puerto Rico’s new debt law is also generating opportunities for traditional muni buyers, by increasing yields on some investment-grade and junk-rated munis beyond the commonwealth’s shores, said John Miller, co-head of fixed income in Chicago at Nuveen Asset Management, which oversees $92 billion of munis.

Tobacco bonds, transportation debt, health-care securities and land-backed bonds have cheapened since Puerto Rico lawmakers passed the bill, Miller said.

The municipal market is set to shrink in 2014 for the fourth consecutive year. States and cities have scheduled $6.6 billion of sales in the next 30 days, 21 percent below the three-year average, Bloomberg data show.

Sales of junk-rated debt have dropped to $990 million this year, from $2.1 billion in the same period of 2013. This year’s tally doesn’t include Puerto Rico’s $3.5 billion March general-obligation deal because it was targeted at hedge funds and other buyers of distressed debt.

Supply Driver

“People realize that there’s good opportunities still in the muni market,” Paris said. “There’s still not going to be a lot of supply this year.”

Investors have slowed their exodus from high-yield muni funds, yanking $59.5 million last week, after an outflow of $691 million the prior week, the most in a year, Lipper US Fund Flows data show.

Munis are also benefiting from gains in Treasuries and investors’ familiarity with the risks of owning Puerto Rico, Paris and Solender said. Yields on 30-year Treasuries set a 13-month-low this week.

“This is really about Puerto Rico,” Paris said. “A lot of people have already shied away from Puerto Rico, whether it be mutual funds or individual investors. This doesn’t have to be a big contagion to the rest of the muni market.”

Yields on junk-rated munis exceed those on speculative-grade corporate securities. The opposite is typically the case, Miller said. Junk munis maturing in about seven years yield 7.39 percent, or two percentage points more than comparably rated company debt, according to Barclays Plc data.

That relative value will help lower-rated munis, Miller said.

“That ratio is really very high and munis would typically yield less than high-yield corporates,” Miller said. “The tax advantage for our customer base is typically really strong too.”

By Michelle Kaske
Jul 22, 2014 5:00 PM PT

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, Pete Young



WSJ: Calpers Pulls Back From Hedge Funds.

California Pension Fund to Cut Investments by 40%

Public pensions from California to Ohio are backing away from hedge funds because of concerns about high fees and lackluster returns.

Those having second thoughts include officials at the largest public pension fund in the U.S., the California Public Employees’ Retirement System, or Calpers. Its hedge-fund investment is expected to drop this year by 40%, to $3 billion, amid a review of that part of the portfolio, said a person familiar with the changes. A spokesman declined to comment on the size of the reduction but said the fund is taking more of a “back-to-basics approach” with its holdings.

The retreat comes after many pension funds poured money into hedge funds in recent years in hopes of making up huge shortfalls.

The officials overseeing pensions for Los Angeles’s fire and police employees decided last year to get out of hedge funds altogether after an investment of $500 million produced a return of less than 2% over seven years, according to Los Angeles Fire and Police Pensions General Manager Ray Ciranna. The hedge-fund investment was just 4% of the pension’s total portfolio and yet $15 million a year in fees went to hedge-fund managers, 17% of all fees paid by the fund.

“We were ready to move on,” Mr. Ciranna said.

Before 2004, public pensions favored plain-vanilla investments and avoided hedge funds almost entirely, according to data compiled by consultant Wilshire Trust Universe Comparison Service. Public pensions began wading into hedge funds roughly a decade ago as they sought to boost long-term returns and close the gap between assets and future obligations to retirees.

Hedge funds typically bet on and against stocks, bonds or other securities, often using borrowed money. Hedge funds also charge higher fees, usually 2% of assets under management and 20% of profits.

Many hedge funds dropped less than the overall market during the financial crisis, and some even posted outsize gains by anticipating the collapse. That performance accelerated the flow of pension money into hedge funds.

The move was part of a wider embrace of alternative investments, including private equity and real estate, as pension officials looked to diversify holdings in case more conventional investments faltered. They also hoped bigger investment gains would help them avoid extracting larger contributions from employees or reducing benefits for current or future retirees.

With many hedge funds, that sort of outperformance hasn’t materialized in recent years: Average public-pension gains from hedge funds were 3.6% for the three years ended March 31 as compared with a 10.9% return from private-equity investments, a 10.6% return from stocks and 5.7% from fixed-income investments, according to a Wilshire review of public pensions with more than $1 billion in assets.

After peaking at 1.81% in 2011, pension allocations to hedge funds dipped to 1.21% of total portfolios as of March 31, according to Wilshire’s review.

The average amount committed to private equity, by comparison, still is climbing. Those investments jumped to a decadelong high of 10.5% as of March 31, according to Wilshire. Stocks and bonds are still the dominant investments for all public pensions.

The reconsideration of hedge funds as an investment option hasn’t produced significant shifts inside all funds. Some big public pensions said they are holding firm on commitments or increasing allocations as they worry about how stocks will perform in any future downturn. About half of the U.S. public pensions still have some sort of hedge-fund investment, according to data tracker Preqin.

“We are seeing a little moving away from hedge funds,” but so far it’s “just on the margin,” said Verne Sedlacek, the chief executive of Commonfund, a nonprofit that manages money for pension funds, endowments and other nonprofit groups.

How far Calpers goes with its hedge-fund review may influence decisions at other public pensions because of its size in the industry. The current value of its assets is roughly $301 billion. The examination began in March as officials inside the fund began raising questions about whether hedge funds are too complicated or can effectively balance out poor-performing stocks during a market crash, said a person familiar with the situation.

A Calpers spokesman said the investment staff will make a formal recommendation to the board in the fall. But some cuts already have been made, said the person familiar with the situation. Hedge funds represented 1.5% of Calpers’s total assets, or $4.5 billion, as of June 30.

Other states have made reductions as well. The School Employees Retirement System of Ohio decided to lower its hedge-fund allocation to 10% by fiscal 2015 as compared with roughly 15% in fiscal 2013 after investment gains were lower than expected, according to a spokesman. New Jersey’s State Investment Council lowered its planned allocation to hedge funds to 12% from 12.25% as part of its fiscal 2014 plan, according to a spokesman.

The debate in San Francisco is indicative of those under way nationwide.

Board members of the San Francisco Employees’ Retirement System are considering whether to invest 15% of assets into hedge funds for the first time. A debate about that strategy dominated a June meeting, in which board member Herb Meiberger argued hedge funds have blown up in the past and aren’t the only investment alternative. The fund’s executive director couldn’t be reached for comment Wednesday.

Mr. Meiberger said at the meeting that he had sought out Warren Buffett’s advice on the matter. The billionaire investor’s handwritten response: “I would not go with hedge funds—would prefer index funds.”

By DAN FITZPATRICK
July 23, 2014 7:08 p.m. ET



Public Works Financing Exclusive: Colorado Banks on Large P3 Savings for I-70.

Colorado DOT (CDOT) has decided to proceed with a DBFOM procurement for its underfunded I-70 East express lanes project in Denver based on Macquarie Capital’s prediction of large design-build savings on availability payment P3s.

CDOT is counting on $270 million in innovation savings from P3 delivery to build a $1.4-billion project with $1.17 billion in public funds, says Ben Stein, Director of CDOT’s Office of Major Project Development. That’s a 16.5% capital cost savings, “and we’re expecting to get more than that,” he says, which will allow CDOT to add scope.

Based on Macquarie’s value for money analysis of the I-70 East project, the difference between capital cost estimates by government and bid costs for six availability payment P3s financed since I-595 in 2009 range from 12 percent to 20 percent.

“We’re counting on Macquarie,” says Stein. “Their reputation is on the line. . . We didn’t hire them to be wrong.”

Stein says CDOT would cancel the procurement if the projected savings do not allow the scope additions it wants.

In July, CDOT will ask the Colorado Transportation Commission to refer the I-70 East project to the High Performance Transportation Enterprise to begin a P3 procurement for a 35-year DBFOM project. Legal advisors are being sought now to work with Macquarie, and technical advisors will follow.

CDOT is proposing to sink two miles of I-70 East in cuts as deep as 40 ft, cover a part of the highway where it passes an elementary school, and add 2×2 tolled express lanes to connect the viaduct to I-270. The existing 60-year-old elevated portion of I-70 East would be removed.

Express lanes, initially striped for one lane in each direction, will be operated to allow maximum flow rather than to optimize revenues.

Public Works Financing is a monthly newsletter covering P3s in all infrastructure markets, since 1988. It is widely read and cited in the media, academic research, federal reports and congressional testimony.

By Editor July 24, 2014



LaHood Cites Detroit’s M1 Streetcar as Example of Partnership for Transit.

Public/private partnerships (P3s) are critical to fixing aging transportation infrastructure and building new mass transit options across the United States, which has failed to maintain the world-class interstate and bridge systems it was once known for, said former U.S. Transportation Secretary Ray LaHood in remarks that concluded a ULI conference on public/private partnerships held in Detroit.

Compared with other countries, “We have not kept up,” he said. “America is not number one in infrastructure any longer.”

According to LaHood, the federal government has neither the vision nor the money to lead the way on transportation as a driver of economic development and community building. That leadership, he said, must come from local and state elected officials, private investors, community leaders, and the philanthropic sector to craft creative deals to leverage the precious few federal dollars that are out there.

Detroit, he said, is the perfect example of a community that unified around a single goal: the M1 streetcar project, a 3.3-mile (5.3 km) fixed rail line that will run along the city’s historic Woodward Avenue, linking downtown with midtown and the New Center neighborhood.

The M1 rail project is expected to stimulate economic development within downtown Detroit, which has seen enormous growth in commercial investment and new businesses, and surrounding areas, which still bear the signs of neglect and retreating investment with empty storefronts and vacant or underused buildings. The M1 is also expected to boost the population of young professionals in Detroit, many of whom are now on waiting lists to move into the few residential projects that have come on line.

“All of these P3s aren’t just good for communities and . . . for rebuilding,” LaHood said. “They create jobs for friends and neighbors . . . who build the community . . . and become an economic engine, not unlike the Interstate Highway System.”

As secretary, LaHood visited the city 15 times over four years, granting $25 million in federal TIGER (Transportation Investment Generating Economic Recovery) funding to the M1 streetcar project before leaving office. M1 Rail, a coalition of business and philanthropic interests, committed $100 million to the project.

“These are the people who are going to rebuild Detroit, not anybody in Washington, D.C.,” he said. “P3s work for one reason and one reason only—when communities come together.”

By Archana Pyati
July 7, 2014



Illinois Supports Startups With New Clean Energy Fund.

Early stage clean energy businesses based in Illinois will soon get a lift from the state’s new revolving equity fund, designed specifically for them.

Governor Quinn says its a way to meet the twin goals of addressing climate change while driving the local economy forward.

Created as a revolving equity fund, The Clean Energy Fund will give startups $100,000 to $500,000 in convertible notes – in areas such as smart grid technology, next-generation transportation, energy efficiency, renewable energy, and water resource management.

But companies can’t just be starting out. Eligible companies will have raised at least $1.5 million from investors, have a credible CEO and governance structure, market-ready products or services and be generating revenue.

Half of the initial $4.6 million seeded to the fund comes from federal funds granted for this purpose to the Illinois Department of Commerce and Economic Opportunity. The other half will be raised from private investors through fundraising efforts of Clean Energy Trust – an organization that offers business development assistance to clean energy startups that have a clear path to commercialization.

Returns generated by the awards will be reinvested into more emerging clean energy businesses.

Interested businesses that meet the criteria will receive mentoring from Clean Energy Trust before pitching business plans to a panel of independent judges. Awards will be made this fall.

Even with minimal incentives and state support thus far, Illinois is home to 97,000 people who work in the clean energy industry, and is ranked #4 among states for installed wind capacity. Microsoft just purchased all the energy generated from a 175 MW wind farm near Chicago and a planned 62 MW solar PV farm will be among the largest in the Midwest. And Illinois ranks #1 for LEED-certified projects.

The state’s Renewable Portfolio Standard requires utilities to source 25% of energy from clean sources by 2025. It needs an update because it doesn’t require utilities to source the energy in-state and doesn’t apply to all utilities equally.

Here’s the Clean Energy Fund website:

Website: http://info.cleanenergytrust.org/illinoiscleanenergyfund



Indianapolis Modernizes Parking, Adds Millions.

In partnership with Xerox, Indianapolis created ParkIndy, a pay-by-phone meter system and app that’s using predictive analytics to make parking more convenient and boost infrastructure revenue.

Pay-by-phone parking meters are common today. But four years ago, when Indianapolis decided to overhaul its antiquated downtown parking meter system, they were still a new concept.

But with 3,600 parking spaces, low parking turnover, broken meters, and flat rates for the past 30 years, the city was in need of a change.

“To say our old system was antiquated is being generous,” said Marc Lotter, communications director for Indianapolis Mayor Greg Ballard. “Parking meter rates had not been increased since the 1980s, and time had not necessarily adjusted to what was going on in the metered areas.”

Looking to modernize, Indianapolis formed ParkIndy, a public-private partnership between the city and Xerox, to revamp its coin-operated parking meters in 2010. In doing so, Indianapolis became one of the first cities in the country to install pay-by-phone meters. Since then, the city has collected an additional $2.7 million in parking meter revenue and reinvested it to help make a number of infrastructure improvements – including sidewalk, road and bridge enhancements.

A PHASED APPROACH

Indianapolis’ parking meter modernization project was implemented in a phased approach to minimize disruption to the city and to allow motorists and businesses an adequate adjustment period.

“One of the biggest lessons we learned was the value of a phased approach,” said Lotter. “We were going through a complete overhaul – from old, barely-functioning, twist-the-knob types of parking meters that only accepted change to a modern, solar-powered, digital system. At the same time, we were instituting the first increase in parking meter rates in many years, and changing the metered hours. There was a real chance for confusion.”

To limit potential disorder, the city made gradual changes. First, all 3,600 metered parking spaces were modernized in 2011 using a mix of single-space, credit card-accepting parking meters and pay boxes. The pay boxes allowed motorists to pay by space. In addition, about 50 percent of the meter poles were removed. The rest were used to designate space numbers and act as bike racks.

In September 2011, ParkIndy released an application to enable users to feed any parking meter by phone. Then on January 2, 2012, the city’s new rates and hours of operation were rolled out. At that point, the days and hours of operation were extended, as were the time limits during evening hours.

“The phased, well-organized effort mitigated some of the confusion, and gave people a chance to quickly learn the new machines and how to operate them,” said Lotter.

Another critical step in the parking meter modernization process involved forming ParkIndy LLC. Under their agreement with Xerox, ParkIndy LLC shifts financial risk away from the city and bears all expenses and financial risk going forward, saving Indianapolis approximately $3 million annually in operating costs. ParkIndy, not the city, is now responsible for meter collections, counting and deposit, parking enforcement, procurement and installation of new meter technology, and ongoing maintenance and support. The agreement allows the city to maintain flexibility and control in key areas of economic development, public policy, and rate structures, however.

THE DOWNTOWN DRAW

Like many cities, Indianapolis – already recognized as one of the top downtowns in America – has seen a revitalization take place over the last couple of years. But as a number of exciting new restaurants, art galleries, entertainment venues, and craft beverage establishments took root in the heart of the city, potential patrons found parking an obstacle.

“With the old parking system there were times when you could literally pay a quarter to park at 4:00 on a Friday afternoon and not have to move your car again until Monday morning when the meter rates resumed,” said Lotter. “So when people were trying go downtown to try a new restaurant, to check out the new mixology bar or to visit a local art shop, they had a hard time finding a place to park. It was turning people away.”

But Lotter said extending the metered hours and increasing the parking rates has both encouraged more visitors and improved turn-over. A recent survey by Indianapolis’ redevelopment agency found 40 percent of people said it was now easy to find parking downtown. In comparison, a similar survey conducted nationally found only 28 percent of people found it easy to find parking in their respective downtowns.

TECHNOLOGY TO OPTIMIZE OPERATIONS

Data analytics and predictive modeling from Xerox are also playing a part in ParkIndy. Data analytics was used to adjust time limits, increasing the average stay by 69 percent, to 90 minutes. Meanwhile, predictive modeling for enforcement has ensured a 101 percent improvement in the citation capture rate. In total, approximately 80 percent of the improved net revenue from ParkIndy has resulted from Xerox’s management and analytics capabilities, including predictive algorithms, to optimize operations. The other 20 percent of the revenue improvement is attributed to rate increases and changes to hours of operation.

“The expertise we had in running the system for so long combined with the data analysis capabilities of the Xerox team provided a very good opportunity for the city to maximize parking revenue,” said Lotter. “But ultimately our goal was not just to increase revenue, but to make parking easier and to generate more turn over, which is better for businesses and visitors coming to the city.”

Visitors to downtown Indianapolis can now also use the ParkIndy app to locate open meters before they arrive or while en route, which Lotter said reduces congestion and pollution and saves fuel. Sustainability efforts are further enhanced on the maintenance side, as wireless connectivity makes it easier to identify and repair damaged or faulty meters, lowering the carbon footprint of maintenance workers.

ParkIndy has garnered significant recognition for its new system. In October 2013, Mayor Greg Ballard was named Innovator of the Year by the National Parking Association. And Lotter said Indianapolis has been contacted and visited by a large number of cities interested in replicating their system.

“It’s solving the city’s needs, it’s growing our revenue, and it’s making it more convenient and attractive to park here,” said Lotter. “When you add all those things together, it makes for a very successful program.”

PARKINDY BY THE NUMBERS:

GOVERNING.COM
BY JUSTINE BROWN / JULY 25, 2014



Culture Change at the Waterworks.

By investing in customer service and innovation, D.C. Water has done far more than simply rebrand an essential public service.

Earlier this month, the District of Columbia Water and Sewer Authority issued a 100-year, $350 million green bond to fund its Clean Rivers Project addressing overflows of sewage and stormwater into the region’s waterways. The issuance leads the way as both the first municipal “century bond” and the first certified green bond in the United States. Innovative both in terms of finance and what it will do with the funds, the entity once known as D.C. WASA and rebranded as D.C. Water is demonstrating that it has changed much more than just its nickname.

D.C. Water has been on a steady path to greater professionalism and innovation for a decade. And across the board, from technology to finance to customer engagement, the utility reflects the organizational acumen and drive of its general manager, George Hawkins.

Named to the post in 2009 after serving as director of the district’s Department of the Environment, Hawkins has worked to remake the water utility’s public identity by strengthening its connections to the public. “The biggest single change we have made is the way that we interact with the people we serve,” Hawkins says. “Customer interactions drive our model, and it is crucial that we continue to reconnect and improve customer service as we would with our latest technology.”

For example, D.C. Water has pursued groundbreaking customer solutions to generate more precise meter readings and to save homeowners money. Its Automated Meter Infrastructure network uses both radio and cell technology to transmit water-consumption data, allowing customers to view their daily usage online. D.C. Water has taken this technology a step further with the development of a high-usage-alert system. Since its inception in 2006, the system has sent out more than 50,000 notices to customers warning them that their water usage had suddenly increased and urging them to look for a leak or other plumbing problem that might be responsible.

In addition to building strong relationships with customers, Hawkins sees engagement with the utility’s employees as a crucial lever in producing a culture of innovation. “When I first get to an organization, I go on a listening tour and meet almost every employee. I hear from the people who work there, and their feedback informs my approach in implementing changes,” says Hawkins, who on most workdays can be seen sporting the same unassuming white logoed uniform shirt worn by other D.C. Water employees. “Employees need to know that their time and effort matters.”

Feedback from another quarter — experts and colleagues in the water industry — led D.C. Water to pursue its latest innovation: North America’s first Cambi digester system. Named for the Norwegian company that developed it, the process reduces the time, cost and physical space associated with turning sewage biosolids into electricity by improving the efficiency of methane generation. When this $460 million project begins operating in January 2015, it is expected to generate 13 megawatts of continuous clean, renewable power and cut the treatment plant’s carbon footprint by one-third, saving D.C. Water millions of dollars annually.

The relationship between professionalism and innovation, as demonstrated by the Cambi project, is at the core of D.C. Water’s work. These efforts include well-designed partnerships with private-sector engineering and construction firms, as well as a peer review process to find opportunities for improvement as measured against international best practices.

On his personal website, Hawkins acknowledges that the water industry is often stereotyped as being resistant to change. But “we have a responsibility to be vigilant about our level of productivity and financial efficiency,” says Hawkins. “Like a private firm, we care about the market, our response times, and what our customers think.”

GOVERNING.COM

BY STEVE GOLDSMITH | JULY 23, 2014



WSJ: Detroit Emergency Manager Calls for Postbankruptcy Monitor.

DETROIT—The city of Detroit would get a monitor to ensure its progress toward cutting $7 billion in long-term obligations and keeping its finances in order, according to the latest version of a debt-cutting plan submitted by the city’s emergency manager Friday.

Now in its fifth version, the more-than-900-page plan filed in federal court serves as the proposed road map designed by Detroit Emergency Manager Kevyn Orr to guide the city out of the nation’s largest municipal bankruptcy and back into solvency.

A previous version of the debt-reducing document recently won the endorsement of many of the city’s creditors, including a politically important bloc of pension holders. But several creditors, including bond insurers, continue to oppose the plan, arguing it shouldn’t be confirmed by federal bankruptcy Judge Steven Rhodes because it favors pension holders over bondholders in some cases.

The vote, after weeks of tense campaigning, sets up a confirmation trial scheduled for next month on the city’s restructuring plan, the final phase of the bankruptcy case.

Judge Rhodes will have the final say, and will hold a trial on whether the reorganization plan, which also includes about $1.5 billion in reinvestment in services and blight removal, is viable. The judge will also likely address the criticism by some bond insurers that pension holders have been treated better than other creditors.

Contingent on the vote was an agreement by the state and private donors to make $816 million available to shore up pensions. That amount represents the present value of the city’s world-class Detroit Institute of Arts collection, which the city said would be placed in a separate trust. The fundraising effort, dubbed the “grand bargain” locally, is meant to allow the city to extract value from the collection to pay down debt while keeping one of the Motor City’s cultural crown jewels intact and available to the public.

The plan now calls for the appointment of an independent monitor after the judge has signed off on Detroit’s exit from bankruptcy through a confirmation of its plan. Judge Rhodes has signaled in the past that he would like a formal system to keep tabs on the city’s progress. It would be in addition to a separate financial review committee called for when the state legislature chipped in nearly $200 million in funding for the city.

A monitor selected by the judge but paid for by the city would be a “neutral party, independent of the City and the State and free of all conflicts,” according to the revised plan. The monitor must also be an expert in municipal finance with experience in entities with annual revenues of $250 million or greater.

The monitor would be charged with completing quarterly reports to the judge, but couldn’t be an appointed or elected official, either current or past. The reports would need to detail how much progress the city has made to pay off its creditors as called for under the plan; keep tabs on pension funding and new funding related to its art museum; watch the city’s retiree health care system; and keep tabs on any bankruptcy-related legal appeals among other issues.

To achieve these goals, the plan monitor as an officer of the bankruptcy court would have subpoena powers, the plan says.

By MATTHEW DOLAN
July 25, 2014 5:23 p.m. ET



WSJ: Detroit Pension Holders Approve City's Debt-Cutting Bankruptcy Plan.

Detroit’s bankruptcy plan approached a new stage Monday after city pension holders endorsed a debt-cutting plan that would dent, but not decimate, their future benefits.

General retirees, who comprise the bulk of those affected, would get a 4.5% pension cut and lose cost-of-living increases. Retired police officers and firefighters would surrender part of their annual cost-of-living increases.

Contingent on the vote was an agreement by the state and private funders to make $816 million available to shore up pensions. That amount represents the present value of the city’s world-class collection of the Detroit Institute of Arts, which the city said would be placed in a separate trust.

The official count, filed late Monday night, showed 82% of those eligible for a police or fire pension who voted supported the plan. Roughly 73% of other retirees and employees with pension benefits who voted favored the plan. Voting lasted through early July.

The voting margins from pension holders were seen as an endorsement for the city’s plan to confront an estimated $18 billion in long-term obligations.

“The voting shows strong support for the City’s plan to adjust its debts and for the investment necessary to provide essential services and put Detroit on secure financial footing,” Detroit Emergency Manager Kevyn Orr said

Despite the critical nature of the vote, a sizable chunk of those eligible sat out. About 59% of police and firefighter pension holders and 42% of other pension holders cast ballots, according to the city’s legal filing.

Some 32,000 current and retired city employees faced a stark choice: Vote for the plan to cut most pensions and eliminate a future cost-of-living increase, or reject the plan and risk more severe cuts.

“It is not what my heart wanted to do and it still isn’t. But I have to support what’s best for our retirees,” Shirley Lightsey, president of Detroit Retired City Employees Association, said in an interview Monday before the vote filing in bankruptcy court.

The vote, after weeks of tense campaigning, also sets up a confirmation trial scheduled for next month on the city’s restructuring plan, the final phase of the bankruptcy case.

Federal bankruptcy Judge Steven Rhodes will have the final say, and will hold a trial on whether the city’s reorganization plan, which also includes about $1.5 billion in reinvestment in services and blight removal, is viable.

On Monday, a court-appointed, independent financial expert came to that conclusion in a report. It found the city would likely be able to provide basic municipal services, meet revised obligations to creditors and avoid future default under the plan’s terms and using its assumptions.

But Detroit’s efforts to fix its ailing municipal services have also met resistance. A crackdown on delinquent water customers since March bubbled over with a public protest last week following concerns voiced by Judge Rhodes. On Monday, the city announced it would stop shutoffs for 15 days while it tries to promote its payment options and financial assistance available for customers.

Opposition has been building in Detroit for months after officials at the city’s Water and Sewerage Department in March said they would shut off water service to delinquent customers.

Mr. Orr has said the water-shutoff approach—which affected more than 15,000 people, at least temporarily—wasn’t misguided. Rather it was a sign of the city’s effort to provide basic city services in a fiscally responsible fashion.

By MATTHEW DOLAN
July 22, 2014 3:27 a.m. ET

—Andrea Gallo contributed to this article.



NYT: Painful Progress in Detroit.

If the measure of a good compromise is that everyone is left unhappy, the Detroit bankruptcy plan certainly qualifies.

Detroit’s municipal retirees have approved a restructuring blueprint that will cut their promised pension payouts significantly as part of a larger effort to reduce the city’s $18 billion debt. Other creditors rejected the blueprint, including hedge funds and bond insurers that hold or back billions of dollars in municipal debt. One of their complaints is that the blueprint unfairly discriminates against them in favor of pensioners. Another complaint, advanced by a group of bondholders who would receive 100 percent of their principal under the plan, is that their losses are too great compared with what they would have made under the bonds’ original terms.

The next step is for Judge Steven Rhodes of federal bankruptcy court to hold a trial, scheduled to begin on Aug. 14, at which the City of Detroit will have to make the case for the blueprint, while objectors argue against it. If the judge finds the plan legal, equitable, fair and feasible, he would confirm it, in effect, forcing the blueprint’s terms on the “no” voters.

Whatever the result, there will be no victories. Pensioners voted yes not because they were getting a sweet deal, but because they faced even deeper cuts — potentially as high as 27 percent of monthly benefits for some retirees — if they voted no. To avert such a crippling blow, the State of Michigan, nonprofit foundations and donors to the Detroit Institute of the Arts pledged $816 million to reduce the planned pension cutback and to protect the city’s art collection from being sold to pay off bondholders — but only if the pensioners approved the blueprint and if the judge confirms the plan. Nonuniformed city retirees now face cuts to their monthly pension payments of 4.5 percent, the elimination of annual cost-of-living adjustments and, for some, claw backs of annuity payments deemed excessive. Police and fire retirees, who are not covered by Social Security, face deep cuts to annual cost-of-living adjustments.

The no votes, in contrast, basically reflect the hopes of bondholders for a better deal, which they have the right to fight for. Some of their grievances involve complex legal issues that clearly need to be resolved in court. But there is no doubt that municipal pensioners who voted yes on the blueprint are a more vulnerable constituency than the financial institutions that voted no.

The pensioners also have negotiated in good faith on a plan that is now Detroit’s best hope for making a fresh start. By comparison, most of the other creditors are professional investors who knew or should have known the risks of lending money to Detroit yet now find themselves calling for deeper pension cuts or auctioning off masterpieces in order to minimize their losses. Their no votes on the blueprint — and their probable appeal if Judge Rhodes confirms the blueprint — will only further delay Detroit’s restructuring and deepen its misery.

For now, the painful bankruptcy process is moving forward as it should. The outcome is uncertain, but one thing is sure: The people of Detroit have suffered enough.

By THE EDITORIAL BOARD
JULY 22, 2014



Colorado Scores Best Rally of ‘14 on Denver Revival: Muni Credit.

Investors looking to tap into the best-performing state in the U.S. municipal bond market barely need to leave Denver International Airport.

Tax-exempt securities issued a year ago to build a 519-room hotel, public plaza and transit station at the nation’s fifth-busiest airport trade with yields close to record lows. Bonds from that sale that mature in November 2025 changed hands July 11 to yield an average of 3.1 percent, down from about 4.1 percent at issue.

Debt of Colorado, with an economy buoyed by energy and tourism, has outperformed the market for five straight years. Securities from the state have earned 7.5 percent in 2014, the best among 27 states tracked by S&P Dow Jones Indices and beating the broader market’s 6.1 percent gain.

“People are saying downtown Denver is cool — it has all these up-and-coming, diverse neighborhoods,” Ron Speaker, president of Carbondale-based Equus Private Wealth Management, which oversees $100 million and specializes in Colorado munis, said in an interview. “When I lived downtown in 1986 it was quiet and ugly and dangerous.”

Mountain Mirror

Colorado mirrors trends driving the $3.7 trillion market for state and city debt. Its localities and authorities have sold about $1.3 billion of munis this year, down 66 percent from 2013, and compared with a 17 percent decline across the entire market, according to data compiled by Bloomberg. The Centennial state’s issuers also include riskier, lower-rated debt that’s been in demand in 2014 with benchmark yields close to generational lows.

The economy is also an appeal. Colorado posted the second-fastest growth in personal income among U.S. states in the year through March, the latest period available, according to the Bloomberg Economic Evaluation of States. The gains helped push Colorado to fifth-best in economic health in the period. At 5.5 percent in June, Colorado’s jobless rate was below the 6.1 percent national average.

“The state has performed well,” said Greg Gizzi, a senior vice president who helps manage the $194 million Delaware Tax-Free Colorado Fund (VCTFX) from Philadelphia. “They are attracting people into the state and there are jobs and they are hiring people.”

Companies Lured

Companies including DaVita HealthCare Partners Inc. (DVA) have moved or expanded in downtown Denver to take advantage of a surge of 25-to-34-year-olds relocating to the foot of the Rocky Mountains. More millennials moved to Colorado’s capital from 2006 to 2012 than to any city in the country, according to a November analysis by the Washington-based Brookings Institution.

“We serve a nine-county metropolitan region from Colorado Springs to the Wyoming border and in 2013 we did 29 major corporate relocations,” a record, said Tom Clark, chief executive officer of the Metro Denver Economic Development Corporation.

The transformation of the capital’s downtown from a gritty industrial center to a place where the population is growing five times faster than the national rate is focused around a $54-million refurbishment of 133-year-old Union Station, a transit hub that will link Denver to its suburbs and the airport.

$2.6 Billion

“We expect the corridor of opportunity between DIA and downtown to have a $2.6 billion impact on our economy and provide 40,000 new jobs over the next three decades,” Mayor Michael Hancock said in his state-of-the-city address July 14.

Development downtown includes metropolitan districts near Union Station, where as many as 6,000 new apartments and condominiums are under construction — a doubling of the housing stock. Another issuer, Denver Water, with $414 million in debt at the end of 2013, benefited from increased construction that increased tap revenue.

Businesses settling in the city’s core boosted residential real estate prices to an all-time high this year and fed sales and property-tax gains.

Denver and Dallas are the only cities among the 20 tracked by the S&P/Case-Shiller home price index where prices surpassed pre-crash peaks and reached records in 2014. Property-tax revenue in the city and county of Denver rose about 16 percent in 2013, with sales taxes up 9 percent, budget documents show.

Revenue Translation

“Growing spending and increased property values translate to more revenue for issuers,” Equus’s Speaker wrote in a May blog posting. “These added revenues reduce the relative burden of debt payments and increase the overall credit quality of the bonds.”

Citing economic growth in the region, Moody’s Investors Service revised its outlook on Denver airport bonds to stable from negative on June 19. The company affirmed the A1 rating, fifth highest, of $3.72 billion in airport system revenue bonds and the A2 grade of $719 million in subordinate revenue bonds.

Moody’s said that cost overruns in the hotel and light-rail station project, on top of a 10 percent increase in the $672 million expansion’s budget, could cause it to reconsider its rating.

Situated on 53 square miles of land, Denver’s airport is the country’s largest in terms of area. DIA averaged more than 1,550 flights daily in 2013 and served 52.5 million passengers, according to the airport. The light-rail line connecting the airport to the capital is key to Mayor Hancock’s vision to develop land around DIA, which opened in 1995.

The city is transforming the former Stapleton International Airport, about nine miles from downtown, into a development mixing neigborhoods, office and retail space.

For now, cranes rising above DIA’s main terminal, with its trademark triangular roof designed to mimic the Rocky Mountains, signal optimism in the potential of the region at the base of the peaks known as the Front Range.

“If the Front Range is the nucleus of the Colorado bond market, a strong Denver perpetuates all the way through,” Equus’s Speaker said.

Bloomberg
By Jennifer Oldham
Jul 21, 2014 5:00 PM PT

To contact the reporter on this story: Jennifer Oldham in Denver at joldham1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, Alan Goldstein



Reynolds American’s Merger and a Massive Fine Could Snare Tobacco Muni Bonds.

A stream of news out of the tobacco industry has failed to derail prices on municipal bonds backed by cigarette makers. But muni bond analysts warn that investors could get caught in the middle as the big players in the tobacco industry shift.

Reynolds American Inc. was whacked with $23.6 billion in damages after a Florida jury decided that the company acted negligently in marketing its tobacco products. The company had been sued by a widow who claimed the company failed to inform her husband about the cancer-causing nature of tobacco.

The news came less than a week after Reynolds said it would buy out rival Lorillard Inc. in a deal worth $27.4 billion.

Tobacco bond pricing

What that news means for some $100 billion in tobacco bonds isn’t yet clear, but the debt hasn’t changed noticeably in price, traders say. Ohio tobacco settlement bonds maturing in 2047 traded at 78 cents on the dollar Monday, up from 76 cents on Friday, prior to the settlement announcement, according to the Municipal Securities Rulemaking Board.

Tobacco debt has rebounded strongly this year amid a broader rally in high yield bonds. The S&P Municipal Bond Tobacco index has gained over 10% so far this year.

“There are very few places left to go and find behind 7% [yields] in munis, and this is one of the places,” said Adam Buchanan, vice president of sales and trading at Ziegler Capital Markets.

But the long-term trend for the risky sector of the municipal bond market is negative, as cigarette consumption continues to plummet. Many of the bonds trade at distressed levels.

Verdict impact

Tobacco bonds are repaid by a consortium of cigarette companies as part of a settlement agreement over health problems caused by cigarettes. Payments come from a fee that is charged to the tobacco companies per cigarette.

While the lawsuit payout wouldn’t directly affect that stream of payment, past lawsuits have had a negative impact on tobacco bond prices, according to Dick Larkin, senior vice president and director of credit analysis for Herbert J. Sims & Co. He sees the Reynolds settlement as one more blow to an already-struggling market.

“The tobacco bond market right now is probably about as bad as it’s ever been. Will [the lawsuit] make it worse? I don’t know, but it certainly won’t make it better,” Larkin said.

The payout in the trial may change, as Reynolds has vowed to fight the decision.

Merger announcement

The Reynolds buyout of Lorrilard, however, may have a broader negative impact on tobacco bond prices, Buchanan noted. When the merged companies sell off some of their brands — which is part of the initial deal — it could negatively impact the amount of payments dedicated to repaying bonds under the settlement, he said. Nonetheless, the way in which those spun off brands will be treated in the settlement agreement is not yet known.

“When you have an unclear message, it takes its toll on markets,” Buchanan said.

Another potentially negative impact: the joint companies will be able to afford more legal fees, which means that continued litigation between bondholders and tobacco companies may grow fiercer.

Strategists at Municipal Market Advisors write in a Monday report: “The combined legal resources of the two behemoths may prove credit negative for MSA bondholders as adjustments to annual payments are dragged out and nitpicked.”

Bloomberg
July 21, 2014, 4:12 PM ET
– Ben Eisen



Local Governments Divided over New Clean Water Rules.

After court rulings muddied up the law, new federal rules seek to clarify which bodies of water have to abide by the Clean Water Act.

Pittsburgh and Philadelphia back proposed rules put out by the Obama administration in April that would spell out which bodies of water are subject to the federal Clean Water Act. They say the new rules would guarantee clean drinking water and provide sorely needed clarity to a muddy area of law.

Pittsburgh’s famous three rivers, which provide drinking water to the city and region, are far cleaner now than they were before the Clean Water Act took effect, said Erika Strassburger, chief of staff to councilman Dan Gilman, who sponsored a measure supporting the federal rules. The improvements come, in part, because of the law’s protections for the headwaters and streams that feed those rivers, she said.

“When a smaller water body that one might not consider to be important is not covered under the Clean Water Act … there’s a problem there, because ultimately all of our streams and rivers do connect,” Strassburger said.

The National Association of Counties, though, worries that the new rules will add more uncertainty and potentially introduce a new layer of red tape to construction projects. “This proposal does more harm than good and creates more confusion than it seeks to clear up,” said Brian Namey, a spokesman for the group.

The split among local governments reflects an even greater divide over the scope of the Clean Water Act. Congress passed the original law in 1972, but a series of court decisions since 2001 left in question which waters were regulated by it.

Everybody agrees that the law applies to navigable rivers and lakes. Beyond that, though, things get trickier. Federal judges, particularly on the U.S. Supreme Court, have trimmed federal authority to regulate isolated waters — such as abandoned quarries now filled with water — and wetlands. But their rulings have often raised as many questions as they answered. Efforts to get Congress to clarify the law have stalled for years, prompting the Obama administration to step in.

In April, the Environmental Protection Agency and the U.S. Corps of Army Engineers spelled out which bodies of water they consider “waters of the U.S.,” which are regulated by the Clean Water Act. The 88 pages of rules and explanations, though, unleashed a torrent of criticism and debate.

But the controversy goes back to a 2006 decision by the high court in Rapanos v. U.S. No majority emerged in the case. Instead, four conservative judges crafted one standard for what qualifies as “waters of the U.S.,” which would have largely restricted the law to permanent waterways. Four liberal judges dissented. And Justice Anthony Kennedy agreed with the result of the conservative bloc, but created a looser standard for arriving at his conclusion.

The Obama administration’s proposals rely heavily on Kennedy’s argument that the Clean Water Act applied to waters that have a “significant nexus” to navigable waters. Opponents of the draft rules argue that they will significantly expand the law’s reach with little benefit.

Dusty Williams, the general manager and chief engineer of Riverside County’s Flood Control and Water Conservation District in California, said the changes would have a big impact on existing drainage systems as well as a new construction project slated for next year.

Extending the reach of the Clean Water Act, he said, would require the county to get more permits when it built new drainage ditches or fixed its existing ones. “What that means is time and money,” Williams said. “We’re like a lot of local governments: We haven’t got a great deal of money.”

Even worse, he said, the added time it takes to comply with new regulations could threaten public safety. “We put in things to safeguard people and safeguard property. If we can’t get to them to maintain them on a regular basis, they can deteriorate and not offer the protection they were designed to offer, and people can be put at risk,” he said. He argued that under the Clean Water Act his agency would have to spend so much time and money getting permits to comply with the law that it wouldn’t be able to keep up maintenance on existing ditches and drainage pipes.

Julie Ufner, who lobbies on land use and environmental issues for the National Association of Counties, is also concerned that, under the proposed rules, municipal storm sewer systems could be considered waters of the U.S., which would change the way they are regulated.

“The concern is that, if the system becomes a water of the U.S., you’re not only responsible for the system at the point of discharge, but responsible at the point of the pollutant entering the system anywhere along the line,” she said. That would require localities to pass ordinances to control pollution from plastic bags, fertilizer or other litter, she said.

Federal officials and proponents of the draft rules say the regulations would make the permitting process clearer. The updates would show how the EPA and the Army Corps of Engineers decide which waters fell under the Clean Water Act, to reflect the high court’s narrowing of its scope, they say.

“There’s never been any formal, enforceable response to some Supreme Court decisions. Because of that, you’ve had all kinds of confusion out in the real world,” said Lynn Thorp of Clean Water Action, which supports most of the proposed rules.

The group worked with city officials in Pittsburgh and Pennsylvania to support the federal proposals, arguing that the drinking water of 117 million people could be affected if streams and wetlands were not protected.

“Cities are being very wise and taking a common-sense approach to say, we’d rather not find out what would happen if we leave streams and wetlands vulnerable,” Thorp said.

Jan Goldman-Carter of the National Wildlife Federation said the rulemaking process is “the best opportunity in a generation and for the foreseeable future” to use both science and the law to determine the proper scope of the Clean Water Act.

The federal agencies are accepting public comments on the proposed rules until Oct. 20. The agencies will consider those comments before issuing a final rule.

Governing.com
Daniel C. Vock | Staff Writer



P3 Consortium Provides Emergency Water Solutions to Midland.

In western Texas, the thriving petroleum industry continues to propel the local economy, attracting high paying jobs and low unemployment, and driving a high demand for water in one the most parched areas of the country.

By 2012, Midland, Texas, faced a very real water scarcity challenge. Years of severe drought left the city with precious little time to find a source of 20 million gallons of potable water per day by summer 2013.

To meet the city’s expedited, 12-month deadline for the new water supply, Midland County Fresh Water Supply District No.1 implemented a public-private partnership arrangement with a team including Black & Veatch, Garney Construction and local companies Parkhill, Smith and Cooper for design support; Severn Trent for operational expertise; LBG Guyton for hydrogeolic support; and Hilliard Energy for land acquisition.

The team adopted an early-procurement strategy that called for overlapping design, procurement and construction processes.

With solid conceptual project planning—and design and construction occurring in parallel—the team was able to expedite and chop weeks from the usual regulatory approval process.

Hilliard Energy acquired land easement agreements from more than 55 landowners along the 60-mile pipeline in less than six months without ever exercising the District’s eminent domain authority – sometimes finalizing easements just ahead of the construction teams.

Procuring sufficient labor to quickly construct the needed facilities was one of the most difficult aspects of the project. Overland Contracting, a Black & Veatch-owned construction company, and Garney Construction drew upon their extensive supervisory and labor resources to get the right people to the field.

The delivery team’s financing plan allowed work to begin on the project before full funding was in place. Local banks provided interim financing, which was repaid by issuing short-term bonds. Revenue notes financed the remainder of the project.

The team reduced the overall contract price by executing work associated with the vertical wells on a unit-pricing basis since fewer wells were needed.

The project delivered the first water to Midland on May 14, 2013, beating the projects 12-month deadline. For providing the city a timely and reliable water supply solutions for the next 40 years, NCPPP is proud to award the 2014 National Public-Private Partnership Infrastructure Award to the T-Bar Ranch Well Field Development and Delivery Project and the project’s partners: City of Midland; Midland County Fresh Water Supply District No. 1; Black & Veatch Corp.; Garney Construction; and Parkhill, Smith and Cooper.

NCPPP
By Editor July 18, 2014



Pennsylvania's Rapid Bridge Replacement PABs Promised.

Pennsylvania Department of Transportation (PennDOT) has received conditional approval of a $1.2 billion Private Activity Bond allocation from U.S. DOT’s Credit Council for what will be the country’s first bundled bridge P3 program. DBFM proposals are due Sept. 29 from four shortlisted teams who will compete on economies of scale derived from organizing the replacement of 560 mostly small bridges over three years.

This first U.S. application of bundling bridge projects under a single P3 procurement has drawn the intense interest of FHWA. Its existing rules and guidelines never contemplated this delivery method. “They’re doing everything they can to figure out how to make this work,” says Bryan Kendro, Director of PennDOT’s Office of Policy & Public Private Partnerships.

The amount of the PABs allocation sought by PennDOT is based on the state’s estimate of the cost of the work using a traditional approach. It doesn’t expect to use that much. The bundled delivery using an availability payment P3 model is expected to reduce capital costs by more than $200 million, says Kendro.

Minimal capital maintenance is expected to be required in the first 30 years. The maintenance contractor will perform periodic deck overlays, structural maintenance like washing and cleaning of joints and bearings, and will perform annual performance inspections, including the biennial inspections required by FHWA.

PennDOT has just completed its seventh round of meetings with each of the four finalists to clarify commercial and technical terms and its approach to alternative technical concepts.

There is some grumbling among the teams about the selection of four finalists rather than three, which is the industry’s preference. The chances of winning are less with four, stipends are lower, and the level of effort by bidders is less than if three groups were competing, the conventional wisdom holds.

Kendro’s answer is that the industry has never seen this kind of procurement; it’s PennDOT’s first P3; and the state did not want to take the risk of losing a bidder and ending up with two or, worst case, one bidder.

“If everyone had seen this kind of thing three or four times, then shortlisting three would be fine,” says Kendro.

Advising on the procurement are Lochner, CDM Smith. KPMG is financial advisor and overall program advisor / strategic consultant. Allen & Overy is transactional counsel and Ballard Spahr is serving as bond counsel.

National Council for Public-Private Partnerships
July 15, 2014
By William Reinhardt



Request for Proposals: Enterprise Zone Consultant.

South Suburban Mayors and Managers Association (SSMMA), a not-for-profit organization representing 43 communities in southern Cook and Will Counties in Illinois, is accepting proposals for consulting services to prepare multiple enterprise zone applications to the Illinois Department of Commerce and Economic Opportunity (DCEO). The State of Illinois has reauthorized the local enterprise zone programs. Communities must apply and meet new criteria to establish local enterprise zones. No preference will be given to communities with existing zones. The South Suburban Mayors and Managers Association in coordination with Cook County Economic Development and Will County, is seeking consultant services to complete applications for multiple enterprise zones for communities located in southern Cook and Will Counties in Illinois. Please click here to download the full request for proposal (RFP), or here for maps and updates.



P3 Awards Profile: Medical Research Project Transforms Seattle's South Lake Union.

When the University Of Washington School Of Medicine prepared a multi-phase plan to develop a biomedical research campus, it used a P3 to transform an office building in the South Lake Union neighborhood of Seattle, allowing the school to accelerate the building process, save the university millions of dollars and deliver state-of-the-art facilities that have been a catalyst in the area’s redevelopment.

To build the new biomedical research campus, UW Medicine entered into a partnership with Vulcan Real Estate, Inc., Perkins + Will and the National Development Council’s Housing and Economic Development Corporation’s Public-Private Partnerships. Together, the group used two forms of tax-exempt bonds (501 (c)(3) bonds and 63-20 bonds) to finance the project.

The first phase of construction began in 2003 with the complete renovation and redevelopment of the four-story Brotman office building into a 105,000 square-foot, space for biomedical research labs, lab support, animal resource spaces and conference spaces.

In 2006, the partners broke ground on phase two: two new buildings totaling 288,000 square feet of laboratory and office space with below-ground parking.

Three more buildings will be constructed as part of phase three of the project. The first building was completed in 2013 and includes a 138,000 square-foot research laboratory. Groundbreaking on the final two buildings will begin in the future.

“South Lake Union is key to UW Medicine’s ability to lead a significant portion of the nation’s biomedical research enterprise well into the 21st Century,” said Dr. Paul Ramsey, Dean of the UW School of Medicine and Vice President for Medical Affairs. “The opportunities for research collaboration across organizational and disciplinary lines are already enormous here, and the future holds much promise for UW Medicine to develop new interdisciplinary initiatives.”

The university currently leases the buildings from the developers, and once the debt is retired the university will take ownership of the campus.

For their unique use of two forms of tax-exempt bonds in a exceptional approach to collaborative project delivery the UW South Lake Union Biomedical Research Campus National Development Council, a partnership between University of Washington School of Medicine, Vulcan Real Estate, Inc., NDC HEDC Public-Private Partnerships and Perkins + Will, has been awarded the 2014 National Public-Private Partnership Innovation Award.

National Council for Public-Private Partnerships
By Editor July 14, 2014



Committee Advances Power & Light Building TIF Plan — Without Debt Guarantee.

NorthPoint Development is prepared to start work on the $63 million redevelopment of the historic Power & Light Building in October, assuming a couple of incentive wrinkles get ironed out.

One of the final public financing issues appeared to be worked out Wednesday, during a joint meeting of the Kansas City Council’s Planning, Zoning and Economic Development and Finance, Governance and Ethics committees.

The committee members voted 8-0 to recommend tax increment financing for a portion of the project to the full council, which is expected to act on the recommendation on July 24. TIF allows new tax revenue generated by projects to be used to cover eligible development expenses for up to 23 years.

About $8 million in TIF was recommended for a $19.9 million portion of the project involving construction of a new 475-space garage wrapped by 52 apartment units and 6,700 square feet of ground-floor retail space. It will be developed on two vacant lots just north of the 84-year-old Power & Light Building at 13th Street and Baltimore Avenue.

According to the plan advanced Wednesday, most of the TIF for the garage project will be generated by a 10-year-old TIF plan approved to help fund redevelopment of the Hilton President Hotel.

The President Hotel opened across Baltimore Avenue from the Power & Light Building in 2005, and it has been so successful that the city-backed TIF bonds sold to provide upfront financing for the hotel project are expected to be paid off four years early, in 2024.

The joint committee on Tuesday supported NorthPoint’s request that the city keep the original 2028 bond repayment date in place, freeing up about $6 million of the President Hotel TIF revenue for the NorthPoint garage project. According to the committee recommendation, another $2 million in public support would come from using all but $500,000 that has accumulated in a reserve fund tied to the President Hotel TIF bonds.

In June, the Tax Increment Financing Commission of Kansas City supported a plan that called for refinancing the President Hotel TIF bonds in order to provide NorthPoint with a total of about $6.2 million upfront for its garage project — $1.9 million from the reserve fund and $4.3 million from the refinanced bonds.

But that plan would have required the city to back new bonds — something the City Council has refused to do since underperformance of the Power & Light entertainment district left taxpayers on the hook for tens of millions of dollars in TIF bond payments for that project.

“We’ve had a steadfast policy (against backing developers’ debt) since we’ve had to pay debt service on the Power & Light District,” Councilman Russ Johnson said during a July 10 city council session. “Our credit rating agencies told us to stop doing that, and I’m concerned we might start back down a slippery slope. Every project is worth doing something on. But you have to have some policies to guide you to make sure you don’t get a (rating) downgrade later on.”

NorthPoint agreed to withdraw its request for bond refinancing to avoid that scenario. But to offset the corresponding loss in upfront revenue, it asked that the amount of pay-as-you-go TIF generated for the garage project be increased from $4.3 million to about $6 million.

To help financing the remainder of the project — conversion of the 36-story Power & Light Building into another 223 luxury apartment units — the developers are seeking a 25-year property tax abatement through the Planned Industrial Expansion Authority.
The city council was scheduled to vote on creation of a PIEA district for the project on July 10, but Councilman Johnson asked that the issue be delayed for a week to allow time to address his concerns with the bond refinancing plan.

In the meantime, NorthPoint also has been working to address concerns of the taxing jurisdictions that will have to forgo revenue as a result of the PIEA abatement.
On Tuesday, Chase Simmons, an attorney with Polsinelli PC representing NorthPoint, told the joint committee that NorthPoint had agreed to “a very small abatement.”
Simmons said NorthPoint will ask the PIEA board to approve an abatement that steps down in percentage over the 25 years and averages 25 percent over that term. The standard PIEA abatement is 100 percent for 10 years, followed by 50 percent for 15 years.

Rob Roberts
Reporter-
Kansas City Business Journal



City Defeats Lawyer’s Attempt to Stop Use of Business-Improvement District Funds.

The San Diego Superior Court has denied attorney Cory Briggs’ motion for an injunction seeking to prohibit the city from spending more than $1 million raised by 18 San Diego business-improvement districts.

Those funds are used to promote neighborhood events like farmers markets, street fairs and festivals and projects like lighting, planters, banners and promotions. Had Briggs been successful, such events and projects would have been jeopardized throughout the city.

In rejecting Briggs’ motion, Judge Ronald S. Prager concluded that Briggs’ entity plaintiff “has not shown that it has a reasonable likelihood of prevailing on the merits.”

A business-improvement district (BID) is a public/private partnership that performs a variety of services to improve the neighborhood and promote individual business districts. They also carry out economic development services by working to attract, retain and expand businesses.

State law authorizes a city to establish BIDs and levy annual assessments on businesses within the boundaries, but only after proper notice and opportunity to oppose is given to the public. In concluding that Briggs is unlikely to prevail in his lawsuit, Prager found that BID assessments are “not taxes for the general benefit of the city; rather they are assessments imposed on businesses to fund activities which confer a special benefit upon the businesses assessed.

“By enacting the BID Act,” Prager said, “the California Legislature determined it was in the public interest to promote the economic revitalization and physical maintenance of business districts in the state’s cities to facilitate the creation of jobs, to attract new businesses and to prevent erosion of the business districts throughout the states.”

City Attorney Jan Goldsmith hailed the legal decision.

“BIDs are specifically authorized by state law and are very popular in our neighborhoods,” said Goldsmith. “Residents of Little Italy are proud of their festivals and special neighborhood touches, for example. This decision allows BIDs to continue enhancing our neighborhoods.”



New York and GE Launch Power Electronics Manufacturing Consortium as Public-Private Partnership.

New York State is partnering with a group of more than 100 companies to launch the Power Electronics Manufacturing Consortium as a public-private partnership to develop and manufacture high tech materials used in semiconductors.

The Consortium, led by GE and the State, will invest more than $500 million and create thousands of new jobs in Upstate New York over the next five years.

The announcement was made at an event at the GE Global Research Center in Niskayuna, NY by Governor Andrew M. Cuomo, GE Chairman and CEO Jeff Immelt and other state and local officials.

“With commitment from our partners, we are advancing New York’s capability to compete in the international marketplace and make this state the place to develop and manufacture high tech materials,” said Gov. Cuomo.

The Governor added that this investment and the partnership today will be utilizing the workforce of tomorrow, creating jobs and increasing long-term investments in the state.

The Power Electronics Manufacturing Consortium (NY-PEMC) will be based out of a State-owned R&D facility in Albany, NY and managed through the SUNY College of Nanoscale Science and Engineering (CNSE/SUNYIT).

This site will function as a shared open-innovation facility that will enable the expansion and growth of SMEs and major corporate partners alike. GE is the lead partner in this fab, which will be housed at the CNSE Nano Tech complex. As the anchor tenant, GE alone will be investing more than $100 million to establish the facility.

“GE is proud to support New York’s Power Electronics Manufacturing Consortium, which places New York at the forefront of the next revolution in power,” said GE Chairman and CEO Jeff Immelt.

New York State is pitching in with another $135 million that will be provided to CNSE to fund the establishment of the NY-PEMC facilities.

Gov. Cuomo explained that they are using the same model that worked so brilliantly in the nanotechnology experience where the state owns the equipment and the facility.

Businesses come for the facility and equipment and research capabilities, and end up staying for the cluster and collective energy of all the companies already working on the same things. The state finances the magnet that initially attracts companies, and the effort then gathers its own momentum. The whole thing stays in place afterwards because the state owns all the essential facilities.

To make the prospect even more appealing, the operations of NY-PEMC partner companies at the CNSE site will be entirely tax-exempted under the STARTUP-NY initiative.

The Governor said it was a brilliant effort that was vastly different from not just New York economic development efforts in the past, but also from those by states all over the country.

SUNY CNSE/SUNYIT CEO and Officer in Charge Dr. Alain Kaloyeros said that power electronics is one of the fastest growing global markets, and New York is now poised to lead the way in their continued refinement.



SEC Mulls Changes to Accredited Investor Standards.

The Securities and Exchange Commission is considering an update to the accreditation standards used to determine eligibility to participate in private securities sales.

Today’s standards require that most investors in startups, real estate limited partnerships and other investments that are not traded on exchanges be accredited. To qualify as an accredited investor, one must meet one of the three following criteria:

Apart from excluding the primary residence, which change was made in [2010], the financial levels have not been adjusted in over 30 years, meaning that inflation has steadily eroded their original significance, allowing millions more people over time to join the ranks. According to SeedInvest, an equity crowdfunding site, indexing these levels for inflation could reduce the number of accredited investors from 8.5 million to just 3.75 million.

The implications for the nascent crowdfunding industry is significant. Title II of the JOBS Act signed by President Obama in 2012 allowed general solicitation for investors, a change that ushered in what many are calling accredited investor crowdfunding. By allowing entrepreneurs and others to announce via social media and other internet avenues (though not restricted to the internet) issuers can suddenly attract many more investors, often investing smaller amounts than might have been required in the past.

A change in the definition of accredited investors could materially reduce the pool of investors eligible to make such investments, potentially reducing the amount of capital raised by the issuers and the platforms that support them.

In a quick, unscientific poll of leaders in the crowdfunding community for this article, 94 percent of respondents favored a change in the standard that would allow investors to qualify by virtue of education or experience alone, without regard to financial position. Such a rule could be applied either as the only means of qualification, eliminating the financial standards or as an alternative qualification method alongside the traditional—or updated—financial standards.

In the same survey, 50 percent of respondents indicated that there should be no change to the individual income standards and 38 percent responded the individual income standard should be eliminated altogether. Similarly, 40 percent of respondents says that the household test should be left alone and 47 percent says that the rule should be eliminated altogether.

Furthermore, 40 percent says the current net worth test should be left untouched and an equal percentage suggested that the net worth test should be eliminated.

No one thought a full ratchet to correct for inflation would be appropriate, though a few suggested smaller upward increases.

The following 18 reactions are representative of the comments gathered for this article:

Grady Thrasher, CEO, CrowdVested articulated the consensus view, “The income and net worth tests have long served as a proxy for financial sophistication, but they consistently exclude sophisticated investors and include unsophisticated investors. Financial resources does not equal financial sophistication.” Thrasher concluded, “Just as you have to take a test to get a driver’s license, or rent scuba gear, or engage in any number of risky activities, you should be permitted to prove you have adequate financial knowledge to participate in private offerings available to accredited investors.

“Around 7% of the US population could qualify as accredited investors today. Instead of reducing the number of people who can invest in privately held companies, we should be seeking ways to expand the growth of investments in small businesses,” commented Ken Marienau, CEO of Mission Markets. “The Dodd-Frank bill passed in 2010 excluded the value of personal residences from the calculation of net worth. This change in the 1982 calculations reduced the number of people who could qualify as accredited investors, since the net equity of principal residences represents 25% of mean personal wealth (and 75% of median personal wealth).”

“Angel investors contribute over $20 billion each year to startups and are what truly fuels innovation in America,” says Ryan Feit, CEO and Co-Founder of SeedInvest. “Reducing angel funding by instituting a higher accreditation bar would undoubtedly be devastating to startups, to jobs and to the entire U.S. economy.”

Scott Purcell, CEO of FundAmerica, commented succinctly, “An entire industry is being created to enable job creation and capital formation, changing the rules would seriously undermine the intent of the Act.”

The “accredited investor definition is an anachronism,” according to Steven Cinelli, Founder of Primarq. “Trying to morph an old law into the digital generation is an inherent waste of time, and focus should be spent on improving disclosures.”
“The bottom line is that angel funded companies hire often and hire aggressively,” says Kiran Lingam, General Counsel of SeedInvest. “To stifle angel investments in this manner [by raising accreditation standards to adjust for inflation] would be akin to shooting our economy in the foot.”

“There could be a test to demonstrate a person’s experience/understanding of finance that shows they know what they are doing and the risks they are taking by making private company investments,” notes Jason Best, Co-Founder of Crowdfund Capital Advisors. “The Internet makes information more liquid and more available to everyone.”
“I think that the standards should be eliminated,” says Karen McRae, Editor in Chief, CrowdfundingGuide.com. “Raising the standard amounts would be upholding the barrier to entry, which is the exact opposite of what these new rules should be doing.”

“It is ridiculous that income and net worth alone are used as the litmus test for an investors sophistication,” says Jason Fritton, CEO of Patch of Land. “In today’s information based economy, an individual’s knowledge base can be completely disconnected from their current financial status. Sophisticated, knowledgeable persons should be able to make their own financial decisions regardless of whether or not they are already currently wealthy. If accredited status is meant to protect an investor by judging their ability to absorb a loss, then perhaps putting a max ratio or ceiling on the total amount of capital they should be able to commit to any one project,” Fritton adds. “As it stands, an accredited investor can still lose everything on an unfortunate investment decision, regardless of how high the cutoff is for accredited status.”

“This is about letting individuals make responsible decisions with their lives,” notes Sherwood Neiss, Principal, Crowdfund Capital Advisors. “In this case, it includes financial decisions. Some people should have government protection (like the poor by keeping them from risking more than they can afford to lose) while others should be allowed to act as adults and take the responsibilities of their action without paternalistic government oversight.”

“I believe the current standards are meant on one hand to show that the investor has some liquidity, ie, can ‘afford’ a loss,” says Nancy Hayes, CEO of MoolaHoop. “That may or may not be true, depending on the investor’s other financial activities. On the other hand, the idea that these standards demonstrate that the investor is ‘sophisticated’ and therefore less likely to fall prey to poor investments or worse, ‘scams,’ does not hold water.”

“It would be a shame to see the definition of an accredited investor become even more onerous,” says Jilliene Helman, CEO of Realty Mogul. “The JOBS act was meant to open up the private markets for investors, and adjusting the income or net worth requirements for accredited investors upward would serve the opposite purpose.””It’s incredibly important that investors are protected, and a core focus of ours at Realty Mogul, but what we’ve found is that the majority of our investors are highly sophisticated. I’d hate to see those investors lose out on the opportunity to invest in private markets if income requirements are increased by the SEC,” Helman concluded.

“A good education in financial issues should allow an individual, even if not accredited according to the present law, to invest in high risk but profitable securities,” Fabio Bancalà, CEO at Xeelion.com. “What really matters is the amount of worth invested in risky securities, since the basis of the risk management is related to the differentiation of a portfolio.”
“We are not protecting smaller investors by precluding them from participating in opportunities of their choice,” says Rodrigo Nino, CEO and Founder of Prodigy Network. “Everyone should have access to the same investments irrespective to the amount of wealth they have. This will level up the playing field and our duty would be to ensure transparency, full disclosure and education for the potential investor.”

“Why can anyone invest in the stock market but they can’t invest in startups or emerging private companies via crowdfunding?” asks Wendy Robbins, CEO of Redcapes.com. “The regulation doesn’t seem to be to ‘protect the average person’ it is to protect the top 1 to 10 percent’s interests. I’m excited for the time (coming soon) that anyone who has taken time to educate themselves on a company can invest in a product or service and be rewarded.”
“I believe that the accredited investor qualifications are long overdue for reexamination and overhaul,” says Vincent Molinari, CEO and Founder of Gate Global Impact, Inc. “I would pose the consideration that many wealthy individuals lack the sophistication to fend for themselves as money by itself does to equal financial sophistication. How many mega athletes and entertainers have gone bankrupt? On the counter side, licensed securities professionals, CPA’s, Attorneys, [and] MBAs who regularly advise wealthy people on strategy who may have decades of experience in the financial sector, don’t qualify as accredited investors themselves simply based upon their own income or net worth.”

While I recognize it has been many years since the definition has been established, I actually don’t believe any change to the numeric components of accreditation is necessary, although a much more modest tinkering would be acceptable (much less than is being sought),” says Douglas S. Ellenoff of Ellenoff Grossman & Schole LLP. “I am a proponent of including other methods of measuring sophistication to satisfy the standard such as actual experience and academic credentials as well.”

Manolis Sfinarolakis, Founder and Producer of Reality Crowd TV Corporation, argues for the broadest inclusion, “Common sense is something that is learned over time. Even a CPA might have no common sense, so having an arbitrary title which only takes into account ‘Book Smarts’ is not adequate and would impede the investing opportunities for the Common sense ‘Street Smarts’ investors.”



San Francisco Sets Bond Vote for Aging Transit System.

San Francisco lawmakers are asking voters to approve a $500 million bond measure as a population surge stoked by technology-industry growth strains the transit network in California’s fourth-largest city.

The general-obligation bonds would fund upgrades to reduce travel times in the 98-year-old system, plus traffic signals and bicycle paths as the city’s 837,442 population is projected to swell to 1 million by 2040. The 11-member San Francisco Board of Supervisors agreed July 15 to send the plan to voters.

“It’s really about how we sustain our public transportation and bring it to the next decade and beyond, or else we’re not going to be able to accommodate the growing population,” said Supervisor Katy Tang, who sponsored the measure.

San Francisco’s bus and light-rail system is trying to keep up with the city’s transformation into a social-media industry hub as payroll tax breaks offered by Mayor Ed Lee lure employers such as Twitter Inc. (TWTR) and Yammer Inc. Last year, 21 pedestrians died from traffic-related collisions, the most since 24 deaths in 2007, according to the San Francisco Municipal Transportation Agency.

Aging Systems

The city and neighboring Alameda County, home to Berkeley and Oakland, are among communities across the U.S. seeking to bolster or replace aging mass-transit systems, roads and bridges. Speaking in May with New York’s aging and overburdened Tappan Zee Bridge in the background, President Barack Obama said that the U.S. risks its economic supremacy by neglecting to repair and upgrade its transportation system.

Investors in the $3.7 trillion municipal market have treated San Francisco securities as better than AAA debt, even though Standard & Poor’s and Moody’s Investors Service grade it one step lower. Fitch Ratings ranks the city AA, its third-highest level.

San Francisco general obligations maturing in June 2020 changed hands July 15 at an average yield of 1.52 percent, data compiled by Bloomberg show. That’s 0.16 percentage point less than benchmark munis.

City’s Appeal

San Francisco is an attractive investment because of its “strong economy, a very large and diverse tax base, which contribute to overall solid credit quality,” said Michael Johnson, managing partner at Gurtin Fixed Income Management LLC.

“Given where interest rates are right now, it’s definitely a good time” to borrow, said Johnson, whose Solana Beach, California-based firm manages $9.1 billion.

Sitting at the tip of a peninsula, the city is 7 miles (11 kilometers) long and equally wide. The San Francisco-Oakland-Hayward metropolitan area added 62,117 people in the year ending July 1, 2013, the ninth-largest increase in the U.S., according to Census data.

The number of technology jobs in San Francisco more than doubled to 53,319 in the fourth quarter, compared with 24,438 in the corresponding period four years earlier, according to data from real-estate brokerage CBRE Group Inc. (CBG) in San Francisco. The number of technology companies grew 41 percent to 2,012 in the fourth quarter from four years earlier.

Tech Shuttle

The Municipal Transportation Agency this week agreed to impose a $3.55 fee on private commuter shuttle buses to use the city’s bus stops starting Aug. 1. The fee is aimed at commuter buses that ferry employees of Google Inc. and other technology firms from the city to Silicon Valley.

Voters approved a $400 million earthquake safety bond measure in June, on the heels of a similar $412 million request in 2010. In 2008, voters agreed to let the city borrow $887 million to rebuild San Francisco General Hospital and Trauma Center.

San Francisco has “more than enough capacity” to borrow, said Nadia Sesay, director of the city’s public-finance office.

The bonds would be sold in four issues from 2015 to 2019 and would have a maturity of 20 to 25 years, she said. The city uses an interest rate of 6 percent for illustration purposes, she said. Municipal yields are close to the lowest since the 1960s.

“We hope we’ll continue to be in this low interest-rate environment,” Sesay said.

Electoral Bar

The measure, the first to be placed on the ballot for the transit system since 1966, will require a two-thirds vote to pass when it goes before voters in November.

“The challenge is that it’s always difficult to get above two-thirds for funding measures,” said Gabriel Metcalf, executive director of the San Francisco Planning & Urban Research Association, a nonpartisan urban policy organization. “There’s always a certain segment of people who would just rather say no to any taxes on principle.”

The transit measure stems from a task force convened by Lee last year to study the city’s transportation needs. The city should invest $10 billion through 2030 in transportation as its population grows, according to a report from the group.

“We don’t have any major credit concerns with San Francisco right now,” said Karen Ribble, a senior director at Fitch in San Francisco. “The city’s debt levels are fine. Their economy is doing very well.”

By Alison Vekshin Jul 17, 2014 5:00 PM PT

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Jeffrey Taylor, Mark Tannenbaum



Munis Cheapest to Treasuries Since March Amid Biggest ‘14 Exodus.

Municipal bonds are the cheapest in four months relative to Treasuries as speculation that debt from Puerto Rico will default spurs the biggest exodus from local-debt mutual funds since January.

Benchmark 10-year munis yield about 2.44 percent, according to data compiled by Bloomberg. The interest rate on 10-year Treasuries, by comparison, is 2.51 percent. That makes the ratio of the yields about 97 percent, the highest since March 13, signaling that state and local debt has cheapened on a relative basis.

Individuals yanked $790 million from muni mutual funds in the week through July 9, with the highest outflows from funds focused on long-dated and high-yield debt, Lipper US Fund Flows data show. With supply next week set to tally about $4.7 billion, compared with the 2014 average of $5.4 billion, investors may be lured by the relatively higher tax-free yields, said Dan Toboja at Ziegler Capital Markets.

“As munis begin to cheapen up and Treasuries stay stable or rally, at some point people are going to say munis are a good relative value,” said Toboja, senior vice president of muni trading at Chicago-based Ziegler.

The $3.7 trillion municipal market is off to its strongest annual start since 2009 because bond sales are 16 percent off last year’s pace. Demand has also benefited as some individuals faced levies on bond interest payments as much as 24 percent higher than in 2012. The 10-year benchmark muni yield is equivalent to 4.31 percent taxable for top earners.

On July 1, Moody’s Investors Service cut Puerto Rico’s rating to B2, five steps below investment grade, because of a new law allowing some public corporations to restructure their debt. The island and its agencies have $73 billion of debt, or about 2 percent of the entire market.

By Brian Chappatta July 11, 2014

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, Stacie Sherman



High-Yield Drives Biggest U.S. Muni Fund Outflows Since January.

(Reuters) – Investors pulled $790.3 million out of U.S. municipal bond funds – most of it in the high-yield sector – in the week ended July 9, marking the biggest outflows since January, according to data released by Lipper on Thursday.

High-yield funds accounted for more than $691 million of total outflows, likely on concerns about Puerto Rico debt, which carries some of the fattest yields but biggest risk for yield-starved muni investors.

In the previous week, high-yield muni funds had added just $5.7 million of investor money.

Oppenheimer Rochester’s High Yield Municipal Fund shed nearly $294 million across all share classes, more than any other individual high-yield muni fund, according to the data from Lipper, a unit of Thomson Reuters. The fund also lost $40.3 million of market value to end the week with $5.13 billion in assets.

Oppenheimer fund managers were not immediately available to comment. But a note on Oppenheimer’s website on Wednesday praised Puerto Rico’s latest efforts to pay its bills. Just over 11 percent of the fund had direct exposure to Puerto Rico debt, nearly all of it uninsured.

The high-yield muni sector has lost value since late June, after Puerto Rico’s legislature passed a law that allows public corporations to restructure their debt. The benchmark Barclays High Yield Municipal Bond Index, up more than 9.5 percent in mid-June, was up less than 5.5 percent as of Wednesday.

The law prompted Moody’s Investors Service on July 1 to push its ratings on Puerto Rico’s general obligation debt deeper into junk territory, and to cut ratings on $46 billion of debt issued by the island’s public corporations.

Fitch Ratings also dropped its rating on Puerto Rico’s GO debt on Wednesday. Fitch cut its high-investment grade rating of ‘AA-‘ on $6.7 billion of senior lien Puerto Rico sales tax financing corporation bonds, or COFINA bonds, by nine notches to junk at ‘BB-‘.

“It is not a big leap to view the legislation as an indication that Puerto Rico’s willingness to pay may be weakening,” Oppenheimer said in a previous posting on its website. “But all of this is just speculation… and, in our opinion, likely premature.”

Overall, muni bond funds haven’t seen such large outflows since the week ending Jan. 1, when they totaled $1.47 billion. That was the last week that saw triple-digit outflows after investors fled muni funds for much of 2013 on concerns out of Puerto Rico’s struggling economy and Detroit’s bankruptcy.

Overall, the four-week moving average turned negative this week at $97.4 million, said Lipper, a unit of Thomson Reuters.

Thu Jul 10, 2014 6:58pm EDT

(Reporting by Hilary Russ; editing by Andrew Hay)



Roadway Bonds Lead U.S. Municipal Sales Next Week.

(Reuters) – Roadways, ports and water projects lead an estimated $4.5 billion U.S. municipal bond and note sale calendar next week, including a $250 million deal from the Indiana Finance Authority on behalf of a public-private interstate highway project.

Citigroup is the lead manager for the negotiated sale of Indiana’s private activity bonds, preliminarily rated BBB-minus by Standard & Poor’s Ratings Services. The bonds are subject to the alternative minimum tax.

Proceeds of the sale go to I-69 Development Partners LLC to design, build, maintain and operate a 21-mile section of Interstate 69.

By the closing date of the bond sale, I-69 Development Partners is expected to be indirectly owned by a private Dutch global infrastructure company and Canada’s public retirement system. The company will be 51 percent owned by Isolux Infrastructure Netherlands B.V., and 49 percent owned by Canada’s Public Sector Pension Investment Board.

Also in the market next week is the New Jersey Turnpike Authority, which is selling $125 million of floating rate turnpike revenue bonds through lead manager RBC Capital Markets. The deal is being offered in three series of 2014 B bonds.

The sale comes on the heels of the authority’s May offering of $1 billion of fixed-rate turnpike revenue bonds, series 2014 A, with serial maturities from 2027 to 2035. The deal was priced with a top yield of 4 percent in the longest maturity with a 4 percent coupon, according to the final pricing sheet.

Also in the market next week is the Massachusetts Port Authority, with a $251.7 million deal of both AMT and non-AMT revenue and revenue refunding bonds pricing through Raymond James.

The Delaware River and Bay Authority, North Texas Municipal Water District and California’s Walnut Energy Center Authority are also each selling at least $100 million of bonds in negotiated deals next week.

The two biggest deals are both competitive ones, with the Massachusetts School Building Authority selling $300 million of subordinated sales tax bond anticipation notes on Thursday and the state of Wisconsin offering $254.8 million of general obligation bonds on Wednesday.

July 3 Thu Jul 3, 2014 4:20pm EDT

(Reporting by Hilary Russ; Editing by Meredith Mazzilli)



Residents Challenge Braves Deal at Bond Hearing.

MARIETTA — Cobb Commission Chairman Tim Lee didn’t have much to say when he was subpoenaed Monday for a six-hour bond hearing concerning the new Atlanta Braves stadium.

The county hopes to issue up to $397 million in bond proceeds to pay for the stadium, but before it does, a Cobb Superior Court judge must sign off on the deal.

Fourteen Cobb residents filed challenges to the bond deal, and nine were present during Monday’s hearing before Cobb Superior Court Judge Robert Leonard.

Leonard said he hopes to have a decision on whether to validate the bond issuance by the end of the month.

Attorney Tucker Hobgood, a former president of the Rotary Club in Marietta, is opposed to the bond issuance and quizzed Lee on several components of the deal, prompting Lee to direct him to the financial agreement.

“What you’re stating seems to be the obvious,” Lee told Hobgood at one point as the attorney read over parts of the agreement.

Hobgood said the Braves would own most of the rights to the stadium. He said documents regarding the project imply the stadium will be privately owned, arguing there will be no public use for the facility.

“The agreements don’t show sufficient public use,” Hobgood said. “You can see this is not intended for public use.”

Taxpayers, Hobgood said, should not be forced to pay for a project they will not use.

“This is a private agreement and shows that the Braves get to call all the shots,” he said.

Larry Wills of Marietta, a retired recycling consultant who also challenged the deal, quizzed the county’s financial advisor, Dianne McNabb, about taxpayer contributions to the project.

McNabb said the bonds will come from Cobb County revenues, but said she didn’t know if any revenues would come from Marietta taxpayers.

Another challenger, Christopher Peters, said the project serves no public benefit and the board “overstepped its boundaries by creating special districts to supply revenue.”

The Cobb Board of Commissioners created a special tax district in February, which roughly follows the same boundaries as the Cumberland Community Improvement District. Revenues from the new district will go toward paying off the bond debt.

Commissioners are violating the Constitution, Peters argued, because the General Assembly, not local governments, should authorize these extensions of taxes and special districts.

Yet Kevin Moore, attorney for the Cobb-Marietta Coliseum & Exhibit Hall Authority, argued the Supreme Court ruled revenue bonds secured by valid intergovernmental agreements are constitutional.

Almost 10 motions to intervene were denied by Leonard because they were filed after the start of the hearing.

by Asia Ashley
July 08, 2014 04:00 AM |



WSJ: Washington, D.C., 'Green' Bond Greeted With Strong Investor Demand.

District of Columbia Water and Sewer Authority Sells $350 Million in 100-Year Bonds

Investors are placing a 100-year bet on the water and sewer system in the nation’s capital.

The District of Columbia Water and Sewer Authority had little trouble selling $350 million in debt on Thursday, called “green bonds” because the proceeds will be used for environmentally friendly purposes. The deal was billed as the first-ever green bond to carry a 100-year maturity.

Demand for the bonds, rated in the double-A-range, was high enough that the authority increased the size of the sale from $300 million. Investors placed orders for about $1.1 billion worth of bonds, more than three times the bonds available.

Any bond that matures in 100 years is rare, although universities, highly-rated companies, and sovereign nations have issued them in the past.

The water authority’s bonds on Thursday were priced to yield 4.814%. That is 1.45 percentage points more than 30-year Treasurys. Bankers organizing the bond sale suggested earlier in the day it could yield as much as 1.60 percentage points higher than Treasurys. Yields and prices move in opposite directions.

The sale, managed by Goldman Sachs Group Inc. and Barclays PLC, comes as issuance in green bonds is growing. The water authority plans to use the money to help construct a drainage system to prevent excess rainwater and sewage from discharging into the area’s rivers, an effort dubbed the D.C. Clean Rivers Project.

“Right now I think there is greater demand than there is issuance for some of this green stuff,” said Matthew Duch, portfolio manager at Calvert Investments, which put in an order for the bonds and runs a green bond fund. “Hopefully it’s a sign of good things to come.”

Traditional buyers for 100-year bonds include pension funds and insurance companies, but about $100 million of the investor orders came from green-bond investors specifically. George Hawkins, general manager of the water authority, said that indicated the green bond “brought more investors to the table” than a regular bond might have.

The water authority deal follows green bond sales from municipal issuers including Massachusetts and the New York State Environmental Facilities Corp. Some U.S. corporations have also sold green bonds recently, including Bank of America Corp., Regency Centers LP and Vornado Realty LP. Previously, much of the green-bond issuance has come from international entities such as the World Bank.

“I think this is something that a number of other water, wastewater and power entities are going to look at,” said Jeff Scruggs, managing director and co-head of the public sector and infrastructure group at Goldman Sachs.

Investors who bought the D.C. water authority’s bond will be paid back with revenue from the water-and-sewer system, which collects fees from residential, commercial and governmental customers. In that sense, the bond will be like a typical municipal bond from a water-and-sewer utility.

Mr. Duch said his firm participated in the bond sale because the 100-year maturity matches the life of the drainage system, which is expected to last at least 100 years. He wasn’t worried about whether the authority would pay back the bonds in 100 years, given that it serves the nation’s capital.

“There’s always going to be people here,” said Mr. Duch, whose firm is based in Maryland, just outside of Washington, D.C.

By MIKE CHERNEY
July 10, 2014 5:41 p.m. ET



Puerto Rico Makes Bond Payments, but Muni Market Remains on Edge.

(Reuters) – Creditors to Puerto Rico’s electricity provider were given a slight respite on Tuesday when the bonds’ trustee made a scheduled payment, but the U.S. municipal bond market remained worried the Puerto Rico Electric Power Authority (PREPA) will soon use a new bankruptcy-like process to restructure its debts.

The law establishing the process has rattled the $3.7 trillion municipal market since it was passed last week and on Tuesday it prompted Moody’s Investors Service to push ratings on Puerto Rico debt deeper into junk territory.

Puerto Rico bonds are widely held due to their tax exemption in every state and their high yields, making them a tempting asset despite the U.S. commonwealth’s struggles to cope with a shrinking economy, chronic budget deficits and a $73 billion debt load.

PREPA could be the first corporation to test the law, as it faces increasing demands for its limited funds, including payments on expiring lines of credit and fuel purchases. Prices of its junk-rated bonds plummeted to the record low of 36.815 cents on the dollar, or a yield 14.887 percent.

The flight to Puerto Rico’s $3.5 billion junk general obligation bonds ended as well – with prices falling to a record low of 84.5 cents or a 9.748 percent yield.

On Tuesday evening, the Chairman of the Government Development Bank for Puerto Rico David Chafey confirmed all bond payments maturing on Tuesday had been made, including $721.97 million paid to service general obligation bonds and $417.56 million for the PREPA bonds.

For most of the day, rumors whipped through the municipal market that bondholders may not receive any money.

The bond trustee is allowed to hold onto funds if it foresees large expenses looming, and Puerto Rico’s new law allowing public corporations to restructure already threatens to rack up costs for PREPA. The authority is considered the most likely corporation to restructure, which could generate legal bills, and on Sunday mutual funds sued saying the law was unconstitutional.

U.S. Bancorp spokeswoman Teri Charest said the bank cannot comment on clients’ accounts.

The fear is that PREPA is the first domino toward the restructuring of Puerto Rico’s debts, a move akin to filing for bankruptcy, which the territory cannot do. The law passed last week excludes Puerto Rico and the Government Development Bank.

Puerto Rico has been fighting hard this year to pull its finances together, after years of population and economic declines led its revenues to shrink. Late on Monday, it passed a scaled-down budget for the fiscal year starting on Tuesday, but recent measures may not be enough to fix its economy.

Meanwhile, Moody’s Investors Service cut the island’s general obligation bonds to B2 from Ba2. Citing the restructuring law, it broadly swung its axe at the ratings of the Government Development Bank, PREPA, the aqueduct and sewer authority, the highway authority and even the sales-tax financing corporation known as COFINA, which is generally considered the safest Puerto Rico issuer.

The law “signals a depleted capacity for revenue increases and austerity measures, and a new preference for shifting fiscal pressures to creditors, which, in our view, has implications for all of Puerto Rico’s debt, including that of the central government,” Moody’s said.

PREPA’s $250 million line of credit from Citibank has already expired. On July 3, PREPA is required to pay the bank $10 million. It must turn over $146 million to the bank through the end of August. Likewise its $550 million line of credit from ScotiaBank de Puerto Rico expires next month, putting it on the hook for $525 million.

In response to the Moody’s downgrade, GDB’s Chafey said the bank was “proceeding with focus and determination to continue strengthening the Commonwealth’s financial position and build a solid foundation for economic prosperity and development.”

PREPA is currently negotiating extensions of the lines. Still, it also must find cash to pay a recent internal loan for buying fuel and then cover future fuel purchases.

In the past the GDB has stepped in to prop up the perennially struggling PREPA but now, dealing with its own liquidity worries, it is staying away. Meanwhile, Governor Alejandro Garcia Padilla has repeatedly said public corporations must become self-reliant.

“They’re a cash-poor entity and have been for a long time,” said Shawn O’Leary, senior vice president at Nuveen Asset Management, which holds $80.6 million of bonds that could be subject to the legislation. “The difference now is that the central government and the GDB said, ‘We’re no longer floating you loans’.”

By Lisa Lambert

Wed Jul 2, 2014 4:58am IST

(Additional reporting by Edward Krudy in New York, Reuters in San Juan and the Bangalore newsroom, Robin Respaut in San Francisco; Editing by Tom Brown, Bernard Orr)



Puerto Rico Biggest Muni Issuer, BofA Top Underwriter so far in 2014.

(Reuters) – Fiscally troubled Puerto Rico was the biggest issuer of bonds in the U.S. municipal market in the first half of 2014 with a single $3.5 billion bond sale in March, according to Thomson Reuters data on Tuesday.

The cash-strapped U.S. commonwealth sold the general obligation bonds to restructure some existing debt and boost liquidity at its Government Development Bank. More recently, the island’s government roiled the muni market by passing a law that could allow its bond-issuing public corporations to adjust their debts through a bankruptcy-like process.

California was the second biggest issuer so far this year, selling $2.56 billion of debt in three deals, followed by the Texas Transportation Commission, which sold $2.43 billion of debt in three deals.

Overall issuance of debt by states, cities, schools and others totaled $143.5 billion, a 15.7 percent drop from the same period in 2013, Thomson Reuters reported.

Bank of America Merrill Lynch was the top senior underwriter of muni debt with 178 deals totaling $19.3 billion. J.P. Morgan Securities ranked second with $16.1 billion of debt in 149 deals.

Insured muni bonds totaled nearly $7.3 billion, up 29.4 percent from the same period last year. Assured Guaranty Municipal was the top insurer.

Letter of credit-backed debt jumped by nearly 75 percent to $1.45 billion with Royal Bank of Canada the top provider.

Wed Jul 2, 2014 1:05am IST

(Reporting by Karen Pierog; Editing by Chizu Nomiyama)



Social Impact Bonds Go to Washington.

They’ve been percolating at the state and local level, and now a bipartisan group on Capitol Hill hopes to fund social impact bonds (SIBs) with federal dollars. We lack extensive data about whether SIBs work, but in theory they’re the perfect match of seeking the public good while enforcing accountability, the yin and yang of conservative and progressive ethos.

Co-sponsors Reps. Todd Young, R-Ind., and John Delaney, D-Md., recently led seven other members from both parties to introduce H.R. 4885, the Social Impact Bond Act. The bill would enable the Treasury Department to reimburse for social betterment projects only after grantees have achieved targeted outcomes. Projects are typically initially funded by private donors, and the project length would be capped at 10 years.

The bill would also create a Federal Interagency Council on Social Impact Bonds to collaborate with Treasury; Council members would come from 10 government agencies or departments, including the Department of Health and Human Services, the Office of Management and Budget, and would be chaired by a member of the Office of White House Policy.

“Social Impact Bonds have the potential to transform our nation’s social safety net by shifting the focus of such programs from inputs to outcomes,” Young said following the bill’s unveiling. “In other words, instead of arguing about how much or how little we are spending, policymakers should reward what works based on actual evidence. Whether you think government ought to do more to help our fellow Americans in need, or you think government needs to save money wherever possible, social impact bonds provide a solution on both counts.”

John Perovich of Social Enterprise Associates gives some useful examples of SIBs in action, including the real-life 2012 case of the New York City Department of Correction and Goldman Sachs, where the investment bank issued a $9.6 million loan to fund therapeutic services for 16- to 18-year-olds incarcerated on Rikers Island. Under the deal structure, the City government will repay the firm on a sliding scale based on program results, i.e. less recidivism.

Perovich cited a fictional scenario from Social Finance US to explain SIB structure. Say the cost of homelessness (e.g., emergency rooms, jails, shelters) for a state is $100 million, though the state seeks to save money while improving life for the homeless. Under the scenario, building affordable housing would cost $40 million and ongoing social services $25 million in case management and behavioral health care. The state could tap private investors for $40 million in SIBs and monitor results in how the affordable housing reduces homelessness. The state would then pay out investor returns with a portion of cost savings, projected at $35 million.

Source: Social Finance US

SIBs are a better fit for human nature than guaranteed government appropriations since they tap into incentives. No results, no money. Should this federal endeavor–right now capped at $300 million–prove successful, it could be the tipping point for a wave of more SIBs.

Forbes
Carrie Sheffield – Contributor



Texas Public School Construction Report.

A new report by Texas Comptroller Susan Combs took a look at school construction spending in the state between 2007 and 2013 and found that secondary schools were more expensive to build than middle or elementary schools, but that costs also varied by year and metro area. Middle and elementary schools averaged $149 per square foot to build while secondary campuses averaged $163 per square foot. But overall, the most expensive schools were opened in 2009 and 2010, “meaning they likely were initiated during the building boom prior to the recession,” the report said. Over the six year period, the Houston area, which accounts for 169 campuses was the least expensive, while the San Antonio area had the highest costs.

Construction didn’t necessarily follow enrollment growth: School districts in the Houston area had 30 percent of statewide enrollment growth, but only 20 percent of the campuses built from 2007 through 2013. The comptroller’s report recommended that the commissioner of education establish data collection and reporting standards for school construction costs and that those stats be reported publicly. Data should include things like total construction cost, cost per square foot and per student so that districts and taxpayers can compare projected construction projects with other districts.



EPA, N.Y. Clash Over State Plan to 'Siphon' Clean Water Funds for Bridge.

NEW YORK — A state agency approved Gov. Andrew Cuomo’s plan yesterday for borrowing $511 million from the federal Clean Water State Revolving Fund to help finance construction of a new $4 billion Tappan Zee bridge across the Hudson River.

The New York State Environmental Facilities Corp. (EFC) approved an idea hatched by the Democratic governor despite fire from prominent environmental groups that charge it is an inappropriate use of money that’s intended for sewage system upgrades at eligible municipalities.

During an EFC board meeting, members justified the move with claims that the money would help protect the Hudson River estuary and threatened sturgeon. They argued they have the legal basis for spending the money on the bridge under a joint New York-New Jersey estuary management plan for the Hudson that allows for environmental mitigation costs related to the construction project to come from the federal fund.

“It is an extraordinary transportation project and a project that is going to protect the environment and the Hudson River estuary in extraordinary fashion,” said EFC Chairman Joseph Martens, also the head of the state’s Department of Environmental Conservation.

The new Tappan Zee, which would replace the old span and include eight traffic lanes as well as mass transit corridors, has separately been guaranteed $1.6 billion in federal dollars through the Department of Transportation. The bridge carries an estimated 134,000 vehicles daily and 160,000 on some weekends.

Martens appeared surprised by the attention the plan has received, and environmentalists in Albany have suggested that Cuomo’s team tried to get the funding stream through unnoticed until a state senator caught on just last week. Martens insisted during the meeting that the money would be unused otherwise and would roll over to the next fiscal year if left unspent.

Martens also referenced a letter sent to the EFC this week from U.S. EPA Region 2 Administrator Judith Enck outlining eight concerns the federal agency has with the concept. EPA has the right to veto such use of Clean Water Act funds if the agency deems it inappropriate.

“We intend to fully address EPA’s questions and any concerns they have,” Martens said.

Enck’s letter notes that EPA hasn’t approved the move, calling it an “unconventional approach” to the use of the clean water fund. She also explained that historically EPA uses the fund for low-interest loans to local governments looking to build or upgrade wastewater treatment systems.

“It bears mention that we do not believe New York state has previously used the CWSRF for many of the types of estuary projects now under consideration for funding,” she said.

Enck further pressed the EFC and Martens to answer how such use of the funds would, among other items, help to improve water quality or adhere to a regional conservation management plan in place since 1996.

“New York’s administration of a strong and reliable CWSRF depends upon its careful stewardship of that fund and scrutiny of proposed expenditures,” Enck wrote.

‘Straight-face test’

Environmentalists charged up about the developments staged two press conferences on the matter yesterday, before and after the board’s vote.

Riverkeeper President Paul Gallay, who previously helped to spearhead his group’s crucial support for building the bridge, has said he was blindsided by the plan and wants the Cuomo administration to back down.

Gallay also attacked the EFC, arguing that the agency is controlled by the governor and effectively has been put in the position to argue that New York state has become an eligible municipality under the federal clean water fund.

“The EFC [yesterday] said that New York state is a municipality of New York state,” he said. “None of this passes the straight-face test.”

Gallay and others believe Cuomo is using the fund because financing for the bridge has become complex, raising the specter of much-higher tolls to cross the span once it is completed. Cuomo in a release earlier this month acknowledged that he was hoping to avoid raising tolls as much as possible.

New York Assemblyman James Brennan, a Democrat, has sided with the environmental groups. He said the clean water fund is meant for towns and cities, which are “inherently subdivisions” of the state, he argued.

“It seems ludicrous to pass the state of New York off as a municipality,” Brennan said, adding that a number of Empire State towns and cities’ sewage systems “are at risk of imminent failure” and need the money. He also cited the rising cost of water in New York City, which has doubled in the last 10 years, partly because wastewater plants are in dire need of upgrades, he said.

“The issue of how much the tolls will go up is a legitimate issue, but [this fund] should not subsidize a bridge,” he said.

Chris Goeken, director of public policy at the New York League of Conservation Voters, added that if New York is allowed to move forward, it could set a precedent for other states looking to “siphon” wastewater money to, say, build a causeway or a bridge.

“They would love to get their hands on this big pot of money,” he said, adding that such a precedent might also make it harder in Congress to argue for Clean Water Act appropriations if members feel the loans are being used for other purposes.

“It will be much easier for Congress to deny wastewater money if this continues,” he said.

Gallay during one of the press conferences was pressed on why the governor shouldn’t look for innovative funding for the bridge since the money isn’t being spent in any event. Gallay responded that municipalities are hesitant to borrow because of caps on spending and the “unintended consequences of efforts to control taxes.”

“Municipalities would seek this money if not for limits on borrowing,” he said.

Gallay added that it is premature to talk about suing the state over Cuomo’s financing plan for the bridge.

“We don’t think it’s going to need to go to court,” he said.

Click here to view EPA’s letter to the EFC.

Colin Sullivan, E&E Reporter
Friday, June 27, 2014



Hendersonville, IDB Intervene in TIF Suit to End It.

The Hendersonville Board of Mayor and Aldermen and the Hendersonville Industrial Development Board each voted last week to jointly intervene in a lawsuit to which neither had been a party solely for the purpose of settling the suit in favor of a major bank.

As part of a negotiated settlement after a three-year-long dispute, both bodies voted to intervene in the contentious Tax Increment Financing lawsuit that Sumner County filed against Fifth Third Bank and Fifth Third Securities in February 2013. Sumner County voted June 16 to settle the lawsuit after verbal negotiations involving County Executive Anthony Holt and County Commissioners Paul Decker and Paul Goode.

“We are intervening in the lawsuit for the sole purpose of agreeing to the settlement and agreeing to be bound by the settlement,” Hendersonville attorney John Bradley explained at the June 24 Finance Committee meeting. “That ends it.”

“That’s a great plan,” responded Chairman Fred Qualls who serves as BOMA’s representative to the IDB.

“Fifth Third Bank, for obvious reasons, wants to be sure that once they settle with Sumner County that (neither) the city of Hendersonville nor the Industrial Development Board will take the same sort of action against them. So, what they’re asking us to do is to join in and just for the purpose of saying that we agree with this settlement and we’re not going to bring a separate lawsuit against Fifth Third Bank. It’s the prudent thing to do,” Bradley stated during the BOMA meeting.

As a result of the settlement, there will be no adverse effect on the bonds, according to Bradley.

The county’s lawsuit against Fifth Third alleged the illegal use of interest rate swap agreements for the tax increment financing bond issues that paid for infrastructure in Indian Lake Village.

The settlement explicitly states that the IDB “had the full power and authority to enter into the Fifth Third Swaps, and those contracts are valid and fully enforceable in accordance with their terms.” In addition: “Neither the County, the IDB, nor the City shall deny or contest the validity or enforceability of those contracts in any future proceedings.”

Each side will pay its own attorney fees.

The county commission vote on June 16 was 18-5. The BOMA vote had one no vote and one abstention. The IDB vote was unanimous.

Jesse Hughes, For The Hendersonville Star News
7:13 p.m. CDT June 30, 2014



Drought-Plagued Regions Struggle to Conserve Water and Make Money.

The more water people save, the more money utilities lose. They’re looking far afield for a solution.

Midland, Texas, has prospered and suffered along with the fortunes of oil and gas drilling since the rich Permian Basin was discovered in 1921. Recently, hydraulic fracturing technology has reopened once-inaccessible formations beneath the dry brown West Texas plains. This spring, Midland’s unemployment rate was down to 2.7 percent, the lowest in the country. But good times are fragile in Midland, often hostage to a different hard-to-find resource. Two years ago, the city came perilously close to running out of water for its 120,000 residents to drink.

Over three straight hot summers, unforgiving drought has sucked two Midland reservoirs virtually dry. Lake O.H. Ivie, the last surface supply, has been falling rapidly toward 15 percent of previous capacity. Things looked so dire in 2012 that Midland rushed into a crash project that city hall insiders regarded as the city’s “last card to play.” Midland reached out 67 miles for a new source that within a year was pumping in 4 million gallons a day.

Eventually that $197 million project will bring Midland 20 million gallons a day of fresh groundwater from beneath the historic T-Bar Ranch, which city fathers bought 50 years ago. Now Midland is backing a 15-mile extension to transport another 4 million gallons daily from a second ranch, and the city has no intention of stopping there. Those new resources “give us 50 years of water,” Midland Mayor Jerry Morales says. Morales has allied with the Abilene and San Angelo mayors to hunt for even more below-surface reserves to provide plenty of future water. “We’re looking for a 100-year supply,” Morales says. “We’re looking everywhere in Texas.”

Long-distance water searching has gotten much more expensive than it once was. Midland bought the 20,000-acre T-Bar spread for $750,000 in 1965. Last year, the city paid $3.5 million for the 6,800-acre Clear Water Ranch just for the right to pump its water. “Water is the new blue gold,” Sara Higgins, the Midland city spokeswoman, says. “It’s never going to be cheap again.”

As a result of its recent moves, Midland’s water problems don’t seem as severe as they did in 2012. But they are causing the city some unexpected financial headaches. While the new pipeline was being built, the Midland City Council slapped homeowners and businesses with fivefold increases in top water rates. The levies were designed to penalize wasting water flagrantly to sprinkle lawns, wash cars and refill swimming pools.

Almost immediately, sticker shock from higher bills slashed the city’s water consumption 35 percent. Midland had tried strictly regulating outdoor watering, but “it wasn’t until we hit people in their pocketbooks that we saw the numbers go down,” says Higgins. “I don’t think consumption will ever come back.”

As a means of conserving water, these punitive rates succeeded. But they created a serious new problem. They left the local water utility short of the revenue it needed to operate.

Midland’s water struggles offer a cautionary tale for other cities where customer water rates are rising at the same time a shifting climate may be starting to dry lakes and rivers up.

Around the country, as water gets scarce and its value goes up, municipal water revenues are going into free fall. Sixty percent of U.S. utilities in one survey sold less water in 2012 than six years earlier. Bond rating services in recent years have given negative ratings to utilities in California, Minnesota, North Carolina and Oregon, citing disappointing revenues.

Utilities in Sun Belt states have had their bonds downgraded because they had relied too much on fees for connecting newly built homes when housing markets were inflated. Elsewhere, Altoona, Pa., and Bowling Green, Ky., were hit with downgrades because they’d put off expensive maintenance, leading to massive losses of water through leaky pipes. Utility costs will only keep climbing as governments work through what may be a $1 trillion backlog to replace deteriorating pipes, improve treatment plants and extend mains into sprawling neighborhoods.

Raising rates to catch up, however, just gives customers more reason to use less water. That reduces water sales even more, and water supply agencies “end up in a downward cycle of lower revenues and increasing rates, and customers feel like they’re being punished for doing the right thing,” says Mary Tiger, chief operating officer at the University of North Carolina Environmental Finance Center.

Drought complicates the fiscal outlook. In Texas, the Wichita Falls utility lost $4.5 million in revenue last year after drought forced it into drastic water-saving steps. Fitch Ratings downgraded Fort Worth’s water and sewer debt after revenues fell $11 million short.

Midland lifted its 2012 emergency rates once its new T-Bar pipeline began operating. But total consumption has leveled off at half its previous level, opening a $4 million annual budget gap. This January, the city council voted to raise rates by 9.5 percent over three years in an attempt to clear the water fund deficit and assure state approval for extending the new pipeline.

Utilities typically bring in 20 percent of their revenues through fixed fees for delivering water to homes and businesses. The other 80 percent comes from fluctuating charges based on meter readings that tally how much water customers used the previous month. Water agencies build and maintain enough infrastructure to supply everybody with water when demand peaks during hot weather. To reward conservation, many cities have installed block rates that go up significantly the more water a home or business uses, sending a pricing signal to encourage customers to conserve. But the more water users conserve, the more fiscal problems the utilities find themselves scrambling to solve.

At the same time utilities are coping with declining revenues, many consumers are dealing with sharply higher prices. The North Carolina Environmental Finance Center found that some low-income families are paying up to 9 percent of their monthly earnings for water. Baltimore is raising rates 41.7 percent over three years, and community activists object that bills totaling $1,000 or so a year will be beyond the means of senior citizens and impoverished families. “Municipal utilities exist to provide something we consider a basic necessity of living, but in a lot of places water is becoming very unaffordable,” says Sharlene Leurig, the water program director for Ceres, a Boston organization that advocates sustainable business practices.

Utility analysts suggest stabilizing rates and revenue by repaying dividends to thrifty customers. Another possibility would be letting a ratepayer select an annual budget, subject to hefty penalties for going beyond the target. Davis, Calif., drafted a “consumption-based fixed rate” plan for collecting the $106 million cost of supplementing overused groundwater with Sacramento River water.

Starting in 2015, the city wants to cut variable rates but tack on a new fixed monthly charge based on each customer’s consumption the previous summer. That way, two-thirds of Davis residents will pay less per month, but “people who use peak capacity [in summer] are going to pay for that year-round,” says Frank Loge of the Center for Water-Energy Efficiency at the University of California, Davis. Some residents, most of them elderly, object that the revamped rates would penalize single-family homeowners who keep Davis lawns and trees green. Uneasy about higher bills, Davis voters in June sent the city back to the drawing board by repealing the new rate structure.

Local officials expect second-guessing when they raise water charges. Americans have learned that gasoline pump prices climb if crude oil rises from $100 to $120 a barrel. There’s no such understanding when it comes to water. In fact, there’s no easily understood benchmark for calculating water’s value. Still, in some arid regions, water can be bought and sold among municipal governments and private parties as a simple commodity. As the Western states were settled, state water laws awarded prior appropriation rights to whomever was first to put water to use; and miners, ranchers, farmers and commercial ventures have traded those rights since Gold Rush days. “While water in most of the U.S. is not yet priced like a commodity, it likely could be within our lifetime” as more markets develop for scarce resources, a 2011 Standard & Poor’s analysis said.

In Texas, a pricey water market already is emerging. Under a 1993 court order, the state capped withdrawals from the Edwards Aquifer, then San Antonio’s sole drinking water source, to safeguard water for endangered wildlife. Since then, the city has pursued relentless conservation campaigns, including rate incentives for curbing use. The San Antonio Water System has also bought groundwater rights that farmers now can sell after investing in water-saving irrigation.

In a January report, the San Antonio Chamber of Commerce warned that a truly disastrous drought could still throw 135,000 residents out of work. The study argued that locking up even more supplies would give San Antonio “an advantage at a time when many other communities are struggling to provide water infrastructure.”

All along the Interstate 35 corridor from San Antonio to Austin and Dallas, “there’s a lot of money and companies coming in here to market groundwater,” says Leurig, an Austin resident who’s chairing a citizens panel to look at the state capital’s water options.

State officials reported this spring that 34 small communities in Texas could run out of water in three months. Meanwhile, the state’s megacities are competing to lock up future groundwater rights. Utility rates could spike a lot more as profit-seeking speculators start bidding on water markets.

Like oil and gas, groundwater is a depletable resource. As groundwater tables fall, it’s no surprise that Texas businessmen with petroleum and gas fortunes are stepping into the water marketing business.

Oilman T. Boone Pickens assembled groundwater rights to 211,000 acres in the Texas Panhandle and pitched a 350-mile pipeline to sell it to Dallas-Fort Worth. The deal never came together, and three years ago Pickens sold the water for $103 million to the water authority that supplies 500,000 people in Amarillo, Lubbock and nine other West Texas cities.

The Panhandle sits atop the Ogallala Aquifer, a formation that stretches north from the Midland area to the Dakotas. The water table has been dropping for decades, overdrawn by irrigated farms, municipal wells and expanded energy production. As the water level falls, Midland and other Texas cities grow more desperate to take water from largely untapped reserves from more distant aquifers beneath surrounding rural counties.

Farm towns and ranching counties are bracing to fend off wealthier big-city designs on their water. Tensions are reminiscent of the Los Angeles water grab a century ago that dried up agriculture in the undeveloped Owens Valley in California’s Sierra Nevada.

West of the Pecos River, Texas ranchers already are in a legal showdown with a prominent Midland oilman. Clayton W. Williams Jr. wants to sell Midland 41 million gallons a day from his family’s ranch near Fort Stockton, population 8,283 and falling. The Middle Pecos Groundwater Conservation District, based in Fort Stockton, voted unanimously to deny Williams a pumping permit. Williams, who runs his own oil and gas company from Midland, has taken his Fort Stockton neighbors to court. Engineers, geologists and lawyers for private ventures keep showing up to scout Pecos County for available water. “There are water marketers, there are water interests and there are water pirates,” Paul Weatherby, the Middle Pecos district manager, says. “We’re in the Chihuahuan Desert, and we don’t have anywhere to go should we run out of water ourselves.”

With drought settling in, the allure of more water led Midland to cut some corners. To finance a Fort Stockton pipeline, project backers rigged an election to create a new state-sanctioned utility — the Midland County Freshwater Supply District No. 1. In Texas, residents normally can vote to set up freshwater districts to supply a rural county, subdivision or other sparsely populated region. Midland’s proposal drew the boundaries to encompass just one 20-acre tract close to the Midland airport. The son of a Williams executive moved onto the property to live in a modular home, qualifying as the district’s sole eligible voter. Casting the only vote, he singlehandedly adopted 2010 ballot measures that established a new water district and gave it $375 million in revenue bond authority.

Williams’ water deal is tied up in court. Desperate to add more supply, Midland officials partnered with the new district to speed up the T-Bar pipeline. “We could have built it ourselves, but they could do it faster,” City Manager Courtney Sharp says. Now Midland pays the district $1.5 million or so a year to deliver the city’s own water. Midland ratepayers will start paying the price when water rates jump 5 percent in October.

GOVERNING.COM
BY TOM ARRANDALE | JULY 2014
arrandaletom@gmail.com



Supreme Court: Quasi Public Employees Exempt from Union Dues.

The ruling creates a new class of “partial public employees” who can choose not to pay membership dues to unions representing them, laying the groundwork for overruling other precedents.

Some employees of state and local government don’t have to pay union membership dues any longer, the Supreme Court decided in a 5-4 ruling June 30.

Led by Justice Samuel A. Alito Jr., the conservative majority determined in Harris v. Quinn that a class of workers — home care aides paid by the state but employed by private individuals — were only “partial public employees” and therefore, compulsory union dues violate their free speech rights.

The decision is a blow to public employee unions, but not as much as some feared. The court opted not to rule on whether membership dues violated the free speech rights of full-fledged public employees.

During the oral arguments, Alito’s comments suggested that he wanted to revisit a 1977 decision, Abood v Detroit Board of Education, which said that public employees could be compelled to pay a “fair share” of the cost of collective bargaining.

“What stood out to me was just how narrow [the ruling] was,” said Paul Secunda, a professor of labor, employment and benefits law at Marquette University Law School.”They criticized Abood, but they didn’t overrule it or even say it was part of the decision.”

The limited nature of the majority opinion doesn’t mean that Abood is safe from further challenges. Rick Hasen, a law professor at the University of California, Irvine, and a longtime observer of the Supreme Court, noted that Chief Justice John Roberts often lays the groundwork for overruling precedents in a series of otherwise moderate decisions.

“Just because the Court takes two or three cases to reach its highly ideological decision,” Hasen wrote, “doesn’t make it any less ideological or any more comporting with principles of judicial minimalism or respect for precedent.”

Ironically, the lead plaintiff named in the case, Pamela Harris, does not benefit from the court’s decision. Harris is a personal assistant who provides home care to disabled participants in a state program administered by a division of the Illinois Department of Human Services. She is a non-union member and doesn’t pay union dues, but she sued the state to pre-empt any future requirement that she pay union dues. Technically, the state sets her pay with money from the Medicaid program, but the individuals for whom she cares are her employers in most other ways, such as having the right to fire her.

The court said Harris and other petitioners who are part of the state’s disabilities program, which is not unionized, do not have standing to challenge a 2003 state law allowing unions to collect membership dues from home care workers. Instead, the ruling applies to three petitioners who are members of the state’s rehabilitation program, which is similar to the disabilities program in its mission, but different in the sense that members voted to be unionized.

Only 26 states, including Illinois, require state employees to pay membership dues to labor unions in order to offset unions’ cost of collectively bargaining with the government and creating contracts that dictate employees’ pay and benefits. It is unclear how many partial public employees would be impacted by the ruling, or what proportion of overall union membership dues they represent. National Right to Work Legal Defense Foundation, which joined Harris in challenging the Illinois law, claims that at least 18 states have similar programs that pay home care aids as if they were public employees.

Public employees have become an increasingly important part of organized labor, as union membership in the private sector has declined steadily over the past 30 years. The U.S. Labor Department tallied about 7.2 million public employee union members in 2013. That accounts for about 35 percent of the sector’s workforce — about where it’s been for the past three decades. By contrast, only 6.7 percent of private sector workers belonged to unions last year. Thirty years ago, that share was 16.8 percent of all private industry employees.

The case prompted divergent responses by state elected officials, depending on their party identification. Illinois Gov. Pat Quinn, a Democrat, called the decision “disappointing” because home care workers deserved the right to collectively bargain for wages, benefits and working conditions. Technically, the ruling doesn’t limit the right to collectively bargain, but by allowing employees paid with public tax dollars to opt out of “fair share” membership dues, the ruling could undermine unions’ ability to negotiate with the government.

Wisconsin Gov. Scott Walker, a Republican, released a written statement applauding the ruling. Walker battled unions over legislation that limited public employees’ ability to collectively bargain, which prompted a recall election in 2012 and appears to have led to a dramatic drop in union membership in that state.

Governing
BY J.B. WOGAN | JUNE 30, 2014



Can Miami Both Cut the Tax Rate and Increase School Spending?

With caution, Miami-Dade Schools Superintendent Alberto Carvalho laid out the framework Wednesday for a $2.9 billion general fund budget that he says will increase schools spending by millions next year while also reducing the property tax rate.

But the district’s budget crunchers also warned that what they see as overly optimistic tax-revenue projections from the property appraiser’s office will force the School Board to again stash away millions in “rainy day” funds.

“It’s not a budget that makes everybody happy,” Carvalho said. “But what in life is?”

The spending plan presented by Carvalho and Chief Financial Officer Judith Marte is not the district’s official budget. The complete document will not be established until later this month, when the state education commissioner certifies Miami-Dade’s tax rolls and sets a minimum local tax rate. After that, the School Board can choose to increase the rate up to an amount capped by the state.

But even as the district waits, Carvalho said “the work is pretty much done,” and he committed to taxpayers paying a lower tax rate than last year. He also wants the district to spend an extra $43 million on schools, largely through increased spending for teachers and counselors at elementary and high schools.

View Full Story from the Miami Herald



Lincoln Park Becomes Latest City Under Michigan’s Control.

Michigan Governor Rick Snyder appointed an emergency manager for Lincoln Park, a Detroit suburb that’s struggled with deficits and rejected an agreement to bring its finances under control.

Snyder named Brad Coulter, a Detroit-area finance consultant, to oversee the city of 37,000, which, like other Michigan municipalities, has been squeezed between the cost of employee pensions and falling property-tax revenue to pay for basic services.

Coulter, 54, is an independent contractor for O’Keefe & Associates, a turnaround consultant in Bloomfield Hills. He has 25 years experience in corporate finance and restructuring, according to a release from the state Treasury Department.

“Brad will work collaboratively with city officials to address the financial emergency and to ensure Lincoln Park residents receive the critical services they expect and deserve,” Snyder, a 55-year-old Republican, said in the release.

The city diverted $2.5 million from water and sewer funds to prop up pensions in fiscal 2013, according to an April state report. The pensions were only 28 percent and 34.6 percent funded, and retirement health care was underfunded by more than $100 million, according to the report. Standard & Poor’s in December cut the city’s debt rating seven steps to two levels below investment grade.

The city must find a way to raise property values to increase revenue long-term, Coulter said in a phone interview. “It can’t be a 100 percent cost-cutting exercise,” he said, added that rising retirement costs must be constrained.

Council Rejection

The city council in May rejected a state consent agreement that would have given a new manager power to create a deficit-reduction plan, including the ability to restructure government, terminate union contracts and honor debt obligations. It’s better to let the state appoint its own manager with more experience, said Councilman Tom Murphy, who opposed the deal.

“A state manager knows how to get things done and save money, and that’s what we need,” Murphy said in a phone interview.

Although Lincoln Park adopted a balanced budget for its fiscal year beginning July 1, it will create a deficit of “a couple million dollars” by next year, said City Attorney Ed Zelenak.

Four other Michigan cities and three school districts, including Detroit and its schools, are under state-appointed emergency managers. A 2012 law gave emergency managers broader authority, including the power to nullify union contracts. The law gives distressed cities and school districts more choices to address fiscal crises, including bankruptcy.

By Chris Christoff Jul 3, 2014 8:38 AM PT

To contact the reporter on this story: Chris Christoff in Lansing at cchristoff@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet



Biggest High-Yield Muni ETF Falls on Puerto Rico Concerns.

The largest exchange-traded fund that tracks the riskiest municipal securities fell the most in a year as investors sold on concerns that downgrades to Puerto Rico and its agencies may threaten their solvency.

The $1.08 billion Market Vectors High Yield Municipal Index ETF (HYD), called HYD, fell $1.10 this week to $29.18, data compiled by Bloomberg show. It’s the biggest slide since June 2013. The fund is at its lowest price since February, erasing gains from individuals pouring money into higher-yielding securities.

Puerto Rico’s general-obligation bonds traded at record lows this week after Moody’s Investors Service cut the commonwealth’s $14.4 billion of general-obligation bonds to B2, five steps below investment grade, from Ba2. The downgrade came after lawmakers passed a bill last week to allow some public corporations to restructure debt outside bankruptcy. Puerto Rico’s debt tumbled 3.4 percent yesterday, the biggest one-day drop since December 2008, S&P Dow Jones Indices data show.

“Puerto Rico has most recently provided the impetus for a more general or more broad-based market move,” said Jim Colby, who helps run HYD for Van Eck Global in New York. “Moves in the marketplace generally occur when you have big moments and big events” such as the commonwealth’s circumstances this past week, he said.

Holiday Lull

Benchmark 10-year munis have climbed about 0.02 percentage point this week to 2.39 percent, data compiled by Bloomberg show. That would be the biggest gain in three weeks. States and cities have scheduled about $3.6 billion of sales next week, up from $2.5 billion during this holiday-shortened week, Bloomberg data show.

This week’s decline pushed HYD to the biggest discount to its net asset value since October. That usually signals to investors an opportunity to buy because the fund’s price is lower than the value of its assets.

ETFs are similar to mutual funds that track indexes of equities, bonds or commodities, though they can be bought and sold during the trading day. That makes it easier for individuals to enter or exit municipal investments than purchasing a portfolio of bonds themselves.

By Elizabeth Campbell and Brian Chappatta Jul 3, 2014 9:01 AM PT

To contact the reporters on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net; Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Stacie Sherman



Puerto Rico Bonds Have Long-Term Value, OppenheimerFunds Says.

The value of Puerto Rico bonds will increase in the long term even as their prices plummeted to record lows after passage of a debt-restructuring law, OppenheimerFunds Inc. said.

“The distressed securities have far more upside than downside in the long term,” according to a post on OppenheimerFunds’ website.

The New York-based investment firm held about $5.2 billion of Puerto Rico debt, the most among U.S. mutual funds, as of May 29, according to Morningstar Inc. (MORN) Prices on the securities sank after the legislature last week approved a measure allowing certain public corporations to reduce their debt loads and the commonwealth on July 1 received a three-level downgrade from Moody’s Investors Service. Oppenheimer Rochester Funds, a subsidiary in Rochester, New York, and Franklin Templeton Investments (BEN) are challenging the law.

Puerto Rico’s fiscal challenges affect the entire $3.7 trillion municipal-bond market because 66 percent of U.S. muni mutual funds hold the securities, which are tax-free nationwide. Debt sold by the commonwealth and its agencies lost 3.4 percent yesterday, the biggest one-day drop since Dec. 26, 2008, according to S&P Dow Jones Indices.

Rating Downgrade

The declining value of Puerto Rico securities has harmed some Oppenheimer funds. Prices on the $67.4 million The Oppenheimer RochesterTM Maryland Municipal Fund fell by 2.1 percent, the steepest one-day drop in a year, to $9.52 per share yesterday, the lowest since Feb. 5, data compiled by Bloomberg show.

The fund directed about 42 percent of its assets to commonwealth securities as of March 31, according to Morningstar data. It has earned 5.14 percent this year through July 2, beating 32 percent of its peers, Bloomberg data show. Moody’s cut the island’s $14.4 billion of general-obligation debt July 1 by three levels to B2, five steps below investment grade, citing the commonwealth’s new preference for shifting fiscal pressures to creditors.

Even though the debt-restructuring law may weaken Puerto Rico’s willingness to repay all obligations, “this is just speculation and, in our opinion, likely premature,” the OppenheimerFunds blog post said.

By Michelle Kaske Jul 3, 2014 12:50 PM PT

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Stacie Sherman



Denver Unveils Social Impact Bond Program for Homelessness.

I can’t remember a time when people in Denver haven’t wrung their hands about homelessness or it wasn’t part of the city’s persona. It’s just moved around.
Larimer Street used to be Denver’s Skid Row. Now it’s home to tony shops and posh restaurants.

But really, the population just moved. It didn’t really go away.

The 16th Street Mall is a magnet for homeless people today. The concentration of homeless people and panhandlers there makes it seem Denver has a bigger problem with homeless people than New York City, which is ridiculous, of course. It’s just more visible.

But there’s no getting around the fact that it’s bad for business. For tourism. For the city’s image.

A couple of years ago, frustrated by the number of people still on the streets at night, the city passed a controversial anti-camping ordinance, which enraged homeless advocates.

I’m told there hasn’t been a single ticket issued under the anti-camping ordinance. This week, the Denver City Council okayed $1.8 million for more police on the 16th Street Mall, but the chief was warned by several members of council that the money was not to be used to hassle homeless people in downtown Denver.

As one city official told me, it’s almost as if homeless advocates and their supporters in government have romanticized homelessness. And when something is romanticized, logical thinking is put in jeopardy.

A lot of smart, compassionate people have tried to solve this problem. But compassion might be part of the problem.

A decade ago, Denver’s Road Home made it a goal to eliminate homelessness, by getting the hardcore homeless into dwellings of their own. That, says everyone, is the key to breaking the cycle. But finding permanent housing for the effort proved difficult.

What’s needed is some hard-nosed business thinking. And, at long last, it looks like we’re about to get some.

The city of Denver Wednesday unveiled a new program that aims directly at the 250 to 300 people identified as “chronically homeless” on the street for 10 years or more with substance abuse and mental health issues. Caring for this population costs as much as $50,000 a year per person when you add up emergency room visits, detox, police, etc.

At the Clinton Global Initiative gathering in Denver Wednesday, Mayor Michael Hancock unveiled a new strategy. The city will partner with private and institutional investors, foundations and social welfare organizations on a program to put private money to work on the homeless problem.

The so-called “Social Impact Bond” program will work like this: Investors will provide upfront financing for organizations that build housing, provide mental health, case management and other services to the hardcore homeless population.
The investors will be paid back by the city from the savings realized when, theoretically, this 250-300 of the most chronically homeless aren’t arrested and jailed, or dumped into detox or patched together in the emergency room.

Cary Kennedy, the city’s chief financial officer, said Denver will be one of the first cities to try this approach and she’s optimistic it can break the cycle of homelessness for this population.

“It provides a tool to redirect city tax dollars that are currently going to a very inefficient and failing system for these individuals as they bounce from jail, to the police to detox,” Kennedy said.

What’s new about it? It’s the relationship between the investors and the providers of housing and mental health services. It’s in the investors’ interest to find providers who are successful dealing with this population, or they don’t get paid because the city only pays if it realizes savings from reduced use of city services by this population, Kennedy told me.

“The cost savings becomes the source for paying back investors,” Kennedy said. “The investors have a contract (with providers) based on actual savings. We are paying only if the providers are successful.”

“The investors have a real stake in partnering with providers that have a track record of success.”

In announcing the program, Hancock it makes no sense “to continue paying the high cost of the ineffective remedial and emergency care systems when we can invest in proven programs that will set these individuals on a healthier path.

“Now is the time to break the cycle from streets, to emergency rooms, to jails and back to the streets and replace it with a long-term solution,” Hancock said.

The initial goal is to raise over $8 million to begin providing services in 2015.
I’ll keep you posted on the progress of this effort, which is pretty exciting. Let’s hope it works.

Neil Westergaard
Editor-
Denver Business Journal

Neil Westergaard is editor of the Denver Business Journal and writes for the “17th & Lincoln” blog. Phone: 303-803-9220.



Freebies Fail to Lift Atlantic City Revenue: Muni Credit.

The two-night getaway with her daughter, Barbara, was a money loser for the New Jersey oceanside resort that’s seeking to reclaim its title as the second-biggest U.S. gambling destination after Las Vegas. With a 44 percent decline in casino revenue since its 2006 peak of $5.2 billion, Atlantic City is attempting to lure all types of visitors to try their luck at the 11 casinos that account for about 70 percent of the municipal tax base.

Promotions such as free stays and meals aren’t translating into the spending boom that Atlantic City needs, 20 months from the five-year deadline that Governor Chris Christie set for a turnaround. Freebies totaled 26 percent of gross revenue for casino owners last year, as North American gambling operators tracked by Bloomberg Industries averaged as little as 6 percent.

“We get a sub sandwich from White House and it’s so big you can eat it all day,” said Barbara Lapsley, a 56-year-old retired counselor from North Arlington, New Jersey.

As tourism struggles, investors in the city’s bonds are demanding more yield compared with other New Jersey entities, said Daniel Solender, who helps manage $15.5 billion of munis at Jersey City-based Lord Abbett & Co.

Extra Yield

Atlantic City bonds due December 2025 that sold seven months ago traded June 5 with an average yield of 3.86 percent, according to data compiled by Bloomberg. That’s 1.15 percentage point more than the yield on an index of New Jersey securities with a similar maturity, according to Barclays Plc data.

The extra yield on the bonds, rated A- by Standard & Poor’s, four steps above speculative grade, has increased since the Nov. 26 sale, Bloomberg data show. The 1.6 percentage point spread above top-rated munis compares with a 1.4 percent gap when the bonds first priced.

“The trends are negative,” Solender said. “You may get a little extra yield, but the challenges to the credit and the increasing potential downside, that drives people away.”

The performance comes as the $3.7 trillion municipal-bond market rallies by the most since 2009. State and local debt has earned 5.8 percent this year through June 25, Barclays data show, with New Jersey bonds gaining 5.5 percent.

Pennsylvania overtook Atlantic City as the second-biggest U.S. gambling market in 2012. Amid the slide, Christie, a 51-year-old Republican, committed $261 million in tax breaks to hasten the completion of the Revel Casino-Hotel, the newest resort, and signed legislation to create a state-supported tourism district, where Tanger Factory Outlet Centers Inc. (SKT) is an anchor.

Revel Bankruptcy

Revel, which kicked off its May 2012 grand opening with a Beyonce concert, never caught on. It filed for bankruptcy protection within 10 months and retooled to appeal to a budget-minded crowd rather than its original target of high-income visitors seeking spas and dining over gambling. On June 19, Revel AC Inc. (REVEQ) again filed for bankruptcy and said it would seek a buyer or close.

Against the February 2016 deadline Christie gave Atlantic City to reverse its decline, casino revenue has continued to drop, to $2.86 billion in 2013 from $3 billion a year earlier, adding pressure to the city and state budgets.

Atlantic City’s promotions rate compares with a range of 6 to 19 percent for North America casino operators tracked by Bloomberg Industries, according to analyst Brian C. Miller.

Atlantic Club

Promotions at one casino force others to come up with their own, and it’s tricky to increase visitors and stay profitable, said Don Guardian, Atlantic City’s 61-year-old Republican mayor. The Atlantic Club Casino Hotel closed in January after finding the generosity unsustainable, with giveaways last year equaling 36 percent of gross revenue, the highest among the city’s casinos, according to Bloomberg Industries.

“They could grow their market 100 percent, but if they’re still losing money you can only give away the house for so long,” Guardian said in an interview in Trenton on June 24. “You only have a loss leader — the food, the beverages — for the short term to bring people back, but then you have to be profitable again.”

On Nov. 20, Moody’s Investors Service lowered Atlantic City debt one step, to Baa2, two levels above junk, with a negative outlook. Moody’s cited successful casino tax-assessment appeals, which forced the city to borrow for refunds, and long-term high unemployment and poverty. The downgrade followed a Nov. 6 bankruptcy filing by the Atlantic Club.

Internet Gambling

The Nov. 26 start of Internet-based gambling, initially expected by the Christie administration to contribute $180 million in state tax revenue by June 30, may produce about $12 million at the current rate, according to the office of legislative services. The state in 2013 collected $205 million in casino tax revenue, about half from the peak year.

On June 17, as the temperature at Atlantic City International Airport reached 92 degrees Fahrenheit (33 degrees Celsius), Dorothy and Barbara Lapsley chose the boardwalk over the air-conditioned gambling halls of Bally’s, where they were staying, and a snack of funnel cake served on a paper plate rather than birthday cake from any of the celebrity-chef or theme restaurants.

Springsteen Cover

At Bally’s Bikini Bar, amplifiers broadcast a singer covering Bruce Springsteen tunes to a young crowd drawn to rum punch and swimsuit-wearing waitresses on a beach reclaimed from decades of use by drug users, prostitutes and the homeless. Guardian’s addition of a rainbow flag over the dunes at Park Place on June 16 signaled a welcome to lesbian, gay, bisexual and transgender visitors.

The beach as a whole, dotted with rows of rented yellow sun umbrellas, “looks better and it feels safer,” said Geraldine Smallwood, a 69-year-old retired house and office cleaner from Philadelphia.

A spot on the sand — accessible for no charge, unlike most others in New Jersey — was the only draw to the city where she grew up, she said.

“My father was a card player until the day he felt a slap on his hand, and he took that as the spirit of his late mother,” Smallwood said. “He never played again and that left an impression on me, too.”

By Elise Young and Michelle Kaske Jun 26, 2014 5:00 PM PT

To contact the reporters on this story: Elise Young in Trenton at eyoung30@bloomberg.net; Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Stacie Sherman, Alan Goldstein



Fastest-Growing Metro Area in U.S. Has No Crime or Kids.

June 27 (Bloomberg) — For Jerry Conkle, life in America’s fastest-growing metropolitan area moves as slowly as the golf carts that meander through his palm-lined neighborhood at dusk. Most days, he wakes early, reads the newspaper, and then hops into his four-wheeled buggy for a 20-mile-per-hour ride to one of the 42 golf courses that surround his home.

“It’s like an adult Disney World,” Conkle, 77, said of The Villages, Florida, whose expansion has come with virtually no crime, traffic, pollution — or children.

The mix has attracted flocks of senior citizens, making The Villages the world’s largest retirement community. Its population of 110,000 has more than quadrupled since 2000, U.S. Census Bureau data show. It rose 5.2 percent last year, on par with megacities like Lagos, Nigeria, and Dhaka, Bangladesh.

That the most rapidly expanding U.S. metro area is a Manhattan-sized retirement village — with more golf carts than New York has taxis — highlights the transformation of the world’s demographic profile. The over-60 set — which the United Nations projects will almost triple to 2 billion by 2050 — offers opportunity to marketers and homebuilders even as it confounds governments that must care for an aging populace.

“A lot of communities see seniors as a huge benefit — they contribute to the tax base and the local economy,” said William Frey, a demographer and senior fellow at the Brookings Institution in Washington. “But these people are going to get older, and they’re going to have health needs and service needs.”

Retiree Spending

Few have benefited from the spending power of retirees more than H. Gary Morse, who developed The Villages. The Holding Company of the Villages Ltd., owned by Morse and his family, has sold more than 50,000 new homes since 1986, generating $9.9 billion in revenue, according to disclosures in municipal-bond filings.

The Villages, which has rules governing everything from how long children can visit to how many pet fish residents can keep, has helped Morse build a family fortune worth $2.9 billion, according to the Bloomberg Billionaires Index.

In addition to selling homes, Morse, 77, and his family own the local newspaper, a radio station and a television channel.

They also hold a controlling interest in Citizens First Bank, which provides mortgages. The holding company is the landlord of more than 4.5 million square feet of commercial real estate, including dozens of restaurants and retailers.

Own Everything

“They own everything,” said Andrew D. Blechman, author of “Leisureville,” a book about The Villages and other retirement communities that ranks Morse’s as the biggest. “You basically have a city of 100,000 people, owned by a company.”

Gary Lester, a spokesman for The Villages, did not return calls seeking comment.

Harold Schwartz, Morse’s father, started selling tracts in Florida in the 1960s, after buying a few thousand acres about 60 miles (100 kilometers) northwest of Orlando. He recruited Morse to join the business in 1983 and the pair soon began marketing homes to retirees, offering free golf for life.

Following an age-restricted model used by developer Del Webb’s Sun City in Arizona, The Villages emerged as growth among the elderly began outpacing all other age groups.

The over-65 population in the U.S. increased 74 percent between 1970 and 2000, more than twice the rate of those 64 and younger, census figures show.

Golf Lure

Marketers for The Villages, where new home prices range from about $150,000 to $1 million, have capitalized, airing commercials on the Golf Channel. The ads lured Conkle — who worked for four decades as a General Motors Co. machine repairman in Muncie, Indiana — to the Villages 20 years ago. He now says he can’t imagine living anywhere else.

Driving his black Chevrolet Impala around the 33-square-mile community on a sunny day in June, Conkle described the appeal.

“One thing I like about The Villages is how clean it is,” Conkle said, driving past a flower-adorned roundabout with manicured golf ranges to the east, west and south. “There’s hardly any crime. I don’t know any place that’s safer than here.”

Golf-cart accidents have killed more people than criminals, said Elaine Dreidame, president of the Property Owners’ Association of The Villages. It regularly hosts Republican politicians. Former President George W. Bush and presidential candidate Mitt Romney have appeared there.

Monthly Tea

It even attracts expatriates. Residents from the U.K. meet over tea once a month. The community spans three counties, including Sumter, where the median age of 65.5 makes it the oldest in the U.S. About 97 percent of the residents are white, according to census figures.

Every day at 5 p.m., crowds descend on The Villages’s three town squares, where they shimmy, line-dance and sway cheek-to-cheek as cover bands perform hits from the 1960s. Viagra-fueled trysts often follow, according to Blechman’s book.

“It’s designed so that you can be active or as inactive as you want,” said Dreidame, 71. “If I can’t be happy here, there isn’t any place I’m going to find.”

The town squares, golf courses and other amenities in The Villages were financed with tax-free municipal bonds, issued under a provision in Florida law via community-development districts established by Morse’s company. Village Center revenue bonds maturing in November 2023 and rated four steps above non-investment grade by Moody’s Investors Service traded June 11 at an average yield of 5 percent, or about 2.7 percentage points above benchmark munis, data compiled by Bloomberg show.

IRS Ruling

The Internal Revenue Service ruled last year that the bonds shouldn’t have been given tax-free status, which is generally reserved for public projects.

The district, governed by a board made up of Morse and his employees, was “organized and operated to perpetuate private control,” the IRS said in a 2013 memo. Attorneys for the district have disputed the IRS’s findings.

Residents like Dreidame, who pay annual assessments that are used exclusively to refund investors, say they don’t mind the costs or the corporate influence. In his business model, Morse builds the golf courses and other amenities and then sells them to residents. Morse has earned at least $955 million in the transactions, according to an analysis of 38 bond-offering statements since 1992.

Carefree Lifestyle

“It’s kind of like if stocks are going up and everybody’s making a few bucks, they don’t care if the CEO is making a $100 million,” Blechman said.

The carefree lifestyle is difficult to replicate, said Frey. The Villages is sheltered by both the government and private insurance held by its relatively affluent residents. Elsewhere, the increase in life expectancy means more people are outliving their savings and incurring higher medical bills as they age, he said. Lower birth rates mean there will be fewer workers to support the elderly.

“Not too far down the road, those people are going to be needing health services and social services,” said Frey. Governments “have not planned for that long-term scenario which is going to be hitting us.”

More than a fifth of the world’s population will be 60 or older by 2050, compared to 12 percent in 2013, according to a report released by the United Nations last year.

The “demographic dependency ratio” — the number of working-age adults compared with the number of children and the elderly — is primed for a “sharp” rise in the developed world through 2050, the report said. By 2047, the world’s elderly will outnumber its children for the first time, UN projections show.

Those trends, which are vexing urban planners from Berlin to Tokyo, bode well for The Villages. On a recent day, construction workers could be seen operating machinery at golf courses, in new subdivisions and at the local hospital.

Conkle, who recently had triple-bypass heart surgery, said everything he needs is a golf-cart ride away.

By Toluse Olorunnipa Jun 27, 2014 3:00 AM PT

To contact the reporter on this story: Toluse Olorunnipa in Tallahassee, Florida at tolorunnipa@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net; James Hertling at jhertling@bloomberg.net James Hertling



States and Counties Try to Cash In on Sky-High Jail Calls and Money Transfer Fees.

Inside the razor wire on Eagle Crest Way, in rural Clallam Bay, Wash., telephone calls start at $3.15. Emails out, beyond the security fence, run 33 cents. Money transfers in, to what pass for bank accounts, cost $4.95.

Within that perimeter lies the Clallam Bay Corrections Center, a state prison — and an attractive business opportunity. One private company, JPay, has a grip on Internet and financial services. Another, Global Tel-Link, controls the phones.

These companies are part of a new breed of businesses flourishing inside American jails and prisons. Many of these players are being bankrolled by one of the most powerful forces in American finance: private equity. Private investment firms have invested many billions of dollars in the prison industry, betting — correctly — that it is a growth business.

Wall Street previously championed companies like Corrections Corporation of America, the nation’s largest private corrections company. But unlike companies that have thrived by running prisons, the likes of Global Tel-Link and JPay are becoming de facto banks, phone companies and Internet service providers for inmates and their families across the nation.

It is a lucrative proposition, in part because these companies often operate beyond the reach of regulations that protect ordinary consumers. Inmates say they are being gouged by high costs and hidden fees. Friends and families say they have little choice but to shoulder the financial burden.

But private enterprises are not the only ones profiting. Eager to reduce costs and bolster dwindling budgets, states, counties and cities are seeking a substantial cut in return for letting the businesses into prisons, a review of dozens of contracts by The New York Times found. In Baldwin County, Ala., for instance, the sheriff’s department collects 84 percent of the gross revenue from calls at the county jail. A Texas company has guaranteed the county at least $55 a month per inmate, according to a copy of the contract.

View Full Story from The New York Times.



The Tiff Over TIF in IA.

Tax-increment financing, known locally and nationally as TIF, is public financing that freezes a property-tax base in an area.

When Coralville’s investment in TIF helped spawn the city’s debt, the national entities started paying attention.

And so, when the November 2013 elections rolled around, a lot of eyes were on Iowa City’s neighbor to the west, wondering how a city of this size, in the middle of small-town America, could amass this kind of public debt and create such an unbalanced financial footing.

But even with the national eyes on the city and its Super PAC donors, none of the candidates who publicly spoke out against TIF use were elected.

Incumbent City Councilor John Lundell — a TIF supporter — triumphed the city’s mayor race with 65 percent of the votes, while two incumbent councilors and one challenger who backed tax-increment financing were elected.

Iowa had taken notice a full year earlier, and the Legislature implemented TIF reforms beginning in 2013.

Further efforts to reform the controversial public-financing method in the state may have died in the Legislature last month, but a handful of local elected officials, state lawmakers, and a university economist say the fight is far from finished.

Leaders from both sides of the political aisle remain torn over TIF’s use and effectiveness.

Those subsidies are often utilized for redevelopment, infrastructure improvements, and other community-oriented projects. Under TIF, the would-be property-tax revenue from projects is absorbed by cities, who often then turn around and usher in new development projects.

The recent action in Des Moines — in which lawmakers debated specific ways in which the controversial public-financing tool may be used — comes amid heightened local and national media attention and the construction of gleaming high-rise towers, sprawling suburban shopping areas, and corporate data centers in many pockets of the Hawkeye State.

While Iowa communities large and small — including Des Moines, Iowa City, Cedar Rapids, Coralville, and Swisher use TIF — much of the attention from residents, lawmakers, and development officials has zeroed in on Iowa’s urban and fast-developing areas.

Coralville: TIF use is responsible

In Coralville — a community of roughly 20,000 residents — the tool and the number of TIF districts the city manages often served as ground zero during recent City Council elections and community meetings.

By Iowa law, cities are allowed to have numerous TIF districts.

Today, 51 percent of the city’s outstanding debt is tied up in the 180-acre Iowa River Landing development and the city-owned Marriott Hotel and Conference Center, city documents show. The notion of TIF districts throughout Coralville have been in place since 1996 and have pushed its property-tax base up by more than $836 million.

Iowa City: Officials call TIF use transparent, conservative, and project-based

While the concept of TIF has been floating around the nation for decades, Iowa City chose not to implement it until 2000.

Since then, the Iowa City City Council has issued more than $16 million in tax increment-financing, according to city records. Sycamore Mall was the first to benefit from the special financing. The East Side mall, now named the Iowa City Marketplace and under new ownership, was struggling with an aging appearance and was bleeding retail and restaurant tenants.

That project was given $2 million in public money to improve the existing mall, retain what was then the 40,000-square-foot anchor store Von Maur, and “maintain or exceed occupancy minimums,” according to city records obtained by the DI. Subsequent city records indicate that $7.1 million in building permits were issued for that project. When completed, the shopping center saw a 222 percent increase in property value.

Since then, officials have used TIF financing to expand the city’s Mercer Park Aquatic Center, to grow operations at two plastic-manufacturing facilities, aid in the construction of two downtown high-rises, redevelop two additional East Side shopping areas, rehabilitate a historic downtown building that until recently housed a shuttered bar, and grow the headquarters for the leading U.S. independent national distributor of natural, organic, and specialty foods.

But of all the projects, the council has mostly come under fire for shoveling out millions in financial incentives to a downtown developer who has invested millions of dollars in the city’s core.

Marc Moen, an owner of the Moen Group, has faced steep criticism after receiving TIF from the city for some new high-rise construction projects and historic-preservation efforts in downtown.

But city officials who have supported him point to Moen’s vast development experience as well as the jobs he’s provided for the community.

Mayor Matt Hayek — a two-term Iowa City mayor who has been a long proponent of Moen-led projects — failed to return requests for comment as of Sunday afternoon.

But he has spoken publicly in favor of the financing — such as for the construction of Park@201 during a July 10, 2012, meeting, the DI has previously reported.

A TIF deal is being negotiated with city officials and the group for the proposed 20-story high-rise, the Chauncey, Moen wrote in an email on April 18.

Critics have said Moen’s large glass-clad buildings don’t fit the character of downtown. However, supporters have said the developments meet niches previously underutilized downtown, including high-end housing, grocery options, Class-A office space, and added retail opportunities.

“It is a fact that Park@201 would not have been possible without the TIF, and we could not construct that project without the assistance,” Moen wrote in an email. According to city documents, the city of Iowa City has allocated $8.75 million in TIF for Moen’s projects.

Park@201, which will cost at least $10.7 million, will be home to roughly 100 employees of the building’s respective tenants. That is on top of hundreds of employees at the Plaza Towers and the several dozen other employees at other Moen-owned buildings, Moen said.

Without the boosts in TIF over the years, downtown would not have Plaza Towers or the presence of FilmScene and Modus Engineering. The Packing and Provision Building, 118 E. College St., would not have been renovated to the extent it was nor have the facilities that are housed there, and Park@201 would still be a one-story concrete block building, Moen’s email said.

ISU economist: ‘It isn’t economic development’

Staunch opponents of public-financed development incentives, including one economist, say Iowa is awash with TIF growth, and its negative effects are widespread.

David Swenson, an economist at Iowa State University, dispels contentions often championed by city councils and developers that TIF translates into economic development.

“It isn’t economic development,” said Swenson, a published TIF critic who has been studying the practice for approximately 20 years.

That said, he notes legitimate TIF use can and does work, and he pointed to Des Moines’s extensive downtown overhaul that was fed in large part with TIF funding.

But. Swenson says he can’t support, say, Coralville’s massive dependency on TIF.

“[TIF allocations] are used much too promiscuously from people who don’t understand them; Coralville is a prime example,” he said. “[Coralville officials have] abused the public’s trust because of their use of the TIF law.”

TIF impact and use in Johnson County

Many members of the governing body of Johnson County, the Board of Supervisors, have been staunch critics of TIF use by local municipalities, saying it damages the county’s budget, the funding of area school districts, and taxpayers.

Currently, nine of the 12 towns in Johnson County have 19 tax-increment financing urban-renewal areas, county Deputy Auditor Mark Kistler told the supervisors on Feb. 25.

University Heights and Hills are two Johnson County towns that have opted out of using the tool, he reported.

According to the minutes from the February meeting, Kistler described how TIF works and noted that Coral Ridge Mall is an example of how TIF negatively affects the county’s tax revenue.

Approximately $5.1 million of TIF appropriations will be diverted from Johnson County in fiscal 2015, which starts July 1, he said.

In a recent email to the DI, Kistler noted that because more bonds for projects took place this year, $4.6 million in revenue will be diverted from the county.

Despite being the fourth-most populous county in Iowa, Johnson only trails Polk County — home of the quickly developing Des Moines area — in largest uses of TIF at nearly $2 billion, Kistler said.
County property located in TIF districts is valued at $839 million, according to Johnson County Auditor’s Office records.

TIF revenue is expected to eclipse $27.1 million in fiscal 2015, Kistler said.

But not all are in favor of adding to that number.

Supervisor Chairman Terrence Neuzil — a supporter of TIF — said the county would never use the tool, even for a proposed $30.8 million annexation to the 1901-era courthouse. Supervisors are aiming to put a courthouse annexation on the upcoming November ballot.

Rather, Neuzil said, it should be applied minimally when it comes to housing and purchases of public buildings, and Johnson County and officials from local school districts ought to be able to say yes or no to expansion of TIF.

In April, Neuzil scrutinized the city of Coralville’s use of TIF, specifically the Coral Ridge Mall’s 20-year TIF district.

That TIF area is set to expire in 2018. Neuzil attributed that city’s bloated financial standings to the $278 million in outstanding debt the city owes as of June 30.

One “valid” TIF use, he noted, would be for Iowa City’s Riverfront Crossings District, a nearly 280-acre zone south of downtown.

Dubbing that area a “tired entryway into the city,” Neuzil said he was unsure how much should be allocated to redevelop that swath of land.

In the most recent interview with the DI, Neuzil emphasized continuing TIF reform.

“There needs to be certainly some additional limitations so that cities aren’t taking 60 to 90 percent of their entire community and putting it in a TIF district,” he said.

Much of the blame lies in the hands of Gov. Terry Branstad and the current legislative leaders in the state, he said.

“We have a bit of an every-government-for-itself mentality, and it has been really just expanded by the Legislature tightening the grip of our local tax base,” he said. “When the governor and Legislature reduce commercial property taxes, it means that every government is trying to find a new source of funding,” leading it many times to TIF.

Without fixes to the state’s TIF laws, county governments are going to be affected the most.

Issue not divided by party lines

Rep. Tom Sands, R-Wapello, said he has had several conversations with Branstad over TIF use, but, like others, he believes the ultimate responsibility falls on the Legislature for finding a fair path.

Sands said he believes there is support in the House to pass a new bill to the Senate. He said it may be drafted and presented during the first month of the new session, which begins in January. Sands, who represents House District 88, which runs from Muscatine County through Des Moines County in southeastern Iowa, said in recent years he has witnessed TIF use expand to build libraries, swimming pools, and city halls.

For him, the question of TIF legitimacy comes down to simply who is forced to front the eventual bill for the projects subsidized with the incentive.

“It’s who has to pay, and if people in northwest Iowa are asked to pay for a swimming pool in southeast Iowa, there is nothing remotely fair about that,” he said.

Rep. Sally Stutsman, D-Riverside, who serves on the Senate Ways and Means Committee, said even though she doesn’t see TIF talks moving forward this year, modifications are needed.

“I think that the problems we’re getting into is we’re seeing communities continue to push the envelope on the use of TIF,” she said, noting that it is an “increased burden on taxpayers.”

Stutsman — who said she is not opposed to TIF use in certain cases — believes the only way it can be modified is with new legislation and support from the Branstad administration. Increased news coverage that has arisen from local and national news outlets is also helping to keep discussions moving, she said.

“I don’t think the original people who wrote the [idea of] TIF thought it would be used for high-end housing or in areas where there isn’t blight,” she said, praising Sands’ bipartisan commitment and cooperation in wanting to see change take place. “The more we talk about it, the more the average taxpayer can understand what it is.”

Tensions between Iowa City and Coralville officials continue as the cities differ on TIF use

Iowa City City Councilor Jim Throgmorton was bullish in his general opposition to TIF. He noted that a number of TIF-funded projects should not have passed the council during the years he has served.

Today, ones that achieve high levels of energy efficiency, especially with regard to carbon emissions are deserving of it, he said.

“I don’t like TIF. In my ideal world, not a single entity would receive TIF,” he said. “But we don’t live in an ideal world, and I am willing to support particular projects that meet particular objectives. We’re better than our neighbor in how we’ve been using it.”

New policies for TIF could and should be done by the Legislature, Throgmorton said, because cities are so constrained by current state government regulations about the economic-development tools they can have at their disposal.

While quick to decry the excessive use of TIF by Coralville, Throgmorton maintained that there is not enough clarity over what defines “public good” — a reason for issuing funding for TIF — in the city.

Throgmorton said he would like to see public financial assistance used in some fashion — possibly another TIF plan — to rejuvenate the Lower Muscatine Road/First Avenue commercial corridor on the city’s East Side. That area includes the Iowa City Marketplace that Throgmorton said could better tie with the Tait Alternative High School, Kirkwood Community College, Southeast Junior High, and the Twain Elementary neighborhood.

“TIF is a complicated beast,” he said.

Iowa City City Manager Tom Markus said the city was among the backers of the 2012 reforms and supported the most recent legislation.

The more aggressive surrounding communities support tax-increment financing, he said, and that pushes cities to fight back with its use.

Comfortable with what he sees as the “conservative” approach the city of Iowa City has taken with TIF, Dennis Bockenstedt, who serves as the city’s finance director, said city staff had looked over the provisions to the newest TIF reform bill. Because one portion of the now defunct bill called for a limit on the life a TIF district can have, he said, the city’s use of the tool would not have been affected.

Although the city is in the process of developing a TIF area for a 170-acre parcel on the Northeast Side known as the Moss Ridge Campus office park, Bockenstedt said, he is unsure whether officials will increase or decrease the use of the tool in the coming years.

The Moen Group’s 14-story Plaza Towers stands as a symbol of good use of TIF, Bockenstedt said, because the $22.2 million project has added around $35 million to the city’s tax base since opening in 2006.

Wendy Ford, the economic-development coordinator for the city, said the city’s three-step process of approving TIF funding is separate and different from the state’s. The policies that were updated on April 15 are the only written and public documents regarding a city in Iowa’s guidelines on how TIF is granted, she said.

While TIF captures the majority of the economic-development spotlight in Iowa for funding, Ford noted that rebates, and the use of bonds, are also at the disposal of communities.

Despite having made national headlines for their eager pursuit of TIF, Coralville officials remain unapologetic.

Tony Roetlin, Coralville’s finance director, continually defended the community’s TIF use, emphasizing that city officials have used it responsibly. He questioned whether more legislative actions and restrictions on TIF use would contribute any meaningful help.

“If the city didn’t believe it wasn’t effective, the city wouldn’t do it,” Roetlin said.

Retail sales in the community of roughly 20,000 residents have grown from fewer than $200 million in 1997 to close to $700 million in 2011, the most recent year of recorded data, Roetlin said. He said much of that growth can be attributed to the aid of TIF.

On Jan. 7, 2013, Coralville city officials published documents on the city’s website regarding TIF in order to become more transparent, Roetlin said. Still, he said, the website does not offer enough transparency, and the hiring of a TIF transparency officer is a “thoughtful suggestion.”

Swenson, the Iowa State University economist, says despite many attempts to rein in TIFs by Iowa lawmakers, restructuring in the short-term is unlikely.

“The economic-development community exerts a tremendous amount of power over the Legislature, and they will prevent any meaningful reform here in the state,” he said. “[TIF] shifts the costs of government. It’s turning into nothing but a great big industrial and commercial giveaway.”

BY QUENTIN MISIAG | JUNE 23, 2014 5:00 AM



P3s and the Future of Chicagoland's Infrastructure.

Chicago’s infrastructure need requires looking to new strategies and financing tools in order to implement crucial public projects that may otherwise fall by the wayside.

At a time when other countries are pouring trillions of dollars into infrastructure development, infrastructure funding in the U.S. and in the Chicago region has been a daunting challenge. Because of the mismatch between need and resources, 71 drivers cross one of the 481 deficient bridges in the Chicago metropolitan region every second. And every week, we lose enough water in northeastern Illinois to fill 1.3 Willis Towers. The need requires looking to new strategies and financing tools in order to implement crucial public projects that may otherwise fall by the wayside.

The Metropolitan Planning Council held a half-day forum on June 3, 2014, in collaboration with Lazard, to hear global investor perspectives on the opportunities and challenges to investing in Chicagoland’s current and future infrastructure needs. Panelists from both the private and public sector outlined the benefits of public-private partnership (P3) as a tool to help bridge Chicagoland’s current and future infrastructure gap. Mayor Karen Freeman-Wilson of the City of Gary noted the city’s P3 pipeline as a means to deliver projects that improve the city’s overall budgetary health while building key improvements. However, panelists also highlighted a number of obstacles in the P3 market. One crucial challenge is the communication gap between the investor community, the public sector and the general public. The discussions suggest that intermediary structures like the Chicago Infrastructure Trust may serve as one solution.

The benefits

Infrastructure investment is attractive to many types of investors, ranging from dedicated infrastructure funds to insurance companies. Jonathan Bram, founding partner from Global Infrastructure Partners, described his firm’s interest in energy, airport and port investments due to their expertise in operation management and risk mitigation. Jon Anderson from John Hancock Insurance highlighted the value of real and infrastructure assets as a source of stable returns for investment firms. In the most recent recession, John Hancock’s asset holdings helped the firm weather the crisis. The diversity of P3 projects and the relative stability of infrastructure investments have the ability to draw many types of investors.

Although the U.S. is known for the relatively cheaper tax-exempt market, the cost of debt via a P3 can still be competitive after factoring in delivery costs, risks and life-cycle costs. Citing London’s Gatwick Airport as an example, Global Infrastructure Partners discussed the ability of private managers to reduce project costs over the long run. After investing roughly £1.5 billion pounds into the airport, Global Infrastructure Partners has increased the airport’s efficiency from processing 140 people per hour to 350 people per hour. As a result of the faster airport lines, travelers now spend more money at the airport stores. This is one example of how shifting the controls and risks of operation to the private party may make P3s more financially attractive to both parties.

In addition to the source of a competitive funding source, the public sector also values P3s as a source of risk transfer. Lois Scott, the chief financial officer for the City of Chicago, described the rapid changes in demographics and technology and the need for infrastructure to respond. For example, although bike sharing is a recent introduction to Chicago’s transportation system, it has changed how people move and live around the city. The future of Chicago’s transportation must account for these new changes in flexible ways. The ability to transfer the future of infrastructure needs to the private sector significantly reduces the burden on government and taxpayers.

The challenges

Transparent communications: The primary stakeholders of infrastructure projects, including government, investors and the general public, have varying levels of understanding regarding P3s. The success of a P3 project is predicated on the agreement of all of these parties. There is a need to level the communication field so that investors can better understand political concerns while the general public can better comprehend P3 benefits.

Research and development: Chicago still uses the same asphalt it did 150 years ago to build roads. The dearth of research and development investment for infrastructure materials and structures ignores the opportunity to create an infrastructure system of the future. When resources are solely allocated to maintaining today’s infrastructure, the future costs and risks build.

Flexible project design: Many public sector actors bring fully designed projects to market, reducing investor interest and bid competition. The result is higher costs and higher risk of project failure. Skanska estimates that private sector participation during the designing of the project can generate 20 percent in construction savings.

Political will: Strong political will is crucial to facilitating the implementation of a P3 because it signals the willingness of the public sector to work in tandem with the private sector. As a signal of the lack of investor faith in our political system, political risk insurance is available for many nations including Chile and Peru, but is not possible in the U.S.
One solution: Intermediary P3 structures

The challenges listed above create tremendous risk for both the private and public sectors. When a project requires the approval of numerous governmental agencies and the general public, the risks of failure are perhaps too high for a private investor to bid. Meanwhile, the public sector often faces political pressure and seeks a private partner who is aware of the bigger picture and is willing to compromise. Both the private and public parties consider the risks of failure when deciding on a project. A successful intermediary body would help to buffer those risks by serving as a negotiator on behalf of both the private partner and the public partner.

The Chicago Infrastructure Trust was created by Mayor Emanuel in 2012 to help the City and agencies access alternative financing and deliver projects. After reaching financial close with its first PPP project, RetrofitOne, the Trust is building a pipeline of projects ranging from pool renovations to property assessed clean energy projects. The Trust has played the role of an intermediary by interfacing with the general public, city council, the mayor’s office, and other stakeholders to advocate for projects. On the other hand, the Trust negotiates with the private sector and provides oversight to capture value and efficiencies. It is a goal of the Trust to eventually become an investor in non-revenue generating projects to further facilitate infrastructure delivery.

Virginia created the Office of Transportation Public-Private Partnerships that negotiates with private investors on one side, and, on the other side, seeks approval from the array of government and community partners ranging from the Department of Transportation to the Virginia Port Authority.

Maryland created a Joint Legislative and Executive Commission on Oversight of Public-Private Partnerships where the heads of key government agencies are all at the table to discuss P3 projects.

The Government of Canada has institutionalized P3s as an infrastructure tool and has created both federal- and regional-level organizations to facilitate delivery. PPP Canada was created in 2009 under the Minister of Finance to deliver public infrastructure by providing expertise, leveraging incentives and achieving better value through P3s at the national level. PPP Canada has been directly involved as an investor or advisor in over $3 billion worth of P3 projects. Regional bodies like Infrastructure Ontario function similarly at the provincial level. Through these intermediaries, Canada has initiated more than $63 billion of P3 projects with an estimated $9.9 billion in cost savings.

The Metropolitan Planning Council recommends the establishment of regional intermediary bodies to better facilitate, procure and implement P3s in the U.S.

This article originally appeared on metroplanning.org.



Lincolnwood, School Districts Reach Compromise on TIF Agreement.

Local School Districts 74 and 219 have finally reached a compromise with the Village of Lincolnwood over a long-running Village-backed proposal to create a new taxing district in the Devon-Lincoln corridor that would help stimulate economic growth.

Following the approval of an intergovernmental agreement with the school districts by Village Trustees Tuesday night, a Joint Review Board comprised of local taxing bodies also unanimously approved the agreement (5-0) at a special meeting Wednesday morning.

The Village Board will next take a final vote on establishing the Devon-Lincoln Tax Increment Financing (TIF) District at a special meeting scheduled for June 24 at 8:30 a.m.

The approval of the intergovernmental agreement from both sides marks the end of a somewhat volatile period between the school districts and the Village.

For more than a year the parties had difficulty coming to terms about whether the school districts would suffer due to the formation of a new TIF, which Village officials said was necessary to stimulate development in a triangular area formed by Devon, Lincoln and Proesel Avenues.

Districts 74 and 219, represented by attorney Anthony Ficarelli, were opposed to the TIF’s creation based on the claim it would take tax dollars away from the schools.

Ever since the Joint Review Board—comprised of the two school districts, Lincolnwood Public Library, Niles Township, Cook County, Oakton Community College, and a member of the public—rejected the village’s plan last year, the two sides have grappled with an intergovernmental agreement.

For many months, accusations flew between the school districts and the village.

The school districts accused the village of failing to respond to multiple requests to schedule meetings, and the village in turn criticized District 74 officials for publishing information on the school district’s web site asking the community not to support the TIF proposal.

Progress was finally made after the village formed a sub-committee of Trustees Larry Elster and Jesal Patel, who met with Ficarelli and the school district representatives on several different occasions to work out new terms both parties could agree with.

The Lincolnwood Public Library was initially on board with the intergovernmental agreement, but then failed to take action on the matter at a June 10 Library Board meeting after members determined they no longer wanted to be a part of it.

Library officials could not be reached Wednesday afternoon for comment.

The library’s failure to sign the document, however, doesn’t mean they won’t be included in the terms of the agreement.

Under the agreement—which also includes the revision of some terms of the existing Lincoln-Touhy TIF and the Northeast Industrial (NEID) TIF—any property tax generated from future residential development in both the Devon-Lincoln and Lincoln-Touhy TIF Districts would be declared surplus and reallocated to the other taxing bodies.

“(The intergovernmental agreement) specifically pertains to the Devon-Lincoln TIF, but what culminated from the meetings with the taxing bodies is an agreement that pertains to all the TIF Districts in the Village,” said Tim Wiberg, village manager of Lincolnwood.

The terms of the agreement also set a maximum budget of $30 million for the Devon-Lincoln TIF, including inflation and fund porting.

That amount is $10 million higher than the $20 million level School District 74 sought to limit the maximum expenditure of that fund to.

For the NEID TIF, a surplus would be declared for 80 percent of the costs the village would pay to build a new bike path if it purchases a swath of land called the Union Pacific Rail area.

“The village acquired grant funding to pay for 80 percent of the costs for acquisition of the Union Pacific property and another 80 percent grant to construct a bike trail,” Wiberg explained.

If the Village doesn’t end up buying the property and building a bike path, the agreement says $3.2 million would be declared surplus and redistributed to the taxing bodies.

For the Touhy-Lawndale TIF—which only includes the Lowe’s store on the 3600 block of W. Touhy Avenue—an agreement was made that declares any leftover funds as surplus after the Village makes its final payment to the store.

Trustee Patel said the agreement marked “the beginning of a new relationship” between the village and the school districts.

District 74 School Board President commended the village for crafting what he described as “an agreement that balances the potential impact to taxpayers against the expected benefits that the TIF districts will provide.“

“While our views may differ on the merits, we can all agree that our community is best served when its officials work through differences and reach a consensus that is in the best interest of the village as a whole,” said Scott Anderson, District 74 School Board president.

District 219 is expected to approve the intergovernmental agreement during the July 7 school board meeting.

Natalie Hayes
For Sun-Times Media
June 25 6 a.m.



TIF District Transforms Brickyards into Economic Engine.

How Deerfield transformed old brickyards into an economic engine

Little did Deerfield officials know nearly 30 years ago their desire to see development over old brick yards would turn the village into a major north suburban employment center.

Since the establishment of a TIF (tax increment financing) district to spur development along Lake Cook Road heading from Waukegan Road into Riverwoods a number of Fortune 500 companies have made the area home bringing thousands of people into town each workday.

“There’s no way to know how many employees there are but my guess is our daytime population is more than double our residential population,” Deerfield Bannockburn Riverwoods Chamber of Commerce Executive Director Vickie Street said.

With Walgreens corporate headquarters employing 4,200 people as of the end of last year and Baxter International, Inc.’s home office another 4,000, according to Deerfield’s 2013 Comprehensive Annual Financial Report (CAFR), Street may be conservative in her estimate.

The village’s top 10 employers in terms of number of workers bring 14,705 people into town each day, according to the CAFR report. Deerfield’s current population is 18,240, giving credence to Street’s estimate.

Deerfield has 5 million square feet of office space in its Lake Cook Road corridor, according to Principal Planner Jeff Ryckaert. That does not include 1.23 million square feet of office space next door in Riverwoods where Discover Financial Services’ corporate headquarters employ 3,898 people, according to Riverwoods Director of Community Services Rob Durning.

“It (the Lake Cook corridor) includes everything on Lake Cook Road (west to the village limits) and the Parkway North Center,” Ryckaert said. Parkway North is just south of Deerfield Road near Riverwoods Road.

None of this development was an accident. Much of the area was old, shuttered brick yards, according to Mayor Harriet Rosenthal. She was a member of the Plan Commission when the idea for the TIF was first hatched. She was elected to her first of six terms as a trustee before it was passed. She was first elected mayor in 2009.

“The Lake Cook corridor was our first TIF district,” Rosenthal said. “(Former Mayor) Bernie Forrest told the (Village) Board to do some grand planning. The whole area was built on the old brick yards. There was no tax revenue then.”

Besides Walgreens, Baxter and Discover, Deerfield and Riverwoods are home to Takeda Pharmaceuticals, Mondelez International, Astella Technologies and Jim Beam Brands. Mondelez, the newest Fortune 500 company to arrive, markets snack foods like Oreo cookies.

Deerfield’s development has grown hand in hand with the businesses that call it home. Walgreens has been in the village for some time. It likes what the area provides its employees like the central location.

“Deerfield and Northbrook are wonderful communities and highly desirable places to live and commute for many people. Because our headquarters has been located here for many years, many employees live in homes selected for ease of getting to work.” The company houses some of it corporate workers in Northbrook.

Just as Walgreens credits its long established presence in Deerfield as a benefit, Mondelez likes the fact it was able to build its new space from scratch when Northfield based Kraft Foods decided to split its snack food business from its groceries. Mondelez markets the snack foods.

“Our headquarters in Deerfield is meant to convey our new company dream and instill a new culture of collaboration and creativity,” Mondelez spokesperson Richard Buino said. “The new space is intended to reflect the collaborative and innovative spirit that we’d like to encourage in the new company.”

Just as Deerfield’s proximity to major surface and public transportation hubs makes it attractive to businesses, the value of those workers coming to town each day returns benefits to the community.

“The employees shop here on their lunch hour or on their way home,” Street said. “They might have their dry cleaning done nearby or pick up dinner on the way home. I call them business residents.”

Besides the proximity to transportation hubs, Takeda likes having other health care related resources nearby.

“Deerfield is a good location for the biopharmaceutical sector because of its proximity to Chicago and Milwaukee with an existing network of health care providers, researchers and a healthy biopharmaceutical sector,” Takeda Senior Manager for Corporate Giving and Communications said.

Steve Sadin
For Sun-Times Media
June 24 3:30 p.m.



Los Angeles County Launching Microsoft Cloud for 100,000 Workers.

Los Angeles County is rolling out one of the largest Office 365 implementations in state and local government this year. On June 18, vendor En Pointe Technologies announced it was awarded a five-year contract to support a Microsoft 365 project that will bring services to more than 100,000 employees across 36 departments.

The project equates to $72 million in licensing revenue, and the county says the technology will save $2.5 million in annual costs after the first year, offering relief on current licensing agreements and in-house email operations costs.

En Pointe specializes in Microsoft systems integration and licensing, and currently manages several of the county’s license agreements.

County CIO Richard Sanchez said the technology will enable all kinds of employees, like law enforcement officers, public health inspectors and social workers, to access information securely from any location, making the county more productive and flexible.

The county wanted to gain all the benefits of an enterprise agreement throughout all its departments, Sanchez said, so this arrangement allows smaller and mid-sized departments to gain access to technology that they would otherwise be unable to afford.

The county’s goal, Sanchez said, was to get a common platform where all the county’s departments could leverage all the tools and products available from Office 365.

“We’ve been working on this kind of arrangement for quite some time to consolidate some licenses,” he said. “Basically, we had 16 enterprise agreements in place amongst the 37 county departments that we have.”

This project — scheduled to be completed in less than 10 months — will change all of that.

BY COLIN WOOD / JUNE 18, 2014 

Colin has been writing for Government Technology since 2010. He lives in Seattle with his wife and their dog. He can be reached at cwood@govtech.com and on Google+.



Athens, Tenn. Brings Significant Savings to Residents through NLC Prescription.

The National League of Cities (NLC) honored the City of Athens, Tenn. earlier this month for reaching the significant milestone of saving residents more than $1/2 million on the cost of their prescriptions through the NLC Prescription Discount Card Program.

Residents of Athens who are without health insurance or have prescriptions not covered by insurance have saved $507,911 to-date on their prescriptions or an average of $13.35 on each prescription since the city began offering the program in 2009.

The city was recognized at the recent Small Cities Council Steering Committee meeting in Burleson, Texas, where NLC Executive Director Clarence Anthony made a special presentation to Athens councilmember William Bo Perkinson.

“NLC is pleased to recognize the City of Athens for helping residents save on the cost of their prescriptions through the city’s participation in the NLC Prescription Discount Card Program,” Anthony said. “The program is a great example of how NLC working with our member cities can directly benefit residents in a meaningful way.”

“The NLC Prescription Discount Card Program has been great for our residents and the savings really makes a difference, Perkinson said. “After the great initial program set-up by Mitch Moore, our city manager, and Rita Brown, our HR director, the program almost runs itself.”

Athens is the fourth city to reach the $1/2 million savings milestone, joining Detroit, Mich.; Monroe, N.C. and Clarksburg, W.Va.

Nationally, the NLC Prescription Discount Card Program is currently available in 545 NLC member cities across the country and has saved residents of those cities more than $13.5 million. The program provides an average savings of 23 percent off the retail price of prescriptions for residents without insurance or prescription not covered by insurance. The discount card is accepted at more than 60,000 participating retail pharmacy and may even be used for some pet medications.

There is no cost to the city to offer the program to residents. Participating cities are provided with customized discount cards with the city name and logo as well as sample press releases and a sample web page to promote the program and raise awareness among residents. Each month, participating cities receives a report from NLC with data on the savings to residents.

Details: To learn more about the NLC Prescription Discount Card Program or to sign up for the program, visit the NLC Prescription Discount Card Program or contact Marc Shapiro, Program Director, 202-626-3019 or e-mail: shapiro@nlc.org.

JUNE 20, 2014
By Marc Shapiro



WSJ: Municipal Broadband Is No Utopia.

Like most utopian dreams, the Utah Telecommunications Open Infrastructure Agency, or Utopia, hasn’t panned out. Utopia, a consortium of 11 municipalities to build a fiber-optic network, was initially financed in 2004 with a $185 million bond; it was supposed to be completed in three years and have a positive cash flow in five. The project is a prime example of why governments should not be in the business of building or operating broadband networks—and why the federal government should not be in the business of cheerleading for them.

In 2006, Utopia received an additional $66 million loan from the Agriculture Department’s Rural Utilities Service. Two years later all but $21 million of the loan was suspended, when the agency determined that the project needed to improve its financial situation and develop a new business plan.

Today Utopia has about 11,000 subscribers, less than one quarter of the 49,350 projected to be on board by September 2007. Its failure to attract the anticipated number of customers has caused a spectacular financial failure. Utopia has lost at least $3 million and as much as $13 million annually. As of July 1, 2013, Utopia had negative net assets of $146 million. And last November voters in Orem, part of the Utopia network, decisively rejected a hike in local property taxes to pay some of the city’s costs for participating in the network.

There is a bailout plan, under which Macquarie Capital, MQG.AU -0.72% a private investment firm based in Australia, would complete the network. But it means new debt obligations for Utopia cities and residents as high as $1.83 billion over the next 30 years, excluding the $355 million in debt already incurred by Utopia.

All households in those cities would have to pay a new mandatory utility fee of $20 a month, whether or not they subscribe to the network or can afford to pay. And the cities will have the power to cut off water service to those who do not pay in full or on time every month.

By rejecting higher taxes to pay for this white elephant, the good citizens of Oren, Utah, were pointing out the obvious: Those services are already being provided in a competitive manner by private businesses.

Nevertheless, in April, Federal Communications Commission Chairman Tom Wheeler said he believes that the FCC can pre-empt state laws that prevent municipalities from building broadband networks—even if the locality already has them. He gave no statutory basis for this power but claimed that the “competition” municipal broadband could provide is being stymied by the states.

This is an astonishing assertion of federal power. States, in Mr. Wheeler’s view, cannot prevent their legal subdivisions—including counties, cities and towns—from imposing unnecessary and burdensome costs on taxpayers.

In 2001, there were only 16 government-owned networks in nine states. By 2011, largely due to post financial crisis “stimulus” spending, that number had increased to 108 projects in 33 states. Today, there are nearly 400 communities nationwide that used taxpayer dollars to build government-owned networks.

The record of these projects is decidedly mixed. In a 2012 study of government-owned broadband networks, Widener University’s Joseph Fuhr Jr. concluded that “Many cities and municipalities have entered into the broadband market with disastrous results.” The failed networks, he said, “have neither the resources nor the expertise necessary to provide consumers with reliable state-of-the-art broadband connections.”

No wonder, 21 states have taken action to prevent much of this wasteful spending by restricting municipal broadband build out. Their laws range from requiring a taxpayer referendum or mandate and evidence the system can be self-sustaining, to complete prohibitions on telecommunications services if a private company or companies already provides such services.

Mr. Wheeler would have the FCC overturn these laws and stop the other 29 states from adopting similar restrictions. He should reconsider. Otherwise, taxpayers will all be living in states of dystopia.

Mr. Schatz is president of Citizens Against Government Waste. Mr. Van Tassell is vice president of the Utah Taxpayers Association.



Virginia Beach Finishes Computer Model to Predict Traffic Effects.

The city has taken a leap forward in its ability to predict the impact of road projects on its traffic network with the completion of a computer model that its developers say is almost unrivaled in the country in scope and precision.

First up for the new tool is another look at the Southeastern Parkway and Greenbelt, a 21-mile highway the city has wanted to build for decades, only to be blocked repeatedly by environmental concerns.

The work is the product of a partnership between the city and Old Dominion University’s Center for Innovative Transportation Solutions, which opened in 2012 at Town Center. Mike Robinson, the center’s director, told the City Council in a presentation Tuesday that he’s aware of only four other U.S. cities with such a comprehensive, detailed model of their roads.
Many large-scale traffic models can’t depict the movement of individual cars, replicate the daily ebb and flow of traffic or show how signals contribute to congestion.

The Beach model zooms in much closer with a so-called “microscopic” look at all primary and secondary roads in the city, complete with 371 traffic signals programmed to reflect the same timing patterns that real drivers encounter. Vehicle counts from nearly 500 locations and historic accident trends are incorporated into the model.

One simulation that was played for council members showed tiny yellow vehicles lining up and moving through an intersection at Independence Boulevard. Robinson then showed off a three-dimensional feature with a video in which the perspective swooped down from over The Westin and into a vehicle as it looped through Town Center on tree-lined streets.

Smaller, quicker applications might involve running a query to see how bad congestion will be if a road is closed for a public works project. The longer-term goal is to use the model to study the effect of much larger changes to the city’s network.

The Southeastern Parkway analysis will take about 20 months “if it goes exactly as planned,” Robinson said.

Five scenarios will be modeled, including a look at what traffic will be like in 2034 if the highway is not built. Robinson said it will entail 45 tests, run about 100 or more times each, a workload that would take about 200 days of nonstop processing time on a high-performance computer.

The combined cost of developing the traffic model and conducting the Southeastern Parkway study is $740,000, all of which will be reimbursed to the city with federal money, said Deputy City Manager Dave Hansen.

BY DAVE FORSTER, MCCLATCHY NEWS SERVICE / JUNE 11, 2014

©2014 The Virginian-Pilot (Norfolk, Va.)



San Francisco Becomes First U.S. City to Offer Encrypted Wi-Fi.

Marc Touitou is hopeful that what’s starting as a small Wi-Fi hot spot on Market Street in San Francisco will soon become the standard for cities around the world.

So what is it about this hotspot stretch that has Touitou, San Francisco’s CIO, so excited?

“It’s about you being safe in the street!” Touitou said with a huge smile in his voice. “With all the data breaches you have seen, it becomes increasingly important to protect our residents.”

Touitou calls it Hotspot 2.0.

“Hotspot 2.0 is free Wi-Fi, but it’s encrypted,” Touitou said. “And San Francisco is the first city in the U.S., possibly in the world, to enable Hotspot 2.0.”

Since the introduction, Touitou says other cities have asked to partner with San Francisco to provide their residents with Hotspot 2.0 as well. Those cities include San Jose, Calif., and Melbourne, Australia.

Touitou describes these partnerships as agreeing to do the “handshake.”

“We have an existing relationship with the Australian government; [they] engaged us, they want to do the handshake,” Touitou said.

JOINING SF WOULD BE ‘QUICK AND EASY’

So what costs come with these handshakes? San Francisco Chief Technology Officer Flavio Aggio says the costs are minimal, if anything at all.

“We took a few developers and technicians to develop this with our partners, but it doesn’t cost anything for the partner cities,” Aggio said. “We need to get together technically, and we will need to get together on the security token, and that’s it.”

Hotspot 2.0 uses the same technology that banking companies do to let customers use online financial services. Aggio said users are sent a security token that registers their device, and continues to authenticate the device from that first point on.

“It works in a similar way to your client — when you have your computer connected to your bank, that gives you a lock to your computer connection,” Aggio said. “It’s called AES256 encryption. And if you are authenticated in San Francisco, you will get automatically authenticated in San Jose. This solves the problem so you don’t have multiple passwords – that is the secret of Hotspot 2.0.”

That technology is called Passpoint, and the city of San Francisco is optimistic it’s the future of free Wi-Fi, in part because it offers cities that join economic benefits.

WIRED CITIES MAKE MORE MONEY

Aggio says currently, only Market Street in San Francisco is offering Hotspot 2.0 in the city, but that the service will expand into San Francisco’s parks this summer.

Meanwhile, San Francisco is becoming the chosen home for many of Silicon Valley’s workers and executives. Yet, Touitou said the encrypted Wi-Fi isn’t being expanded through the city to help lure even more tech workers.

“We’re not doing this for economic reasons,” Touitou said. “We do it for the same reason we do high-capacity Wi-Fi. We’re doing it because we [want] to be first — and because it’s fun!”

But Touitou does acknowledge that there are economic benefits that come by offering Wi-Fi and broadband services, especially services that are secure.

“We know [when] there is 20 percent of broadband penetration, you get a 1 percent growth in local GDP,” Touitou says. “It encourages people to have their tech companies here. And because of the train on security, everyone wants Wi-Fi, and everyone wants secure Wi-Fi.”

A 2013 research paper by the National League of Cities confirms the importance of being wired for economic growth. The paper urges American cities to develop innovative ways to keep wired access available, and even directs cities to look for federal grants to develop the Internet infrastructure.

“In 2011 the United States ranked 15th among 30 developed and developing nations in deploying broadband services,” the researchers state in the paper. ”This is a huge departure from where this country stood in the 1990s, when it was one of the leaders in providing broadband access.”

While Hotspot 2.0 isn’t universal broadband services, the city did mirror the steps outlined by the researchers to implement its Wi-Fi plan. That includes partnering with other cities, Touitou said.

“When the CIO of San Jose [contacted us], we decided to do a pilot – on Market Street — and give the desire to other players to do the same,” he explained.

That partnership extends to companies as well: Corporate partners Global Reach and Ruckus Wireless worked with the city to provide Hotspot 2.0.

Touitou is hopeful that eventually New York City and maybe Boston will join the network as well. But for now, Touitou says San Francisco is looking forward to expanding Hotspot 2.0 into San Jose and Melbourne.

“It’s exciting, because we had that in the back of our minds, to always be pushing the envelope on the technology itself,” Touitou said. “Security is not new. But what we’re doing is.”

BY JOHN SEPULVADO / JUNE 11, 2014



Stricter Regulations Could Close Insurance Gap for Uber, Lyft, Sidecar.

In California, state regulators are looking to toughen up insurance requirements for on-demand ride services that rely on people driving their own cars while on the job.

Documents released Wednesday revealed proposed expanded regulations for insurance coverage with ride companies like Uber, Lyft, and Sidecar, demanding they provide $1 million commercial liability insurance starting when drivers turn on a smartphone app showing they are available to work. Right now, companies only need to provide coverage between when a driver has accepted a ride request and when a driver drops off a passenger.

The California Public Utilities Commission also proposes requirements for $5,000 in medical coverage, $50,000 in collision coverage and $1 million in uninsured or underinsured motorist coverage.

The commission, which regulates the ride companies, also would require the ride companies’ insurance be the primary coverage. Currently, the companies’ policies only cover a driver when the driver’s own policy has been used up.

“This proposed decision protects trial lawyers, insurance companies, and big taxi — ignoring the needs of hardworking Californians,” Uber spokeswoman Eva Behrend said in an emailed statement. “Uber will vigorously defend the rights of California riders and drivers to enjoy the competition, choice, reliability and safety that ridesharing affords the Golden State.

“At a time when California desperately needs job creation initiatives rather than industry destroying bureaucracy, we look to the leaders of our state to ensure that the innovation economy doesn’t crumble at the hands of special interests.”

A spokeswoman for Sidecar agreed.

“Sidecar has rapidly gained popularity in California because there is statewide demand for safe, reliable and affordable transportation alternatives,” said company spokeswoman Margaret Ryan. “Californians deserve to have access to innovative solutions that make transportation better for our wallets, our communities and our economy.

“The government’s role is to adopt laws that strike the right balance between protecting public safety and consumer choice in the marketplace. We look to legislators to put forth regulations that are best for its citizens and not just the narrow interests of the taxi industry.”

However, if passed, the proposal would permit expanded coverage to be any combination of insurance from the ride companies or driver policies that cover them while on the job.

The commission’s proposal will go to a vote July 10. Representatives for Lyft were not immediately available for comment.

BY KATIE NELSON, MCCLATCHY NEWS SERVICE / JUNE 12, 2014

©2014 the Contra Costa Times (Walnut Creek, Calif.)



Tennessee Town Goes for Gasification.

Lebanon is looking to find better uses for the area’s waste than simply filling a landfill.

So the city looked to the west for inspiration — specifically, to Covington, Tenn.

The West Tennessee city recently implemented what’s known as a “gasification” system to convert waste into clean energy.

“Mayor Gordon was intrigued by our gasification process and thought it could help ‘turn dirty into dollars’ for the community,” said PHG Energy’s Chris Koczaja.

He said gasification is a “clean, efficient conversion of biomass into a combustible fuel gas in an oxygen-starved environment.”

He noted that the process is a thermo-chemical process, not incineration.

The process can convert items ranging from wood chips and manufacturing waste to scrap tires and rubber products to wastewater treatment sludge.

“It’s feedstock flexible over the life of the equipment. It’s flexible to what you have available,” said Koczaja.

He said that regardless of the feedstock, the process helps reduce the area’s “emissions picture.”

“[The Tennessee Department of Environment and Conservation] is definitely behind the process we’re doing here,” said Koczaja.

The process, which is initiated with just two bags of Matchlight charcoal, features rapid start-up and can convert up to 12 tons of material per day.

“About 95 percent of the what comes out is fuel gas, and the other 5 percent is a charcoal biochar with many uses,” said Koczaja.

Last fall, Councilor Fred Burton and Public Works Commissioner Jeff Baines visited the Covington facility, and representatives from PHG Energy spoke to Lebanon’s Public Works Committee to offer an overview of the process.

BY SARA MCMANAMY-JOHNSON, MCCLATCHY NEWS SERVICE / JUNE 13, 2014

(c)2014 The Lebanon Democrat, Tenn.



Feds Demonstrate Bridge Inspection Robot.

Federal transportation officials came to Allegheny County Thursday to show off a piece of new, million-dollar technology in the hope of wooing a potentially stingy buyer: the Pennsylvania Department of Transportation.

At center stage was a four-wheel robot named RABIT — Robotic Assisted Bridge Inspection Tool — that a team at Rutgers University designed and built for the Federal Highway Administration. Appearing like the lovechild of NASA’s Mars rover and a Zamboni, the RABIT rolled around the floor of the Heidelberg Volunteer Fire Department Thursday morning, forced to perform part of the demonstration of its structure-evaluating talents indoors before the inclement weather cleared and officials were able to move it outside.

Federal officials see Pennsylvania as a likely buyer when it comes to bridge-safety technology, due to the state’s infrastructure woes.

“We have the most structurally deficient bridges in the country, and our bridges are the oldest in the country,” said Scott Christie, Pennsylvania’s deputy secretary of highway administration.

Pennsylvania is home to 25,000 state-owned bridges, the third most of any state in the country, but it’s No. 1 when it comes to the total of structurally deficient bridges. Allegheny County is home to more than 2,000 bridges, with more than 10 percent structurally deficient, according to a 2013 report from the American Society of Civil Engineers (ASCE). Structurally deficient refers to a bridge with worn or deteriorated elements that need repair but do not cause immediate safety concern.

“It looks like some exciting technology,” said Lou Ruzzi, bridge engineer for PennDOT’s District 11, which includes Allegheny County. He described the machine as an MRI for bridges to catch structural problems earlier, therefore leading to less expensive repairs. RABIT performs data collection in about an eighth of the time than is currently done manually, he said.

The Federal Highway Administration purchased five of the devices at about $1 million each and is testing them throughout the country as part of the Long-Term Bridge Performance Program. PennDOT officials expressed hope that the price would fall as more are produced, allowing the state to purchase the device in the future if it continues to prove adequate in demonstrations.

RABIT is being fine-tuned as it assesses bridges in Pennsylvania, Delaware, Maryland, New Jersey, Virginia, West Virginia and Washington, D.C. The system got a resounding vote of confidence in the spring when it received the Charles Pankow Award for Innovation from the ASCE.

BY MATT NUSSBAUM, MCCLATCHY NEWS SERVICE / JUNE 13, 2014

©2014 the Pittsburgh Post-Gazette



Dayton, Ohio, Using Cameras to Curb Illegal Dumping.

Illegal dumping has cost the city of Dayton, Ohio, more than $1 million in cleanup in the last three years, so the city is installing more hidden surveillance cameras to crack down on the unlawful activity.

The city’s public works department is adding 18 cameras to its current supply of 23 in order to identify and prosecute more people who illegally discard trash along city streets, alleys, abandoned properties and other places.

“These are cameras we use in a variety of places to find the people who are throwing trash in our neighborhoods and doing illegal dumping,” said Tim Riordan, Dayton city manager.

Public works receives complaints about illegal dumping virtually every day. Staff members then investigate the complaints and evaluate the sites to determine whether surveillance is needed.

The city began using 23 cameras in April 2013, and the city since then has monitored 46 dumping sites, said Fred Stovall, the city’s director of public works.

Public works staff review about 600 photos each day from the cameras, which are mobile, motion-activated and work in the dark.

Photographic evidence from the devices has resulted in dozens of prosecutions for illegal dumping and unlawfully transporting tires, Stovall said. The charges have led to 20 misdemeanor convictions and five property seizures. Some prosecutions stem from citizen complaints and police traffic stops.

“It’s an ongoing battle,” Stovall said. “We have seen some positive results: When we put cameras up, we do see less dumping at that particular site.”

Officials hope to get an upper hand in the ongoing battle with the installation of 18 more cameras.

City commissioners on Wednesday approved spending more than $14,000 to purchase the equipment.

The investment is minor compared to the costs of cleaning up dump sites.

The city last year spent about $522,350 on labor and trash-removal fees associated with cleaning up improperly discarded trash, Stovall said.

The city spent about $445,700 cleaning up trash on abandoned properties in 2012 and $386,190 in 2011.

Photos from the cameras show people throwing old recliner chairs and piles of trash on abandoned lots.

Some people back their trucks into an empty lots and drag bags of trash from the vehicles.

Some people who engage in illegal dumping live a stone’s throw from the sites.

“They live right across the alley, and they want to walk across the alley and dump the trash out,” Stovall said. “It makes no sense to me because you have a trash can, so all you have to do is put the trash in your container and we’ll pick it up every week.”

Dayton recently started installing security video cameras downtown to deter and prosecute criminals in strategically selected areas.

BY CORNELIUS FROLIK, MCCLATCHY NEWS SERVICE / JUNE 13, 2014

©2014 the Dayton Daily News (Dayton, Ohio)



Drones Eyed as Tools in Traffic War.

A new Georgia Tech study found unmanned aircraft — commonly known as drones — could be used to help the Georgia Department of Transportation count vehicles on the highway to analyze traffic congestion and or to help with accident investigations.

The $75,000 study, commissioned by GDOT to explore the potential benefits of drones, came up with more than 40 tasks they could help with.

The goal of the study was to “take a look into the future and see how this could help us,” said Georgene Geary, research engineer at GDOT. There could be safety benefits and cost savings, but there’s “still some unanswered questions” for a cost-benefit analysis, she said. And there are other issues to address, including federal regulations and privacy concerns.

Potential uses for drones include everything from traffic management to inspections of traffic signals after installation or sampling vehicle speed along particular corridors. Drones could also be used for other GDOT tasks such as inspecting bridges for damage, conducting airport flight path inspections or monitoring wildlife along intracoastal waterways, such as birds nesting in the Savannah Harbor area, the study found.

But it would likely be a couple of years or more before drones actually begin flying for GDOT.

GDOT expects it would likely contract out operations of unmanned aircraft, rather than buy its own drones. For now, it’s generally illegal to use unmanned aircraft for commercial purposes. The Federal Aviation Administration is still developing regulations to cover unmanned aircraft, with the first proposed rule expected later this year. The FAA has been tasked by Congress to come up with a plan to integrated unmanned aircraft into the airspace by Sept. 30, 2015.

For GDOT, potential use of unmanned aircraft “kind of hinges on the rules,” Geary said. “You want to make sure it’s safe. You don’t want to affect air travel… I know there’s still a privacy concern, too.”

Javier Irizarry, a lead author of the study at Georgia Tech, said he expects that once the FAA regulations that enable commercial use of drones are complete and issues like insurance coverage are worked out, “I think there’s going to be a lot more people using it.”

“Technology evolves very fast and it gets cheaper very quickly,” Irizarry said.

BY KELLY YAMANOUCHI, MCCLATCHY NEWS SERVICE / JUNE 9, 2014

©2014 The Atlanta Journal-Constitution (Atlanta, Ga.)



L.A. County Implements New System to Ease Procurement Challenges.

Los Angeles County, one of the largest local governments in the U.S., is implementing new technology designed to help effectively manage contracts, statements of work (SOW) and RFPs. The new enterprise document management solution is designed to help the county “dynamically assemble” documents, improve consistency and minimize exposure to legal risks.

L.A. County has 35 departments and manages about 7,800 contracts. The $26 billion organization was previously challenged with complications and risks associated with managing its contracts and other legal documents, often resulting in strained relationships with key vendors and increased costs of operations.

“The historical problem we have had is keeping track of the standardizations needed in our contracts and ensuring consistency,” said Robert Davis, assistant auditor-controller for the county. “Multiple departments will contract with the same vendor for multiple services and their contract terms will be different or there will be different clauses in the contracts. It’s very important that we use the same terms, especially if we are using the same vendor.”

The county sought an adaptable control mechanism to solve the problems associated with its size and complexity. An enterprise document management system from Beach Street Consulting, called Contracts Lifecycle Management, leverages EMC technologies to help the county “dynamically assemble” contracts, RFPs and SOWs. Contracts analysts can choose from approved templates, specify the counterparty and other details, and select from optional and alternative clauses. The system then returns a formatted Word document to the user that contains the appropriate clauses and has performed term replacement with the contract/counterparty details.

“Things change often — there are always new provisions, HIPAA laws change, regulations change, etc.,” said Davis. “That presents a significant challenge for our legal staff and for our auditors. The new system ensures the use of standards, while maintaining flexibility in meeting our business requirements.”

Davis said contracts administrators in various departments would previously grab the last contract, RFP or SOW templates they used, unaware of what had changed since the document was created. Davis said the county initiated several initiatives over the years to address these issues, without success.

“We’ve talked about doing this many times, but it’s such a monumental task — how do you start, and where do you start?” he said.

Contract review was an additional challenge previously. The county’s basic contract contains between 50 and 60 standard clauses. The Beach Street solution flags manual changes made to standard clauses so county attorneys can easily identify them.
“Every time one of the county’s attorneys read a contract previously, they would read it from scratch. Changes to standard clauses were often difficult to spot,” Davis said. “Sometimes critical things would be taken out. When you are looking at a 50- to 75-page document, things can get missed. But this way if something is taken out or modified, it’s automatically flagged and counsel can ensure the clause is put back in.”

Davis said county attorneys now only need to review sections that have marked changes rather than reading entire documents. “The application will greatly improve our processing time, quality of documents and compliance with county standard terms and conditions. It will also help the county ensure that the latest approved legal text is used and all appropriate provisions are included in the final executed contract.”

“Contract automation is traditionally difficult as it bridges requirements from business, legal, compliance and IT,” said John Burns, president and co-founder of Beach Street Consulting Inc. “The new system helps to solve a classic issue of how to maintain control while providing for flexibility and change.”

Davis said though the system will be particularly helpful for Los Angeles County because of its size, it could potentially benefit any jurisdiction.

“Having this type of standardization could help anybody, because they don’t have to rethink the whole process and start from scratch each time,” he said. “We expect this will help lower our risk, standardize our dealing with vendors and ensure we’re not dealing with multiple versions of documents.”

Davis said the county developed the working prototype of the system in eight weeks.

BY JUSTINE BROWN / JUNE 9, 2014 0



Boulder Eyes Challenge to Colorado Law Blocking City Broadband.

City leaders in Boulder, Colo., are preparing to fight state restrictions that prevent the city from connecting citizens with 100 miles of municipal fiber.

A 2005 Colorado state law prohibits cities from offering broadband services to citizens. But on June 17, the Boulder City Council is scheduled to vote on a plan to put a measure on the November ballot declaring the city’s authority to offer high-speed Internet access and related services.

City officials believe the telecommunications restrictions are a major reason the city was passed over by Google Fiber, Boulder policy adviser Carl Castillo told Boulder News.

“Boulder remains a community that would significantly benefit from more economical, higher-capacity telecommunications services given our tech-savvy demographic, readiness for ‘next gen’ broadband services and available public fiber-optic infrastructure,” a city memo states. “While no definitive plans are in place to create a telecommunications utility or engage in new public-private partnerships in Boulder, the planning and execution of new public initiatives will be unencumbered by the significant limitations in state law if an exemption measure is passed.”

City IT Director Don Ingle said Boulder is unlikely to launch a city-run utility, but would more likely pursue private partners to build out the city’s existing network. Following a favorable vote next week, a public hearing and second city council vote on the proposed ballot measure would be held later this summer.

Boulder’s move to defy state law follows similar efforts by other Colorado cities. Montrose City Council voted on the issue in March, and Longmont, Colorado, proposed an exemption to the restriction in 2011. Construction on Longmont’s fiber network is scheduled to begin this fall.

Today, Boulder’s fiber network is used by city offices, the University of Colorado, and federal labs.

BY NEWS STAFF / JUNE 13, 2014



Localities Want More Say in Transportation Spending.

Mayors and county officials have two tough missions as they lobby Congress on transportation.

First, they want federal lawmakers to find an elusive source of new money so that federal highway and transit funding does not dry up.

Second, they want Congress to revisit changes it made two years ago in how that money is divvied up. Local leaders say the changes, instituted under the law called MAP-21, disproportionately hit cities and counties. Under the law, Congress not only cut money available for local roads, it also gave local leaders less say in deciding how federal money should be spent by putting states in charge of more of those decisions.

Now that the law is about to expire, localities hope Congress will require states to coordinate with local officials when deciding how to spend the money.

“We want to be partners with our governors,” Atlanta Mayor Kasim Reed told a U.S. House panel earlier this year. “We understand that will mean being junior partners. But we’d like to have a seat at the table to ensure that cities have a voice as well.”

The 2012 federal law put more money toward big highways and less toward local roads. It cut money for bridges and roads that are not part of the National Highway System by 30 percent. Local governments own more than half of those smaller roads. The law also gives states a greater role in determining how to spend federal money on everything from run-down bridges to bike lanes and sidewalks.

Chris Abele, the county executive of Wisconsin’s Milwaukee County, said this week that the current funding system is like federal and state officials passing an envelope full of taxpayer money for transportation along a line, with localities at the end. “Sometimes, by the time the envelope gets to us, there’s nothing left,” he said.

Local officials, especially those from urban areas, worry that their top priorities could be lost or ignored at the statewide level.

“Many of the legislators are in rural counties (and have) different needs, different visions,” said Sharon Barnes Sutton, a commissioner from Georgia’s DeKalb County. “(They’re) very heavily invested in pavement, and not considering transit-oriented projects in the metropolitan areas.”

Tony Dorsey, a spokesman for the American Association of State Highway and Transportation Officials, declined to comment on the localities’ push for more control of transportation spending.

Despite years of discussion, there is no consensus in Congress on where to find extra money for transportation. The idea of raising the federal gas tax — which has been at 18.4 cents a gallon since 1993 — is politically toxic on Capitol Hill. Other proposals to pay for infrastructure with corporate taxes or general funds also have not gained much traction.

While funding debates have stalled at the national level, many counties have raised property or sales taxes to pay for transportation improvements. Some states prevent localities from doing so.

Either way, residents get frustrated when they do not see their state and federal taxes return to their neighborhoods, said Commissioner Sallie Clark of El Paso County in Colorado. “They’re already paying income tax. They’re already paying gas taxes. What they’re saying is: Why isn’t a fair share coming back to us?”

But if Congress were to find money, there is a chance it might reconsider how the funds are allocated. Two members of the U.S. House’s Transportation and Infrastructure Committee are sponsoring legislation that would require states to set aside a portion of the federal transportation money they receive for competitive grants, for which localities could compete.

David Goldberg, a spokesman for Transportation for America, which supports greater local involvement in transportation decisions, said that approach would allow the federal government to set national priorities. Then states and localities could decide which projects best meet those national goals.

That way, cities and states could focus on spurring economic development, creating links between different modes of transportation or attracting private money to a project, rather than simply just building and maintaining highways, Goldberg said.

“We’re not saying local communities would get unilateral control over a state highway. We are saying there has to be more acknowledgement of the needs of localities,” he said.

The competitive grants would be similar to the federal Transportation Investment Generating Economic Recovery (or TIGER) grants, first created under the 2009 stimulus law. The U.S. Department of Transportation has awarded more than $4.1 billion to more than 200 projects under the program, but demand has been far higher. In the most recent round, for example, the agency received $9.5 billion in proposals for $600 million in funding.

Localities can apply directly for the grants, which have been used to help build light rail between Minneapolis and St. Paul; improve pedestrian safety in and around Ft. Myers, Florida; and increase the capacity of the port in Wilmington, Delaware.

Daniel C. Vock | Staff Writer
dvock@governing.com | https://twitter.com/danvock



Florida Supreme Court Rules City Governments Illegally Used Red-Light Cameras.

Florida’s highest court ruled Thursday that several local governments had acted illegally when they set up video cameras designed to catch motorists who run red lights before the legislature officially approved them.

According to the Tampa Bay Times, these governments—which include several in the Tampa and Orlando areas as well as the city of Aventura, north of Miami— could face thousands of lawsuits from drivers ticketed after being caught on these cameras between their installation and July 1, 2010, when a state law approving their usage took effect statewide.

The state supreme court, in a 5-2 decision (PDF), ruled that these local municipalities did not have the power to enact their own traffic laws, and that by having the cameras prior to July 1, 2010, they were in conflict with state traffic law. Motorists had challenged the Orlando and Aventura cameras in the case. However, the court made clear that any municipality that had red-light cameras installed before July 1, 2010 was in violation of the law. In his majority opinion, Justice Charles Canady held that while municipalities did have the power to regulate traffic matters like movement or parking, they did not have the right to impose discipline for traffic violations. “The Orlando and Aventura ordinances establish a regime for the punishment of red light violations that is distinct from the statutory regime for the punishment of such violations,” Canady wrote.

In her dissent, Justice Barbara Pariente argued that Florida’s home rule authority was broad and gave the municipalities the power to install the cameras.

One thing the court did not do was order any refunds. According to the Tampa Bay Times, individual motorists will have to file suit if they want to get their money back. “There will absolutely have to be litigation filed,” said Luke Lirot, a Clearwater lawyer whose firm represents ticketed drivers, to the Times. “It wouldn’t be a difficult court order to get based on this Supreme Court precedent, but absent a court order, I don’t see any municipality voluntarily giving back a dime of that money.” The Times reports that cameras in Temple Terrace received $1.4 million in fines between October 2008 and November 2009. Cameras in another municipality, Port Richey, generated $1.2 million in fines from May 2008 to December 2010.

Attorney David Kerner, whose firm had originally sued Orlando over its cameras, told the Times that he would seek to file a class-action lawsuit for everyone who was ticketed before July 1, 2010.

Posted Jun 13, 2014 11:48 AM CDT
By Victor Li



Putting Open Data to Work for Communities.

The National Neighborhood Indicators Partnership (NNIP) is a network of local organizations that collect, organize, and use neighborhood data to tackle issues in their communities. As the movement for government transparency has spread at the local level, more NNIP partners are participating in the call for governments to release data and are using open data to provide information for decisionmaking and community engagement. Local NNIP partners and open data advocates have complementary strengths and should work together to more effectively advance open government data that benefits all residents.

Read complete document: PDF

Kathryn L.S. Pettit, Leah Hendey, Brianna Losoya, G. Thomas Kingsley



San Antonio Focuses on Brainpower and Collective Impact to Improve its Economy.

Municipal and community leaders understand that education is a driving force behind economic development, but in San Antonio it is “brainpower” that’s fueling the entire city.

Clifford Johnson, executive director of NLC’s YEF Institute, talks with Mayor Castro at the annual Mayors’ Education Policy Advisors Network (EPAN) meeting in San Antonio. Mayor Castro urged EPAN members to continue putting education at the forefront of their mayors’ agendas.

From cradle to career, San Antonio is focusing on education to develop and harness skilled talent to improve its economy. The city serves as a model to other cities looking to do the same. For this reason, the city is not only a guiding example to NLC’s Mayors’ Education Policy Advisors Network (EPAN), but was also host to EPAN’s 2014 annual meeting.

At the EPAN meeting, education advisors explored education as a means to ameliorate poverty and foster citywide collaborations. Advisors from across the nation descended on the Alamo City, where an array of experts – pediatricians, principals, career and technical education specialists and foundation partners – presented different ways education can serve to reconcile the economic and academic achievement gaps.

For example, Dr. Meggan Goodpasture, director of the Child Abuse and Neglect team at Wake Forest Baptist Medical Center in Winston-Salem, N.C., explained how exposure to trauma and toxic stress affects brain development and social behaviors. Darnell White, principal at Sam Houston High School in San Antonio, complemented this presentation by explaining how he was able to change the trajectory for Sam Houston – a high school on the brink of closure when he took over as principal. White was able to increase test scores, high school graduation and college enrollment rates by establishing an environment with present, attentive and consistent faculty.

In 2009, Julián Castro, Mayor of San Antonio and recently nominated secretary of the U.S. Department of Housing and Urban Development, worked with local leaders and community partners to create and implement a comprehensive community agenda. The agenda, known as SA 2020, is comprised of 11 community causes ranging from arts and culture to environmental sustainability, and was heavily informed by residents’ vision for their city.

San Antonians envisioned a culturally rich, environmentally sustainable and economically booming city by the year 2020. In order to make this vision a reality, Mayor Castro and the people of San Antonio understand that “brainpower” must be at the heart of all of the decisions the city makes moving forward.

After establishing SA 2020, San Antonio received $25 million in federal funding in 2010, through the U.S. Department of Education’s Promise Neighborhood grant. (The city’s Eastside neighborhood was also designated as one of five Promise Zones earlier this year.)

Alongside the targeted efforts in the Eastside neighborhood, the city was able to put in place a number of education initiatives: Café College, Pre-K 4 SA, SERVE SA and Student Aid Saturdays. And all of these initiatives have had standout success, serving well over 10,000 students and enlisting the help of more than 1,000 volunteers.

This year’s convening allowed advisors to learn what has worked for San Antonio from a panel of Pre-K 4 SA leaders, Café College advisors and SA2020 directors. The panelists didn’t just paint a picture of what it was like to implement these initiatives though. Participants were able to talk to parents whose children have participated in Pre-K 4 SA and got to hear from current students who utilize Café College (San Antonio’s “one-stop-shop” for college access, advice, guidance and workshops) and its resources. EPAN members also had the opportunity to visit Café College and observe students interacting with advisors and getting excited about their futures.

“The reality is that to become more competitive in this global economy we must focus and focus and focus like a laser on education,” Mayor Castro said to the EPAN members. “All of that is to say that I think many folks have brought a lot of energy to the entire education ecosystem. And we have challenged everyone in that ecosystem to do more.”

In San Antonio, education efforts are influenced by its citizen, bolstered by the business and nonprofit community, spearheaded by the mayor and made to last by the collaboration of all three parties. Leaders like Priscilla Camacho of San Antonio’s Chamber of Commerce and Eyra Perez, executive director of San Antonio Education Partnership are working together towards a common goal: improve access and success in education for every student in San Antonio.

“The Chamber of Commerce became involved with education efforts because my predecessor was asked by the mayor to get involved,” Camacho said. “He said the business community needed to step up. Without educated talent there will be no workforce in the future.”

This effort to step up and work together is known as collective impact. Jeanne Russell, chief strategist at SA2020, explains in her blog how this collaboration works. “The Eastside Promise Neighborhood, along with Wheatley Choice Neighborhood and the Promise Zone in the same EastPoint area exemplify place-based collective impact, bringing together the school district, the city, the housing authority and key nonprofits such as the United Way to focus on improving health, educational, housing and economic outcomes for the people who live in some of our poorest census tracts,” she said.

“The biggest reason we adopted this model was because we noticed a similar structure to the work in the areas where we could really see the needle moving — such as teen pregnancy,” Russell continued. “These collaboratives had clear goals, strategies they sought to measure, support from an effective organization such as Metro Health, and continuous, proactive communication – all pillars of successful collective impact work.”

JUNE 10, 2014
By Janell Smith



NYT: Appeals Court Rules Bloomberg Plan for ‘Taxi of Tomorrow’ is Legal.

A state appeals court on Tuesday ruled that a plan for a nearly uniform fleet of yellow taxis in New York City was legal, reversing a lower-court ruling and resuscitating a program enacted — and initially invalidated — under the Bloomberg administration.

Writing for the majority, Justice David B. Saxe of the State Supreme Court Appellate Division, First Department, said that the city’s decision to require nearly all fleet operators to buy the same vehicle, a Nissan NV200, was “a legally appropriate response.”

The plan, a cornerstone of Mayor Michael R. Bloomberg’s transportation agenda, was blocked in October, when Justice Shlomo S. Hagler of State Supreme Court in Manhattan said that the Taxi and Limousine Commission had exceeded its authority with the mandate.

Though the departing administration hailed the cab’s distinctive features, like transparent roof panels and “lower-annoyance” horns, critics seized on the choice of the Nissan because it was neither a hybrid nor wheelchair-accessible without modifications.

Mayor Bill de Blasio has opposed the vehicle, though his new taxi commissioner, Meera Joshi, was the commission’s general counsel as it fought for the cab in court.

A spokesman for Mr. de Blasio did not immediately return a message seeking comment.

Ms. Joshi said in a statement that the commission was “still reviewing the ruling and its implications, especially in view of the potential for further appeal.” She added that she was “gratified” by the court’s view of the commission’s regulatory authority.

The plaintiffs in the case, a group of yellow cab operators known as the Greater New York Taxi Association, said that the use of the taxi violates the Americans With Disabilities Act, a federal law, because the Nissan NV200 is a van; the act stipulates that for-hire vans must be wheelchair accessible, the group said.

“Fleet owners are now in the uncomfortable position of having to violate either local or federal law,” Ethan Gerber, the group’s executive director, said in a statement released Tuesday.

Many NV200s are already on the road, despite the absence of a mandate.

By MATT FLEGENHEIMER
JUNE 10, 2014



California Supreme Court Backs Red-Light Traffic Cameras.

SAN FRANCISCO — The California Supreme Court has ruled that images captured by traffic cameras are valid evidence against drivers who run red lights, in a victory for law enforcement over the use of the cameras that have often been met with public distrust.

The decision on Thursday, involving the case of a Los Angeles-area woman who sought to challenge a traffic ticket, ruled that pictures by automated cameras taken of motorists who enter an intersection on a red light can be legally presumed as accurate unless proven otherwise.

Critics say automated traffic cameras are more of a revenue-generating gimmick for local governments than effective tools for public safety.

The case involved a Los Angeles County woman who sought to appeal a $436 ticket she received after a traffic camera photographed her running a red light in the city of Inglewood.

Carmen Goldsmith argued that evidence from traffic camera images was a form of hearsay, but the court dismissed the claim by saying that hearsay could be committed only by a human, not a camera.

Goldsmith’s defense attorney sought to bring in the camera’s manufacturer for testimony about its dependability, but Chief Justice Tani Cantil-Sakauye said that was unnecessary.

“We have long approved the substantive use of photographs as essentially a silent witness to the content of the photographs,” she wrote in the decision.

Several local governments in California have stopped using cameras because of legal battles that arose when residents contested the validity of their tickets, said attorney Patrick Santos, who submitted a brief in support Goldsmith.

Santos said he expects to see a resurgence in traffic cameras across California as a result of the decision.

“They have green lit the red-light traffic ticket cases,” he said. “These companies are going to triple.”

The American Civil Liberties Union, which does not oppose the use of the cameras for traffic law enforcement, has raised concerns about how it could affect people’s privacy rights.

“These cameras have the potential to collect an enormous amount of data,” said Will Matthews, a spokesman for a California arm of the ACLU. “If law enforcement were to use the data for something unrelated, are they required to obtain a warrant? Because the public really needs assurance that technology like this is not going to be used in a way that would violate peoples’ privacy rights.”

By REUTERS
JUNE 6, 2014

(Editing by Dan Whitcomb and Mohammad Zargham)



Car-Ride Services UberX and Lyft to Compete in Miami.

What began as a civil campaign to change Miami-Dade County laws so passengers could hail car rides using their cellphones has, in the face of political opposition, evolved into an outright insurgency.

Ride-sharing service UberX plans to launch in the county Wednesday, joining Lyft, which began offering rides two weeks ago.

The cutthroat rivals will compete against each other while fighting on the same side against county government, which considers their business illegal. Regulators say they have already issued 11 fines to Lyft drivers.

Openly defying local laws amounts to a guerrilla blitz against Miami-Dade, though the dueling companies explain their strategy in much friendlier — and strikingly similar — terms.

“What we’re hearing more and more is an urging and an excitement to try to work to find a solution,” said Rachel Holt, a regional general manager for Uber.

Said Paige Thelen, a Lyft spokeswoman: “We’re committed to working with local leaders to pass new rules for this new, peer-to-peer industry.”

Uber lobbied county commissioners unsuccessfully last year to deregulate the car-service industry, which has long-established protections for limousine and — especially — taxicab operators. The San Francisco-based firm also tried to appeal to Florida lawmakers in Tallahassee, to no avail.

Neither Lyft, which is also based in San Francisco, nor Uber hires drivers or owns a fleet of vehicles. Instead, they’re technology companies that act as on-demand digital dispatchers. Passengers rely on the mobile apps to bring them together with drivers. The companies charge variable fares and take a commission for each ride.

Uber’s signature service, formally known as Uber Black, partners with independent drivers who own luxury cars. Those rides would compete with limos, for which county regulations cap the number of driver permits, require that rides be pre-arranged at least 15 minutes in advance and set a minimum fare far higher than for taxicabs.

UberX, the service launching at noon Wednesday by offering free rides through June 20, is not as upscale. Like Lyft, it connects drivers of regular cars (Uber says they must be “midsize”) to passengers looking for rides (hence “peer-to-peer”). Most drivers work part-time and, both companies say, are vetted to make sure they have licenses, pass background checks and have automobiles that are in good shape.

But even though these aren’t luxury rides, they still run afoul of the Miami-Dade rules requiring a permit per for-hire driver, according to the county. For cabbies, those permits are known as medallions, and they’re valued at hundreds of thousands of dollars.

Doing away with the permits, as Uber pushed to do, would make the value of those medallions plummet, taxicab companies have said. Ride-sharing services, with their ability to hike fares during peak times and to avoid costly insurance mandates, would also compete unfairly with cabs, whose rates and liability coverage are regulated, said Diego Feliciano of the South Florida Taxicab Association.

“The reality is that these people disguising themselves as shared-ride services are not a shared-ride service. Shared-ride service is people going to a common destination,” he said. “They’re being picked up with a phone call and taken from Point A to Point B, like a taxicab” — but without taxi safeguards, he added.

Michael Hernández, a spokesman for County Mayor Carlos Gimenez, said the mayor wants competition for taxis and limos, and more transportation options for residents and visitors, but his administration can’t flout the law.

“Mayor Gimenez certainly wants to attract companies like Uber and Lyft to Miami-Dade County, but his position hasn’t changed: As long as our regulatory code is what it is, he’s going to continue to enforce what we have on the books,” Hernández said.

Since commissioners on a transportation committee rejected legislation that would have opened the door to Uber and other companies, Hernández said, Gimenez has tasked one of his deputy mayors, Jack Osterholt, to take a look at regulations and perhaps once again push for changes.

It was already difficult earlier this year to get commission approval for basic taxi upgrades such as a requirement that cabs take credit cards. Feliciano said that political battle and the push by Uber have prompted more taxi companies to embrace e-hailing apps such as Flywheel and Hailo to attract more passengers.

In less than two weeks, the county’s for-hire transportation regulators have issued 11 citations to Lyft drivers for failing to obtain a chauffeur registration and for operating a for-hire vehicle without a valid for-hire license, said Joe Mora, the division chief. That amounts to a total of $2,000 per citation.

Lyft’s Thelen said the company, which has only been made aware of four citations, helps its drivers fight and pay for the fines. So will UberX, Holt said.

The competitors appear willing to take on the fines as a cost to break into the coveted Miami market, with its urban sprawl, throngs of tourists and fledgling tech scene eager to take advantage of ride-sharing services available in scores of other big cities across the country and the world. Though Lyft doesn’t have a permanent office here, Uber is advertising for three Miami-based management positions.

While spokeswoman Thelen wouldn’t release figures for how many drivers or rides Lyft has provided in Miami so far, she said the service has received a “positive response” from users who “can choose to leave their cars at home or when going to a work meeting during the day.”

Holt, the Uber regional manager, reiterated that the company has tracked “tens of thousands” of users who have opened their Uber app in Miami only to find that there is no service here.

“It’s high time there are transportation options in Miami,” she said.

BY PATRICIA MAZZEI, MCCLATCHY NEWS SERVICE / JUNE 4, 2014

©2014 The Miami Herald



Houston City Council Delays Decision on Ride-Sharing Rules.

One of City Hall’s most heated lobbying fights of the year will persist for at least another week after the Houston City Council delayed a vote Wednesday on new vehicle-for-hire regulations that would allow companies to connect riders with drivers via smartphone and tablet applications.

The suggested changes to Houston’s taxi and limousine laws follow more than a year of discussions among city staff, taxi and limo operators and the new companies, Uber and Lyft.

The proposed changes would place specific requirements on the independent drivers and the technology companies, which connect drivers willing to ferry people around with people looking for a ride. The companies must acquire permits to operate in the city and must carry $1 million in commercial liability insurance on its drivers. The drivers and the vehicles they use would face their own safety and inspection standards. Local cab and limo companies have fought the proposed reforms and remain opposed.

If the council approves the changes, Uber officials have said the firm could operate its existing Uber X service, as well as Uber Black, a private car service that teams the company with existing local limo firms.

Lyft’s future in Houston is less certain. A spokeswoman said the company is unwilling to use the driver background check system proposed by the city, which includes fingerprinting, believing its own procedure is better.

‘COVERED PROPERLY’

Lyft representatives circulated amendments to the proposal related to background checks this week, but no council member presented them on Wednesday. The amendments still could be put forth next week.

In discussing the measure before delaying the vote, council members focused largely on what have been key talking points for the cab industry throughout the debate: the new firms’ insurance coverage and their ability to accommodate those with disabilities, particularly those in wheelchairs.

“I’m not satisfied with what has been presented so far, and we need to make sure we have this covered properly with regard to people with disabilities,” said Councilman Robert Gallegos, who noted his brother is in a wheelchair.

Gallegos and Councilman Dave Martin both mentioned that the council last week passed an equal rights ordinance prohibiting discrimination against more than a dozen protected groups, including those with disabilities, and should be consistent.

Taxis must provide trips for disabled passengers, but the same demand is not placed on the so-called transportation networking companies, Yellow Cab lobbyist Cindy Clifford said.

Tina Paez, director of the city’s regulatory affairs department, told council members in a memo that the city plans its own tweaks to the ordinance, including one aimed at getting companies like Uber and Lyft to deploy wheelchair-accessible vehicles among 5 percent of their drivers.

Councilman Michael Kubosh was concerned that setting a goal to achieve accessibility would not produce access for the disabled.

“I have a goal to lose 100 pounds,” he said. “You can have a goal. No one is going to punish you if I don’t meet your goal.”

The council discussion also included mention of Uber and Lyft’s decisions to launch preemptively in February, despite city officials urging them to be patient.

160 CITATIONS

Councilman Mike Laster said Wednesday that 160 citations have been issued to the companies for operating illegally, 142 to Uber and 18 to Lyft; none has gone to court, he said.

“That just goes to show you these operators are operating illegally,” Laster said. “Either we have ordinances that we enforce or we don’t, and I think that’s part of the discussion.”

Councilman Ed Gonzalez, filling in as mayor pro-tem for Mayor Annise Parker, who was in Washington, D.C., on Wednesday, said.

“That’s the purpose of why the administration has been working on this, to be able to have the tools and to make sure they spell out clear rules for everyone.”

BY MIKE MORRIS AND DUG BEGLEY, MCCLATCHY NEWS SERVICE / JUNE 5, 2014

©2014 the Houston Chronicle



Memphis Mayor Touts Benefits of New Pothole-Fixing Machine.

Memphis has invested in the Pro-Patch machine, a truck that powers hydraulic cutting tools for removing section of road around potholes and carries heated asphalt mixed with tack.

Memphis’ first Pro-Patch machine, a truck that powers hydraulic cutting tools for removing section of road around potholes and carries heated asphalt mixed with tack, costs about $125,000. Wharton hopes to get two more in the coming months, and said the machines will “pay for themselves.”

“We can’t afford not to” get these machines, Wharton said. “Folks who come here looking to invest ride up and down these streets, and if it feels like they are riding a bucking bull they are going to go to Birmingham or Nashville.”
The mayor also defended the purchases by saying, “It’s a matter of quality of life. Quality of life does not always have to have a dollar figure.”

A major factor that has slowed the filling of potholes has been a lack of money, said Director of Public Works Dwan L. Gilliom.

“Street operations are paid for by the general fund,” he said. “Over the last four or five years it has been cut by as much as 30 percent. Only until now have we been able to secure these high-tech vehicles.”

These new trucks will allow workers to repair up to 100 potholes a day, Gilliom said. These numbers are not higher than the current method of filling potholes, but the quality of the fix is superior, he explained.

“The patches they place down will be a permanent fix,” Gilliom said. “This will allow us to extend the life of our streets.”

On average, there are four dedicated crews driving around their specific quadrants of the city fixing potholes daily, said deputy director Robert Knecht.

“Last year we filled about 40,000 potholes,” Knecht said. “This year we have averaged about 1,000 a week. Our crews do respond to calls, but the vast majority of the potholes filled are ones the drivers found while on the job.”

In addition to purchasing the new trucks, the mayor also said the number of public works crews fixing potholes will double.

BY JONATHAN A. CAPRIEL, MCCLATCHY NEWS SERVICE / JUNE 5, 2014

©2014 The Commercial Appeal (Memphis, Tenn.)



Chattanooga, Tenn., is Proof Municipal Broadband Works.

Last month, FCC Chairman Tom Wheeler addressed net neutrality and municipal broadband, stating his organization would preempt states that wanted to prohibit local governments from offering locally owned broadband (20 states currently have such laws). Wheeler boldly declared the FCC would not allow the Internet to be divided into the “haves” and the “have-nots.”

The statement, made at a meeting of the National Cable and Telecommunications Association, unsurprisingly ruffled some feathers.

Among the dissenters is North Dakota Rep. Blair Thoreson, who, in a Governing VOICES column titled “Why the FCC Should Stay Out of the Local Broadband Business,” argues among other things that “Local governments almost inevitably lack business know-how, and in many noteworthy cases they’ve run their broadband networks into deep financial difficulties. Enormous operating losses and the mounting debts of local government-owned networks have had spill-over effects on local budgets.”

To this, I have two words: Chattanooga, Tennessee.

Several years ago, Chattanooga unleashed a beast: A fiber-to-the-home network spanning 600 square miles with 1 Gigabit-per-second speed available to all businesses, residences, and public and private institutions. The network is the fastest in the nation — approximately 50 times the speed of homes in the rest of the U.S. It not only allows for the novelty of 30-second downloads of a 2-hour high-definition movie, but has the potential to revolutionize public safety and enable the city to implement smart grid technologies.

Opposite from bankrupting the city or putting stress on taxpayers, it’s attracting businesses and industry to the area, helping to revitalize a community that once depended on pollution-heavy manufacturing. Developers, computer programmers, investors and entrepreneurs now call the city home.

Like Wheeler’s statement, Chattanooga’s plan had its dissenters and its journey was not without roadblocks.

Unlike other cities, Chattanooga’s end-game wasn’t originally high-speed Internet — it was electricity. The fiber-optic lines that enable the city’s superfast broadband were commissioned by the Electric Power Board (EPB), Chattanooga’s municipally owned electrical utility. EPB needed the fiber optic lines to build a state-of-the-art grid with smart meters on every home and business. While the cost was high — a total of $300 million — it was financially feasible if done in stages.

During this planning process, a realization was made that the new fiber-optic system could also be used for digital data, video and telephone services. This is where opposition brewed. Internet service providers, who had monopolized for decades, attempted to dissuade the city from investing in this infrastructure, arguing the plan would fail. They argued that even if it succeeded, it constituted unfair competition with private enterprise.

The city proposed these companies install a complete network of fiber instead, and offered to lease that network for its electrical utility needs, piggybacking off the private system. The response from these multi-billion dollar entities? “We can’t afford it.”

In the end, Chattanooga was sued four times by these providers and endured public relations campaigns to characterize the project as unfair and as dangerous intrusion into private affairs. The court ruled in the city’s favor despite the fact that Tennessee is one of the 20 states that preempts locally owned municipal broadband. The court’s reasoning was that the fiber was used to primarily manage the electrical distribution system and this gave it sufficient reason to move forward.

Economic stimulus programs in response to the recession specified “shovel-ready” infrastructure projects. Making good use of bad times, the city applied for and received a $111 million grant to compress the construction phase of the project and provide service quickly to the more economically distressed areas of the community.

As an act of good will, EPB avoided competing with existing businesses by undercutting its rate structure. Competition is instead based on quality of service and the digital product. In spite of its higher rate structure, EPB is the only provider with fiber connected to every home and business in Chattanooga and its surrounding area. As a result, EPB has claimed almost 40 percent of the local market for other digital services.

As FCC Chairman Wheeler said, we cannot allow the Internet to be divided into the “haves” and the “have-nots.” On a broader scale, city innovation cannot be stifled by its inability to invest in 21st-century infrastructure. As a city planner and a mayor, I always believed I could predict with some degree of accuracy what a new investment in infrastructure might produce. However, Chattanooga’s network exceeds what I thought possible and makes me excited for the future — it is a gift to be more fully utilized by future generations.

RON LITTLEFIELD | JUNE 2, 2014



From Washington, a ‘311 for Cities’

The new National Resource Network aims to help local governments find the experts and information they need.

Consumers everywhere have a voracious demand for customized data. And in just the past few years local governments have gotten remarkably good at responding. The growing proliferation of local 311 systems and where-is-my-bus-type apps allows citizens to quickly — if not immediately — get the information and guidance they need.

Remarkably, however, local governments do not have access to the same kinds of organization tools, platforms or information for their own use. Cities confronted with a range of persistent challenges — from pension liabilities to failing school systems — often lack the means to consult with the right experts or have the time to identify the federal programs, best practices or foundation initiatives that could help them.

In an effort to provide this kind of guidance for cities, the Obama administration recently announced the launch of the National Resource Network. A pilot program with an initial $10 million award from the Department of Housing and Urban Development, the initiative aims to be a one-stop resource for technical, policy and financial assistance for local governments.

The network will employ a distinct approach. Rather than starting with a bold new theory of urban change, it will be listening to what cities need first and then customizing the right action-based solution for them. The assistance will encompass three approaches:

On-the-ground assistance: Over a three-year period, the network will provide direct assistance to dozens of cities. Rather than a typical consultancy that is provided by one group, the network will form teams of assistance providers based on what cities truly need help with. Along with New York University and the International City/County Management Association, the leadership of the network includes non-profit and for-profit leaders — including Enterprise Community Partners, Public Financial Management Inc. and HR&A Advisors — with expertise across economic development, community development and public budgeting. Network teams will tackle a broad range of challenges related to economic turnaround.

Policy assistance: If the on-the-ground assistance is the retail strategy, there also will be a wholesale set of offerings that cities can easily tap into through the National Resource Network’s website. This will include a clearinghouse of federal technical assistance programs as well as a curated library of toolkits and guidebooks that focus on the nuts and bolts of government reform and improvements.

“311 for Cities”: Perhaps the most exciting effort the network is developing is what it calls “311 for Cities.” This will offer timely, on-demand access to expertise and assistance. A city official will be able to log on to the network’s secure site and ask for the best resources to meet a particular need, such as proven crime-reduction strategies, best practices in economic development, or model fiscal and operational plans. The network will review the inquiry and within three business days send an initial response including an online package of annotated resources and referrals. As needed, the network will arrange follow-up action. 311 for Cities is now available for approximately 50 communities and will be available to hundreds more in the next three years.

Creating a one-stop resource for city services is an ambitious agenda. But the National Resource Network is off to a serious start to guide cities to the people, resources and ideas they need.

Neil Kleiman | Contributor
neil.kleiman@nyu.edu



Virginia Orders Uber, Lyft to Stop All Operations.

The war between app-based ride-sharing services Uber and Lyft and the state of Virginia is escalating.

Earlier this year, Virginia officials slapped the app-based services with more than $35,000 in civil penalties for operating with out proper permits. On Thursday, Richard D. Holcomb, commissioner of the Virginia Department of Motor Vehicles, sent a cease and desist letter to both companies.

“I am once again making clear that Uber must cease and desist operating in Virginia until it obtains proper authority,” Holcomb said in the letter.

Officials at both companies said they will continue to operate in the state, despite Thursday’s order.

“We’ve reviewed state transportation codes and believe we are following the applicable rules,” Lyft spokeswoman Chelsea Wilson said in an e-mailed statement. “We’ll continue normal operations as we work to make policy progress.



Innovation Districts are Catalysts for Urban Growth.

For the past 50 years Silicon Valley and Research Triangle Park epitomized the environments where the nation’s innovations germinated. Now, there’s a noticeable shift to a new complementary urban model, unleashing exciting opportunities for cities and city leaders: innovation districts.

The National League of Cities and the Brookings Institution Metropolitan Policy Program have both observed how innovation districts are emerging in dozens of cities in the United States and abroad. From Barcelona to Baltimore, to Stockholm and Seattle, innovation districts represent a radical departure from traditional economic development (e.g., housing, retail, sports stadiums) and help cities move up the value chain of global competitiveness by growing the firms, networks and traded sectors that drive broad-based prosperity.

Innovation districts are places where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators. They are also physically compact, transit-accessible and broadband-ready, offering mixed-use housing, office and retail. Their success reflects our increasingly complex world, which demands increased collaboration to understand and address problems with solutions that are more and more found at the boundaries between different fields.

In cities, innovation districts are growing in downtowns and mid-towns, where large scale mixed-use development is centered on major anchor institutions and a rich base of related firms, entrepreneurs and spin-off companies involved in the commercialization of innovation. Kendall Square in Cambridge, Philadelphia’s University City and St. Louis’ Cortex Innovation Community are all anchored by robust research universities and medical campuses.

Districts are also found near or along historic waterfronts, where industrial or warehouse uses are undergoing a physical and economic transformation to chart a new path of innovative growth. The South Boston Waterfront, San Francisco’s Mission Bay and Seattle’s South Lake Union area are seeing this type of growth.

How City Leaders Can Catalyze Innovation Districts

Leadership has been a crucial force underpinning the conception and development of innovation districts around the globe. Leadership is imperative, whether it comes from elected leaders as in Boston, a major real estate company as in Seattle, the manager of a research park as in Houston or a collection of institutions as in Detroit. In many cities, a clear leader or driver rallied others to the table and kept the vision alive. Local elected leaders are able to convene civic champions, the business sector, nonprofits and universities within the city to successfully catalyze and grow innovation districts.

In the United States, a handful of mayors have catalyzed the formation and evolution of innovation districts—a number that will likely grow over time. Former Seattle Mayor Greg Nickels played a critical role in the growth of South Lake Union, making key infrastructure decisions around transit, roads and energy. Former Boston Mayor Tom Menino’s successful effort more recently to designate the South Boston Waterfront as an innovation district and steer its redevelopment in collaboration with a broad network of stakeholders is now being studied by mayors in an array of cities around the country as they seek to build upon their unique economic strengths.

Menino launched the Boston Innovation District with his 2010 inaugural address, and captured the impetus for its creation when he said, “Our mandate to all will be to invent a 21st Century district that meets the needs of the innovators who live and work in Boston—to create a job magnet, an urban lab on our shore and to harvest its lessons for the city.”

How Land is Being Leveraged for Investment

A number of innovation districts have opted to change antiquated land use and zoning ordinances or assemble land in an effort to create the favored attributes of complexity, density and mixed uses and activities. Cambridge just outside Boston and Cortex in St. Louis, for example, developed master plans to address the challenges in physically redeveloping their districts. Under existing state statute, the City of St. Louis designated Cortex West Redevelopment Corporation the master developer of the innovation district, delegating powers over planning, development, tax abatements and eminent domain.

In Seattle’s South Lake Union, efforts to transform a run-down, low-rise warehouse district into a thriving innovation district are paying off. In the aftermath of a failed referendum to approve a public park, Vulcan Real Estate assembled a substantial inventory of distressed properties in the area and began to lure key anchor tenants like the University of Washington Medical Campus to spark growth in life science companies. The city, for its part, worked closely with Vulcan and other stakeholders to make key investments around transit, congestion relief and energy and power. With the attraction of Amazon’s global headquarters, the district has become a central hub of innovation for not only the city but the region.

Other investments, such as in schools and workforce training, are integral as many innovation districts are adjacent to low-income neighborhoods. Philadelphia, for example, is considering the smart use of school investments to prepare disadvantaged youth for good jobs in the STEM (science, technology, engineering and math) economy.

Boston has found that developing an innovation district does not require big spending or picking winners. Previous research conducted by the American Institute of Architects found that “spending time not money” can be as instrumental in driving the agenda. Mayor Menino and his staff—from planners to a small group of innovation district coordinators—negotiated developer deals to include shared work-spaces for entrepreneurs. They also developed social media platforms to cultivate networks across industries in an attempt to stimulate new ideas for the market.

While a strong market city, Boston chose to not pick specific industry sectors “and it’s paying off,” shared Nicole Fichera, manager of District Hall, a dedicated civic space where the innovation community can gather to share ideas. “Designers, software programmers, marketers, lawyers, bio-engineers and more have all found a supportive place to grow in the Innovation District.”

What’s Next?

As this decade unfolds, we should expect more cities to use their powers in the service of this new model of innovative, inclusive and resilient growth. The National League of Cities and the Brookings Metropolitan Policy Program plan to work together to help cities and their leaders explore this model of innovation as they chart their economic future.

We invite you to learn more about innovation districts by attending the June 9 release of the Brookings paper, “The Rise of Innovation Districts: a New Geography of Innovation in America” To be held from 9:30 to 11:30 at the Brookings Institution, 1775 Massachusetts Avenue, NW (please RSVP at eochs@brookings.edu). The National League of Cities will send a short update when the research paper on innovation districts will be available to download.

Join the innovation district launch event in person or via live webcast on June 9: http://www.brookings.edu/events/2014/06/09-innovation-districts.

JUNE 2, 2014
by Brooks Rainwater
This post was written by Bruce Katz, Brooks Rainwater and Julie Wagner .

About the author: Bruce Katz is a vice president at the Brookings Institution and founding director of its Metropolitan Policy Program. Follow Bruce on Twitter at @bruce_katz.

About the author: Brooks Rainwater is the Director of City Solutions and Applied Research at the National League of Cities. Follow Brooks on Twitter at @BrooksRainwater.

About the author: Julie Wagner is a nonresident senior fellow with the Metropolitan Policy Program at the Brookings Institution. Follow Julie on Twitter at @wagnerjk.



New Research Reveals Local Government Officials Need to Get Up to Speed on Parking.

DALLAS, Texas – June 2, 2013 – A new survey of city and county officials shows that more than half are unaware of new parking technologies that can help alleviate traffic congestion, promote sustainability, and increase revenues, but they are eager to bridge that knowledge gap.

Conducted by American City & County magazine with the International Parking Institute (IPI), the survey asked local government decision-makers, about their jurisdictions’ parking challenges and knowledge of latest parking innovations.

Findings were presented at IPI’s Municipality Smart Parking Symposium at the 2014 IPI Conference & Expo in Dallas, Texas, this week. The annual conference is the world’s largest gathering of parking experts.

The survey revealed a significant need and desire for basic knowledge and guidance on parking. Most respondents were not familiar with today’s parking technology and how it can benefit their municipalities.

Forty-four percent expressed dissatisfaction with their use of technology, and 55 percent said their city or county did not use any of 13 technologies listed in the survey. These included pay-by-mobile parking options; meters that accept credit cards; wayfinding and guidance systems that indicate space availability; systems that enhance traffic management through use of data collection and wireless technology; and sustainable solutions such as electric vehicle (EV) charging stations, solar panels, and motion-sensor lighting.

Surprisingly few cities and counties have undertaken a critical examination of their own parking operations. Just 30 percent had conducted a parking study in the last five years; 12 percent had never conducted a study; and 22 percent did not know if or when a study might have been conducted.

The study confirms what the parking industry, which has undergone a revolution in technology in the past few years, has long known. IPI’s Emerging Trends in Parking Survey, research conducted annually among parking professionals, consistently identifies local government officials, along with urban planners and architects, as groups most in need of education about parking.

“There is a real disconnect here,” explains Bill Wolpin, associate publisher and editorial director of American City and County. “Local government officials recognize the importance of parking to vital downtowns, resident and tourist satisfaction, reduced traffic congestion, and more liveable, walkable cities, but more than half are not aware of new technology and new approaches to parking that would offer assistance.”

The study revealed a particular interest on the part of cities to incorporate sustainability initiatives, which nearly 70 percent of respondents cited as being important. Sustainability is also enhanced with new technology that makes it possible to find parking faster, thereby reducing emissions and fuel consumption.

“We will be working to bridge the gap between what city officials know about parking and the solutions parking professionals bring to the table,” says Shawn Conrad, executive director of IPI. Conrad was encouraged that more than half the city officials surveyed indicated strong interest in “developing a strategic plan for parking,” and that “collaboration between parking professionals and municipal decision-makers” was ranked among the top traffic-related trends having an impact on government.”

Download the complete survey here.

BY HELEN SULLIVAN, INTERNATIONAL PARKING INSTITUTE / JUNE 5, 2014

The International Parking Institute is the largest trade association representing parking professionals and the parking industry. www.parking.org

This story was originally published by FutureStructure.



U.S. Supreme Court to Decide Key Cell Tower Siting Case.

The nation’s top judiciary body will decide how thorough local governments need to be when informing telecommunications providers that their cell tower permit applications have been denied.

Cities and wireless providers have been at odds for years over how detailed written denials of cell tower permit applications should be. Some clarity is on the horizon, however, as the U.S. Supreme Court will weigh in on the issue later this year, setting the stage for a legal showdown that may have a significant impact on local governments.

Under federal law, municipalities are required to inform applicants in writing that a cell tower permit has been denied. But the lower courts are split on whether the “in writing” provision of the U.S. Telecommunications Act of 1996 (TCA) requires a separate explanation from a municipality for that denial. While it may be a narrow issue, the remedy for failing to meet the requirement is the granting of the permit. So even if a city decides a tower isn’t appropriate, the company would get permission to build it anyway, usurping local decision-making power.

The nation’s high court will hear arguments in T-Mobile South v. City of Roswell, Ga., a case where the city issued a letter to T-Mobile denying its permit application and informing the company it could obtain hearing minutes where councilmembers explained their reasoning from the city clerk. T-Mobile sued, claiming the notification did not meet the “in writing” provision of the TCA.

The lower courts involved in the case ruled in favor of T-Mobile. On appeal, however, the 11th U.S. Circuit Court of Appeals disagreed with the ruling, overturning the decision.

According to Lisa Soronen, executive director of the State and Local Legal Center, the federal appeals court relied on a plain reading of the statute. The court’s decision noted that the TCA doesn’t say that the cell tower permit decision must “’be in a separate writing,’ a ‘writing separate from the transcription of the hearing and the minutes of the meeting in which the hearing was held,’ or ‘in a single writing that itself contains all of the ground and explanations for the decision.’”

As a result, the U.S. Supreme Court will determine whether a document from a state or local government stating that an application has been denied, but provides no reason for the denial, satisfies the requirements of the TCA.

Lani Williams, general counsel of the LGL-Roundtable, a group that assists municipalities on complex legal issues, admitted that many local government attorneys and advocates were caught off guard by the U.S. Supreme Court taking the case.

While the high court regularly takes up issues where there is disagreement between various federal circuit courts or between federal and state courts, Williams explained that she and other attorneys that work on telecom matters on a regular basis didn’t feel the “in writing” debate was urgent enough to be tackled on the “big stage.”

A number of lower courts have ruled over the past few years that a written decision explaining the reasoning on cell tower siting permit applications was necessary. And while municipalities were doing their best to comply based on case law, Williams argued the task is difficult for many smaller communities because a clerk not versed in telecommunications law has to try and go through a huge verbatim transcription and pull out every reason why an application was denied.

And if the clerk or city employee makes an error and doesn’t interpret the reasoning correctly, Williams said it could inadvertently lead to a lawsuit where the judicial remedy is to push the permit forward instead of re-starting the permitting process or amending it.

“We’d rather just say, ‘Here’s your transcript, you can read it just as well as anyone else can, and these are the reasons we denied it,’” Williams said. “Instead of repeating it in a one- or two-page letter written by a clerk, who may get it wrong.”

Jonathan Campbell, director of Government Affairs for PCIA – The Wireless Infrastructure Association, disagreed. He called the example of a clerical error “a bit extreme,” and argued that the “in-writing” provision is meant to give clarity to wireless providers so they know the “rules of the road” for the particular jurisdiction on why the application was denied and what can be changed in the future to gain approval.

“I think it’s beneficial for just about everybody involved, because it allows the municipality to clearly state the grounds … and it saves the municipality time as far as litigating the case with the carriers,” Campbell said. “It [also] saves carriers time as far as getting a clear decision on their applications.”

Williams, however, was steadfast in her belief that local governments’ decisions regarding cell tower siting shouldn’t be overturned because wireless providers want municipalities to spoon-feed them

“None of us like dropped calls and we get frustrated,” she said. “But on the other hand, in whose backyard are those cell towers going to go? I believe in local control. And if a community decides it is OK with a few dropped calls in favor of the aesthetics that they want … if they go through that calculus, they should be entitled to have their decision be upheld.”

Brian Heaton | Senior Writer
Brian Heaton is a senior writer for Government Technology. He primarily covers technology legislation and IT policy issues. Brian started his journalism career in 1998, covering sports and fitness for two trade publications based in Long Island, N.Y. He’s also a member of the Professional Bowlers Association, and competes in regional tournaments throughout Northern California and Nevada.



Burger-Flippers of Seattle to Savor Taste of Victory: Muni Week.

A $15 minimum wage is about to become more than just a fast-food worker fantasy. Cities are posting help-wanted signs again. And Illinois lawmakers are walking away from a $2 billion budget shortfall until after Election Day after the customary ritual of self-flagellation. So it goes this week in U.S. states and municipalities.

***

Today, the Seattle City Council is poised to give final approval to phasing in a $15-per-hour minimum wage, which would be enough to lift a family of five out of poverty. The wage would be the highest of any big U.S. city — sought by unions, activists and fast-food workers, thousands of whom walked off the job last year.

Burger flippers aren’t the only ones tasting victory. Michigan, which angered unions by rolling back their power to collect dues, last week became the first Republican-controlled state to have lifted the minimum wage this year, pushing it to $9.25 over the next four years.

Seven states have enacted increases this year. Citing stagnant wages and a growing gap between the rich and poor, advocates are pursuing similar increases in Oakland, San Diego, Chicago and beyond.

***

Dismissals. Benefit cuts. Early retirement. The Great Recession took its toll on teachers, firefighters, and other civil servants. State and local governments eliminated 784,000 jobs.

Their finances on the mend, cities and states have been slowly adding jobs again since last year. The latest indication of whether the trend is continuing will come June 6, when the Labor Department releases its employment report for the merry (maybe) month of May.

***

Illinois, burdened by growing pension bills, already has the lowest credit rating among U.S. states. Lawmakers say their own actions put the state at risk of sinking even lower.

Facing re-election, they passed a budget that allows a record tax increase to expire, as planned, on Dec. 31. They left unresolved how to make up for the $2 billion in lost revenue, a matter they probably have to take up again after November. Keep your eyes on those rating companies. This sort of thing is like catnip to them.

***

Public officials are becoming reticent to spend money they haven’t already collected from taxpayers. They’re selling fewer bonds to pay for projects such as roads and bridges and senior centers.

The municipal market has shrunk for the past three years, according to the Federal Reserve Board, which will release its latest tally June 5.

Investors benefit from the scarcity. Last week, benchmark, top-rated 10-year municipal bond yields edged down about 0.05 percentage point last week to 2.25 percent, the lowest in a year.

Municipal borrowers are set to sell $4.7 billion of bonds this week, down from about $5 billion last week.

The Colorado Regional Transportation District is seeking to raise $431 million, according to Bloomberg data. And the Miami-Dade County Expressway Authority is selling $340 million of securities.

***

Earthquakes. Wildfires. Legislative gridlock. Budget shortfalls. Cash-starved schools. “Omega Man.”

This has all been part of life in California — part dystopic, part idyllic — until recently. The legislatively induced chaos, at least, is fading.

In the state that started a national tax revolt, voters consented to pay more to avoid deeper cuts to schools and other services. And the budget can now be passed by a simple majority, putting an end to regular crises that attended it.

On June 3, primaries for governor and other statewide offices will be decided for the first time by a method aimed at allowing a more moderate brand of politician to flourish.

Instead of Republicans picking Republicans and Democrats picking Democrats (which forces candidates to appeal to strong partisans), voters can pick candidates of any party. The top two face off in November.

Democratic Governor Jerry Brown is in the lead. Also running: Republican Assemblyman Tim Donnelly, whose backed by the Tea Party, and Neel Kashkari, a former banker and Treasury official who oversaw the bank bailout that inspired some of his opponents’ supporters.

By William Selway Jun 1, 2014

To contact the reporter on this story: William Selway in Washington at wselway@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Justin Blum



Minimum Wage Increases Advance From California to Seattle.

Unions and other advocates of higher minimum wages saw advances in California and Seattle as President Barack Obama’s call to raise the federal minimum languishes in Congress.

California would increase the state’s minimum to $13 an hour by 2017, the highest state rate in the nation, under a bill passed yesterday by the Democratic-controlled state Senate. Seattle’s city council signaled approval of a $15 minimum yesterday, the highest of any big U.S. city and more than double the federal standard of $7.25.

The campaign for higher minimum wages, originally a rallying cry of fast-food workers who staged strikes last year, has gained momentum in states and cities as Obama’s proposal for a $10.10 wage has stalled. Thirty-four states are considering increases, according to the National Conference of State Legislatures. Chicago lawmakers introduced a bill this week to adopt a $15 minimum wage.

“It’s not even paycheck-to-paycheck anymore, it’s paycheck to pawnshop,” Kshama Sawant, a socialist elected to the Seattle council last year, said at a meeting where members of a committee on wage inequality approved the bill.

The measure had the support of all seven members present, making a full vote of the nine-member council next week a formality.

The California bill must still pass the Assembly, also controlled by Democrats. It’s not clear whether Democratic Governor Jerry Brown would sign the bill since he enacted an increase last year to $10 an hour by 2016.

Home to Starbucks

The Seattle increase would take effect starting next year. The required hourly minimum jumps to $11 for Starbucks Corp. (SBUX) and other large employers, then escalates to $15 for all businesses by 2021.

Cities including San Francisco, at $10.74, and Washington, D.C., where the wage will reach $11.50 by 2016, have also required higher pay, according to the National Employment Law Project.

Supporters point to evidence of stagnant family wages and academic studies showing the gap between rich and poor at the highest since the 1920s.

The opening passage of Seattle’s legislation cites Thomas Piketty, the economist whose bestselling book, “Capital in the 21st Century,” has stoked debate about inequality this year. Adjusted for inflation, wages for most U.S. workers have been mostly unchanged since the 1970s, while those of the top 1 percent of earners rose 165 percent, according to Piketty.

Restaurants Oppose

Seattle restaurants, hotels and other employers have objected to higher wages, saying they could raise prices, lead to job losses and force smaller shops operating on low profit-margins to close.

Pay for day-care and home health workers will also rise, potentially leading to “tens of millions of dollars” in higher costs for government agencies, according to the Washington state treasurer, Jim McIntire.

“The cost to the state of a number of social services would actually go up,” McIntire said in an interview March 25. “The question is, is that something we’re ready to step up to and deal with?”

Academic studies commissioned by Seattle Mayor Ed Murray showed a small effect on restaurant prices: about 0.7 percent for every 10 percent increase in the minimum wage.

Fastest Growing

The Seattle legislation contained several measures intended to soften the blow on smaller businesses, including allowing them to include tips and health care benefits in the wage calculation for several years.

Seattle’s economy has been growing briskly, with cranes erecting new skyscrapers for Amazon.com Inc. and other large employers changing the skyline. The population growth of 2.8 percent from July 2012 to July 2013 was the fastest among the biggest 50 U.S. cities, the Census Bureau says.

Growth is so strong that wages may have risen even without the measure, said Kurt Dammeier, owner of Beecher’s Handmade Cheese, a seller of artisan cheese in Pike Place Market.

“It isn’t as high a drama as it sounds on paper,” he said. “It is getting increasingly hard to hire people with any skills below $15 an hour.”

The Seattle area is home to several companies known for paying above-average wages and benefits, such as Starbucks and Costco Wholesale (COST) Corp., where hourly workers get an average of $20.89 an hour, not including overtime.

Job Killer

“While we have not taken a position on this proposal, we support efforts to increase the minimum wage,” Starbucks spokesman Jim Olson said by e-mail. “Starbucks already pays above the minimum wage in every market we serve and we are committed to doing more going forward.”

Washington state has the country’s highest minimum wage, at $9.32, due to an initiative passed in 1998 that linked the state minimum to the cost of living. Opponents including restaurants and bars warned it would be a job-killer.

In the 15 years following its passage, the state’s job growth continued at an average 0.8 percent annual pace, 0.3 percentage point above the national rate. Poverty has trailed the U.S. level for at least seven years. Payrolls at state restaurants and bars expanded 21 percent.

By Peter Robison and Michael B. Marois May 29, 2014

To contact the reporters on this story: Peter Robison in Seattle at robison@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Pete Young, Vivek Shankar



Salesforce Meets FedRAMP Compliance for Saas, PaaS.

Just in time for federal agencies’ deadline to meet a new set of cloud security standards, Salesforce announced today that its cloud offerings are Federal Risk and Authorization Management Program-ready.

On June 5, federal agencies using cloud systems will be required to meet Federal Risk and Authorization Management Program (FedRAMP) security standards for these systems. While the program was designed to create a standardized system to ensure the security of cloud deployments, it has put much strain on agencies and vendors as they worked to meet the deadline. But on May 30, eight days before the deadline, Salesforce announced that it is the first vendor to offer FedRAMP approved services for both platform-as-a-service (PaaS) and software-as-a-service (SaaS).

“What’s significant for our government customers is that we’re really now offering [them] a choice when they leverage Salesforce,” said David Rey, senior vice president of public sector for Salesforce. “They can use our No. 1 customer relationship management software on our platform, or they can leverage our world class Salesforce1 platform to do their own custom development to build their applications to reach their employees and the citizens in a whole new way.”

This announcement is one that Salesforce’s government customers have been looking forward to, Rey said, noting that it’s also an opportunity for them to attract new business. “[The] Salesforce1 platform is really like the next generation systems platform for connecting government,”



Is President Obama's Wi-Fi Goal Realistic?

Cost estimates show that the Wi-Fi goal will take a major increase in E-Rate dollars.

For the Federal Communications Commission to bring high-speed wireless access to 99 percent of students in four years, it will need some political courage — and $3.2 billion.

In a ConnectED initiative announced last year, President Barack Obama called on the commission to not only increase high-speed broadband, but also high-speed wireless through its E-Rate program, which funds telecommunications, Internet, internal connections and connection maintenance in schools and libraries.

The problem is that everyone ignores the Wi-Fi and local area network aspect of connectivity, said Keith Krueger, CEO of the Consortium for School Networking. And no one really knew what wireless network upgrades schools needed and how much they would cost. That’s where the Consortium for School Networking and the non-profit EducationSuperHighway come in.

1. Add a minimum of $800 million in new E-Rate funding each year for local area network, Wi-Fi and core wide area network upgrades. This funding should be distributed to schools and libraries based on what each campus needs to bring the network up to snuff.

Total: $3.2 billion over the next four years

2. Set aside part of this new funding to cover any schools that overestimated their network readiness.

If the commission follows these recommendations, it could make the Wi-Fi portion of Obama’s ConnectED vision a reality by 2018. The commission has expressed interest in modernizing and potentially increasing E-Rate funding if the Consortium for School Networking could demonstrate a need for it in schools and provide an estimate of how much it would cost to meet those needs.

“For the first time, we have real data about what the gap is in where we are today and what it will cost to get to the president’s vision for this aspect,” Krueger said.

To get the numbers behind these recommendations, the two organizations consulted with more than 50 chief technology officers – in addition to equipment vendors and networking experts – to figure out a list of equipment that schools would need for robust wired and wireless networks. Then they researched the amount of equipment needed and estimated the cost of the equipment through price lists, vendor discussions and district purchasing experiences.

For example, each classroom needs about 1.2 wireless access points at a cost of $520, while one internal core switcher/router costs $12,500 for a medium-sized district of six to 15 schools. The cost estimates include potential labor costs for big jobs like installing wiring, but do not include network design, configuration or operational costs because they vary so much.

In addition to equipment numbers, the organizations needed to get a sense for where schools stand in their network readiness. With data in hand from the consortium’s E-Rate and Broadband Survey of more than 460 people last fall, they suggested that the commission should focus first on upgrading the 57 percent of schools that don’t have robust wired and wireless networks. They estimated that 40 percent require network switch upgrades and 26 percent require fiber backbone upgrades, for example.

If the Federal Communications Commission can come up with the funding of at least $800 million over the next four years, Obama’s goal is realistic. But to maintain good connectivity moving forward, EducationSuperHighway and the Consortium for School Networking suggest that this funding level should continue beyond 2018.

“It’s very realistic if we have the political will to do it,” Krueger said.

This story was originally published by the Center for Digital Education

Tanya Roscorla | Managing Editor, CDE

Tanya Roscorla covers education technology in the classroom, behind the scenes and on the legislative agenda. Likes: Experimenting in the kitchen, cooking up cool crafts, reading good books.



The Tools We Need to Measure Quality in Government.

Auditable standards for public-sector quality improvement efforts are the key to their sustained and effective implementation.

It is conventional wisdom that “if you can’t measure it you can’t manage it.” Lean and other quality-improvement efforts in government are doomed to be showcase events, removed from mainstream management practices, unless they are supported by auditable standards that make results measurable and reportable.

Providing auditable quality standards for government at all levels is the goal of a new initiative from the American Society for Quality’s Government Division, which I chair. The standards provide for the numeric rating of the maturity of processes, systems and scorecards for every government office, agency and jurisdiction. They make possible an annual and objective scorecard on government quality initiatives in the same way that the annual financial audit provides a report card on the use of fiscal management standards.

These standards are the key to the sustained implementation of quality in government. Because the standards are measurable and uniformly reportable, they will allow the public to compare quality implementation across government, evaluate whether agencies are efficient and effective, and determine whether elected officials and executive offices support quality efforts.

Auditable standards also align with fundamental good-management technique and support any other quality disciplines already in place. For example, any government that takes the time to document its practices using the ISO or Baldrige frameworks can easily “hold the gain” through annual use of these standards.

There are three parts to the auditable quality standards that encompass the three levels of leadership:

The latter two standards recognize that government is a system made up of elected leaders on the one side and hired workers and managers on the other, and that the fundamental value of government — what it achieves — can be controlled only by elected leaders. It is vitally important to recognize that government managers and front-line employees can only consistently deliver high levels of efficiency and effectiveness when the elected branch of government joins in the partnership.

Without auditable standards, quality in government cannot be measured. If broadly adopted, these standards hold the potential to enable quality initiatives to engage and empower government on a sustainable basis.

The writer is the author of a new book on the subject of this article, “Quality Standards for Highly Effective Government.”

BY RICHARD E. MALLORY | MAY 26, 2014

VOICES is curated by the Governing Institute, which seeks out practitioners and observers whose perspective and insight add to the public conversation about state and local government. For more information or to submit an article to be considered for publication, please contact editor John Martin.



The Value in Our Garbage.

The food we don’t eat gives us gas. But beyond renewable energy generation, organic waste holds the potential of big benefits for our communities.

Most of the nation’s garbage still ends up in landfills, and as much as half of what Americans toss into their trash bins is food waste and other organic material. But increasingly there’s recognition of the value in all of that smelly stuff.

Organic waste produces enough biogas that the collection of landfill gas to produce electricity or fuel has become a big business in the United States. And thanks to technological advances, another major use of organic waste, the production of high-quality compost, is increasingly being seen as a key ingredient in long-term community sustainability.

In the near term, there’s little question that capturing landfill gas and putting it to use as renewable energy makes sense. The federal Environmental Protection Agency (EPA) lists an array of benefits, including reducing greenhouse gases, offsetting the use of nonrenewable resources, helping to improve local air quality, providing revenues for landfills, and creating jobs and other local economic activity.

But while landfill biogas is a renewable energy source, there’s an ongoing debate about whether it’s good long-range policy to continue to send organic material to landfills. Landfills are filling up and biogas, after all, can be produced only if the municipal waste stream continues to provide a flow of material to generate it. The landfill waste-diversion goals that states and local jurisdictions are adopting signal that this flow will diminish over time.

In this light, it’s worth noting that the EPA has created a set of guiding principles around the highest and best use of food waste, which makes up a significant portion of the organic waste stream. Illustrated as an inverted pyramid hierarchy, the preferences descend from avoiding the generation of waste in the first place to using surplus food to feed people and animals, using food waste for fuels and energy generation and composting it into a nutrient-rich soil amendment. At the bottom is disposal to landfills or incineration.

While composting falls toward the low end of that list, a report by Brenda Platt of the Institute for Local Self-Reliance and Nora Goldstein of BioCycle magazine, to be published soon by the institute, provides a well-researched case for composting’s extended benefits, ones that reach well beyond its basic value as a soil conditioner. The authors endorse “a more nuanced hierarchy of highest and best use, one that takes into account scale, ownership, and the level of community engagement.”

Such decentralized, locally based use of resources is seen as a cornerstone principle that underpins community resilience. While local water reuse and distributed electricity generation are much more visible to the public, Platt contends that locally based composting is equally valuable for community sustainability. “Unlike recycling,” she said in an interview, “composting is inherently local and a place-based industry that takes advantage of a community’s existing resources to create jobs.” And it has potential as a business development strategy that draws upon local resources.

Today the flow of waste organic material is predominantly a simple stream, from source through consumer to landfill. Using that material to produce renewable energy certainly makes sense as long as the waste stream continues to flow. But in the longer term, programs that advance composting have the potential for diverse benefits — akin to the rewards that come from managing an entire watershed rather than individual waterways.

Bob Graves | Associate Director of the Governing Institute

MAY 28, 2014



VW, the UAW and the Re-Industrialization of America.

The changing relationship between labor and business is important for communities hoping for a manufacturing comeback.

The failed attempt to unionize the new Chattanooga Volkswagen plant set off shock waves in the business community. But the importance of the vote goes beyond a single plant in a single industry in a single city: It raises questions about an emerging new relationship between management and labor in general and the future of organized labor in particular. These are issues of vital importance to local leaders looking to rebuild manufacturing and bring well-paying jobs to their communities.

The February vote was close (626 for the union and 712 against), but the fact that it came after the company gave its tacit approval to the union effort, followed by an intense two-year campaign by the United Auto Workers, added to the significance of the outcome. It might be tempting to write this off as just another example of organized labor trying to gain a foothold in the traditionally conservative and anti-union South, but the stereotype doesn’t fit in this case.

Chattanooga has a heavy-industry history. It’s sometimes called a “Rust Belt city in the South,” with all the union heritage that such a nickname might imply. Organized labor has been a part of the fabric of the community practically forever. A representative of the Chattanooga Area Labor Council sits on the board of directors of the local United Way.

Immediately after the vote, the accusations of improper behavior and finger-pointing began. The union was accused to heavy-handedness in signing up potential members. Local politicians were criticized for suggesting that there would be no financial incentives from the state and that a much-hoped-for expansion of the plant would be put on hold if the election went in favor of the UAW. The union filed an appeal with the National Labor Relations Board asking that the vote be set aside and that a new election be held. (The union later acknowledged that an appeal could drag on for years, and the complaint was dropped.)

Local, national and even international media pounced on the union election and produced scores of articles, editorials and postmortem analyses of the landmark vote. Intertwined and intermingled with all the discussion and dissection was a unique element that has future consequences for other communities dealing with re-industrialization: the issue of “old” vs. “new.”

Volkswagen epitomizes a “new” type of world-class manufacturing. In Chattanooga the company is building a new vehicle utilizing a new workforce in a new billion-dollar plant. VW made no secret of its desire to establish “works councils,” a type of shop-floor organization like those found in most of the company’s other plants in Europe and elsewhere. The UAW promised to deliver a new sort of union representation to make it possible. Some argued that the only legal way that such works councils could exist under U.S. labor laws was with the participation of a union — and the UAW was the only candidate.

Tennessee had a similar experience almost 25 years ago with the opening of the dazzling General Motors Saturn plant in the previously rural village of Spring Hill south of Nashville. As with VW in Chattanooga, Saturn was a new vehicle produced by a new workforce in a new plant. GM and the UAW pledged themselves to an equally new sort of cooperative labor/management arrangement.

Things went well for a time, but as the “new” wore off, the old-line company and the old-line union reverted to their old-line ways. The new sort of labor agreement was abandoned in 2004, and the Spring Hill plant closed in 2007. Some of this sad experience still haunts the present situation.

There are many successful unions that do exhibit a new way of thinking and doing business. They focus on worker training and qualification and exhibit a cooperative rather than a confrontational image. They look and sound a lot like what Volkswagen says it wants in its works councils.

The VW/UAW vote of 2014 is history, but the greater issue of establishing new ways of thinking about labor and management must be addressed by every city hoping to rebuild its manufacturing base. There will be more such challenges as this new-world industrial culture evolves and matures.

VOICES is curated by the Governing Institute, which seeks out practitioners and observers whose perspective and insight add to the public conversation about state and local government. For more information or to submit an article to be considered for publication, please contact editor John Martin.

Ron Littlefield | Senior Fellow

MAY 30, 2014



Recycling Project to Bring 200-Plus Jobs to Detroit.

Detroit – A new project backed by the Michigan Strategic Fund will divert millions of tons of Metro Detroit waste from area landfills and put more than 200 people to work.

Green Box NA, a Wisconsin-based company that specializes in using 100 percent of reclaimed materials for new purposes, will set up shop near the Interstate 94 and Interstate 75 interchange in the city.

With the help of $125 million in tax-exempt bond financing from the Strategic Fund, the company plans to take in massive amounts of food-service waste from restaurants around the region and recycle them into commercial products.

The $200 million project will have the Detroit facility working in tandem with another Green Box operation in Cheboygan. Materials such as cups, lids, straws, plastic bottles and even napkins will be collected locally and converted into bails and pellets. Those materials will then be shipped to Wisconsin to be transformed into paper products like facial tissues and napkins, as well as biofuels.

“We actually like working with all big cities, but Detroit has some very good incentives,”



Playing the Slots: Technology’s Growing Role in Bringing Efficiency to Parking.

Los Angeles and San Francisco are jumping into variable-rate parking in a big way.

Using technology to implement roadway pricing has a lot going for it. Approaches such as variable highway tolls can reduce congestion by better managing demand, improving customer service and providing a revenue source for public transit, which in turn takes vehicles off the road.

Now Los Angeles and San Francisco are among the cities taking a similar concept and applying it to make it easier to find a parking space.

LA Express Park, a pilot program that covers a 4.5 square-mile area of downtown, uses technology to match on-street parking prices with demand. Its goal is to ensure that between 10 and 30 percent of the parking spaces on each block are open throughout the day. “Smart meters” and sensors compile occupancy and payment data. Based on that information, a pricing algorithm recommends parking rates for various times of day that are designed to ensure that meters are used but that no area is overly congested.

San Francisco has a longer history with dynamic parking pricing. SFpark began in 2011. It’s in use over a wider swath of the city and also covers city-owned parking garages. Similar to LA Express Park, it aims to achieve a consistent space-occupancy rate of about 85 percent. In some ways, SFpark is more precise. For example, it applies special rates around AT&T Park during Giants baseball games.

SFpark and LA Express Park both offer free apps that provide users with real-time space-availability information.

As parking expert Donald Shoup, a professor of urban planning at UCLA, puts it, these programs “reduce cruising, speed up buses, [and] reduce air pollution.” By minimizing the experience of driving around endlessly in search of a parking space that all of us who live in and around big cities know all too well, they also improve customer service.

Since parking patterns change continuously, adjustments to LA Express Park rates take effect on the first Monday of each month and are made public in advance. SFpark rates change less frequently — no more than every other month.

In Los Angeles, pilot-wide rates have decreased by 11 percent but revenue is up by 2 percent, thanks to better utilization of parking spaces and the increased rates in high-demand areas. The pattern has been similar in San Francisco.

Thus far, neither program has been used to raise significant new revenue, but the technology could certainly facilitate that. For example, meter hours could be extended past the typical 6 p.m. in areas that are busy in the evening.

One challenge these programs face is awareness. A survey in Los Angeles found that 76 percent of drivers would choose to park in a less-expensive space a little farther from their destinations, but those drivers must know about the dynamic-pricing plan to take advantage of it.

In transportation, we’ve increasingly seen in recent years that when technology is applied to improve customer service, it can also enhance revenue and create environmental benefits. Early results from San Francisco and Los Angeles suggest the same is true for parking.

BY CHARLES CHIEPPO 

MAY 23, 20140



Google’s GovDev Challenge Provides Real Solutions for Government.

The tech giant’s first government hackathon is over, and according to at least one CIO, the event was a great success.

On May 18, Google wrapped up its first GovDev challenge, a 24-hour hackathon that challenged local software developers and entrepreneurs to solve problems facing state agencies in Colorado and Wyoming. More than 100 developers joined with government workers, community groups and organizers in Denver for the event, and when the coding was done, nine teams were awarded cash prizes. Officials said the event was a success because it produced software they may ultimately use in their businesses, it sparked new relationships between government and the public, and it gave their agencies new ideas on how to work.

At the start of the event, three challenges were announced, two for Colorado and one for Wyoming, and teams and individuals selected a challenge and began working.

Wyoming CIO Flint Waters explained toGovernment Technology why his state’s challenge was about improving budget transparency: “We wanted to attack an area that had a sustainable and impactful effort toward the citizens’ view of government. There’s been so much done at the national level, in terms of technological innovation, that has damaged the public’s trust, and we needed to do things that worked a little bit different than that. It’s really tough to find champions in state government that are meaningful but not necessarily as passionate as data transparency and budget. It’s a hard thing to go into the Legislature and get them excited about.”

The event was a huge success, Waters said. Each participant was granted ownership of his or her intellectual property, so if the states want to use the solutions, they need to enter negotiations with the team or individual. Waters wouldn’t say which winners his agency is interested in, only that it’s very interested. “It does have very strong potential for what we’re doing,” he said. “We do want to be able to pull that data off the back end and see the hard budget numbers.”

The hackathon was also a big learning experience for Wyoming’s staff members, and Waters said a school-bus load of IT workers from different areas of government attended. “They spent their time watching how this was structured, how this attacked the problems, how this affected their thoughts, how they did their resource gathering,” he said. “They learned a huge amount on the collaborative environment that was there onsite, and how they could bring it back and change their workflow – whether they were in networking or servers or systems.”

The event gave state representatives an opportunity to meet with local developers, and also to meet some community groups for the first time. “It was really exciting in ways we didn’t even imagine. Not in the sense of who coded the fastest or who busted out the slickest interface, so much as about the development and excitement of the community,” Waters said.

One of the most impressive projects, Waters said, was the second-place winner for the Wyoming challenge, Dahl Winters, a Colorado-based research and development scientist and software developer. Winters made WyFi, a data visualization project that condensed the state’s budget data into a searchable map and a few simple charts.

Winters said she was amazed that she won a prize at her first hackathon. “I didn’t really know what to expect,” she said. “I just thought there would be a lot of people coding, and I’ve never coded for 24 hours straight before so I was really curious what the process would be. I came in with a very open mind.” The event was well organized and everyone showed a remarkable willingness to participate, Dahl added.

Kelly Shuster, a Denver-based software developer and member of the first-place winning team for one of the Colorado challenges, said the event was really cool because it was attempting to solve meaningful problems and people were working together and listening to one another, which doesn’t happen at all hackathons. “Like every hackathon, I kind of go hoping that I’ll learn something new in my field, and I definitely did that but I was surprised at how proud I was coming away,” she said. “I didn’t expect people running the hackathon, the people from Colorado and Wyoming, to be so pleasant. That was something I took away that I didn’t expect — they were so excited about it, they actually did care and it wasn’t just a gimmick.”

Shuster’s team addressed one of the challenges faced by Colorado Disaster Assistance Centers, which are set up after an emergency like the severe flooding that impacted the state last September. “Basically people are required to fill out anywhere from 20 to 30 forms to the different agencies for the different assistance they’re going to end up needing, but a lot of the information they’re filling out is the same like name, address and phone number. We talked about how not only is that a tedious and inefficient process, but the sociological and emotional impact of having to write your address down 30 times after you just lost your house is pretty terrible,” Shuster said. “We were really inspired by that.”

When devising a solution, Shuster said it was helpful to have people from government right there to work with. Sometimes the team members had ideas that they found out wouldn’t work, but the state workers helped them find a realistic solution.

“I’ve never participated in a hackathon that had such a real human example,” Shuster said. “Maybe it’s because there’s a lot of talk about the flooding we had in Colorado last September, and I think everyone knew someone who was affected by it. So we’re designing for those people that we know, and it sort of brings a more human aspect to the whole thing.”

MAY 22, 20140

Colin Wood  |  Staff Writer

Colin has been writing for Government Technology since 2010. He lives in Seattle with his wife and their dog. He can be reached at cwood@govtech.com and on Google+.

 



The Drive to Modernize: Governments Hatch Strategies to Bring Legacy Applications Up to Date.

Some public entities have been working for years to get their applications in line with business needs. Others are just getting started.

Legacy software can be a drag: It weighs the operation down. Take, for example, the U.S. General Services Administration (GSA). In recent years, that agency has lead the way in areas like open data, green energy and new models for acquisition, said Sonny Hashmi, the GSA’s acting CIO. “Yet, in many cases, our applications are not there to support us in the need to change a process or change data that we need to collect.”

After years of building special-purpose applications in silos, governments may find themselves managing portfolios crammed with redundant systems that can’t share data or integrate business functions, said Bill Kehoe, CIO of King County, Wash.

Because they’re difficult or even impossible to modify, old applications force governments to stick with outmoded procedures, and legacy applications also take a heavy financial toll. “The support cost to maintain all these applications is eating up probably 43 to 54 percent of our total IT operations budget,” he said.

The burden of legacy applications constitutes a looming crisis for governments, Kehoe added. “If governments aren’t already dealing with this in terms of an overall modernization strategy, they will have to very soon.”

Some public entities have been working for years to get their applications in line with business needs. Others are just getting started.

LINCOLN-LANCASTER COUNTY, NEB.: FROM SHELLS TO SQL

The IT department that serves Lincoln and Lancaster County, Neb., has been modernizing since the 1990s. Early efforts focused on writing new, browser-based front ends for mainframe applications. “We wrote shell programs to replace all the CICS [customer information control system] programs, so we could start presenting things in common ways,” said Terry Lowe, systems coordinator of information services for the combined city-county government.

Using this strategy, developers gave all of the government’s applications a similar look and feel, provided a mouse-driven interface and added software widgets. “It was a much more pleasant experience for my staff, and they adapted to it immediately,” said Lowe.

The team moved on to writing shells for other mainframe programs and, later, to writing code in SQL within the Microsoft .NET framework. Today, about one-third of the staff supports mainframe applications, a third works on products developed by vendors and a third supports newly written programs developed in .NET, Lowe said.

However, things are about to change again for Lincoln and Lancaster County, as it prepares to shut down its mainframe, moving many apps to a state-run data center. Some apps will stay local, though; Lowe and his team plan to rewrite them in SQL.

Systems developed in SQL under .NET run better than their predecessors on the mainframe, Lowe said. “They’re not as expensive to support, because on the mainframe there are some fixed costs that you don’t deal with when you’ve got SQL.”

Governments preparing for modernization should first take stock of all the technology assets that might influence the path they choose, said Lowe. Those assets include the skill sets possessed by staff, existing network technology, the email infrastructure and how GIS and document management systems will fit into the picture.

It’s also important to explain to elected officials who control the budget why modernization is worth the investment, Lowe said. In the long run, the potential to reduce operational and support costs should win them over. So will the fact that new applications are easier to use, he said. “It’s not a real hard sell when you ask people, ‘Do you really like these green screens?’”

FORT WORTH: BRING IN THE ERP

Fort Worth, Texas, has been working on modernization since 2009. It’s been moving applications from an old mainframe to a Windows environment and replacing a variety of programs with a PeopleSoft (now Oracle) enterprise resource planning (ERP) suite.

“The goal was to retire the mainframe, ideally before it was too far out of date, and replace it with servers,” said Pete Anderson, the city’s CIO.

Three years ago, Fort Worth moved its human resources and payroll functions to the server-based Oracle system. In 2014 and 2015, it will move finance, purchasing and budgeting to Oracle as well, Anderson said.

The initial migration still left about 200 applications to modernize, most of them designed for specific departments. In 2012, as a temporary measure, Fort Worth used software from U.K.-based Micro Focus to adapt about 14 of those programs for Windows.

“It’s like wrapping the mainframe applications in an envelope that’s Micro Focus. That envelope then allows them to communicate and operate on a Windows server,” Anderson said. “That was easier and less expensive than rewriting them.”

Since then, Anderson’s team has been working to determine which of the 200 applications the city needs to modernize, and which it can drop because the ERP system will handle those functions instead. That process has reduced the number of legacy mainframe systems to about 65, he said. The team also hopes that the ERP suite can take over many functions currently managed in Access databases and Excel spreadsheets, he added.

Modernization poses a significant change management challenge, Anderson said. When end users have been working with an application for years, they may be reluctant to give it up. And the proposed changes don’t concern software alone: Modernization provides a chance to update existing business processes. “We don’t need to automate exactly what they’ve been doing,” he said. “We might be able to use automation to do something even better.”

No one will be forced to give up existing software, Anderson said. But he hopes the business units will seize this chance to define their needs and discover how best to meet them. He also hopes they’ll choose solutions that exist within the ERP system or else select off-the-shelf solutions. “If this really is a permanent need, we should look at what third-party products are out there, so we don’t have to maintain the solution with our limited staff.”

U.S. GSA: OPEN SOURCE OR COMMERCIAL

The GSA’s modernization efforts date back about three years. The agency aims to invest in platforms that are open, configurable and extensible, Hashmi said. Some will be open source solutions, and some will be based on industry-leading commercial platforms such as Salesforce and Appian. “Instead of building our own version of the wheel, let’s buy something off the shelf that addresses 80 percent of our needs and then only invest in the 20 percent that’s specific to our business,” he said.

Like Fort Worth, the GSA is studying its portfolio to see which legacy applications it needs to update and which it doesn’t need at all. One such effort focused on about 1,500 small to medium-sized apps, mostly back-office business process automation tools, all based on 15-year-old technology.

Staff started asking which of those applications people actually used, which were redundant and could be combined, and which supported functions that the agency no longer needed. “Through that process, we shrank that portfolio down to about 100,” Hashmi said.

The agency then used a cloud-based platform to create new versions of those 100 applications, which vastly simplified development work on each app. “You’re using common business process templates, common workflow templates, common data entry forms and authentication,” Hashmi said. “All those things are done once and well, rather than doing them for each application.” This approach has reduced the total life cycle cost per application by more than 90 percent, he said.

Large, complex applications, like those used for financial accounting and payroll, aren’t easy to modernize, Hashmi said. Rather than rewrite or replace them independently, the GSA might contract with other federal agencies that already have the necessary software and could provide it as a service.

For more specialized applications, a management challenge arises when the agency tries to replace a collection of redundant systems with a single solution for everyone. One example is the work the GSA has been doing to roll out a new real estate management solution. The administration is divided into 11 geographical regions, and each one used to have its own procedures for managing property. When the GSA started working on new software, developers assumed that the product would have to cater to the unique needs of each region — that is until the development team asked regional managers to agree on a single set of policies and procedures.

“That really paid dividends,” Hashmi said. “We were able to build that app in a matter of months in an agile way, with a cost-effective, cloud-based solution.”

WASHINGTON STATE: THREE TIERS

The impulse behind the Washington state government’s modernization program came from the Legislature. Lawmakers directed the Office of the CIO to take inventory of the government’s legacy applications and then determine how to modernize that portfolio.

CIO Michael Cockrill and his team have identified three tiers of legacy applications. Tier 3 consists of tens of thousands of small apps, most designed to perform a single function in a department, such as producing a quarterly report. The state doesn’t have the resources to include those in its modernization effort, Cockrill said.

Tier 2 apps generally focus on crucial functions within individual agencies. Washington has about 3,000 of those, and they need frequent tweaking to keep them in step with changing laws or market demands.

Making those modifications isn’t easy. For instance, the mainframe application that comes into play when customers renew vehicle registrations online needs an upgrade. But it’s impossible to change that core system without also considering 30 to 40 ancillary applications, Cockrill said. “You have to figure out how to modernize all the supporting functions.”

Tier 1 consists of about 200 large, complex applications used statewide. One of the largest is the system used by the Department of Health and Human Services to pay its providers. Many Tier 1 apps run on mainframes, but mainframe technology in itself wouldn’t render a given system obsolete.

“We have lots of mainframe applications that we have no intention of replacing,” Cockrill said. “They’re very economical, they solve the problem and there are people who know the code and can update them.” But other apps in the portfolio have fallen behind the business problems they need to address — because they’re complex and few staffers know how to work with the code behind them, they’ll become candidates for modernization.

Once the state has a list, the IT team will decide case by case how to modify or replace each application. “Anytime users are looking at a significant upgrade, we’ll encourage them first to see if there’s a commercial product that lives in the cloud,” Cockrill said. If not, the team will seek a commercial off-the-shelf product, opting for in-house development only when absolutely necessary.

KING COUNTY, WASH.: HOLISTIC APPROACH

Officials in King County also plan to start their modernization efforts by taking stock, seeking chances to weed out apps that no one uses or to consolidate those that perform the same functions. Like Hashmi and Cockrill, Kehoe will look to the marketplace for modernization solutions, moving functions when possible to commercial off-the-shelf solutions or to platforms like Microsoft SharePoint or Microsoft’s cloud-based customer relationship management service.

One problem that Kehoe’s department faces is the plethora of applications that departments develop internally — using Access, for example — and then rely on the IT department to maintain. Modernization will reduce that burden. “Our hope is that a certain portion of our overall portfolio can drop off and they can use other applications,” he said. Or they might find that once they streamline the business process, an application is no longer needed.

Like Anderson, Kehoe foresees a significant change management challenge and not only with regard to end users. Many employees in the IT department would like to keep maintaining and updating legacy applications, rather than learn to work on new platforms. “Not everyone is going to be happy,” he said. “We have to provide training. We have to show a path forward and make sure they’re involved in the process as much as possible.”

Because it won’t be possible to put all of the county’s applications in the cloud or on new platforms, some staff members will continue to work on homegrown systems. “For staff who want to stay in that environment, there will be opportunities to do that,” Kehoe said. “For staff who want to expand their horizons and move on to some of these newer platforms, we’ll have opportunities for those as well.”

King County’s modernization effort is part of a larger technology strategy that involves more integration of data, more shared services and creating a simpler applications portfolio, Kehoe said. That strategy requires a holistic approach to modernization. “If we just took it one application at a time, we would end up with a more modern siloed application portfolio,” he said. “We’re trying to get away from that.”

 MAY 23, 20140

Merrill Douglas  |  Contributing Writer

 



Public School Funding Falls in Fiscal 2012, First Time Since 1977.

Decline in Federal Funding Cited; State, Local Spending Slightly Higher

Funding for U.S. public elementary and secondary schools decreased by $4.9 billion in fiscal year 2012, the first recorded drop since the U.S. Census Bureau began collecting the data in 1977, according to a report released by the bureau Thursday. Total funding of nearly $595 billion was down 0.8% from the previous year.

An approximate 19% downturn in federal dollars from the previous year—to about $60 billion in 2012 from about $74 billion in 2011—explains the shortfall for schools, according the Census Bureau. Revenue from state and local sources went slightly higher—about $270 billion and almost $265 billion respectively—in the same time frame.

Fiscal year 2012 represents roughly the same time period as the 2011-2012 school year.

The decrease in school funding reflects changes in revenue patterns during and after the recession, according to Mike Griffith, a school finance consultant for the Education Commission of the States, a nonpartisan research group.

“What we saw was the phase out of the additional federal dollars in stimulus funding,” said Mr. Griffith. “Those dollars had helped prop up state budgets during the recession. We saw state budgets recuperate in 2011-2012 at same time as federal money was disappearing…but states hadn’t recovered enough to make up for the federal dollars lost, so overall funding dropped.”

The largest slice of 2012 spending was for instructional salaries, which totaled about $207 billion, or nearly 35% of total spending.

“Expenses grow every year,” said Mr. Griffith, referring in part to teacher salaries and benefits. “The decrease in revenue is a problem for school districts because they will have to make cuts.”

Per-pupil spending remained stagnant, hovering at about $10,600 per student. The total number of students, at about 48 million, was down slightly from the previous year, according to the Census Bureau. Overall expenditures by the schools declined for the third year in a row, to nearly $594 billion, or a 0.4% decrease.

By CAROLINE PORTER
May 22, 2014 5:32 p.m. ET

Write to Caroline Porter at caroline.porter@wsj.com

 



City Pursues Social Impact Bonds to Tackle Teen Pregnancy.

Last September, the Mayor’s Office of Budget and Finance issued a solicitation for companies interested in conducting a feasibility study on a tool called social impact bonds. They’re essentially bonds with a cause. Investors provide up-front money for the city to launch a project that will provide social benefits—say, reducing prison recidivism or chronic homelessness—and save the city money in the long run. If everything goes according to plan, the investors will recoup a portion of the savings.

Today, the administration of Mayor Vince Gray announced that it had chosen an area where it hopes to make a social impact: teen pregnancy. It’ll be the first time social impact bonds have been used in America to reduce unplanned teen pregnancy and reap the economic rewards.

The city has selected the Boston-based Social Finance, Inc. as a nonprofit intermediary to coordinate the development and launch of the city’s first social impact bond program. Social Finance, founded in 2011, is an offshoot of Britain’s Social Finance UK, which created the world’s first social impact bonds in 2010.

Social Finance, Inc. has worked on several U.S. social impact bond projects, beginning with one in New York State to reduce prison recidivism. The company started working with the District in the winter, and identified a few areas where the city could pursue social impact bonds. City officials selected teen pregnancy.

“A young woman who has a child when she’s 14 or 15 has a much lower chance of receiving her high school diploma,” says Social Finance’s Rebecca Leventhal. “There are significant opportunities for savings relating to early health needs for children delivered to young women, as well as the educational opportunities for the mother that may be delayed or not achieved if she has a child.”

Social Finance is releasing a request for qualifications today for programs to reduce unplanned teen pregnancy that could participate in the program. That request will be followed by a request for proposals from qualified respondents.

Gray spokesman Pedro Ribeiro says the city won’t know for sure how the program will save the District money until responses to those requests come in. But he says reducing teen pregnancy can cut costs in a number of areas, including education, homelessness, and welfare payments.

“Look at D.C. General,” Ribeiro says, referring to the overcrowded homeless shelter where the city spends more than $150 a night to house each family. “Look at how many young mothers are in D.C. General. That’s incredibly expensive.”

Posted by  on May. 14, 2014 at 2:43 pm



How to Make Analytics Work for Your Government.

A California pension and health services executive highlights tips and progress in analytic initiatives.

Use of analytics in government is on the rise around the country, as proven by Chicago, the Sacramento Municipal Utility District in California, Indiana, Pittsburgh and a host of other jurisdictions.

And on May 13, a senior official from California Public Employees’ Retirement System (CalPERS) shared her insights on government analytics — the practice of using big data for predictive or statistical decision-making. For CalPERS, success in analytics is credited to the agency’s freedom to embrace risk, said agency Deputy Executive Officer Ann Boynton, who delivered this message at Data Analytics 2014, an event hosted in Sacramento, Calif., by Government Technology sister publicationTechWire.net.

CalPERS completed 22 analytics initiatives in the last three years, Boynton said, which meant there were many lessons to learn about the practice. One such initiative was the creation of MyCalPERS, a massive overhaul of 109 different data systems that manages the organization’s account portfolio of $290 billion — the largest in the nation.

One piece of advice Boynton has relates to government’s attempt to be perfect — which she says can unintentionally limit government to significantly imperfect solutions and restrain its ability to innovate next to the private sector.

“I think CalPERS as an organization tries to take the position of, ‘Go for it!’ because I can guarantee you we won’t get any better if we don’t do anything,” she said. “And even if we fail, we will have learned what not to do the next time out.”

Drawing upon examples of her work at CalPERS, which began in 2010, Boynton said the ability to take leaps and experiment has led the organization to make sizable efficiency improvements that employ analytics to gain business insights.

She identified four main areas where analytics has helped the agency: innovations in services, timely and enhanced insights of member needs, deeper understanding of market trends, and comprehensive impact analysis of policy and legislation.

“The beauty of business intelligence,” Boynton said, “is that it creates insights that enable an organization to take a holistic view of information for instant decision-making.”

To set the stage for analytics, CalPERS completed a number of initiatives in 2011, which included conducting a study to assess analytics needs, drafting a five-year road map for its operational goals and strategies, and consolidating 109 databases into MyCalPERS, a transactional database system housing agency information.

“Conversion from legacy systems to MyCalPERS required a lot of patience and hard work,” she recalled, and then joked that some employees in the room may still have a few nightmares about the needful — yet massive — undertaking.

Notwithstanding Boynton’s levity, the labor was a crucial step for the organization as it seeks to improve services and innovate. As a use-case example, Boynton said CalPERS has harnessed analytics and its unified database to dramatically reduce the time spent on research for annual rate plan negotiations.

“Research for annual rate adjustments and negotiations took days to accomplish and multiple spreadsheets,” Boynton said. “Now [analytics] enables the center to perform the analysis in seconds or minutes, rather than weeks.”

Additionally, areas where analytics have improved efficiency include payroll audits, contracted service assessments and a project that uncovered a few instances of erroneous sick leave paid out to retirees.

Like some states, CalPERS has the practice of converting remaining sick leave time into retirement compensation. Typically, most state employees must work 21 years before they’re able to accrue one year of sick leave. However, an analysis found pockets of discrepancies where service didn’t match time awarded.

“What happened when we looked at the data is that some members had more leave than we thought was actually possible based on our information of their service records,” she said.

Boynton also advised governments to nurture a work culture for analytics use, focusing hiring practices toward business analytics skill sets and harboring creative solutions with an open mind.

Jason Shueh  |  Staff WriterMAY 13, 20140

Jason Shueh is a staff writer for Government Technology magazine. His articles and writing have covered numerous subjects, from minute happenings to massive trends. Born in the San Francisco Bay Area, Shueh grew up in the east bay and Napa Valley, where his family is based. His writing has been published previously in the Tahoe Daily Tribune, Amazon Publishing, Bike Magazine, Diablo Magazine, The Sierra Sun, Nevada Appeal, The Union and the North Lake Tahoe Bonanza.



Student Workers Replace Retiring IT Staff in Los Angeles.

As the City of Angels prepares to lose 60 percent of its IT staff within the next five years, management looks for new ways to fill the gap.

Being in a compromised position can sometimes lead to new ideas — something Los Angeles and many other cities know much about given their budget constraints and challenges of a new economy. And retiring IT staff is another such challenge, but the City of Angels has figured out a way to handle the problem — at least for now. Los Angeles is using student workers as a temporary solution to its IT help desk staffing issues, said Steve Reneker, general manager for the city’s Information Technology Agency.

About 60 percent of the city’s IT staff will reach retirement age within the next five years, Reneker said, and four of the seven full-time workers at the help services desk have already retired (a fifth will be hired the week of May 19). Ideally, the city would replace the staff with new full-time employees because, as Reneker noted, hiring student workers has a few disadvantages — like the fact that they can’t work more than 24 hours per week, among others.

Because money is tight, however — and because hiring full-time employees has some drawbacks of its own, such as being time consuming and expensive, and allocating funds for those positions is something Reneker’s office no longer has the authority to do — the city hired student workers and determined how to work around the obstacles.

Another thing that made the hiring of student workers a bit simpler is that some already were on staff to help the city switch operating systems from Windows XP to Windows 7. And because Los Angeles didn’t want a lapse in service for IT phone support, the fastest way to fill those vacant positions was to hire in-house, Reneker said, so they moved four of those student workers to new positions at the help desk — one of which is being transferred to provide technical field support for the City Attorneys Office the week the fifth full-time staffer comes on board, according to the staff at the Technology Service Center.

The help desk position are imperative. The Technology Service Center provides first-level support to 4,500 of the 30,000 city users, which are primarily elected offices and small departments without systems support, according to the center. And from May of 2013 to April of 2014, the TSC managed 22,000 service tickets.

Though the hiring of student workers wasn’t initially a huge benefit over hiring full-time staffers, Reneker said the solution ultimately turned out “really well” for the city. The retired help desk staff were very specialized – they could help with some software and basic hardware issues over the phone, he said, but they didn’t have the skills to handle field work. This new generation of students and student workers, however, has a bigger skill set, he said, which allows the city to be more flexible.

“We’re able to rotate those on the help desk into the field so we don’t burn them out,” he said. “Because they’re [student workers], the turnover is going to be relatively high, so it’s important that we have a good backfill strategy for being able to deal with those resources.”

For up to the next 36 months, the city’s strategy will be to use its student workers in both call center and field work positions, Reneker said. And while having employees who can fill that diverse range is a benefit, there are a couple of big disadvantages as well.

“You probably have a total cost that’s somewhat less, but you lose the institutional knowledge of people who understand how things work in the city, who the critical points of contact are, and legacy systems knowledge and things like that, so having that type of turnover doesn’t necessarily mean you’re getting a consistent level of service,” he said. “We’re definitely answering the phones, but what we’re seeing is there’s a decline in our ability to be able to resolve those calls on the first call before we transfer it or capture the ticket. It’s a Band-Aid. It’s not a long-term strategy we think is prudent for others to consider.”

Having student workers on staff with larger skill sets led to the realization that there’s value in hiring people who have the flexibility to do multiple jobs, Reneker said, and the city plans to continue rotating its staff between the field and call center when the funds become available to fill those positions with full-time workers.

This story was updated at 2:40 p.m. on May 14 to reflect information obtained from the Los Angeles ITA’s Technology Service Center.

Colin Wood  |  Staff Writer

Colin has been writing for Government Technology since 2010. He lives in Seattle with his wife and their dog. He can be reached at cwood@govtech.com and on Google+.



East Chicago Police Offer Up Their Lobby, Parking Lot for Craigslist Transactions.

 Buying or selling something on Craigslist near East Chicago and want a little peace of mind? Head to the police station.

The East Chicago Police Department is offering the use of its headquarters parking lot and lobby — with a police officer present, if you like — for residents looking for safe spaces to conduct transactions arranged online.

Dubbed “Operation Safe Sale,” authorities in the northwest Indiana town said the program is a response to safety threats for those engaging in cash transactions involving items advertised on the Web or other classified ads.

Tales of Craigslist-related assaults and robberies, where victims are lured to locations with the promise of a sale, aren’t uncommon.

A Boilingbrook man was robbed in Evanston at the beginning of the year when he attempted to buy a handful of smartphones from a Craigslist dealer for $4,000, for example.

Mark J. Becker, chief of East Chicago’s police department, said an officer’s suggestion and a recent report of a Gary couple being robbed while trying to purchase a vehicle helped spur the program.

“I don’t know if it’s increasing, but it’s certainly been sustained,” Becker said of Craigslist-related crimes. “Certainly this has been going on for a long time, so why not make use of this building?”

Becker said the department will make every effort to have an officer available to oversee transactions Mondays through Fridays from 9 a.m. to 7 p.m. and Saturdays from 11 a.m. to 3 p.m. at the department’s office, at 2301 E. Columbus Dr.

The chief said officers can also double-check whether, say, a car or television for sale has been reported stolen.

“Not that there aren’t idiot crooks out there, but who’s gonna be willing to come here with stolen items?” Becker said.

Residents can also use the police lot or lobby for business without an officer present at any time, Becker said.

After all, the department said, its parking lot and the lobby are both well-lit and offer extensive videotape coverage.

BY JUAN PEREZ JR., MCCLATCHY NEWS SERVICE / MAY 2, 20140

©2014 the Chicago Tribune



San Antonio Police Might Impound Lyft, Uber Vehicles.

Chief William McManus said Wednesday that the Police Department might impound vehicles belonging to Lyft and Uber drivers if they continue to violate the city’s regulations for vehicles for hire, such as taxis and limos.

The city has cited 10 drivers for Lyft and Uber for providing a taxi or chauffeurlike service, McManus told the City Council Public Safety Committee.

The citations, which could result in fines of up to $500, were issued because the drivers are charging for rides, he said, which makes them subject to the city’s ordinance.

Lyft and Uber, two upstart companies that use smartphone apps to connect nonprofessional drivers with passengers looking for rides, contend they’re technology services, not transportation operations.

Therefore, the firms contend, existing vehicle-for-hire rules, such as licensing and permitting requirements for taxi and limo drivers, should not apply to them.

The police sent a cease-and-desist notice to Lyft in late March; a letter will be sent to Uber soon.

Since they started operating here in March, neither company had been charging for rides in order to avoid running afoul of the law, but now both said they are.

At the crowded council committee meeting Wednesday, taxi and limo company representatives, many wearing yellow shirts with the words “Licensed. Insured. Legal,” complained that Lyft and Uber just are trying to skirt the city rules that taxis and limos must follow.

The controversy now will go before a task force, which will determine if and how the city’s ordinance could be revised to allow Lyft and Uber — which McManus calls transportation network companies instead of ridesharing services — to operate legally in San Antonio.

The task force, which would include the taxi and limo industries, the ridesharing companies and the Transportation Advisory Board, will meet with city staff and report back to the council in August.

Leandre Johns, general manager of Uber in San Antonio, called the creation of the task force a “positive development” and indicated the company has no plans to stop operations in the meantime.

He confirmed Wednesday that the company started charging passengers recently.

In light of McManus’ threat to impound vehicles, Johns said drivers will have to decide if they want to keep working with Uber, which operates in more than 100 cities across the world.

Although Uber contends the city ordinance does not apply to the company, Johns agreed the rules do need to be revised because ridesharing services “weren’t conceived of” in the past.

A Lyft spokeswoman wrote in an e-mail that riders who recently signed up with the service still are enjoying free rides. But for other riders, “Lyft is on the donation model in San Antonio, meaning that passengers are free to adjust their donations at the end of the ride,” Katie Dally wrote.

Lyft calls its fares “donations.”

About the impoundment threat, Dally wrote, Lyft “will stand behind our drivers as we work through challenges at the city and state levels.”

In a presentation to council members, Steve Baum, the assistant police director who oversees ground transportation, said the ordinance, as written, does not distinguish between a company that “connects” drivers and passengers, as Lyft and Uber say they do, and one that dispatches, like a taxi service.

He suggested the council adjust the ordinance to allow for ridesharing and to level the playing field for all vehicles for hire.

Most of the council members on the committee supported creation of the task force, but some were hesitant to revise the ordinance, which was amended in August.

Council members also raised concerns that Lyft and Uber are refusing to follow existing regulations.

Representatives of Lyft and Uber reiterated that their operations are safe, even if not regulated by the city, and provide passengers with a choice.

Similar debates over Lyft and Uber are playing out in cities across the country.

Dallas and Houston are rethinking their ordinances. Austin, however, has said ridesharing services can’t operate legally.

Baum also said International Airport officials have recommended Lyft and Uber only be allowed to drop off passengers at terminals, not pick them up. Airports in other cities designate pick-up areas for ridesharing companies. However, Portland has outright banned them.

Insurance agencies in 10 states — but not Texas — have warned drivers and passengers in the past week about potential coverage gaps when using a ridesharing service.

Joseph Okpaku, Lyft’s manager of government relations who was in San Antonio for Wednesday’s meeting, said Lyft’s insurance coverage goes beyond what is of required of taxis in San Antonio.

McManus reiterated the issue is protecting the public.

“This is all about public safety,” McManus said. “It’s not about trying to keep new ideas from coming in the city.”

BY VIANNA DAVILA, MCCLATCHY NEWS SERVICE / MAY 8, 20140

© 2014 the San Antonio Express-News



Tablet Policy Puts California City on the Cutting Edge.

Rancho Cordova’s move to tablet devices has been a rousing success in its first year of implementation.

An experiment using tablet devices to display city council agendas has sparked a paperless office movement and progressive technology policy-making in Rancho Cordova, Calif.

Under a new policy launched last July, if an employee can show three business reasons why a tablet would help improve work efficiency, the city will purchase either an iPad or Android tablet for him or her. The device is then authorized for both business and personal use, but the employee must agree to bring it to work every day.

The policy has been a success for the city so far. Jay Hadley, IT manager for Rancho Cordova, told Government Technology that 61 of the city’s 70 full-time employees are now using city-owned tablets. In time, Hadley believes the devices will eventually enable staff to become a completely mobile work force.

The tablet explosion originally started as a way to eliminate the high cost of printing the city’s meeting agendas. Hadley revealed the city was spending $17,000 per year printing materials for the meetings, so it rolled out iPads for city council meetings to cut that expense. The devices were used by council members and staff, and one device in the council chambers displays a copy of the meeting agenda for the public to reference.

Encouraged by the results, city leaders decided to invest in tablets for the entire staff and make a commitment to keep its employees at a high level of technology.

“We want to provide state-of-the-art resources to staff so they can be more efficient and productive,” said Joe Chinn, Rancho Cordova’s interim city manager. “Access to this newer technology has been embraced by our city team and seems to be allowing employees to find more creative ways to accomplish their jobs.”

POLICY RESEARCH

Drafting a policy to govern tablet use wasn’t an easy task, however, as there weren’t any best practices established to work from. While Hadley and his team reached out to their peers in other cities, what they found was a bunch of varying BYOD policies, but nothing that addressed tablets specifically.

So Rancho Cordova looked internally and discussed what the policy should look like with users from various city departments, and executive level leaders. The result was a simple document that outlines basic expectations and responsibilities for the use and care of a tablet that clearly outlines the city’s right to inspect the device as needed.

The city’s mobile device management (MDM) solution notes when a device logs into the system and can send a ping out to one of the tablets if an employee loses it. Rancho Cordova pays for the applications on the device necessary for public business, but employees must pay for all other private-use apps.

The cross-pollination of business and personal use has risks, however. Theoretically, employees could potentially spend an inordinate amount of time using a state-of-the-art tablet for fun and games. But Hadley wasn’t overly concerned about the potential for abuse.

“I don’t think we’ve gotten into the minutiae of worrying about them being used too much on the personal side,” Hadley said. “Our organization is based on empowering and trusting employees to do the job, and we have a very cohesive team of people here.”

Chinn added that having a support team in place to help employees integrate technology into their jobs – internally called the Technology Tribe – helps reinforce the city’s trust in people and the commitment to embracing new ways to do their jobs.

“Because our culture has removed the fear of taking risks, employees look forward to new technologies as an opportunity, and do not associate it with a fear of failure,” Chinn said.

Rancho Cordova city employees can also bring in their own mobile devices under the city’s BYOD policy. While generally used for smartphones and laptops, tablets also fall under the BYOD umbrella. But users have to agree to have the city’s MDM solution installed on it and adhere to the relevant access policies.

Hadley added that his team sits down with employees for a frank discussion on how their personal tablets are used, and if it appears to be more of a family device with children using it, he typically suggests the issuance of a city-owned tablet.

SECURITY ISSUES

Although Hadley hasn’t had any technical challenges implementing the tablet policy so far, he admitted that security is always a concern. His staff spent a lot of time researching security policies and technologies related to tablets, but found that in reality, most of the mobile security tools available are MDM solutions aimed at traditional computers.

Rancho Cordova has a network access control system that automatically scans PCs and laptops logging in to its network. The system evaluates certain parameters like the computer’s anti-virus status, operating system service pack level and other criteria. If the machine doesn’t meet those parameters, the network access system won’t let it in. But according to Hadley, the same automation doesn’t exist for tablets, so his team has to manually set protocols for users of those devices.

In addition, Hadley noted that in his research on tablet use policies, he found that many cities are still locked in to what he considered the “old archaic way” of thinking of device security – not trusting the users to do the right thing. While Hadley admitted that even the most technologically-savvy employee could fall for a phishing scam or get sucked into social media obsession, he feels it’s important to trust the judgment of city employees to do the right thing.

“Everybody is thirsting for freedom and doing stuff, they don’t want to be locked down,” Hadley said. “But we have to balance it. [Security] is more of an educational and policy-driven thing, and on the other side, we have to keep our firewalls in place and do due diligence on the IT side. The more you open yourself up, the more you have to make sure you are covering those bases.”

Brian Heaton  |  Senior Writer

Brian Heaton is a senior writer for Government Technology. He primarily covers technology legislation and IT policy issues. Brian started his journalism career in 1999, covering sports and fitness for two trade publications based in Long Island, N.Y. He’s also a member of the Professional Bowlers Association, and competes in regional tournaments throughout Northern California and Nevada.



Should Cities Limit the Number of Rideshare Cars?

Seattle recently became the first city to limit the number of rideshare cars. City Councilwoman Sally Clark talks about the controversial regulations that have since been suspended.

In the past year, cities around the country have struggled with how to regulate so-called “rideshare” companies where drivers provide rides for pay using a phone app and their personal vehicle. In some places, municipalities have enacted temporary bans while they contemplate how these companies should be treated relative to existing businesses, mainly taxis. In March, the Seattle City Council took the unusual step of enacting new rules that legalized the companies and capped the number of vehicles (at 150) a company could have on the road at any given time.

Like the California Public Utilities Commission, Seattle concluded that the companies did not meet the federal definition of ridesharing, which essentially requires that any compensation only cover the cost of the trip. Instead, the council created a new designation: Transportation Network Companies, or TNCs. In addition to the caps, the city’s new regulations for TNCs required that the drivers receive a criminal history background check and adhere to a zero-tolerance drug policy. The city also imposed minimum liability insurance requirements for the companies and required the companies to conduct vehicle safety inspections.

The rules were the result of 11 months of public hearings and council deliberations, informed by a market demand study. Now they’re in limbo. In April, opponents of the new ordinance, funded with more than $200,000 each from Lyft and Uber, collected more than 36,000 signatures — twice the number needed — for a ballot measure that would repeal the regulations. Seattle Mayor Ed Murray’s office is currently negotiating with the rideshare companies and other stakeholders over modified rules in order to avoid a public vote. In the mean time, the city has suspended the new rules.

Seattle City Councilwoman Sally Clark, who oversaw the council’s committee on taxi, for-hire and limousine regulations, spoke with Governing April 30 about the city’s recent experiences trying to fit rideshare companies within a regulatory framework.

Do you have a sense of how much of the push to repeal the new regulations is coming from the companies and their drivers? Is this really a citizen-led movement?

Oh, no, it’s completely led by the companies. They funded the signature-gathering effort and drafted the referendum. Having said that, plenty of people were willing to sign on. Gathering the signatures that they needed was not particularly hard work.

I thought the demand study was really interesting. Were there specific lessons you drew from the study that helped shape the regulations you ended up passing?

For a long time, Seattle regulators had been saying, “well, we don’t think there is a need for more taxi vehicles because the wait times are fine — no one is waiting an intolerable amount of time for a cab to respond.” Yet I think what the demand study showed is that the wait time isn’t a very accurate predictor of demand or of latent demand. What we thought was masked in that was increased demand over time, but it was being met by town cars and also by these new providers.

In Seattle’s case, we don’t regulate the number of town cars; that’s a state set of regulations and they don’t have a cap on the number of town cars that can work in the city. And so, you have this restricted market in terms of taxis because we do have a cap on the total number of licensed [taxi] vehicles, but they’re operating side-by-side on the roadway with this uncapped set of vehicles, towncars, and then subsequently by the up-until-now uncapped TNC vehicles. The demand study got at that. We probably did have demand that wasn’t being met by the existing taxi world.

There were some areas where the ride-sharing companies were outperforming taxis, like ease of payment and quality of service.

Yeah. We heard a lot about that. There was something about cracking into this subject that really allowed people to talk more openly or more vocally about their dissatisfaction with their taxi service.

Did the council discuss whether it has a role to play in trying to improve quality of service or ease of payment? I was thinking about how some cities require taxis to take credit cards. Did you think about requiring taxis to accept online payments through Hailo, Taxi Magic or some other phone app?

In general, I would like to see all the providers make it easier for customers to both get the ride and complete the ride, meaning payment. What the TNCs are providing in terms of the technology interface and also their focus on the customer satisfaction and communication — you get to rate the driver, you know who the driver is when they’re on the way — I think that’s all really good. I think that’s a huge improvement over how we handled dispatch the old way.

For the legacy taxi systems, I think the exposure that customers are going to have to these easier apps will create demand for the same kind of ease of access of dispatch and attention to customer service. The communication and the data, I think, are really attractive to people.

So rather than trying to require it, you would just allow the market to create its own incentive for offering that option?

To be honest, I haven’t thought much about a requirement because I think the market is going to require it. I haven’t thought about the city saying “thou must have an app.” I think it’s going that way. I think anybody that doesn’t have an app in the future is going to be at a severe disadvantage.

One of the findings that stands out to me is that taxis were more widely used among lower income brackets than rideshare services. Taxis were also more widely used among older riders. Do you think these new companies, if allowed to operate under city code, could change that rider behavior? Or do you think these types of riders might lose access to a transportation option?

I think that’s still an open question for cities. We’re looking at cities that have a slightly more mature market for ridesharing than we do. We look to San Francisco to say, how are lower income or disabled or more elderly riders using these systems and where are they left with more limited choices? I don’t think we know yet.

That’s a concern though. The concern for me is, for folks who really need the dependability of set meter rates, who don’t want to be at the mercy of surge pricing, TNCs don’t work so much for them. They want to know what the fare is going to be. And I certainly hear the argument that TNCs are going to cheaper at certain times. That might be true, but when an elderly person needs to get to a doctor’s appointment during a daytime baseball game when there’s a lot of demand, they’re going to feel pinched by that. Traditionally, you had a system where everybody pays the same rate, no matter the time of day, and there’s at least the dependability in that of being able to go from point A to point B at a rate that you understand and that’s not affected by market demand at the same time.

What was the rationale for the 150 cap? Where did the number 150 come from? And why 150 per company instead of a single cap for all companies?

If we are going to stay in the business of constraining the universe of cars that are available for service, then it seemed reasonable that if we cap taxis and we cap flat-rate cars in Seattle, then it seemed reasonable to look at what our system needs. Does our system need an unlimited number of cars in there? Or does our system need a certain number of cars to provide the service, particularly in the pilot phase? We called this first two years a pilot phase to figure out: will the companies be around a year from now, will they will be able to operate under the rules we’re putting in place for driver and vehicle safety, do we have enough time to rebuild some of those systems to better reflect how we should be onboarding drivers and checking vehicles for the 21st century? Some of our systems for that are really behind the times.

I think the idea was to look after a certain amount of time at the real impact that these cars are having and how we could adjust maybe a year into this and take a look at either lifting the cap, increasing the cap, doing something a year from now once we would have some data on what is happening to the traditional taxi system, and how it’s affecting different slices of the client base that need access to rides.

In D.C., a few weeks ago, the taxi commission discussed deregulating taxi meter fares if you order a ride online or over a mobile app. Do you see Seattle doing something similar?

Deregulation is a big word. We probably are going in the direction of getting away from capping the total number of vehicles. That’s a big change for the industry though and you have a lot of folks who have invested their life savings into their business as a way to provide for their families. If we go too fast in the deregulation route, we really destabilize a lot of folks.

The big question that we really haven’t tackled yet is, are we going to get out of the business of managing fares? That would be a huge step for cities to say that we don’t have an interest in having a ride available at a predictable cost at any time. It’s not something we’ve got into here yet. I have a feeling it is something that cities are going to be talking about in the coming years.

It’s been interesting to watch how interest groups have tried to lobby on for-hire-driver regulations as cities wrestle with what to do about companies like Lyft, Sidecar and Uber. In Seattle, were there differences in tactics and messaging between say, the taxi industry and the rideshare companies?

The TNCs are aggressive with their public relations. They’re spending a lot of money on every city. They’re both aggressive with the public relations in terms of talking with the regulators, but it’s also about building their driver base and their customer base. To some degree, being in the news is good for them. Having people say, “oh my gosh, I don’t want my ride service to be under attack” works for them. It builds a sense of community where they can say, “We’re the new people. Nobody likes the new people. Help us fight back against the intransigent, dinosaur powers.”

The taxi folks, in Seattle at least, have been on their heels. I don’t know if that’s the same in every city, but certainly in Seattle, the taxi folks have started out by simply hoping that we would shut [the TNCs] down. I think they were relying on technically what’s the law and then recognizing that really the ground is shifting. So, taxi companies are saying “these are for-hire vehicles, why aren’t you regulating them?” That’s exactly what we’re talking about, putting in place regulations that are about safety and consumer protection. And then there’s just the fact that the industry is fundamentally changing. Taxis, the ownership groups, in Seattle at least, need to recognize that sooner rather than later and figure out how they’re going to adapt.



This City is Heading Down Detroit's Path.

North Las Vegas could be the next city to risk bankruptcy if its current trends continue, a new report warns.

“North Las Vegas, while not in default, is nearing insolvency,” said Fitch Ratings Director Matthew Reilly. He added that the “dire fiscal picture stems from a steep drop in revenues due to the severity of the recession” coupled with several years of contractually obligated salary increases for city employees. “The city also faces a structural budget deficit, one-time expenses, and restrictions on certain revenue-raising measures,” Reilly said in a prepared statement.

His statement accompanied a report released Monday that concludes North Las Vegas, a city of nearly a quarter million that has almost doubled in population since 2000, faces the same factors that led to the bankruptcies in Harrisburg, Stockton and Detroit. Namely, North Las Vegas has made bad financial decisions, has rigid and escalating cost structures and also faces revenue raising limitations and weak economic conditions.

The report notes that America’s now bankrupt cities all were hamstrung by financial decisions made years before that increased their liabilities. Yet lawmakers also failed to make necessary decisions to fund those obligations. In particular, the pension benefits in all three cities became burdensome liabilities during the 2000s. Detroit, for example, issued debt in the mid-2000s to shore up a more than $1 billion pension funding gap, only to face a $644 million unfunded liability by 2013. (The city’s emergency manager, using different assumptions, says the pension’s unfunded liability is closer to $3.5 billion.)

Nevada state law is unclear on whether cities can file for Chapter 9 bankruptcy but a Moody’s Investors Service analysis earlier this year noted that “state intervention is possible given the city’s significant financial pressures.” Under a “severe financial emergency” the state would take over management of the city or Nevada could also provide “technical financial assistance” to review and consult on operations and debt administration. In April, the city barely submitted a balanced budget to the state after officials initially projected a $24 million budget shortfall (nearly 15 percent of budgeted operating revenues). However, North Las Vegas is drawing upon its reserves to achieve the balance.

Adding to those pressures were recent court judgments against the city. One was settled down to $7.7 million after a judge initially awarded $25 million in back pay to public safety workers. The other award was for $4 million in damages to land developers from wrongful pre-condemnation by the city.



Public Sector Takes Sides in Patent-Troll Fight.

Transit agencies and public universities have a lot at stake while corporate heavyweights clash over state and congressional efforts to rein in “patent trolls.”

Proposals before Congress to crack down on so-called patent trolls have pit major tech companies against each other. But they can be just as divisive in the public sector, too.

To see why, just take a look at the central Illinois cities of Champaign and Urbana, which are home to the state’s flagship public university.

The local bus agency was forced to settle with a so-called patent troll who claimed the intellectual property rights to technology that helped passengers track the arrival times of buses. Now the agency is weighing its options after receiving a threatening letter from a patent holder who claims exclusive rights to sell equipment for recording video on buses.

“Honestly,” says Karl Gnadt, managing director-designate of the Champaign-Urbana Mass Transit District, “I think this legislation is just a baby step toward taking care of the real problem, and that is just a broken patent system.”

But two miles from the headquarters of Gnadt’s agency, Lesley Millar-Nicholson heads an office that licenses and protects the intellectual property generated at the University of Illinois’ main campus. She worries the proposals would reduce the university’s mission of “taking the research, getting it out and trying to actually have an impact on the world.”

“The universities pretty much have fairly limited budgets with which to both protect and enforce intellectual property,” Millar-Nicholson says. “Further barriers to being able to do that on a level playing field make it even harder.”

Patent trolls are getting more aggressive, which is a major reason that states and localities—just like small businesses and nonprofits—are suddenly tangled up in patent fights. Lawsuits filed by patent trolls increased from 731 in 2010 to more than 2,500 in 2012, according to the White House.

The term “patent troll” is used widely, but it can be difficult to distinguish them from other aggressive patent holders, especially when public officials are attempting to write legislation.

Generally, patent trolls are holders of  vague patents who do not use the protected technologies themselves. Instead, they demand payment from alleged infringers in the hope that their targets will settle rather than defend themselves in court.

2014 State Patent-Troll Bills
Last year, Vermont was the first state to pass a law directed at “patent trolls.” This year, legislatures in at least a dozen states have passed similar measures.AlabamaGeorgia

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Last year, Vermont became the first state to allow defendants to countersue alleged patent trolls for abuses after a company sent demand letters to two non-profit groups that serve the disabled for allegedly infringing on patents allowing scanned documents to be sent via email. This year, at least a dozen state legislatures (see table) passed laws also attempting to curb patent abuses.

State attorneys general also have stepped up legal pressure on alleged trolls, using consumer protection laws. The attorneys general of 41 states and Guam also asked congressional leaders in February letter to make sure that state laws and state courts could still be used to handle cases against patent trolls.

“Federal legislation should confirm that state courts have personal jurisdiction over entities that direct unfair or deceptive patent demand letters into the state,” they wrote.

The U.S. House passed a measure in December to discourage patent abuses on a 325-91 vote. The legislation, dubbed the Innovation Act, would require patent holders to disclose more information when bringing enforcement actions in court. It would allow manufacturers to intervene in patent lawsuits brought against their customers.

Most controversially, the measure would also require patent holders who lose their case to pay the attorney fees for the prevailing party, unless the court determines that the award would be “unjust” or that the patent holder’s claim was “reasonably justified in law and fact.”

A group of senators is now working on its own patent legislation, which it expects to release next week.

Proponents of the House measure say the changes would at least reduce the number of lawsuits brought by patent trolls.

“There’s so much money in it, it’s not going to stop,” says Matt Levy, patent counsel for the Computer and Communications Industry Association (CCIA). “But the goal is to make it less attractive.”

But major research universities, including many public schools, say “loser pays” proposals and other measures to discourage patent abuses would also make it harder for universities to pursue legitimate claims.

“Not only does (fee shifting) present a strong disincentive for universities to enforce their patents, but it will substantially increase the perceived risk to potential licensees and venture capitalists of investing in university patents,” wrote the Association of American Universities in a statement.

“We’re already struggling,” adds Millar-Nicholson from the University of Illinois. ABrookings Institution study found that 84 percent of research universities lost money in 2012 on their technology licensing offices. Adding to the cost of litigation and discouraging lawsuits, Millar-Nicholson says, would put universities “on the back foot.”

“Universities are not patent trolls. We are not out there to get a quick buck or sue individuals without merit. But we have to have (patent lawsuits) in our bag of tricks. In fact, any patent owner has to have that tool in their bag of tricks,” she says.

The proposals before Congress could also undermine other congressional priorities, she says. The federal government funds much of the research at major universities, and it requires universities to take ownership of and license inventions produced by federally funded research.

That licensing boosts the economy by launching start-up companies, creating jobs and advancing technology, Millar-Nicholson says. “It’s like the ripple effect. It’s a small pebble in a big pond.”

But in the same central Illinois community, patent trolls are blamed for hurting a small business that worked with Champaign-Urbana’s transit agency.

The local mass transit district was one of at least 11 agencies around the country to get a demand letter from ArrivalStar, which threatened to sue the agencies if they did not pay money to license its patented technology predicting bus arrivals.

The central Illinois agency settled without paying money, Gnadt says. But its vendor, a local company laid off five workers and abandoned its software business as a result. The transit agency hired new workers to take on the extra work.

But settling patent lawsuits “is almost always a sound economic decision” for transit agencies, says James LaRusch, general counsel for the American Public Transportation Association, a trade group.

When ArrivalStar wrote transit agencies in Toledo, Ohio and Raleigh, North Carollina, for example, it indicated it would allow the agencies to license its technology for $150,000. Metra, the commuter rail agency in the Chicago area, settled with ArrivalStar for $50,000. King County Metro in the Seattle area agreed to pay $80,000.

But going to court, LaRusch says, would likely cost a transit system millions of dollars.

APTA faced a similar problem. It could not afford to take action against ArrivalStar until the Public Patent Foundation, a non-profit legal services agency at the Benjamin N. Cardozo School of Law in New York City, offered to help.

Public Patent’s lawyers represented APTA in a lawsuit filed against ArrivalStar last June.

APTA claimed that public transit agencies were essentially arms of the states that created them and therefore could not be sued for patent infringement because the 11th Amendment gives states sovereign immunity. The group also argued that ArrivalStar’s patents were invalid and unenforceable.

The parties settled and agreed to keep the terms confidential. But LaRusch said ArrivalStar agreed not to pursue the transit agencies or their vendors.

The APTA settlement came too late for the Champaign-Urbana MTD, whose vendor already laid off workers. Now, Gnadt says, his agency faces a different type of patent threat, which he calls “threat marketing.”

For example, Gnadt says, his agency recently received a letter from a company that sells video equipment for buses. The letter says its competitors’ merchandise violates the company’s patents, but that the Champaign-Urbana agency could avoid legal problems by buying its equipment instead.

Gnadt says he is encouraged by the activity on Capitol Hill to discourage patent trolls. “It’s a beginning effort to take care of (the problem),” he says, “but in of itself, it does not eradicate the problem.”



E-Cigarette Bans Take Effect in New York City, Chicago.

Laws in New York and Chicago making electronic cigarettes subject to the same regulations as tobacco are taking effect, and their sellers and users are steadfast in their opposition.

The New York ban — along with the measure in Chicago, one that previously went into effect in Los Angeles and federal regulations proposed last week — are keeping debate smoldering among public health officials, the e-cigarette industry and users.

Proponents of the bans which began Tuesday say they are aimed at preventing the re-acceptance of smoking as a societal norm, particularly among teenagers who could see the tobacco-free electronic cigarettes, with their candy-like flavorings and celebrity endorsers, as a gateway to cancer-causing tobacco products.

Dr. Thomas Farley, the New York City health commissioner under former Mayor Michael Bloomberg, says allowing electronic cigarettes in bars and restaurants would undermine existing bans on tobacco-based products.

“Imagine for a moment you’re at a bar and there are 20 people who are puffing on something that looks like a cigarette and then somebody smells something that smells like tobacco smoke,” Farley says. “How’s the bartender going to know who to tap on the shoulder and say, ‘Put that out’?”

Makers of the devices say marketing them as e-cigarettes has confused lawmakers into thinking they are the same as tobacco-based cigarettes. They say the bans ostracize people who want an alternative to tobacco products and will be especially hard on ex-smokers who are being lumped into the same smoking areas as tobacco users.

Their defenders also say they’re a good way to quit tobacco, even though science is murky on the claim.

View Full Story from AP/The Washington Post


NYT: Town Meetings Can Have Prayer, Justices Decide.

 WASHINGTON — In a major decision on the role of religion in government, the Supreme Court on Monday ruled that the Constitution allows town boards to start their sessions with sectarian prayers. The ruling, by a 5-to-4 vote, divided the court’s more conservative members from its liberal ones, and their combative opinions reflected very different views of the role of faith in public life, in contemporary society and in the founding of the Republic.

Justice Anthony M. Kennedy, writing for the majority, said that a town in upstate New York had not violated the Constitution by starting its public meetings with a prayer from a “chaplain of the month” who was almost always Christian and who sometimes used distinctly sectarian language. The prayers were ceremonial, Justice Kennedy wrote, and served to signal the solemnity of the occasion.

The ruling cleared the way for sectarian prayers before meetings of local governments around the nation with only the lightest judicial supervision.

The decision built on one from 1983 that allowed prayers at the start of legislative sessions. The two sides on Monday disagreed about whether town board meetings, which include not only lawmakers and spectators but also citizens seeking to do business with the government, are meaningfully different from legislative sessions.

Justice Kennedy said the prayers in both settings were “meant to lend gravity to the occasion and reflect values long part of the nation’s heritage.”

Justice Elena Kagan said in dissent that the town’s practices could not be reconciled “with the First Amendment’s promise that every citizen, irrespective of her religion, owns an equal share in her government.”

She said the important difference between the 1983 case and the new one was that “town meetings involve participation by ordinary citizens.”

She did not propose banning prayer, Justice Kagan said, but only requiring officials to take steps to ensure “that opening prayers are inclusive of different faiths, rather than always identified with a single religion.”

Town officials in Greece, N.Y., near Rochester, said members of all faiths, and atheists, were welcome to give the opening prayer. In practice, however, almost all of the chaplains were Christian. Some prayers were explicitly sectarian, with references, for instance, to “the saving sacrifice of Jesus Christ on the cross.”

Two town residents sued, saying the prayers ran afoul of the First Amendment’s prohibition of government establishment of religion. They said the prayers offended them and, in Justice Kennedy’s words, “made them feel excluded and disrespected.”

But Justice Kennedy said the relevant constitutional question was not whether they were offended. “Adults often encounter speech they find disagreeable,” he wrote. “Legislative bodies do not engage in impermissible coercion merely by exposing constituents to prayer they would rather not hear and in which they need not participate.”

Justice Kennedy said traditions starting with the first Congress supported the constitutionality of ceremonial prayers at the start of legislative sessions. Both Houses of Congress, he said, have appointed and paid for official chaplains almost without interruption ever since. Legislative prayer, he said, is “a practice that was accepted by the framers and has withstood the critical scrutiny of time and political change.”

In a long footnote, Justice Kagan disputed that assertion, saying some of the most prominent members of the founding generation — George Washington, Thomas Jefferson and James Madison — took pains to keep sectarian language away from public life. “The demand for neutrality among religions is not a product of 21st century ‘political correctness,’ ” she wrote, “but of the 18th century view.”

But Justice Kennedy said legislative prayers may have sectarian content and need not “be addressed only to a generic God.” He added that it would be perilous for courts to decide when prayers crossed a constitutional line and became impermissibly sectarian.

“To hold that invocations must be nonsectarian,” he wrote, “would force the legislatures that sponsor prayers and the courts that are asked to decide these cases to act as supervisors and censors of religious speech, a rule that would involve government in religious matters to a far greater degree than is the case under the town’s current practice of neither editing or approving prayers in advance nor criticizing their content after the fact.”

Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr. joined all of Justice Kennedy’s opinion, and Justices Antonin Scalia and Clarence Thomas most of it.

Justice Kennedy did suggest that some prayers may be unacceptable if offered consistently, including ones that “denigrate nonbelievers or religious minorities, threaten damnation or preach conversion.” But without proof of “a pattern of prayers that over time denigrate, proselytize or betray an impermissible government purpose,” he wrote, “a challenge based solely on the content of a prayer will not likely establish a constitutional violation.”

Town officials had tried, he said, to recruit members of various faiths to offer prayers.

In dissent, Justice Kagan said they had not tried hard enough. “So month in and month out for over a decade,” she wrote, “prayers steeped in only one faith, addressed toward members of the public, commenced meetings to discuss local affairs and distribute government benefits.”

In 1983, in Marsh v. Chambers, the Supreme Court upheld the Nebraska Legislature’s practice of opening its legislative sessions with an invocation from a paid Presbyterian minister, saying that such ceremonies were “deeply embedded in the history and tradition of this country.”

Justice Kagan, joined by Justices Ruth Bader Ginsburg, Stephen G. Breyer and Sonia Sotomayor, said the case from Greece, N.Y., was different. The prayers at the town board meetings were often explicitly sectarian, they said, and residents were forced to listen to them in order to participate in government.

“No one can fairly read the prayers from Greece’s town meetings as anything other than explicitly Christian — constantly and exclusively so,” Justice Kagan wrote in her dissent in the case, Town of Greece v. Galloway, No. 12-696.

Moreover, she said, the clergy “put some residents to the unenviable choice of either pretending to pray like the majority or declining to join its communal activity, at the very moment of petitioning their elected leaders.”

In a concurrence with the majority opinion, Justice Alito called the dissent’s qualms “really quite niggling.”

That comment, Justice Kagan responded, “says all there is to say about the difference between our respective views.”

By  



Zombie Towns’ Days Numbered Under Pennsylvania Bill.

 

Pennsylvania created its municipalities. It won’t let them die.

The state is one of 10 that don’t permit communities to dissolve, even as its steel and coal towns dwindle. Pennsylvania trails onlyIllinois and Texas in the number of local governments and school districts, with about 4,900. Almost 800 of its municipalities have less than 1,000 residents.

Lawmakers are considering a bill that would allow dissolution and limit municipalities’ stay in the state’s distressed program. Thirteen cities have been stuck with that designation for at least a decade, and fragmentation at the local level makes it harder to turn them around, said Matt Fabian, managing director at Concord, Massachusetts-based research firm Municipal Market Advisors.

“The commonwealth of Pennsylvania creates all these municipalities, so the buck comes back to the commonwealth if their citizens are not able to receive services adequately,” said Representative Chris Ross, a Republican from East Marlborough Township west of Philadelphia.

“We need to have a viable alternative,” said Ross, sponsor of the measure, which awaits a vote in the Pennsylvania House of Representatives.

Existential Question

Some localities have shrunk so much they may be unable to operate, according to Ross. The communities are stagnating as Pennsylvania’s economy is falling behind, with job and population growth trailing most states, said Standard & Poor’s.

The company assigns the sixth-most populous state a AA rating, third-highest, though with a negative outlook partly because of its sluggish economy. Bonds of Pennsylvania issuers have earned 4.8 percent this year through May 1, compared with 4.9 percent for the entire municipal market, S&P Dow Jones Indices show.

The House bill, with sponsors from both parties, would force distressed municipalities to alleviate fiscal strains within five years, unless they receive a three-year extension. Otherwise, the communities would fall under state receivership.

This would shake them out of their “zombie-like status,” Ross said.

The bill also lets Pennsylvania dissolve municipalities, transforming them into unincorporated districts run by state-appointed administrators.

Phased Out

Ted Smakosz, a former councilman in Fallston, northwest of Pittsburgh, said Pennsylvania should phase out towns that fall below a certain size in population and area. That includes his own, with about 266 residents in 0.5-square mile (1.3-square kilometer).

“Pennsylvania has way too many little municipalities that should not exist,” said Smakosz, who as councilman supported a merger of the borough with a larger township, a step that Fallston voters rejected last year. “It’s a waste of money.”

Dissolution, or disincorporation, differs from merger or consolidation, which Pennsylvania permits. The latter step results in a new governing body and requires voter approval in affected towns. In disincorporation, a municipal border is eliminated and residents, now in an unincorporated area, are served by the surrounding higher level of government, often a county. This process needs approval only by the government wishing to erase itself.

In Pennsylvania, every square inch of land must be incorporated, preventing dissolution. Municipalities in Connecticut, Delaware, Hawaii, Massachusetts, New Hampshire, New Jersey, North Carolina, Rhode Island and Vermont also restrict dissolution, said Michelle Wilde Anderson, who studies distressed communities as an assistant professor at University of California Berkeley School of Law.

Municipal Toolkit

Pennsylvania’s rural populace, Rust Belt communities and former company towns that have lost residents could benefit from the option, she said.

Legislators “should give those kinds of areas the tools to reconsider what’s the best way to provide services,” she said. Having the ability to dissolve can give municipal officials leverage, she said.

“It’s a way to say, if we can’t survive on this business model, we have to think about which of the changes we can make,” she said. “It’s one more thing on the list to focus voters’ attention on the urgency of fiscal challenges and get them to make some hard decisions.”

Pennsylvania Choice

The path of merger or consolidation is often unavailable because municipalities are reluctant to take on neighbors, which may be distressed.

State officials recommended that Farrell, a steel city on the Ohio border whose population has fallen to 5,000 from more than 15,000 in the 1920s, consolidate with four neighboring municipalities to tackle its fiscal strains. Yet voters in three of the other communities rejected the measure, and Farrell has been in the state’s program for distressed communities since 1987.

“People don’t want to give up their territories,” said Mayor Olive McKeithan, who doesn’t support dissolving Farrell. “Why would you want somebody coming into your town to run your community?”

In Fallston, merging with the adjacent township of Patterson would have resulted in savings and better services, said Smakosz, the former councilman.

Even though the township’s population is 10 times greater than Fallston’s, the borough spends almost as much — $18,000 a year — for municipal insurance, he said. The borough website displays a call for volunteers to help provide services.

Cuomo Push

There have been 10 mergers and consolidations since 1994, according to state data. In neighboringNew York, more villages have dissolved in the past five years than in the previous 30, said Joseph Stefko, chief executive officer of the Center for Governmental Research, a Rochester, New York-based nonprofit that advises municipalities. Since 1920, 47 villages have dissolved, with 10 cases in the last five years, he said.

“Economic and fiscal pressures have resulted in more communities looking at this,” he said.

New York Governor Andrew Cuomo touts the need to reduce local governments to lower property taxes, and has proposed rebates to land owners in localities that share services.

In New Jersey, Pennsylvania’s other neighbor, the merger of Princeton Borough and Township last year has resulted in savings and some services being expanded, said Stefko, whose group worked on the transition.

“Pennsylvania is at a critical junction,” Gerald Cross, executive director of the Pennsylvania Economy League, told lawmakers at a hearing last month in Harrisburg, the capital.

“If we fail to reform the way local governments operate, we will see more and more communities unable to claw their way out, but plenty of reasons for residents to move out for other states that take a more modern approach to governance,” he said.

By Romy Varghese  May 4, 2014 5:00 PM PT

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.netMark Tannenbaum, Justin Blum



California Dispute Over Spicy Sauce Imperils Bond Payment.

A dispute over eye-watering odors between city officials in Irwindale,California, and a company that makes spicy sauce there may jeopardize bond payments if the food maker leaves, according to bond documents.

Huy Fong Foods Inc., which grinds peppers for its Sriracha Hot Chili Sauce in the community about 20 miles (32 kilometers) east of Los Angeles, has been locked in a legal dispute with the city since last year, when a judge ordered it to reduce “extremely annoying, irritating and offensive” smells that prompted complaints from neighbors.

While the two sides are negotiating over odor-abatement technology, closely-held Huy Fong has threatened to leave town, even as Irwindale plans to sell $10.8 million in bonds to refinance debt. The offering is backed by real-estate taxes and Huy Fong, with its 628,000-square-foot (58,300-square-meter) plant, is the third-largest property owner in the city, according to the documents.

“Although anticipated that the parties will reach an agreement, if such agreement cannot be reached between the city and Huy Fong, and Huy Fong’s operation is negatively impacted or shut down, it could have a material negative impact on the assessed valuation of such property and corresponding negative impact on the tax revenues,” according to bond documents.

Huy Fong’s property would generate about $584,000 a year in tax revenue toward the bonds, according to the documents. The bonds, which are insured, are rated AA, third-highest, by Standard & Poor’s.

Donna Lam, operations manager for Huy Fong, didn’t immediately respond to a phone call requesting comment on the company’s plans.

‘Public Nuisance’

Complicating the issue is a planned City Council vote, scheduled for May 14, on a resolution to declare that Huy Fong has breached agreements to deal with the odors and declaring the factory a public nuisance, according to the bond document.

Chief Executive Officer David Tran, 69, grew up in Vietnam and emigrated to the U.S. in 1979. He named the company for the ship that carried him.

The rust-colored sriracha sauce, packaged in a clear squeeze bottle with a green cap, is decorated with a rooster, the symbol of Tran’s birth year. The company expanded into its Irwindale plant from nearby Rosemead as its popularity grew.

Neighbors of Huy Fong’s plant have complained of stinging eyes, aggravated asthma symptoms and nosebleeds, Irwindale’s city attorney has said.

Irwindale, with a population of about 1,500, is located at the base of the San Gabriel Mountains. Just 1 percent of the city’s area is occupied by homes and apartments, with the largest share devoted to industrial uses such as sand and gravel mining, according to the city’s website.

The case is City of Irwindale v. Huy Fong Foods Inc., BC525856, California Superior Court, County ofLos Angeles.

By James Nash  May 1, 2014 8:23 PM PT

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.netPete Young, Rosalind Mathieson



Ride Sharing: The Big Opportunity for Cities.

Uber, Lyft and Sidecar present cities with the opportunity to radically transform transportation in their communities. If cities make use of the lessons they are learning from work with car share firms like Zip Car and with bike share programs, they are likely to achieve remarkable success in the newest iteration of the sharing economy.

However, if current trends are any indication, city taxi commissions see these companies primarily as threats to the established order and are seeking regulatory solutions where a little entrepreneurship might be more properly applied.

The outlook is not at all rosy for the car share firms. A dozen cities are either writing citations to Lyft and Uber drivers, issuing cease and desist orders to the companies, or banning operations outright. To be fair, many cities are also seeking to catch up with the application of technology to this otherwise static public service, so I remain optimistic.

It matters little whether companies such as Uber, Lyft and Sidecar are called Transportation Network Companies or traditional taxi and limousine services. The simple fact remains that existing regulatory frameworks for taxis in cities became outmoded with the advent of the smartphone and the app. The sooner taxi commissioners embrace this reality the sooner they will find the path out of the regulatory maze.

Of course cities have some obligation to regulate services to the general public within their jurisdictions. But where is it written that the basis of such regulation must be the existing formula for traditional dispatch taxicabs? What is it that cities need to actually regulate that is not presently required as part of qualifying for a driving license? Enhanced driver training? Premium vehicle liability insurance? Universal service? Car specifications (color, model, age)? Competition? Price? A case probably can be made for the first two or three but not so much for the latter three.

In 2013, the California Public Utilities Commission issued a ruling that allowed Lyft and Uber to operate under less rigid rules than locally regulated taxis. As recently as this week, a federal judge in Houstondeclined to temporarily restrain Lyft and Uber from operating in Houston and San Antonio. A further hearing is set for July 15, perhaps providing time for the cities and the companies to hammer out an agreement.

The sharing economy offers opportunities for cities to increase the options available for those in need of transportation, lodging (see Airbnb and its similar challenges) and a range of other services not yet envisioned. The sharing economy represents the highest form of individual entrepreneurship and as such deserves the chance to grow and contribute to the daily life and economic prosperity of city residents.

When a company called Flex Car (later bought by Zip Car) arrived in cities more than a decade ago, the transformation was revolutionary. Cities did the unthinkable – they gave up precious curbside parking spaces to a private company to place universally accessible cars in proximity to people in need of wheels for a short-term errand.

Cities created a new regulatory paradigm for this new and much sought after service. I own a car and still signed up in the first month the company offered services in my city (I’m still a member all these years later.) That same spirit of innovation needs to be applied to the likes of Uber, Lyft and Sidecar, and to their successors.

by 

APRIL 24, 2014

About the Author: James Brooks is NLC’s Director for City Solutions. He specializes in local practice areas related to housing, neighborhoods, infrastructure, and community development and engagement.  Follow Jim on Twitter @JamesABrooks.



Supreme Court Weighing Whether Public Employees Can Reveal Corruption.

The Supreme Court on Monday sounded ready to rule that a public employee who testifies about corruption in his government department cannot be fired for revealing the truth.

But first justices will need to confront their own 2006 ruling that sharply limited the free-speech rights of such workers.

“Why do we put people at risk for telling the truth?” asked Justice Sonia Sotomayor, as the court heard the case of an Alabama community college official who was dismissed after revealing that a state legislator was drawing a salary for a college job but doing no work.

Edward Lane, the fired official, lost his free-speech lawsuit last year against the college president who dismissed him after the U.S. 11th Circuit Court of Appeals ruled that, under the 2006 Supreme Court precedent, Lane was not protected.

Although teachers and other public employees are free to speak as citizens, the high court ruled, the 1st Amendment does not protect them if they learn something on the job and reveal it to the public over the objections of their employer. The 5-4 ruling in Garcetti vs. Ceballos rejected a suit by a Los Angeles County deputy district attorney who was demoted after raising questions about the validity of a disputed search warrant.

The court’s opinion by Justice Anthony M. Kennedy said the deputy district attorney was speaking about an internal complaint. He was “not speaking as a citizen for 1st Amendment purposes,” Kennedy said.

That decision left public employees with little protection from supervisors upset by their comments.

Civil libertarians, whistle-blowers and public employee unions supported Lane in his appeal and urged the justices to revisit the issue so that public employees who expose corruption can be better protected.

In Lane’s case, federal prosecutors had ordered him to testify in the corruption trial of the state legislator.

“Well, what is he supposed to do?” Chief Justice John G. Roberts Jr. asked an attorney defending the college president. “He gets a subpoena” from the prosecutor and has to tell the truth in court.

“Mr. Chief Justice, we would never suggest anybody not comply with a subpoena and testify truthfully,” said Mark Waggoner, a lawyer from Birmingham.

“But you are suggesting he can be fired if he does it,” Roberts replied.

Sotomayor said the court should retreat from what it said in the Garcetti decision. “If someone is called to testify truthfully about a matter of public concern, should they be able to be fired under the 1st Amendment?”

It was clear she and most others thought the answer was no.

But Lane may win only a partial victory. Several justices said that although Lane had a strong free-speech claim, Central Alabama Community College President Steve Franks could avoid paying damages because the law was unclear.

The court usually shields police or other public officials from paying damages for violating a constitutional right if the law was not clear at the time. A decision in Lane vs. Franks is due by late June.

Meanwhile, the court agreed Monday to hear the case of a Florida fisherman who was ensnared by a federal law designed to prevent white-collar criminals from shredding documents.

The Sarbanes-Oxley Act makes it a crime to hide documents or any “tangible object” to thwart a federal investigation. Fisherman John Yates was accused by a federal agent of reeling in red grouper that were under the 20-inch minimum, then tossing them overboard to hide the evidence.

Yates was sentenced to 30 days behind bars. The justices will hear his appeal arguing that the so-called anti-shredding provision should not apply to fish.

By David G. Savage

BY  | APRIL 29, 2014

(c)2014 the Los Angeles Times



D.C. GIves Up on Proposal to Make People Wait 24-Hours to Get Tattoos.

The D.C. Health Department said Thursday that it has abandoned its attempt to force tattoo and piercing customers to wait 24 hours before receiving their body art.

Najma Roberts, a department spokeswoman, said the waiting-period proposal was rejected because of “strong public opinion” against it, as well as a desire to focus on “public health concerns.”

“The ultimate goal is to prevent disease and health threats,” Roberts said in an e-mail.

When a 66-page package of draft regulations was released in September, the department took the position that government might have a role in protecting consumers from permanent consequences that they might come to regret.

“They can’t be responsible for themselves, as well as the person doing the work on them,” Roberts said at the time. “We’re making sure when that decision is made that you’re in the right frame of mind, and you don’t wake up in the morning . . . saying, ‘Oh my God, what happened?’ ”

View Full Story from the Washington Post


NYT: The Wire Next Time.

CAMBRIDGE, Mass. — LAST week’s proposal by the Federal Communications Commission to allow Internet service providers to charge different rates to different online content companies — effectively ending the government’s commitment to net neutrality — set off a flurry of protest.

The uproar is appropriate: In bowing before an onslaught of corporate lobbying, the commission has chosen short-term political expediency over the long-term interest of the country.

But if this is the end of net neutrality as we know it, it is not the end of the line for fair and equitable Internet access. Indeed, the commission’s decision frees Americans to focus on a real long-term solution: supporting open municipal-level fiber networks.

Such networks typically provide a superior and less expensive option to wholly private networks operated by Internet service providers like Comcast and Time Warner.

The idea of muni networks has been around for a while, with bipartisan support. When the Telecommunications Act was under discussion in 1994, Senator Trent Lott, Republican of Mississippi, was one of its most enthusiastic supporters. Thanks to him and others, the act, passed in 1996, prohibits states from putting up unreasonable obstacles to any entity that wants to provide telecommunications services.

So why didn’t a thousand muni networks bloom? After all, the 1996 act was aimed at increasing competition. But private providers rightly recognized muni networks as a threat, and in the subsequent decades have pushed through laws in 20 states that, despite the 1996 act, make it difficult or impossible for municipalities to clear the way for the sorts of networks that the 1996 act envisioned.

That means that the main problem behind getting muni networks up and running isn’t about the technology — which not only exists, but is already being used in large and small cities around the world — but about the politics.

As a first step, Americans need to focus their efforts on getting these laws taken off the books. (To its credit, the F.C.C. recently signaled its willingness to help, saying it would consider blocking those laws at the federal level.)

Mere legislative change won’t be enough, however. We need to elect leaders on the basis of their commitment to changing America’s stagnant communications infrastructure.

There is much to be done at every level of government, but cities are the most promising battleground right now. Mayors, Republican and Democrat alike, are in the business of providing their citizens with services, and fiber infrastructure is just like a city street grid: Economic development, quality of life, new jobs and a thriving competitive market all depend on its presence.

Most important, cities have assets in the form of control over conduits, poles and rights of way that can be used to support the provision of competitive fiber-optic networks. Since 1998, my hometown, Santa Monica, Calif., has been saving money by shifting from paying expensive leases on private communications lines to using its own fiber network, called City Net.

The city planned carefully and built out City Net slowly, taking advantage of moments when streets were being opened for other infrastructure projects. Businesses in Santa Monica now pay City Net a third of what a private operator would charge, and the city government has made millions leasing out its fiber resources at reasonable rates to other providers.

According to Christopher Mitchell of the Institute for Local Self Reliance, a national expert on community networks, more than 400 towns and cities across America have installed or are planning networks. And that’s not just good for consumers; it’s good for business. Companies are moving to places like Wilson, N.C., and Chattanooga, Tenn., because those cities provide public, inexpensive, high-capacity connectivity.

American cities need fast, cheap, ubiquitous, open fiber networks, and every city has the tools at its disposal to get these networks built. But there are powerful and well-funded incumbents who will fight any mayor brave enough to consider the idea. If you’re furious about your cable bill and worried about net neutrality, go tell city hall.

By SUSAN CRAWFORD



An 18.8 Percent Pay Hike for Boston Firefighters.

Boston firefighters would get an 18.8 percent pay raise under a contract deal that city labor officials said includes measures to improve safety and management in the Fire Department.

The six-year pact, which firefighters are expected to vote on next week, would cost the city $92.4 million, say city officials, and it comes seven months after an arbitrator put an end to acrimonious negotiations between the city and police officers .

Firefighters have been without a contract for about three years. Mayor Martin J. Walsh had promised during last year’s campaign that he would move swiftly to reach a resolution.

The firefighters’ raise would be less than the 25.4 percent pay increase police officers received from the arbitrator last year, a boost that became a hot topic in last year’s mayoral race.

The tentative firefighter agreement includes a baseline 14 percent pay increase, along with additional funds that preserve a unique 0.5 percent pay perk known as the transitional career award program, which firefighters get each time there is a pay increase.

Walsh administration officials said the union agreed to a lower pay package than police received to end the long-stalled negotiations.

View Full Story from the Boston Globe

APRIL 25, 2014



Seattle Mayor's $15 Minimum Wage Plan Hits Snags.

Mayor Ed Murray of Seattle said Thursday that his effort to build consensus behind raising the city’s minimum wage to $15, more than twice the federal rate, had faltered amid continuing differences between business leaders and labor unions that had been advising him on the issue.

“We’re stuck at the moment,” Mr. Murray said in a news conference where he had been expected to present a proposal for raising the wage to one of the highest in the country. Instead, Mr. Murray, a Democrat and former state senator who was elected last year on a promise to fight economic inequality, said the negotiations were continuing on a committee of elected officials and business and labor interests that he had appointed to develop a wage plan.

The mayor said that he was as committed as ever to a $15 minimum wage, with a cost of living adjustment mechanism that would push the wage to $17 over time — and that the committee had agreed in principle on that much as well. But after the committee could not reach agreement by a deadline this week, he said that he had decided to let it continue its deliberations to avoid having the issue placed before voters this fall as a ballot initiative, a move threatened by some labor advocates.

A protracted fight over such an initiative might lead to “class warfare,” the mayor warned. “I’m probably less optimistic than I was this morning, but I still remain optimistic. If this fails, we’ll try something else until we get to $15.”

View Full Story from the New York Times

APRIL 25, 2014



The Rising Pressures on the Water We Drink.

We need to know more about how agricultural practices, extreme weather and aging infrastructure affect our water systems.

With large areas of the United States suffering through severe drought, it is understandable that policymakers should be focused so intensively on the availability of water for agricultural, industrial and drinking uses. Yet, as our recent study of Nebraska water resources suggests, there are equally challenging and closely related issues for managing the quality of the water supply.

The costs of managing drinking-water quality are substantial and rising. The federal Environmental Protection Agency estimated last year that the nation may need to spend upwards of $380 billion in capital costs alone to upgrade its drinking water systems. Investing in our water infrastructure is certainly important. But what is equally important is a more integrated and balanced approach to managing the water supply that recognizes the interconnection of land-use and agricultural practices with surface- and ground-water quality.

For Nebraska, there are three main pressures on water quality that are likely to resonate across the United States, especially in farm states: the ever-increasing intensification of agriculture in response to increasing demands for food; the increasing frequency of extreme weather events as climate changes; and an aging infrastructure of drinking-water and sewage-treatment systems.

Without improved management practices at the source, intensification of agriculture will inevitably lead to increased contamination from runoff into surface waters and leaching into ground waters. The adverse human-health effects of nitrates and traces of pesticides in drinking water in agricultural areas are well known, but there are possibly more subtle effects that are less well understood and yet potentially more serious. For example, there is evidence that increasing levels of nitrates can lead to a change in chemical conditions in which naturally occurring contaminants such as uranium and selenium can be mobilized and as a result find access to the drinking-water supply. Combinations of nitrate and other difficult-to-treat and potentially toxic chemicals increasingly have been identified in both public and private drinking-water supplies.

Add to this the expected increase in the variability of precipitation events — from drought to flood in a short space of time — and there is the possibility of episodic events that overwhelm the drinking-water system. Some states, such as Iowa, have already experienced surges of nitrates from fertilizers that accumulate in dry soils during drought and then are washed out when rains return. These kinds of changes in source water quality have only recently come under study.

Finally, an aging treatment and distribution infrastructure is unlikely to meet the technological demands of more challenging clean-up requirements and may also contribute to contamination, especially from bacteria, through leakage and cross-connections. Water-supply and sewage systems are closely linked in many communities, both above and below ground.

If we expect to solve these problems by cleaning up contaminated waters at the point of release, then the costs are likely to be considerable. If treatment alone is viewed as the only solution, then costs are unfairly passed on to communities not responsible for the contamination. These costs can be particularly serious for small rural communities, where the technology required to remove both uranium and nitrate could cost as much as $5 million and require substantially increased operational costs.

Potable drinking water supplies are especially vulnerable and increasingly expensive to maintain in an agricultural landscape. There must be a balance between the costs and benefits of using chemicals that can impact water quality at different points of the water system. For example, how do the costs of managing fertilizer applications at the farm stack up against lost agricultural yield? And how do these compare with the costs of treating for nitrates and related contaminants at the water-treatment plant?

Studies of questions like these are few and far between. Yet if we are going to respond efficiently and equitably to the complex and intensifying pressures on our water supplies, we will need to do it through dialogue that uses this kind of evidence as a basis for developing sound policy.

BY , | APRIL 17, 2014

 


How a Small County in California Went Grid Positive.

Yolo County has become the first county government in the state to not only zero-out its electric bill with renewable energy, but also to become grid positive.

California is known for being a leader in solar energy, but a small county in Northern California has taken things a step further. It has become the first county government in the state to not only zero-out its electric bill with renewable energy, but also to become grid positive. Yolo County (population 200,000), just west of Sacramento County, now produces 152 percent more energy from solar panels than it uses.

Terry Vernon, deputy director of Yolo County General Services, is behind much of the solar success. In 2010, the Yolo County government was facing an annual $1.4 million electric bill. Vernon knew there was a better way. In the 1980s, Vernon helped Stanford University put power back into the grid with a cogeneration plant that heated the entire campus. So he was no stranger to innovative energy solutions, and knew that he could help power Yolo County with renewables. The issue he was facing, however, was that Yolo County was, like the rest of the country, in a recession.

“I had to look for a way to do a zero-capital investment because we didn’t have any capital funding,” Vernon told RMI. “It had to pay for itself the very first day.” Vernon said it took a lot of effort; he had to go to the county board numerous times. Fortunately, the board was extremely supportive of the project. Even before board members knew it would produce a positive cash flow, they saw the potential to reduce the county’s carbon footprint and greenhouse gas emissions. Once they approved the proposal, the first solar project was under way.

An Innovative Solar Plan

Working with SunPower, Yolo County installed a 1-megawatt solar power system at the Yolo County Justice Campus in the county seat, Woodland. Yolo County owns the system and associated renewable energy credits, and financed the purchase using multiple funding sources, including a $2.5 million loan from the California Energy Commission, and clean renewable energy bonds and qualified energy conservation bonds available through the American Recovery and Reinvestment Act of 2009. The system produced $162,000 the first year of operation, and is predicted to earn the county $10 million over the first 25 years.

With the success of that project under his belt, Vernon decided to do even more. In 2013, the county installed three arrays totaling 5.8 MW of power as part of its County Wide Solar Project. The first array produces .8 MW for three buildings on the county government campus in Woodland, reducing the campus’ electric bill by 75 percent through net energy metering. Two 2.5 MW arrays were installed at Grassland Regional Park in Davis and sell power back to PG&E, the local utility company, through a feed-in-tariff (FiT). These projects also were installed with no upfront capital investment. In partnership with the Yolo County Office of Education, the county secured $23 million in qualified zone academy bonds (QZAB).

The projects not only eliminated the county’s electric bill, but also earned just under $500,000 the first year. The county sells electricity to PG&E for 10-cents/kilowatt hour, although when its 20-year FiT contract is over, that price might rise. The county conservatively predicts it will generate $60 million over the next 35 years and avoid 12,000 metric tons of carbon dioxide emissions each year. “We not only did it with zero upfront capital investment,” Vernon stated, “we eliminated our electrical bill, and we generate cash, which goes into our revenue stream.”

In July, the EPA recognized Yolo County on its list of green power partners that generate and consume the largest amount of green power on-site, alongside companies such as Walmart and Apple. Although Yolo County came in 14th in the nation (in January, it moved up to 13th) for amount of kWh used on-site (13.5 million), if ordered by the percentage of total electricity use, Yolo County would be first at 152 percent with no other entity even coming close (second place partners only reach 75 percent).

Efficiency First

Even before the solar projects were installed, Yolo County was at the forefront of environmental action. In the 1980s, it adopted an energy plan that was the first of its kind, and built a gas-to-energy facility at the county landfill that generates 20 MWh/year and captures 90 percent of methane emissions. From 2002 to 2004, the county enacted the County Wide Energy Conservation Retrofit Project, through which it replaced lights, boilers, HVAC equipment, chillers, fans, water heaters and motors in all major county buildings.

In 2008, Yolo County approved a plan to change the temperature set points in all county office buildings (3 degrees higher in summer, 2 degrees lower in winter), to change air conditioning and lighting system schedules to the minimum hours per day of operation, and to perform retro-commissioning on all building outdoor air economizer systems, among other actions. These actions annually save the county over $200,000 and reduce carbon emissions by more than 1,200 tons. And in 2011, the county passed the Climate Action Plan, designed to reduce the county’s greenhouse gas emissions back to 1990 levels by 2020.

Educating the Younger Generation

Yolo County officials realized that public education is key to their climate goals. Part of the QZAB education bonds acquired through their partnership with the Yolo County Office of Education, along with a donation from SunPower, financed the construction of seven “solar academies” to bring environmental education to K-12 students. The academies teach school children about climate change, environmental science, renewable energy technologies and energy auditing.

The Qualified Zone Academy Bonds typically are used by K-12 school districts, community college districts and county offices of education to fund capital projects accompanied by an educational component. For Yolo County’s solar projects, the bonds were structured as a lease payable from the county’s general fund with a term of 20 years. In addition, the bonds required a 10 percent match by a private or nonprofit entity, which came from SunPower. The benefit of using these bonds to finance the county’s solar projects is twofold — first, the county benefits from a direct federal subsidy (ability to pay back the bonds at no interest); and second, the County Office of Education benefits from the 10 percent contribution to implement the academies. But “the real winners,” explained Vernon, “are the children of California.”

Santa Clara County and Orange County already are trying to replicate Yolo County’s successes, and Vernon would like to see other counties follow. “Global warming makes me nervous for my children and grandchildren,” Vernon told RMI. “Other counties and municipalities can duplicate a piece of this project and achieve the same results. Even if they only did one megawatt, which most cities can do, it would make a big difference.”

BY LAURIE GUEVARA-STONE – ROCKY MOUNTAIN INSTITUTE | APRIL 17, 2014

Republished with permission from Rocky Mountain Institute

 



Battle Intensifies Over Ride-Sharing in Seattle.

Supporters of Seattle’s ride-service companies submitted more than 36,000 signatures to place a referendum on the November ballot to block new regulations that would have limited the number of cars they operate in the city.

Supporters of Seattle’s ride-service companies Thursday submitted more than 36,000 signatures — twice the number needed — to place a referendum on the November ballot to block new regulations that would have limited the number of cars they operate in the city.

Backers of the new services — which includes Lyft, Uber and Sidecar — say the flood of signatures reflects strong public support and alarm that the new City Council ordinance would have restricted access to the popular, mobile-app-summoned alternative to taxis.

“The fact that we were able to gather more than double the required number of signatures in such a short time shows that Seattle voters clearly want to have a conversation about this issue,” said Brad Harwood, spokesman for Keep Seattle’s Ride Options Coalition.

By filing the petitions, the companies prevent a limit of 150 drivers each on the road at one time from going into effect. But the action also suspends requirements on safety, driver training and insurance that made up the bulk of the City Council ordinance approved March 17 and scheduled to kick in Friday.

The city could still enforce existing taxi and for-hire laws that make ride-services illegal, something City Attorney Pete Holmes declined to do while the City Council was formulating new rules over the past year.

Seattle Mayor Ed Murray, who opposed setting limits on the number of ride-service vehicles, said the mobile-app, taxi and for-hire companies have agreed to a 45-day negotiation period in which to try to work out rules for their continued operations.

In the meantime, Murray said, the city Finance and Administrative Services Department will develop enforcement guidelines.

The ride-service companies say they recognize the need for city policies governing their operations.

“We look forward to working with the mayor and the city to find a workable solution,” Harwood said.

Murray held out hope earlier in the week that he could reach an agreement that would keep the referendum off the ballot. But a lawyer for the companies said that once submitted, referendums can’t be withdrawn.

“Once they’re filed, they’re filed,” said James Greenfield, an attorney with the Seattle firm, Davis, Wright, Tremaine.

He said the City Council could refer a revised ordinance to the ballot to compete with the ride-service referendum.

A citizen’s initiative is also in the works. One filed last month would limit the number of ride-service drivers and add that they could not work while under the influence of marijuana. No signatures have been gathered for that measure.

The City Council adopted the ride-service regulations after an outcry from taxi and for-hire drivers who said the new companies weren’t subject to the same strict rules about numbers and safety. Seattle limits the taxi industry to 688 vehicle licenses and hasn’t increased the number since 1990.

Councilmember Tom Rasmussen said he opposed putting caps on the ride-service companies, but said the provisions on vehicle inspections, driver training and insurance were important for customer safety.

“The services are very popular. They’ve been very well received. The caps we put on them were arbitrary,” he said.

But he questioned why the referendum didn’t just repeal the caps and leave the safety provisions in place.

“Seems like that would make them concerned, to be operating without any local regulations, the potential for liability and the potential for the city to shut them down. I think they would be motivated to reach some agreement,” Rasmussen said.

Under the Seattle City Charter, 16,510 registered voter signatures, or 8 percent of the total number of votes cast in the last mayoral election, are required to qualify a citizens referendum for the ballot.

After initial inspection by the City Clerk, the petitions will be delivered to King County Elections for signature verification.

Information from The Seattle Times archives was included in this report.

Lynn Thompson: lthompson@seattletimes.com or 206-464-8305. On Twitter@lthompsontimes

___

(c)2014 The Seattle Times

Visit The Seattle Times at www.seattletimes.com

Distributed by MCT Information Services



Shared Cities: Building the Infrastructure for a Collaborative Economy.

Today, in many U.S. cities, an innovative, shared infrastructure is being erected, fueling a renaissance in how people live, work, and play.

Sharing and collaboration have long been a universal characteristic for cities. Centuries ago, money and other financial means of exchange didn’t exist. Thus human survival depended on cooperation, trading, and bartering.

Today, in many U.S. cities, an innovative, shared infrastructure is being erected, fueling a renaissance in how people live, work, and play. This new movement—both revolutionary and disruptive—dovetails the popularity of the book What’s Mine Is Yours: The Rise of Collaborative Consumption, a bestseller by Rachel Botsman. It features ideas that promote civic connection, economic continuities of scale, and sustainable lifestyles. Once the concept takes hold, this fast-growing collaborative model promises to revolutionize urban systems and the delivery of goods and services to the general populous.

Convenient Options

In the past 12 to 18 months, consumers and civic leaders have witnessed the proliferation of early stage companies in what’s being called the “collaborative economy.” Popular new enterprises such as Lyft (ridesharing) and Zipcar (car-sharing) are sprouting up in hundreds of communities to provide cost-effective, convenient options to consumers craving flexibility.

These and other shared economy options have captured the attention of scores of stakeholders including public officials, transportation planners, regulatory commissions, private sector service providers, sustainability experts, and non-profit community advocacy groups. All are grappling with what a restructured societal landscape might look like amidst this new normal. And all of this is occurring against a backdrop of explosive shifts in demographics, consumerism, and technology that are butting up against existing Industrial Age rules and regulatory structures.

Shared Cities as an Emerging Trend

Enter “shared cities,” a movement which is reimagining ways to efficiently and safely facilitate the dispersion of community assets like housing, transportation, and workspaces. Denver, Portland, Boston, and Madrid (Spain) are among the many cities now capitalizing on this model. If executed well, these collaborations will foster highly sustainable communities that boost civic vibrancy and strong economies.

Brad Segal is president of Progressive Urban Management Associates, a national leader in advancing downtown and community development. He believes that sharable assets in cities naturally grows out of significant changes in consumer behavior. “An entire section in our PUMA Global Trends Report explores the impact of the sharing economy on cities throughout the U.S.,” says Segal. “It’s an emerging trend that appears to be here to stay.”

The shared cities movement recently captured the attention of municipalities, as evidenced by the June 2013 Sharable Cities Resolution adopted at the U.S. Conference of Mayors. The purpose of this resolution? To foster and encourage increased adoption of sharability within cities. This includes boosting awareness of the possibilities as well as addressing regulations that may hinder participation in the shared economy.

Collaborative Travel Services

A major catalyst behind the shared cities movement is Airbnb.com. This online travel rental portal facilitates guest lodging at private residents, in castles, on boats, and so on. Since 2008, it has created a worldwide community of hosts and travelers through its inventory of 500,000 accommodation listings in 33,000 cities in 192 countries.

Recently, AirBnb announced a partnership with the City of Portland called the Shared Cities Initiative. Based on a manifesto from its innovative CEO Mark Chesky, Airbnb aims to set up a social capital model that will be replicable in other cities. This model promises expanded economic, social, charitable, and environmental value to Portland’s sharing economy.

As sharing services like Airbnb become more commonplace in cities such as Portland, so too will these partnerships between cities and companies. Collaborative arrangements such as this are being brokered amid concerns that private lodging and car share companies are violating laws and regulations designed to capture tax revenues and ensure consumer safety. In New York, Chicago, and San Francisco, for example, tensions are escalating as new shared city innovations bump up against established regulatory practices. In Denver— arguably the top relocation city for millennials hungry for a collaborative culture— hotels, taxi companies and other legacy businesses aren’t happy. They argue that shared economy competitors reap an unfair advantage by sidestepping local rules and regulations.

Government agencies, meanwhile, feel reluctant to use their enforcement powers in fast-growing shared economies. After all, these collaborative business markets didn’t even exist five years ago. So for shared economy stakeholders, both public and private, it can prove difficult to find the sweet spot between their model and existing, more traditional models.

A Middle Ground?

“Given the rapid emergence of the sharing economy infrastructure, there is a growing call nationally for cities to take a more expansive look at their regulatory practices in order to determine whether there is some sort of middle ground,” said Brittany Cameron, partner for Smart Regions Initiative, a consumer advocacy firm that cultivates dialogue on regional strategies fueling smart consumption.

Cameron is also a private driver and mentor for the ridesharing service Lyft. This role has given her a behind-the-scenes perspective on how shared city environments can evolve. Citing a California example, she believes the political climate around the concept of shared cities will remain in flux as Industrial Age models collide with new market realities.

“The California Public Utilities Commission’s approval of new regulations governing ridesharing services such as Lyft, SideCar, and Uber offers a great step forward in terms of informing future regulatory decisions for shared service providers,” Cameron said. “This is our first real look at how to offer a clear articulation of guidelines for welcoming shared city providers to a new market.”

Cameron believes prolific opportunities for shared cities innovations exist both locally and regionally. “It’s no longer only a local issue,” she said. “Even Lyft is expanding outside of Denver into adjoining cities such as Boulder and Fort Collins.”

Innovations in Workspaces

In addition to transportation and travel lodging related services, communal workspaces are becoming another key infrastructure component of today’s shared cities revolution. It has led to a popular concept called “coworking,” which has sparked the proliferation of collaborative workspaces in warehouse and commercial districts throughout the world. Many of these locales were started by remote workers and freelancers who grew restless with working at home or in boisterous coffeehouses. These spaces cater to independent workers eager to nurture a like-minded community of professionals.

Craig Baute, owner of Creative Density Coworking in Denver, believes that this proliferation of shared worksites represents a hidden gem for local economies. In addition to independent workers, coworking appeals to start-up businesses that are on a growth trajectory but need to keep their expenses in check. Baute’s recommendation to cities? Invest in coworking start-ups. He believe that this allows for greater productive use of underused vacant spaces that dot many central-city areas. “Once a city steps forward to get the ball rolling, the private sector often helps move it ahead,” says Baute.

He notes that a small investment (typically $150,000 or less) can yield a huge return for a city in terms of civic vibrancy and economic activity. “Sadly, many cities are unaware of this idea. Many city leaders haven’t recognized it as a tool for attracting top talent. Yet it’s an investment they can quickly break even on, one that young professionals will increasingly flock to.”

Coworking Setups Regionally, Nationally, Globally

As the shared cities model solidifies its presence locally, look for increased attention around these concepts regionally and nationally. In Colorado, for example, Baute is spearheading the development of a Colorado coworking “passport”. This will provide members with unlimited access to all passport-sponsored spaces throughout the state. He notes that beyond broadening the accessibility to those seeking shared work communities, this innovative passport creates a perfect forum for advancing regional economic cooperation.

Also in its early stages is CoworkingVISA, which provides access to member businesses at coworking spots globally. The city of Madrid, Spain, which boasts a fervent shared economy culture, features HUB Madrid, a coworking venue which provides benefits to businesses and their workers in this Spanish metropolis. All of this reflects the nature in which shared city infrastructure elements such as coworking spots are being adopted to support a global economy.

Implications for Shared Cities

Adopting a shared cities regional mindset could improve how municipal budgets are allocated for infrastructure projects such as roads and transportation systems. Currently when funding approval is being sought for new highways, bus lanes, or new rail lines, it’s often hard to get all stakeholders situated on the same page.

Making a shift to a shared economy may result in a more efficient means of addressing these issues in a cost effective manner. This will foster an environment where local and regional leaders begin asking questions such as: “Does it make sense to invest all this money, time, and construction effort into expanding our infrastructure? Or should we consider the less costly option of letting shared city innovations fill the gaps? What will allow for the best use of taxpayer money?” These questions and more are likely to dominate future debates on the merits of the shared economy model.

In the meantime, a terse marriage is in the offing as Industrial Age mores continue to clash with innovations that represent the “new normal” for markets seeking efficiencies in service. While this wrestling over boundaries is likely to continue in the foreseeable future, the shared cities concept and the supportive infrastructure required to sustain it will garner increasingly more attention in years ahead.

BY MICHAEL SCOTT

APRIL 21, 2014



The Obstacles in the Pathway to Zero Waste.

A resource recovery rate of 100 percent may be a worthwhile goal, but there are plenty of challenges facing governments that want to achieve it.

Trash, garbage, rubbish, refuse, scrap, debris, junk, dregs — we refer to the waste we produce by many names. However, a shift in our terminology is rapidly taking place: More and more, waste collection and disposal are being relabeled as “resource recovery.” That “waste” is getting trashed as a concept reflects a growing awareness that we can’t continue to bury our garbage in landfills forever.

That awareness is central to an emerging goal of zero waste: a resource-recovery rate of 100 percent. We’re a long way from that now. Nationally, the average waste-diversion rate is about 35 percent, while reported diversion rates around the country vary widely, from single digits to just over 80 percent for San Francisco at the top of the scale.

While waste-diversion rates are important, they offer only one measure of the entire cradle-to-grave system of materials sourcing, production, use and disposal. Most simply conceived, that system encompasses raw material (mined, extracted or grown) that is made into products that, at the end of their useful lives, are thrown away. But branching and connected subsystems add complexity. For example, when raw materials become limited due to availability or pricing, or disposal becomes too expensive or restricted, more products are reused or their components are recycled, creating “feedback loops” into the system.

More complexity is added when input and output flows are considered. Raw materials are inputs, but so are recycled materials when they are looped back into the system. Similarly, wastes can be disposed of as solids (in landfills) but also as liquids (via sewer systems and wastewater treatment plants). Then factor in whether the waste is coming from residential, commercial, industrial or agricultural sectors. A diagram of the system components and flow pathways gets more and more tangled.

In this light, measuring waste diversion is not so simple. Yet, without finding a widely accepted way to calculate diversion rates, how could one ever claim zero waste has been achieved?

Nevertheless, “it’s important to set a zero-waste goal,” says Jared Blumenfeld, the U.S. Environmental Protection Agency’s Region 9 administrator and former director of San Francisco’s Department of the Environment, because “it gets you on the road to designing a zero-waste system.” As that process proceeds, he says, “you’ll engage in waste-characterization studies and find lots of things that don’t need to go into landfills.”

As compelling as the idea of a zero-waste system may seem, there are plenty of challenges facing governments that are embarking on the process Blumenfeld advocates. Los Angeles already has the highest waste-diversion rate among the 10 largest U.S. cities, having achieved 72 percent in 2012. But Sinnott Murphy and Stephanie Pincetl, authors of a recent research paper on L.A.’s quest to achieve zero waste, find that while the city’s efforts are “aggressive” they are “insufficient for addressing resource conservation challenges.” Murphy and Pincetl cite L.A.’s “continued reliance on waste management approaches that have proven inadequate to address the increasing complexity of solid waste and limited data quantifying and characterizing waste generation patterns.”

L.A.’s waste-management methods are common to existing systems in the United States. They are a legacy of the Progressive Era, when federal policy institutionalized solid-waste management at the local level and set a design for systems to take unlimited quantities of waste and try to deal with them to minimize adverse local impacts.

Murphy and Pincetl note that while little attention is being paid to waste generation at the federal level, many states have enacted recycling goals to divert waste from landfills and have pursued extended producer-responsibility policies to reduce the more-toxic elements of the waste stream. But Murphy and Pincetl conclude that “these policies have been too limited in scope to stem the tide of increases in waste generation,” leaving cities and counties “managing a problem that continues to grow.”

Indeed, as is so true of politics, all waste is local. Local communities sit at the end of the waste stream. The more effectively they act, the less goes to waste. But the local recovery system is part of the much larger materials system, and it’s going to take an integrated policy and regulatory framework by government at all levels to create true pathways to zero waste.

APRIL 21, 2014

Bob Graves  |  Associate Director of the Governing Institute

bgraves@governing.com



Keeping Cities from Becoming “Child-Free Zones”

With kids on the decline in urban areas, cities can make themselves more attractive to young families by building more playgrounds.

It’s beyond dispute at this point that there’s been a central city revival over the past decade or so. Downtowns throughout the country have seen increases in residential population, and commercial districts that were moribund in 2000 have come alive with restaurants and entertainment. If you’re seeking evidence, just look around.

Real as the resurgence has been, however, it is one marked by a nest of nuances. Perhaps the most important of them has to do with children and families.

In the past few months, the urban policy websites that help define the debate over cities and their future have nearly all weighed in on a striking set of numbers, ones that focus on the relative absence of children under 18 in some of the most successful city centers. The numbers are straightforward: 13 percent of San Francisco is under 18; 15 percent of Seattle; and 17 percent of Boston. That compares to the national average of 24 percent.

In spring 2013, the Tulane University geographer Richard Campanella wrote an online essay lamenting the fact that children were notably scarce in the newly fashionable neighborhoods of New Orleans, including the one he himself lived in. “Unless gentrified neighborhoods make themselves into affordable and agreeable places to raise and educate the next generation,” Campanella declared, “they will morph into dour historical theme parks with price tags only aging one-percenters can afford.” Within a short time, Campanella’s blog post had attracted hundreds of responses, most of them sympathizing with his argument.

Even some of those who have passionately championed the city revival are expressing their concerns over the issue. “In our rush to promote higher-density urbanism,” the urbanist author Kaid Benfield recently asked in a piece for Atlantic Cities, “are we inadvertently creating child-free zones that are inhospitable to families with kids? … If we’re as committed to diversity as we like to say, shouldn’t that include children?”

A little perspective is useful here. Cities are reviving at a time when the size of families throughout the country is shrinking. The percentage of U.S. residents under 18, which was 26 percent in 1990, has declined steadily since then and is projected to decline further over the coming years. Some of the cities with the lowest percentage of kids, including New York and San Francisco, saw smaller percentage declines in the past decade than the national average. Walk around Lower Manhattan or New York’s Upper West Side on a weekend morning and you will see a parade of strollers; children haven’t exactly disappeared from urban America’s gentrified streets.

Still, there’s no denying that the shortage of urban children is something to worry about. When some of the nation’s most desirable cities show under-18 populations of one-sixth or less, an imbalance exists that threatens over time to turn otherwise healthy central cities into demographic outliers.

Washington, D.C., is a good example. Over the past decade, it has been growing at a pace far greater than most American cities. Almost all of the population increase has come from the age 24-35 cohort. Washington has the highest rate of one-person households in the country. And though it has seen a fair number of births compared to other cities—about 8,000 per year—D.C. has found it difficult to keep families living within the city once the children grow a little older. The statistics for other big cities, including those with impressive downtown revivals, are relatively similar.

The worrisome absence of children in reviving urban areas is not a phenomenon that public policy can easily address. There is no magic antidote to high rents and dysfunctional schools. But there is one step that cities can take in the short run to make their central neighborhoods more family friendly. They can see to it that there are places for children to play.

Most of America’s older cities are park-rich and playground-poor. They possess huge areas of sprawling parkland that make the city as a whole a greener place, but aren’t easily accessible to families living in the inner neighborhoods. Darell Hammond, head of the children’s advocacy group KaBOOM!, refers to huge swaths of territory in America’s big cities as “play deserts.” “Kids aren’t playing the way they used to play,” Hammond says. “And that has an impact on their health and the community’s health.”

There are good statistics on the play desert problem in America.

According to a study in 2012 by the Trust for Public Lands, the most playground-friendly city in America is Madison, Wis., with a total of 7.1 playgrounds for every 10,000 residents. Cincinnati is second, with 5.1. By this yardstick, some of the more successfully gentrifying cities in America in recent years have abysmal numbers. Chicago stands at 1.9 playgrounds per 10,000 residents; Washington, D.C., at 1.7; San Francisco at 1.6 and Los Angeles close to the bottom at 1. If you plot the percentage of children in a big city against the number of playgrounds, you nearly always get a correlation. This is not to say what causes what, but it does make clear that quite a few cities desiring a reputation for family friendliness have failed to address a simple problem that is limiting their attractiveness to young families.

Los Angeles is one of those cities. Its confines include the magnificent 4,000-plus-acre Griffith Park, but many of the city’s neighborhoods have no usable public playground at all. “In older parts of town,” the chairman of the L.A. Parks Foundation wrote recently, “there are many dense miles of residences and commercial properties unbroken by green spaces.”

In Los Angeles, play deserts are an old problem. For decades, they contributed to the sterility and monotony of the inner-city neighborhoods where poor people and minorities clustered. Most of those people remained in the city because they lacked the resources to settle further from the center. Now they have been joined by an affluent cohort of urban returnees who have the skills and political clout to pressure the city into creating more green space. Gentrifiers and inner-city old-timers have plenty to argue about, but this is one subject on which they should be unanimous. More green space is good for everybody.

And the need for more and better places to play is slowly becoming part of the national conversation about urban revival. “I think you have a convergence going on,” says Darell Hammond, “about what it means to have family-friendly, child-friendly cities.”

Two years ago, in the midst of a decline in real estate prices all over the city, Los Angeles purchased 181 acres of available land and used it to create 50 new neighborhood parks. More than 20 new parks have already opened. Most of them are less than an acre in size. But they are big enough to contain up-to-date equipment and to give local kids a place to play other than the street. Some of the parks are actually quite elaborate, like Drum Barracks Park, located on an old oil well site, which includes statues of camels that once lived nearby.

But you don’t need camels to have a serious impact on your city’s playground problem. Chicago is a good example. It doesn’t so much have a shortage of playgrounds as a shortage of playgrounds any family would want to use. There are 525 city playgrounds in all, not counting those attached to public school grounds. A majority of them are in bad condition, with broken equipment, rotting wooden fixtures and no accessibility for the handicapped.

In spring 2013, the city announced a program called Chicago Plays, which promised to restore 300 playgrounds over five years. Fifty were scheduled for restoration by the end of the first year alone. “It’s not a paint job,” Mayor Rahm Emanuel declared in announcing the initiative. “It’s a total redo of equipment. No other city is doing this.” Emanuel promised that when the program was complete, every child in the city would be within a seven-minute walk of high-quality playground space.

The remarkable thing about Chicago Plays is how cheap it figures to be, at least compared to other family-friendly urban strategies. The city estimates that it can restore a dysfunctional playground to good shape for about $125,000. That means a total cost of $38 million over five years, all from existing Park District funds, no new money necessary.

New York City is going about playground enhancement in still another way. It is gradually making school playgrounds, normally closed outside school hours, into facilities open to the public virtually around the clock. Some 290 sites were selected for the city’s Schoolyards to Playgrounds program in 2007, some of them needing nothing other than to be unlocked, and others requiring extensive renovation and capital improvement. By the end of 2013, 229 school playgrounds had been opened to the public, most of them in play desert neighborhoods in Brooklyn and Queens.

The crucial point is that here, too, the cost is minimal in the context of a city budget of roughly $75 billion. The initial capital cost projection was $117 million, with operating subsidies of $14.5 million a year. New York can afford that, especially given the tangible increase in urban livability that the program promises.

It would, needless to say, be a mistake to treat play deserts as the primary reason families with children move out of gentrified cities. Underperforming schools are the reason most often cited, and with justification. But when weak schools are paired with the absence of playgrounds, the pressure on young parents to decamp for the suburbs can be too much to resist.

No city should want a reputation as a place unfriendly to children. For a relatively trivial sum, it can take a step in the right direction. Any city that doesn’t take that step is sending the wrong message.

APRIL 2014

Alan Ehrenhalt  |  Contributing Editor

aehrenhalt@governing.com  |



Transit Agencies Turn to Alternative Fuels.

Both environmental and budget concerns are prompting American municipal transportation agencies to turn away from diesel.

The transit agency in South Bend, Ind., like many others, is getting rid of its diesel-powered buses and replacing them with vehicles that run on natural gas.

The South Bend Public Transportation Corporation, known locally as “Transpo,” put in an order for 16 new coaches that run on compressed natural gas. They typically cost about $20,000 more than similar, diesel-powered vehicles, but they pay for themselves quickly, said David Cangany, Transpo’s general manager.

Transpo is paying $3.04 a gallon for diesel this year, but an equivalent amount of natural gas only costs about $1, Cangany said. Even after taking account the fact that buses burn more natural gas than diesel, the change will eventually save Transpo at least half of its $1.2 million annual fuel budget.

“It’s being green, and it’s being conscious of how we’re spending taxpayer dollars. At the end of the day, it’s good for our community,” Cangany said.

Transit agencies around the country are increasing their use of alternative fuels. The American Public Transportation Association (APTA), in an Earth Day release, reports that last year more than 40 percent of transit buses used alternative fuels.

One in five transit buses runs on natural gas. Another 13 percent are hybrid-electric and 7 percent run on biodiesel, according to APTA.

The 40 percent of buses using alternative energy compares with 3.4 percent for automobiles (including flex-fuel vehicles). Even more buses are likely to use alternative fuels in the future.

“This is good for the environment, good for the economy and good for the country,” said APTA President and CEO Michael Melaniphy, noting that much of the alternative fuels being used are produced domestically.

The environmental benefits of using alternative fuels is a matter of great debate. The industry group Natural Gas Vehicles for America, for example, claims that new natural gas vehicles can emit as much as 21 percent less greenhouse gases than new diesel vehicles. The reductions are even greater when replacing older diesel vehicles. But a study published earlier this year in the journal Science concluded that those savings were negated by methane leaks elsewhere in natural gas transmission networks.

The first transit agencies to use alternative fuel vehicles generally did so out of concerns for the environment, Melaniphy said, but more agencies are making the switch now that the technology is cheaper, smaller, safer and easier to use. These days, the appeal of alternative fuels still varies from agency to agency.

“One of the biggest appeals of transit is for people to go green. Taking public transit is an easy way to reduce your carbon footprint. We want to advance that,” said Anna Chen, a spokesperson for Metro, the transportation agency in Los Angeles County.

Los Angeles retired its last diesel bus in 2011, following nearly two decades of replacing diesel buses with “clean” vehicles. The agency, which has more than 2,200 buses, said the shift will reduce smog and greenhouse gases in the region. It also bought 25 electric buses, which are expected to arrive by the end of the year, in an effort to further lower emissions.

But Tony Bryant, director of bus maintenance for MARTA in the Atlanta region, said cost was the driving factor in the shift there. MARTA also began replacing its diesel vehicles in the mid-1990s, but it put the move on hold after 70 percent of the fleet ran on compressed natural gas.

Last year, though, MARTA decided it would start to complete the process. Buses that run on natural gas are more expensive to buy and more expensive to maintain than diesel buses, but those extra costs pale in comparison to the money MARTA would save on fuel by converting its remaining vehicles to natural gas.

“Because our fuel costs are going to decline over time, it allows us to put that money back into increased service. We can actually offer more service than we were able to before,” Bryant said.

The huge surge in U.S. production of natural gas means transit agencies can count on natural gas being cheaper for a long time, even if natural gas prices climb, Bryant said. “The fuel supply has been so plentiful that the cost of the fuel has plummeted. There is no reason to expect that to change anytime soon.”

Because natural gas is so cheap, the Atlanta agency also hopes it can convert its fleet of 400 support vehicles, along with its smaller paratransit buses to natural gas, he added.

But Bryant said the budget reasons, not environmental goals, made natural gas the clear choice for MARTA. The U.S. Environmental Protection Agency has tightened emissions standards for diesel vehicles over the last decade, so that new diesel buses and new compressed natural gas buses have “virtually identical” emissions of greenhouse gases, he said.

In South Bend, the shift to natural gas buses is part of an agency-wide focus on better environmental practices. Transpo opened a new building in 2010 that recycles water, uses geothermal energy for heating and cooling and uses intelligent lighting to save energy.

The transit agency also partnered with city hall to build a fueling station for natural gas vehicles. The city started by buying four garbage trucks that run on compressed natural gas and wants to convert 65 percent of its fleet to the new fuel. That move would save the city 22 percent of its fuel costs over five years, said Kara Kelly, South Bend’s director of communications.

Cangany, Transpo’s general manager, said the switch in fuels will also help the agency weather budget crises.

“As our funding continues to dwindle and be in question, we have to look at ways to be sustainable on our own,” he said. “It’s one of the ways we are able to be sustainable financially but sustainable environmentally.”

Daniel C. Vock  |  Staff Writer
APRIL 22, 2014


Portland Will Drain 38 Million-Gallon Reservoir After Teen Urinates in It.

Portland administrators will flush 38 million gallons of water from Mt. Tabor Reservoir 5 after a 19-year-old man urinated in the city’s drinking supply.

“Even though there is very minimal public health risk, the bottom line is that our commitment is to serve water that’s clean, cold and constant,” said Water Bureau administrator David Shaff. “That doesn’t include pee. Not from people, at least.”

Surveillance video of man urinating in Mt. Tabor Reservoir in SE Portland Around 1 a.m. Wednesday, April 15, 2014, the security officer who monitors video cameras at Mt. Tabor Reservoir complex in SE Portland spotted a man leaning against the iron fence at Reservoir 5, and, after a moment or two, hitching up his pants and pulling away from the bars.

Around 1 a.m. Wednesday, the security officer who monitors video cameras at the reservoir complex spotted five people with skateboards “hanging out near the gatehouse,” Shaff said.

Three of the men headed toward Reservoir 5, the kidney-shaped landmark on the western flank of Mt. Tabor.

The camera caught one man as he stopped, leaned against the iron fence and, after a moment or two, hitched up his pants and pulled away from the bars, Shaff said.

“When you see the video, he’s leaning right up because he has to get his little wee wee right up to the iron bars. There’s really no doubt what he’s doing,” Shaff said.

“It’s stupid. You can see the sign that says: ‘This is your drinking water. Don’t spit, throw, toss anything in it.’ He’s four feet away from that sign. Unless he’s from North Dakota and just moved here, he’s got to know that’s our drinking water.”

The video also shows two men trying to climb the fence. One made it and may have stepped in the water — “If so, he discovered that it’s really, uncomfortably cold,” Shaff said. Then the men spent some time taking cell phone pictures of themselves.

While the group was documenting its visit to the reservoir, a Water Bureau security officer and Portland Police officers headed in their direction. Police stopped a car on Southeast 69th Avenue near the east entrance to the park and cited three men on accusations of trespassing; one was also given a citation accusing him of public urination. Police have not released the names of those cited and have not decided whether to charge anyone with additional crimes.

The Water Bureau used to keep security guards on duty at the Mt. Tabor and Washington Park reservoirs around the clock. But those posts were cut several years ago in an attempt to limit rate increases.

Now the bureau has guards patrol all Water Bureau property, including the reservoirs, and officers who monitor reservoir security cameras from the city’s Emergency Operations Center in east Portland. Shaff said he does not believe having a security guard posted at Mt. Tabor would have sped the response Wednesday morning.

Water Bureau officials turned off the pipes that carry water to and from Reservoir 5 immediately. They expect test results on the water to come back Thursday, and to show no contamination or health risk. Still, crews will flush the reservoir — and give it a second spring cleaning on top of the one it received about a month ago — over the next four to six days just to be safe and to reassure consumers.

Strange things end up in Portland’s water supply all the time, with minimal risk or impact to users. And this is not the first time human beings have attempted to interfere with the stuff that comes out of Stumptown taps: In 2008, a man and a woman caught skinny dipping in Mt. Tabor were sentenced to 16 hours of community service each.

Three years ago, the city flushed 8 million gallons of water after a 21-year-old Molalla man peed in Mt. Tabor Reservoir 1.

City officials estimated that flushing the water and cleaning up after that episode cost $35,000. Shaff said he wasn’t sure what this effort will cost. The current shutdown at Mt. Tabor won’t impact Portland water users, he said.

“Right now we’ve got 100-plus million gallons of day free flowing down the river because the Bull Run reservoirs are as full as they can be,” he said. “I’ve got tons of water available that doesn’t have human pee in it, so I’m going to replace this.”

The federal government has ordered Portland and other cities with open-air reservoirs to cover them. City leaders are waiting on results of a May ballot measure that could shift control of the Water Bureau from the City Council to a new independently elected board to decide how to proceed.

BY  | APRIL 18, 2014

(c)2014 The Oregonian



Keystone Pipeline's Fate Now in Hands of Nebraska Supreme Court.

The focus of the Keystone XL debate has shifted from a fierce lobbying war in Washington to Lincoln, Nebraska, where the state Supreme Court has been asked to weigh a legal challenge to the pipeline.

The U.S. State Department, which is responsible for reviewing whether the project is in the nation’s interest, said April 18 that it would delay making a recommendation until questions about the way the route was approved through the prairie state are resolved. That could spare President Barack Obama from having to decide on a project that splits supporters of his in the environmental and labor movements before an important congressional election in November.

“Once again, the administration is making a political calculation instead of doing what is right for the country,” Terry O’Sullivan, general president of the Laborers’ International Union of North America, said in an e-mail. “It’s clear the administration needs to grow a set of antlers, or perhaps take a lesson from Popeye and eat some spinach.”

If the seven-member state Supreme Court upholds a lower court decision, TransCanada Corp. (TRP), the Calgary-based company that wants to build Keystone, will need to apply to the Nebraska Public Service Commission. The commission by law has seven months for its pipeline reviews.

The State Department said the possibility of a new route coming out of that process justified hitting the pause button. The announcement drew a strong reaction from all sides — including pledges from congressional leaders to force a decision sooner by legislation.

View Full Story from Bloomberg

APRIL 21, 2014



California Preparing for Self-Driving Cars by 2015.

Self-driving cars sound like fantasy to many, but regulators are laying the groundwork for the technology to hit the roads next year. 

Autonomous vehicles are headed for the commercial market, and they may find their way onto our roadways as early as 2015.

But that reality would require a huge rework of today’s operational regulations for personal vehicles — and the California Department of Motor Vehicles (CA DMV) is moving fast to see that it does in fact become reality. Accounting for the multitude of issues and conflicts with existing regulations is a big job, so the CA DMV is looking to the public for help. On March 11, the department workshopped its regulations at its headquarters in Sacramento, where representatives of industry, advocacy groups and the public met and discussed what the future of autonomous vehicles will look like.

The workshop, a recording of which is available on Google+, was attended by Google; automakers like Volkswagen Group, Mercedes and Chrysler; and third-party manufacturers like Garmin and TomTom. IT Security and privacy advocacy groups were also represented, along with some members of the public, both through a Google Plus webcast and in person.

“They [the automakers] want to come to California because there are 38 million people in California and they see the market,” he said. “They see the different terrains. There are mountains, beaches, deserts, forests — there are all of the different climates, and all of the different roadways. There are rural roads, and congested city streets.”

Getting autonomous vehicles launched commercially is a huge job because of all the factors at work, which include privacy, security, safety, liability, proper usage and standardization, but Soriano said the DMV will reveal a draft of the regulations in June or July in a hearing where the public will have a chance to see what the rules are going to look like, and then weigh in on them. The public will have a chance to formally address the regulations and influence them, Soriano said, noting that the public already hasinfluenced the DMV’s work through participation in online communities on Reddit, Twitter, Google Plus and LinkedIn.

“They’ve heavily influenced what we brought up and what we discussed at the workshop,” Soriano said. “The things that are brought up online, we monitor this; people come up with ideas that we are actively discussing.”

One discussion on Reddit received more than 700 comments from users who had questions, suggestions and concerns about the upcoming regulations. As with all things technology, the issue of privacy is one of the prominent concerns with autonomous vehicles. In this vein, Consumer Watchdog, a nonprofit advocacy group, told the DMV on March 11 that new driverless car regulations must protect privacy.

“The DMV regulations must give the user control over what data is gathered and how the information will be used,” said Privacy Project Director John M. Simpson. “The DMV’s autonomous vehicle regulations must provide that driverless cars gather only the data necessary to operate the vehicle and retain that data only as long as necessary for the vehicle’s operation.”

And Soriano is well aware that privacy is a main concern. “What information is being collected by these automobiles and who has access to that information?” Soriano explained rhetorically. “Who owns that information? How is that information going to be used other than the operation of the vehicle?”

People are talking about the good and bad uses of such data, Soriano said. A good use might be insurance companies taking a vehicle’s driving habit data and applying it to the owner’s rates in some yet-to-be-determined way, while a bad use could be if a user’s Google habits somehow influenced his navigation software’s decision-making, Soriano said. Hypothetically, a person who frequently Googles hamburger restaurants might find her car’s navigation system taking her on detours through her town’s hamburger district — if advertisers greased the right palms (with money, not hamburgers).

“It’s not like you can go across the street to Joe Bob’s Garage and say, ‘Hey, can you certify that this thing is safe?’ There’s no industry for that,” Soriano said.

Cybersecurity as it pertains to personal vehicles faces a similar problem. There simply aren’t many practical studies of the challenges facing cybersecurity in autonomous vehicles, and how could there be? The vehicles don’t yet exist in the numbers that they presumably someday will. “it’s going to be difficult at best to try to regulate some of these things,” Soriano said.

There is also the task of deconflicting existing regulations with the use autonomous vehicles. As this technology rolls out, vehicle code will need to adapt, but right now there are a lot of question marks, Soriano said.

“Potentially these things could roll out, and if the vehicle code doesn’t change, it still will be illegal for you to text and talk on the phone while you’re in these vehicles” he said. “But that doesn’t make sense, so we’re thinking of all these things that need to be changed.”

Another big issue, which was raised by at least one Reddit user, is whether it will be permissible to drink and ride in an autonomous vehicle. Some vehicles are semi-autonomous, allowing for user operation on demand, while others are completely autonomous. Some support the idea of only embracing fully autonomous vehicles with an eye on what are estimated as large benefits.

“One of the primary functions of self-driving cars will be to transport people who cannot drive, whether they be too elderly, too young, visually impaired, and most importantly, inebriated,” one Reddit user wrote. “We have the potential with SDCs to wipe out drunk driving in a generation.”

One of the biggest hurdles when it comes to issues such as these, Soriano said, pertains to public perception and acceptance of new technologies and the cultural shifts they often bring about. Some people might not like the idea of people getting drunk in their cars, even if it were found to be safe. But that’s something that will change over time, he noted, and their regulations will continue to change as well.

“What we produce at the end of this year,” Soriano said, “is not going to be the end all to be all.”

Colin Wood  |  Staff Writer

Colin has been writing for Government Technology since 2010. He lives in Seattle with his wife and their dog. He can be reached at cwood@govtech.com.



Dane County, Wis. Hopes Pre-Alerts Will Cut 911 Response Times.

The 911 center board unanimously approved a 90-day pilot program that would add pre-alerting for additional types of emergencies.

Amid continuing concerns about dispatch times, the Dane County 911 center will soon start having dispatchers alert responders more quickly for more types of serious emergencies.

The 911 center board on Wednesday unanimously approved a 90-day pilot program for so-called “pre-alerting” that would begin May 5.

Currently, the 911 center sends fire, EMS or police personnel quickly after obtaining location, name, phone number and nature of a problem for only a handful of emergencies. After that rapid dispatch, call takers continue to get further information. For other calls, 911 center staff ask more questions before dispatching personnel so the right resources are sent.

The current rapid-dispatch emergencies are a person on fire, trapped in a sinking vehicle, choking or not breathing; a vehicle in flood water or with accelerator stuck and unable to stop; or an active assailant. With the new pre-alerting, a rapid-fire dispatch would also be made for structure, outdoor or vehicle fires, and “significant” rescues.

The move comes six weeks after County Executive Joe Parisi announced pre-alerting should begin for Madison and other interested jurisdictions on March 31. The board, however, on March 19, indefinitely delayed Parisi’s bid over concerns by Madison fire and police officials and others about the method of pre-alerting Parisi sought and his failure to consult with responders before announcing the move.

Amid the delay, a subcommittee that had already been studying pre-alerting made recommendations that were then approved by the broader Operating Practices Committee and forwarded to the full, Madison-dominated board for a decision, which was unanimous and without discussion.

“The practice of pre-alerting had the chance to be vetted by the right committees,” Madison Fire Chief Steven Davis said later.

Madison police support the move for the same reason, and will monitor the pilot to see if more types of calls, such as a robbery in progress, would be appropriate for pre-alerting, Lt. Carl Strasburg said.

John Dejung, 911 center director, said that pre-alerting makes sense for the new fire emergencies included and that the system isn’t much different than the one Parisi promoted in early March. The main difference is that vehicle accidents with apparent injuries were not included, he said.

Maple Bluff Fire Chief Josh Ripp, who led the meeting because Chairman Paul Skidmore was absent, said he expects scrutiny of the pilot to detect unintended consequences.

Parisi is glad to see the board, the only governing body that currently has authority to make changes to the 911 center, is moving forward on pre-alert, spokeswoman Casey Becker said later. The county executive believes it’s important to continue to take a look at the board’s governance structure and determine which model best serves an agency, which works for 85 departments every day.

The board’s decision Wednesday is the latest development in a recent spat between Madison, the county and others over dispatch times. The dispute has been over technology and protocols, not the work of call takers or dispatchers.

Also at the meeting, recently retired dispatcher Debra Julian read a prepared statement voicing a lack of confidence in Dejung on staffing, training and other matters, and urged the board to recommend replacing him when his contract expires in June. The board did not ask Gillian any questions, and Dejung later declined comment on her statement.

The board also heard more concerns about a new computer-aided dispatch, CAD, system launched a year ago and continuing problems and fixes.

“It’s better than it was,” Dejung said. “We still have a long way to go.”

BY DEAN MOSIMAN, MCCLATCHY NEWS SERVICE / APRIL 17, 20140

© 2014 The Wisconsin State Journal (Madison, Wis.)



WSJ: Judge Orders Detroit Into Mediation Over Regional Water Authority.

Bankrupt City Ordered to Reach Agreement with Surrounding Suburbs

DETROIT—A federal judge Thursday ordered this bankrupt city into mediation with its suburbs to reach an agreement on a new regional water authority to oversee water and sewer services currently provided by the city.Months of direct talks between the city of Detroit and the surrounding Wayne, Oakland and Macomb counties has failed to produce an agreement on a new authority. But U.S. Bankruptcy Judge Steven Rhodes said a regional authority could still be in the best interest of the city and its suburbs.

“I also have a sense that this bankruptcy offers a unique opportunity for the creation of that regional authority,” Judge Rhodes said. “If we do not take advantage of that unique opportunity, the opportunity in all likelihood will be lost forever.”

Direct talks broke down last month and the city started seeking proposals from private companies to run and potentially buy the regional water and sewer system. It is unclear whether the city will continue the privatization process as the closed-door mediations begin.

The move to regionalize one of the nation’s largest water systems comes as Detroit considers unloading assets to complete its debt-cutting plan, which creditors are expected to vote on later this spring.

After a year in office, Detroit Emergency Manager Kevyn Orr had said an outright sale of Detroit’s water department, which serves nearly 40% of Michigan’s population, is unlikely. He prefers a plan that calls for leasing the water system to a new regional authority, which he estimates would bring the city $47 million a year for 40 years. The money could help boost financial recovery for the city’s creditors and plans by the city for reinvestment in municipal services.

But suburban leaders so far have balked at their potential share of costs for system improvements and unpaid water bills. It is still possible the city-owned system could continue to be run as a municipal department from Detroit.

The Detroit Water and Sewerage Department provides about 600 million gallons of water a day to Detroit and 127 suburban communities in seven counties. It has nearly $1 billion in annual revenue.

By

MATTHEW DOLAN

April 17, 2014 10:29 a.m. ET

Write to Matthew Dolan at matthew.dolan@wsj.com



D.C. Council to Sue Mayor over How the City Spends Its Money.

The D.C. Council will sue Mayor Vincent C. Gray and the city’s chief financial officer, the council chairman said Wednesday, setting up the first such legal showdown between the city’s two branches of government in a decade.

Council Chairman Phil Mendelson (D) said the council will ask a D.C. Superior Court judge to determine whether Gray (D) and CFO Jeffrey S. DeWitt are violating a voter-approved law that allows the city to spend billions of dollars of its own money without strict congressional approval.

Under the measure approved last year — which was signed by Gray and passed a congressional review period — the District no longer needs to submit its budget to the president and Congress for approval. The process left the city vulnerable to national politics and often complicated its financial planning.

Now, the budget would pass the council, just as any other city legislation, and it would take effect unless Congress voted to reject it and the president agreed.

But last week, DeWitt joined Gray, Attorney General Irvin B. Nathan and the Government Accountability Office in saying the measure had no legal effect because it violates the city’s charter, set by Congress.

Mendelson and a team of pro bono lawyers disagree. In a suit they intend to file Thursday, the council argues that Gray and others have been relying on a flawed legal analysis in rejecting the measure.

The section of law that the measure amended, they say, was one Congress did not set in stone but left subject to ­changes.

View Full Story from The Washington Post

APRIL 17, 2014



Is the Era of Unfunded Federal Mandates Over?

The current Congress has imposed few of these costly requirements. But it may be premature for state, local and tribal governments to stop worrying.

 A Congressional Budget Office report issued in late March includes a rather surprising revelation: With the exception of the Affordable Care Act and another law affecting child nutrition passed in 2010, Congress has not passed any significant bill imposing unfunded mandates on state, local or tribal governments since 2008.

When the Unfunded Mandates Reform Act (UMRA) was passed in 1995, the problem was considered so important that the bill that became this law was the first to be introduced in the new Republican-controlled House after that party took over Congress for the first time in 40 years. The reason? Republicans desperately wanted to amend the Constitution to require a balanced federal budget, but states and localities raised concerns that the federal budget might be balanced simply by passing responsibilities — and costs — down to state and local governments.

UMRA requires the Congressional Budget Office (CBO) to disclose the cost of any mandate as defined by the law, including intergovernmental and private-sector mandates that exceed statutory thresholds, before a bill can be considered on the floor of the House or the Senate. For 2013, that threshold was $75 million for intergovernmental mandates and $150 million for private-sector mandates. The notion was that highlighting the cost would have a chilling effect on mandates.

The most striking figure in the new CBO report (which carries the not-so-catchy title of “A Review of CBO’s Activities in 2013 Under the Unfunded Mandates Reform Act”) is the small number of laws enacted in 2013 that contained intergovernmental mandates. In fact, there were only four mandates in the 72 bills that became law in 2013; none of these had costs above the threshold. One other bill — immigration legislation involving verification of employment eligibility — would have had costs exceeding the threshold, but it did not become law.

This 2013 experience compares to an average of 45 intergovernmental mandates per year in the prior four years, with only seven (in two bills, both in 2010) with costs above the statutory threshold. So, judging from the activity reported by the CBO, Congress has, for all intents and purposes, virtually stopped imposing costly mandates on state, local and tribal governments.

Further, CBO reports that only 13 laws containing 18 intergovernmental mandates above the threshold have been enacted in the 18 years since UMRA took effect. There is no record of the pace of intergovernmental mandates prior to the imposition of UMRA, but if the problem of unfunded mandates prompted the enactment of UMRA, the problem seems to have all but gone away.

There are several possible reasons for why this has occurred. First, the 1995 law simply may have worked as intended. With more information about the cost of mandates available to federal lawmakers, Congress has refrained from enacting mandates, or at least has taken action to lower the costs of the ones it does enact.

The other possible explanations suggest that more caution is in order. For one thing, it seems likely that the narrow definition of a mandate is partly at issue here. UMRA, for example, does not cover most “conditions of assistance” even if meeting those conditions might cost state and local governments a lot of money. This means that the requirements in the No Child Left Behind Act do not meet the UMRA definition of a mandate because states could (theoretically) choose to forego the federal funding. Similarly, changes to Medicaid have not been identified as mandates because large portions of the program are optional expansions that states have the authority to change. UMRA also does not cover legislation that supports the guarantee of a federal constitutional right; if UMRA had been around when the Americans with Disabilities Act was passed, for example, the requirements in that law would not have been identified as mandates.

In addition, as has been well documented, the current Congress not only has failed to pass unfunded mandates — it has failed to do lots of things. The 113th Congress passed 72 bills last year, 40 percent fewer than the number passed in 2009 and less than half of the number passed in 2005. This is a rare positive attribute of a so-called “do nothing” (or, to be fair, “do little”) Congress: no laws, no mandates.

In the future, if we return to government controlled by a single party (or even a unified Congress), state and local governments worried about unfunded mandates imposed by Washington will have to return to a vigilant stance. For the time being, however, the highly partisan and dysfunctional nature of lawmaking in Congress appears to have at least one silver lining.

BY  | APRIL 16, 2014



Oklahoma Bans Cities from Setting Local Minimum Wages.

Oklahoma’s cities and counties are banned from setting their own minimum wage standards under a bill signed into law Monday by Gov. Mary Fallin.

“Senate Bill 1023 protects our economy from bad public policy that would destroy Oklahoma jobs,” Fallin said in a prepared statement. “Mandating a minimum wage increase at the local level would drive businesses to other communities and states, and would raise prices for consumers.”

Fallin’s action appears to thwart efforts by an Oklahoma City group that had been circulating a petition calling for a local vote on whether to increase the city’s minimum wage from the national standard of $7.25 an hour up to $10.10 an hour.

View Full Story from News OK

APRIL 16, 2014



Milwaukee’s Push to Turn Vacant Land into Urban Farms.

After one of the longer winters in recent memory, the city of Milwaukee is planning to engage in a new kind of rebirth. As the ice melts away, a number of parcels of city-owned land that have long lain vacant and unused will be coming back to life, set to become urban farms and orchards yielding healthy food along with new opportunities for employment and business entrepreneurship.

It’s all part of Mayor Tom Barrett’s HOME GR/OWN program, a Bloomberg Mayors Challenge finalist whose mission, beyond increasing access to fruits and vegetables, is to turn the city’s growing liability of vacant, foreclosed land into an asset: space for new economic activity that helps to stabilize distressed neighborhoods. We recently had a chance to talk with HOME GR/OWN’s program manager, Tim McCollow, about the program’s launch now that spring appears to finally be on its way.

When vacant properties in Milwaukee are tax-foreclosed, ending up under city ownership, they become substantial liabilities, costing the city $250 to $1,000 annually in direct costs of upkeep. And there are serious indirect impacts: attracting crime, stymying neighborhood cohesion and development, eating away at civic morale, and keeping property values, wealth creation and supportive tax revenues low.

The city is working in a smart way to shift these property liabilities out of the municipal budget and convert them to assets. HOME GR/OWN, a 2013 startup, is related to another effort Barrett launched this year: the Strong Neighborhoods Investment Plan. With $11.8 million in city funding, it aims to intensify the marketing of salvageable homes, raze 300 that are beyond repair and fund vacant-lot rehabilitation. HOME GR/OWN will help neighborhood associations, nonprofits and social entrepreneurs turn those vacant properties into the pieces of a new distributed food system.

Milwaukee is taking the steps needed to remove barriers to this revitalization. The city is reviewing internal processes, permitting and ordinances, and even designing “templates” of potential reuses, including costing and contracting models to help guide interested parties. In part due to the elimination of uncertainty and clarification of the process, many nonprofits and neighborhood associations already have signed on.

That aspect of hyper-local participation was no accident: HOME GR/OWN is designed to leverage existing resources and social capital already present in the neighborhoods targeted for revitalization. The launch of the program consists largely of parcels within the Lindsay Heights neighborhood, both because the area is troubled and in need of revitalization but also because of the rich network of funders and nonprofits already involved there.

While Milwaukee is building HOME GR/OWN through partnerships with nonprofits and social entrepreneurs, ultimately the goal is that program participation will be commercial as well, and McCollow sees Milwaukee as a perfect “national lab” to test the long-term commercial viability of urban agriculture. Ultimately, it’s the city’s hope that the market can drive this effort, needing only be helped along the way by municipal efforts.

Certainly the potential benefits of urban agriculture are multifaceted. One of the first well-developed urban-agriculture programs was Philadelphia’s Greensgrow Project, which was founded in 1998 through the Reinvestment Fund (an initiative of the federal Community Development Financial Institutions Fund) and has continued to expand its community-supported agricultural effort. Greensgrow’s vision is for people and communities nationwide to see urban agriculture as a useful tool in creating and sustaining regional food economies. Philadelphia has developed a robust set of partnerships that produce better use of the land and healthier food as well.

Many other cities have been developing complete urban agriculture programs to turn former costs into benefits. For example, San Francisco’s Department of Public Works saves about $4,000 annually when urban agriculture replaces a vacant lot formerly festering with dumping, vandalism and degradation. In New York City, a study of community gardens showed that they can bring about a 10 percent increase in surrounding property values, translating into community wealth accumulation as well as higher tax revenues to support city services.

To Milwaukee’s Tim McCollow, there are literal as well as figurative “healing aspects of food production.” Taking each vacant property off the city’s ledgers eliminates another small drain on its budget, but more importantly HOME GR/OWN aims to rebuild the city through the growth of a new local industry that adds to Milwaukee’s health, well-being and vibrancy.

Ben Weinryb Grohsgal contributed to the research and writing for this column. He is a research assistant at the Ash Center for Democratic Governance and Innovation and a student in the master’s in public policy program at the Harvard Kennedy School.

BY  | APRIL 16, 2014


Waste Incineration is Proving to be a Hard Sell for Cities.

New incinerators appeal to cities looking to get rid of garbage and produce renewable power. But local leaders find it tough to weigh sparse evidence on health threats against public opposition.

http://www.futurestructure.com/news/Waste-Incineration-Plants-a-Tough-Sell-for-Cities.html

 



Free Neighborhood Wi-Fi? Easier Said Than Done.

On April 2 in Washington D.C., the North of Massachusetts Avenue neighborhood — branded NoMa — launched the city’s first outdoor neighborhood-wide free Wi-Fi network. And the project was much more challenging than officials expected.

NoMa is the fastest growing neighborhood in the city, according to the NoMa Business Industrial District (BID), and it now offers this network as part of the district’s campaign to attract talented, tech-oriented people to live and work in the area — alongside existing organizations like NPR, the General Services Administration and the U.S. Department of Justice.

And according to NoMa BID President Robin-Eve Jasper, this launch is what their residents expected from the neighborhood — and they’ve gotten only positive feedback so far.

“You look around and see the world as changing; people are using their devices everywhere, and they’re integrated into all aspects of our lives,” Jasper said. “We thought, ‘We want to enable people in the neighborhood to have service inside and outside,’” Jasper said. “We have a lot of very tech-savvy people, so they’re very excited this is the first neighborhood in Washington to have it.”

The launch on April 2 was the first phase of the rollout and provides access to roughly six streets — streets considered the neighborhood’s core. The current set up can easily support up to 1,000 concurrent users, with data speeds of 200 Mbps, according to the district. Users should be able to stream high definition video throughout the neighborhood while outside, unless they are in a fast-moving vehicle or the network is particularly congested, Jasper said.

Though the official cost of the network has not yet been tabulated, Jasper said that it was expensive, despite a lot of local support from government agencies and community members. The network was more than one year in development, with one staff member who dedicated almost all her working hours for that year on the project. The rollout was funded entirely by district member dues, as well as supported by commodity contributions from the community.

“All the land owners donated the use of their roofs, so we’re not paying any fees for that, which ordinarily they would charge,” she said. “And DDOT [the District Department of Transportation] donated the use of all the electric and all the light poles, so we’ve got a lot of good in-kind value.”

The network features 17 enterprise access points that distribute the signal. So far, the only glitch has been that one area of the neighborhood is not getting as much bandwidth as officials had anticipated, Jasper added, so the district is now working on solving that.

BID contracted with New York-based Skypackets to complete the technology rollout because the city did not have experience with this kind of project, she said, and officials didn’t want to delay the rollout while they went through a learning process. The main rollout costs consisted of the equipment, pulling cable to buildings that didn’t have it, and ongoing system management, she said.

Further upgrades to the network are now underway, including coverage for the remainder of the neighborhood. One map of the neighborhood’s outdoor Wi-Fi coverage shows that eventually, almost every street will be included in the coverage area. But, Jasper said, the timeline for the continued rollout has not yet been established because the district realized during the first phase that this type of project is difficult to predict.

“We initially thought the whole thing would take six months, and we were way off,” she said, adding that the rollout took 11 months — and even more than a year if counting from the time the concept was conceived. “So it’s just made us more cautious about estimating, and we found in terms of building the infrastructure that there were more challenges than we thought. We had to get cable into enough points to get what we think was sufficient bandwidth. We had to get equipment on roofs of private buildings, and every building has a different perspective on license agreements or data they needed about the equipment that we were putting up.”

Despite some hiccups, support from the community has continued after the launch. Now that the network is operational, other buildings in the neighborhood have offered to contribute their infrastructure to be used in the network, offers the district is now considering alongside its future plans for the network.

“This is an active project, and we are closely monitoring the system’s performance,” Jasper said. “We plan to address any issues that negatively impact users and make sure that it is a quality network.”

The neighborhood is growing very quickly, she added, and it’s crucial that if BID is going to deploy a large, expensive project like this, that it provide the type of high-quality service that its residents expect.

By Colin Wood

BY  | APRIL 7, 2014



A New Way for Schools to Pay for Technology.

The federal e-rate program that provides money to schools and libraries for Internet connectivity is about to undergo a major overhaul that could mean the end of subsidies for pagers and mobile phones in favor of broadband wireless infrastructure.

Federal Communications Commission (FCC) Chairman Tom Wheeler announced the change in March during a speech he delivered at a Council of Chief State School Officers conference. The e-rate program provides discounts of up to 90 percent to help eligible schools and libraries obtain telecommunications and information services.

But in the years since the e-rate program was launched in 1996 as part of the Telecommunications Act, “Technology has changed; the needs of schools have changed; [and] the e-rate program must reflect this change,” Wheeler said. He recalled an incident in Michigan when elementary school students were midway through a 45-minute online math test when the system crashed as a result of inadequate bandwidth. The students had to retake the entire exam.

The telecommunications portion of the program, which includes everything from pagers and mobile phones to 800 numbers and email, is out of date in a world where communications is increasingly Internet-based, mobile and expected to be fast — whether it involves a phone call, text or video clip.

The e-rate program receives about $2.25 billion annually from the Universal Service Fund, an $8.5 billion program that uses a tax on various phone services to expand telecommunications in rural and high-cost areas of the country. The FCC created the fund during the 1930s to meet universal service goals of accessible phone service for rural areas and for low-income families. In less than 20 years, high-speed, mobile technology has passed by many of the original services subsidized by the fund.

The FCC wants to overhaul funding to focus on broadband connectivity, especially wireless service inside schools. “Wi-Fi has transformed computing and education, creating the possibility of one-to-one learning in classrooms and libraries, and freeing desks from wired connections,” the FCC explained in a report issued in March. More than half the public schools in the country, though, don’t believe their existing wireless networks have the capacity to handle new, technology-based custom teaching.

The wireless upgrade is part of a broad set of modernization goals set by the FCC that include: 1) giving schools and libraries affordable access to high-speed broadband to support digital learning; 2) maximizing the cost-effectiveness of e-rate funds; and 3) streamlining administration of the program.

Wheeler said the e-rate program spends about $600 million on outdated services.  He acknowledged that moving some of the money away from programs that are no longer central to the needs of schools and libraries will antagonize certain groups in the education community, such as the producers and users of narrowband pagers, PBX switchboards and 800 number services. Dropping subsidies for outdated  technology is one part of a broader focus on funding that the agency believes can free up an additional $2 billion over the next two years to help support broadband networks. The FCC also wants the distribution formula for wireless services to be more equitable. Currently, 80 percent of funding for wireless technology goes to urban school districts. Schools in rural communities have not benefited as well from the program as it’s currently structured, according to Wheeler.

What the FCC does not want to do (yet) is request more funds for the e-rate program. The FCC has said it will search for savings in the program before considering expansion. That may be prudent, given that Congress, especially the Republican-led House, has been cool to the idea of tacking on any more fees to cellphone subscriber phone bills. But advocates for increasing the funding point out that demand for e-rate funding has continuously exceeded the program’s cap of $2.25 billion.

Last year, President Barack Obama got the ball rolling on the new e-rate program when he proposed expanding the amount of funding by up to $6 billion by increasing the monthly universal service fees to cellphone users. The proposal was part of the president’s ConnectED initiative, which is aimed at connecting 99 percent of public school students to broadband speeds of at least 100 megabits per second, with a target of 1 gigabit per second within five years.

However, former Republican Congressman Tom Tauke told the Technology Policy Institute forum last year that proposing to tack on more fees on phone bills was likely to antagonize Republicans who want to limit government spending. Fred Upton, the Republican chairman of the House Energy and Commerce Committee, in speaking out against the president’s proposal, told The Washington Post, “Most consumers would balk at higher costs, higher phone bills.”

Republicans might not want to raise fees to boost the e-rate program, but the plan to change funding has received widespread support from the major organizations that represent the education and library communities. The American Library Association (ALA) called for swift action on e-rate reforms, including an increase in funding. The ALA pointed out that the average public library has about the same connectivity as the average home. “High-capacity broadband drives innovation and underpins modern library services in public and school libraries,” said ALA President Barbara Stripling.

The National Association of Elementary School Principals (NAESP) and the National Association of Secondary School Principals both pledged their support for modernization. While they support FCC Wheeler’s call to modernize the program, more funding is crucial, according to Gail Connelly, executive director of NAESP. “We hope the [FCC] chairman and commission members make a serious attempt to not only improve inefficiencies, but increase e-rate funding to meet current school and library needs, which is an estimated $5 billion,” she said.

The U.S. Conference of Mayors has also weighed in on the issue, sending a letter to the FCC that called for swift action. Citing the fact that the other advanced countries have much better technology infrastructure in their schools, the mayors called broadband as important as chalkboards and textbooks.

Can the FCC modernize the e-rate program without asking Congress for more money? The commission believes it can, though Chairman Wheeler has indicated he won’t hesitate to ask if more money is needed. Given the fierce drive to hold down the cost of government in Congress, it may be a while before more funds flow to schools and libraries to pay for technology.



States Looking to Sell Some Roads to Cities and Towns.

For years, the leaders of Beaufort, S.C., have promoted the charms and convenience of their coastal city, which has a historic downtown and cozy neighborhoods. Many of Beaufort’s 13,000 residents can walk or ride their bikes to work or to stores.

To improve safety and boost pedestrian traffic, city officials would like Beaufort’s street grid, parts of which are more than 300 years old, to include narrow lanes and on-street parking, which would encourage drivers to slow down. But Beaufort cannot make changes to many of its own streets because the state, which prefers wider roads and faster speeds, owns virtually all of the roads in town.

That may change soon, as South Carolina legislators try to save money by unloading part of the state’s vast road network onto localities like Beaufort.

Road Network Ownership
The percentage of state road networks owned by state governments varies widely. 

States With Biggest Share of Road Network

 

 

  1. West Virginia* (89 percent)
  2. Delaware (84 percent)
  3. Virginia (78 percent)
  4. North Carolina (75 percent)
  5. South Carolina (63 percent)

 

* The District of Columbia owns 92 percent of its roads

 

States With Smallest Share of Road Network

 

 

  1. New Jersey (6 percent)
  2. Kansas (7 percent)
  3. Iowa (8 percent)
  4. Michigan (8 percent)
  5. Massachusetts (8 percent)
Source: Federal Highway Administration, 2012.

In recent years, North Carolina, Texas, West Virginia and other states that own large road networks (see sidebar) have tried similar tactics. The cost of maintaining roads varies widely by the type of road and the location, but it can add up quickly. For example, the Texas Department of Transportation in 2009 spent $1 billion on road maintenance in 2009, the most recent year for which numbers are available.

State transportation departments once used their roads to wield power over politics and planning. South Carolina, for example, originally stepped in to build roads between county seats, connect to roads in neighboring states and funnel travelers to main routes. State legislators, who controlled the roads in their home counties, kept adding to the state’s network.

“The road system as it currently exists still reflects the organizational and political realities of the 1930s and 1940s rather than the 21st century,” said Pete Poore, a spokesman for the South Carolina Department of Transportation.

Now the roads are costly relics. But states have had limited success in giving them away, because cities such as Beaufort don’t want to pay for them either.

“Our council feels there should be some quid pro quo. If we take the roads, we should be able to do what we want with them in a reasonable and responsible manner,” said Scott Dadson, Beaufort’s city manager. “Secondly, we should have funds that come with it.”

Waning Appetite

Nationally, state governments own about 19 percent of the roads within their borders. But West Virginia, Delaware, Virginia, North Carolina and South Carolina all own more than 60 percent, according to the Federal Highway Administration. The state with the next-highest share is Maine, at 37 percent.

Each state amassed its huge network in a different way. But generally, state officials took over county roads and other farm-to-market routes because localities did not build enough of them or failed to maintain them adequately.

Decades later, states that gobbled up local roads no longer have the appetite to keep them. In growing areas, highways that once linked distant towns are now major local arteries. In some cases, states own odd stretches of local roads because of political reasons that were forgotten long ago.

States increasingly see their shorter, less-traveled roads as a drain on resources at a time when resources are increasingly scarce.

Inflation and fuel efficiency are sapping revenues from state and federal gas taxes. The federal government, which provides a third of the money that states spend on transportation, expects to run short of road money as early as July. This year’s brutal winter, which added expenses for snow plowing and pothole repair, further strained state transportation budgets.

Another key question in handing over roads is who keeps the federal money designated for their maintenance, said Leslie Wollack from the National League of Cities. The current federal transportation law channels more money through states, which then decide how much to turn over to their cities.

“That creates a very large problem for the local governments, because they’re not getting the money. They may not have chosen to build these roads in the first place, yet they are suddenly being given the responsibility to spend a lot of money,” Wollack said.

Promoting Local Control

Some states are trying to convince cities to take on the added financial burden of maintaining the roads by touting the benefits of local control.

That is the case in Texas, which owns 80,000 miles of road, more than any other state (although North Carolina is a close second). The Texas Department of Transportation launched a “turnback” program last summer to encourage medium-size and large cities to take back lesser-used roads.

Mark Cross, an agency spokesman, said cities could better protect property values and respond to residents’ concerns if they took over the state streets. With a transfer, he said, “a local government would have total control of traffic flow, parking, driveway access, speed limits, road closures and maintenance schedules.”

The 59 localities eligible for the program would not get any money to keep up their new roads, but the state would redirect the funds it saved to other road projects in the same city on an ongoing basis. The state now spends $165 million a year maintaining the eligible roads, but it said it would not spend more than $100 million on the new program.

So far, only San Antonio and Lubbock have applied for the program, although other cities are in talks with TxDOT, Cross said.

Growing Pains

West Virginia state Sen. Bob Beach, a Democrat, is working on legislation to enable counties to raise money for transportation that the state would match. (There are no county roads in West Virginia; all of the famed country roads are owned by the state.)

Business leaders in the Morgantown area, where Beach is from, developed the plan to cope with a population surge and increased traffic congestion in the area, the senator said. Monongalia County, which includes West Virginia University, saw a 20 percent jump in residents during the last decade, bringing the total to just more than 100,000 people.

Legislators from the state’s northern panhandle, which is fast becoming a suburb of Washington, D.C., also are interested in the arrangement, Beach said.

Local leaders told Beach they thought they could generate $50 million to $80 million with new taxing authority, which they want the state to match dollar for dollar. One of the projects they are considering is a $100 million bridge to ease traffic traveling from Morgantown’s hospitals and athletic facilities to the nearby interstate.

But legislators do not want to take up new taxing authority in an election year, so lawmakers will study the idea this summer and consider making the changes next year, Beach said.

In South Carolina, previous attempts to offload state roads onto cities fell flat, so lawmakers are considering adding some money to the mix.

“While we’re willing to discuss taking over roads, we have to have a dependable revenue source for it,” said Scott Slatton, a legislative and public policy advocate for the Municipal Association of South Carolina.

The state House of Representatives approved offering financial incentives for cities to take over state roads. The proposal would dedicate a quarter of state road funds for an area to help cities maintain state roads that they take over. If the state did not provide adequate funding, the road would revert back to state ownership.

Even with the prospect of dedicated money, some cities are balking at the deal, Slatton said.

The Other Foot

Counties and municipalities in New Jersey have the opposite problem: They own virtually all the roads within the state’s borders. When repair costs mount, they often turn to the state and federal government for more money.

Bill Dressel, the executive director of the New Jersey League of Municipalities, said he asked state and federal officials to find money to deal with the costs of this winter’s storms, with little luck.

The amount of snow wasn’t enough to merit a federal disaster declaration, he was told, and the state did not have money for relief.

Dressel met with Assembly Speaker Vincent Prieto, a Democrat, around St. Patrick’s Day to plead his case. But the speaker told Dressel in a light-hearted way that there was no extra money in New Jersey for any needs, a Prieto spokesman said.

“Bill,” Dressel remembers the speaker saying, “you’re going to have to find the leprechaun’s pot of gold, because you’re not going to find it under the gold dome on West State Street.”

By Daniel C. Vock

BY  | APRIL 10, 2014



Pensions and Bureaucracies Strangle L.A., Panel Says.

Los Angeles’s future is threatened by a sixfold increase in public pension costs and dueling bureaucracies that hinder its ports and tourism, according to a panel led by former U.S. Commerce Secretary Mickey Cantor.

The second-largest U.S. city could be more competitive if the nation’s busiest seaport complex, the ports of Los Angeles and Long Beach, were to merge and regional tourism agencies were combined to speak with one voice, according to the report by the L.A. 2020 Commission.

The recommendations came the week after economists at the University of California, Los Angeles reported that Los Angeles lost 3.1 percent of payroll jobs since 1990, the biggest drop of any U.S. metropolitan area. The panel’s proposals are intended to reverse the trend, Cantor said in a telephone interview from Los Angeles.

“This will have an effect on the trend,” said Cantor. a partner in the Chicago-based law firm of Mayer Brown LLP. “Will it solve every problem? Of course not. We don’t even pretend that.”

The report went unmentioned last night by Mayor Eric Garcetti, a 43-year-old Democrat elected last year, in his first state-of-the-city speech.

Garcetti pledged to rein in the municipal bureaucracy, phase out the city business tax and offer summer jobs training to young people.

“Simply put, we are creating jobs in Los Angeles that aren’t being filled by L.A. residents,” Garcetti said. “We have failed to train tomorrow’s workforce here in our own neighborhoods. I will change that.”

Pension Costs

He did not propose any changes to city pensions, which the commission said now consume 18 percent of the city budget, up from 3 percent in 2003.

Los Angeles relies on an overly optimistic expectation that investments will return 7.75 percent a year, which causes the gap between available assets and obligations to widen, according to the report.

In contrast, Warren Buffett’s Berkshire Hathaway (BRK/A) Inc. counts on annual returns of 6 percent for its pensions, according to the report.

“The city should use the discount rate and pension plan earnings assumptions Buffett uses,” the commission said.

As of June 30, 2013, the Los Angeles pension plan for non-safety employees was 68.7 percent funded. The pension fund had $10.2 billion in assets and $14.9 billion in liabilities, resulting in an unfunded accrued liability of $4.7 billion.

‘Accountability’ Office

The independent commission, established last year by Los Angeles City Council President Herb Wesson, also recommended establishing an “Office of Transparency and Accountability” at City Hall, and empowering an independent five-member commission to set water and power rates.

Los Angeles’s problems with public education and transit, while “critical” to the region’s future, were beyond the scope of the 13 volunteers who served on the commission, the report said. In addition to Cantor, members included Austin Beutner, a co-founder of New York investment bank Evercore Partners and a former Los Angeles deputy mayor; former California Governor Gray Davis, and former U.S. Labor Secretary Hilda Solis.

By James Nash  Apr 10, 2014 7:59 PM PT

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.netPete Young, Theo Mullen



San Antonio: Innovative, Creative, Environmentally Conscious. And Still Running Out of Water.

To understand the legendary culture of water conservation that this city has cultivated in the last 20 years, consider that an 11-foot tall model of a low-flow toilet adorns the lobby of its water utility’s headquarters. The toilet recently was the subject of many photo opportunities when a group of more than 80 lawmakers, legislative staffers and water planners toured San Antonio’s water facilities.

“We’ve got cities coming from all over the world,” Greg Flores, the spokesman for San Antonio Water System, or SAWS, told the visitors over a home-cooked brisket lunch. Later, the group gawked at the utility’s underground reservoir storage system, drank treated wastewater from its award-winning water recycling plant and learned of plans for a desalination plant. The message was clear: The state’s thirsty cities should follow San Antonio’s lead.

Yet even with recent accolades from federal officials and a featured role in a public television documentary, San Antonio is grappling with explosive growth and dwindling water resources, just like rest of Texas. The city has long hunted for a new source of water beyond the inexpensive and clean Edwards Aquifer, which it has depended on for decades. But critics say that pursuit is happening at the expense of more rural communities. And they also fear it endangers San Antonio’s reputation as a “green” city that has been able to successfully balance growth and water conservation.

“We have to go outside the Edwards,” said Amy Hardberger, an assistant professor at St. Mary’s University in San Antonio who teaches water law and land use. “But how we do it and how much we do it means everything.”

San Antonio’s aggressive conservation efforts started in the early 1990s, when a federal judge ordered the city to pump less water from the Edwards Aquifer to protect endangered species. Ever since, attempts to secure new sources of water have had limited success. More than half of the 80 billion gallons of water SAWS delivered to 1.7 million consumers last year came from the Edwards, of which San Antonio is by far the biggest user, but that will probably be curtailed this year because of drought conditions and to protect the endangered animals who depend on the aquifer’s springs.

Overtures to buy groundwater from underneath rural South Texas counties have led to fears that the city will drain those aquifers. The utility says that is not its intention, but points out that if San Antonio does not get those water supplies, another city will.

Other regional water authorities that have pursued joint water projects with San Antonio have felt rebuffed. Ever since the utility backed out of a collaboration with the Guadalupe-Blanco River Authority in 2005, the two entities have fought constantly over water supplies in various river basins in South-Central Texas. “It’s the same as Lucy yanking the football away when Charlie Brown tries to kick it. We always feel that we are Charlie Brown,” an official at the river authority, Todd Votteler, said.

Even some legislators have said that San Antonio has insisted too aggressively that they relax local groundwater regulations, which would ease their attempts to buy water from other counties.

“When San Antonio comes into the room, there’s definitely a reaction that I’ve noticed: ‘Who loses on this deal for the benefit of San Antonio?’” said state Rep. Lyle Larson, R-San Antonio. “We’ve got to change that reputation. It’s created some regional confrontations.”

Both Larson and Flores say that the utility’s president, former state Rep. Robert Puente, has helped foster a more diplomatic approach since he was appointed in 2008.

Last month, yet another search for water supplies appeared to have failed. After more than three years of evaluating multiple proposals from the private sector to make the biggest addition to San Antonio’s water supply in history — 16 billion gallons a year — Puente appeared to throw up his hands and abandon the endeavor. All the projects were too risky because local opponents could cut off the supply, he said.

While environmental advocates  applauded the decision, the business community was appalled. “It was a very surprising and disappointing announcement,” said City Councilman Joe Krier, former president of The Greater San Antonio Chamber of Commerce. Krier said businesses constantly ask him, “Are you going to have enough water for me 20 years from now? And we can’t give them an answer.”

Under pressure, Puente agreed to reconsider a proposal to pipe water from underneath rural lands northeast of Austin. But he also said the project would cost the utility $2.6 billion over 30 years and could require a 12 percent  increase in water rates  in just a single year. That would not be an easy sell in a region whose water rates have jumped more than 50 percent in the last decade. A large chunk of those increases are paying for $1 billion in sewer improvements after leaky pipes spilled more than 20 million gallons of raw sewage from 2006 to 2012, prompting the federal government to sue SAWS.

Such a large contract could also discourage conservation, environmental groups have pointed out, because the utility must pay for all the water whether residents use it or not. By contrast, the utility will own and operate the desalination plant it is currently building, which will treat water from a nearby salty aquifer, so it could cut production if demand lessens, saving costs.

A debate also still persists as to how much San Antonio has conserved, and how much new water it will need. Puente has championed the fact that from 1984 to 2009, water use decreased despite huge population growth. But data from the time frame of 1988 to 2013 shows consumption by ratepayers went up 24 percent, in part because SAWS absorbed a large new customer base in 2012.

The utility also serves sprawling areas outside city limits, where it has no say on how new developments are planned. Planners say that new homes are much more likely to include automatic irrigation systems, which can significantly increase water use. The city has long used off-duty police officers to build up one of the most robust enforcement programs of lawn-watering restrictions in the country, but that can only go so far.

But most believe that no matter what the city does to quench its thirst, decades of conservation habits will continue to be an emphasis.

“You’ve got to recognize that as the price of water goes up — and it will go up, because it is a scarce resource — that’s going to encourage more conservation,” said Reed Williams, a member of the SAWS board.

And it is indeed the water utility that prizes such a culture above everyone else. When Larson called El Paso the state’s best water conserver at a recent water law conference, Puente, sitting right next to him, could not help but whisper audibly, “second only to San Antonio.”

By Neena Satija

BY  | MARCH 31, 2014



Rural Hospitals Are on Life Support.

Hospitals may be rural America’s single most important and most endangered institution. Between having to serve some of the sickest and most expensive populations and federal cuts, can small town America save more from closing?

Forkland, Ala., is about as remote and as poor as towns in the United States get. Located on the western edge of Alabama’s “black belt”—50 miles south of Tuscaloosa—its 645 residents earn just over $10,000 per capita a year, less than half the state average. The town has just one store—a squat whitewashed building next to city hall—with a smattering of soft drinks, candy bars and potato chips on its otherwise empty shelves. What Forkland does have is kin and community. Get off Highway 43 and the potholed county roads that connect to it, and you’ll find that sense of community down the red clay roads winding through the pines that lead to the shacks, single-wides and small homes where generations of family live. When newborns enter this world, they do so at nearby Bryan Whitfield Memorial Hospital.

Forkland is small, poor and overwhelmingly African-American. Next-door Demopolis is larger (population 7,500), wealthier and equally divided between blacks and whites. With two paper mills and a cement factory, Demopolis has a significant industrial economy. It also has another economic driver that supports and supplements local industry: health care. Bryan Whitfield isn’t simply a vital provider of medical services for its residents and those in the surrounding areas. It is one of the region’s largest employers with about 260 people on its payroll. To put the hospital’s impact in context, its budget is more than three times larger than the city and county budget combined.

Like most rural hospitals, Bryan Whitfield is in many ways a creature of government. Built with the help of federal funds under the Hill-Burton Act of 1948, the hospital is organized under Alabama state law as an independent health authority. The city of Demopolis appoints five of the hospital board’s nine members and, under the terms of a court settlement, appropriates $125,000 a year to provide indigent care to town residents. Marengo County, in which the hospital is situated, pays an even larger sum—$360,000 a year—under the terms of the same settlement. By far the biggest contributors to the hospital’s bottom line, though, are Medicare and Medicaid. Roughly 75 percent of the hospital’s $73 million-plus budget comes from those programs, a significantly higher percentage than the average hospital.

In rural Alabama, $73 million is a large number. Even so, Bryan Whitfield’s profit margins are razor thin—and recently got thinner. About two years ago, the federal recovery audit program found that the hospital had improperly billed Medicare; the federal government demanded that the hospital repay $1.3 million immediately. That presented hospital administrator Mike Marshall with tough choices. In December, he announced that the board had voted to lay off 40 employees and shut down the hospital’s labor and delivery unit, which delivered 231 babies last year, but which did not collect enough revenue to cover its costs. If the labor and delivery unit shuts down, the residents of Demopolis and the areas that surround it, like Forkland, will be forced to drive to Tuscaloosa, Selma or Meridian, Miss., to receive prenatal care and to give birth.

“Some simply won’t make it,” says Forkland Mayor Derrick Biggs. “You’ll have the baby on the way.”

Tiffany Ward, one of the two doctors in Demopolis who delivers babies, warns of even more dire consequences. Many pregnant women depend on neighbors or on public transport to get to a doctor’s office for a checkup, she points out. With prenatal care and delivery services an hour or more away at best, she says, “babies are going to die.”

Unborn babies aren’t the only ones at risk. Many residents of Demopolis see the debate about the future of labor and delivery as a proxy for something larger—whether their community will be able to maintain a full-service hospital. Similar debates are playing out in rural communities around the country, engendered by the costs of health care for small populations, by the way the federal Affordable Care Act (ACA) affects hospital financing and by decisions about what mix of services can best serve the health needs of a community that can’t afford to have it all.

The stakes are high—and not just in terms of the availability of medical services. “Health care is actually the fastest-growing job in rural America,” notes Maggie Elehwany, government affairs and policy vice president of the National Rural Health Association (NRHA). “If the hospital closes, a lot of these towns wither on the vine.”

The numbers are startling. Rural America is sicker, poorer, older and more overweight than the country as a whole. That puts financial pressure on the hospitals that serve it.

“They are in more isolated areas, which means they have lower patient volumes overall,” says Adam Higman, a vice president with Soyring Consulting, a firm that works with rural hospitals. Lower volume leads to lower staffing levels, which makes it hard to roll out new technology and implement new rules. “You can’t get the same utilization out of the equipment,” Higman says. “Every case is a higher cost to them than it would be to another facility.”

They are also more dependent on Medicaid and Medicare, which tend to reimburse providers at lower levels than private insurance. According to Keith Mueller, who heads a center for rural health policy analysis at the University of Iowa, some 18 percent of rural Americans are Medicaid recipients, compared with 15 percent of urban Americans. Doctors in rural America receive an average of 25 percent of their reimbursements from Medicaid, as compared with 20 percent for nonrural doctors.

Not every rural hospital is struggling. In the energy-rich Mountain West and Great Plains, some rural hospitals enjoy monopoly positions that allow them to earn huge profits. But in areas where the economy is sluggish, as in rural Alabama, hospitals aren’t just hurting, they are starting to close. The state has lost six hospitals in the past 18 months, more than in the previous 20 years, according to Don Williamson, the state health officer and acting head of the state’s Medicaid agency. Another 22 hospitals are operating in the red. Many are serving areas with high numbers of uninsured patients, a combination that will make it extremely difficult for them to survive.

It’s not just Alabama. More than 40 percent of rural hospitals nationwide are operating in the red, according to the NRHA. Even hospitals that are profitable typically operate with narrow profit margins. Many of these facilities are subsidized or owned outright by local or county governments, making what to do about the local hospital one of the most challenging issues faced by local officials. It’s a challenge greatly magnified by the controversies surrounding the ACA.

When the reform was signed into law four years ago, the expectation was that virtually all of the nation’s 48 million uninsured would gain health insurance, either through subsidized health insurance policies purchased on health exchanges or through expanded state Medicaid programs. In anticipation of this outcome, significant changes were made to the Medicare and Medicaid payments system. Most notably, the ACA requires that the federal government begin making deep cuts in so-called Disproportionate Share Hospital (DSH) payments to hospitals serving areas with high numbers of Medicaid patients and people without insurance. Other adjustments that have benefited rural hospitals are already being phased out. That might have been tolerable if hospitals were seeing a surge of new customers with health insurance. They are not. The U.S. Supreme Court’s summer 2012 ruling on the constitutionality of the ACA gave states the ability to opt out of Medicaid expansion. As of today, only 25 states (and the District of Columbia), have chosen to expand. The result, says Tennessee Hospital Association president Craig Becker, is a slow-motion disaster.

“Between the ACA and other cuts, we are looking at $7.4 billion in cuts over a 10-year period,” says Becker. “The cuts”—which begin in earnest in 2016—“are so catastrophic to some of our hospitals, not only rural hospitals but some of our big city hospitals as well, that I don’t know how they are going to survive, particularly without a [Medicaid] expansion in place.”

The situation poses challenges for state and local government officials. State officials must contend with the politically hot question of expanding Medicaid. Local officials in communities such as Demopolis are looking at committing ever-larger amounts of public funds to the local hospital or risking the loss of valuable services. In the process, they are making life-and-death decisions, both literally and figuratively, for their constituents and their communities.

The debate over the future of Demopolis’ labor and delivery unit is many things: a debate about the value of life; about a community’s demands and its limits; and about the future of rural medical care, a future embodied by people like Tiffany Ward and her husband Johnny.

Ward is Demopolis’ newest physician. At the age of 30, she is also by far its youngest—and the kind of physician smalltown America dreams of. She grew up in a town of 350 people in rural Nebraska. When she decided to become a doctor, she wanted to be a generalist, someone who delivered babies, performed surgery and provided care in a rural area. When she completed her residency, she was recruited to be a doctor in Demopolis. Ward and her husband decided to move, even though it meant that Johnny would have to give up his high-paying job. Three months after arriving in Demopolis, Tiffany read in the local paper that the board had voted to close the labor and delivery unit.

Ward felt betrayed. She felt that she had been clear about her passion for obstetrics, even discussing strategies for increasing the number of kids born at Bryan Whitfield with the hospital board. She and other physicians in the community also worried about the effect a closure would have on patients.

“Transportation is a problem,” says Dr. Alex Curtis, who divides his time between private practice and Bryan Whitfield’s emergency room. “We have women who live two or three miles from the clinic and can’t make it to their visit. We’re now going to expect them to drive 50 miles?”

It’s a concern that a significant number of Demopolis residents seem to share. On Jan. 30, the city council and county board of commissioners held an unusual joint meeting to explore whether some joint effort to preserve the unit might be possible. Among the ideas discussed was the possibility of enacting a small property tax increase or submitting a larger tax increase to voters as a whole.

It didn’t happen. While the city offered $68,000 to keep labor and delivery open for an extra two months, the county board of commissioners balked at the suggestion that the county should make a matching contribution. Nor did county commissioners embrace the idea of raising property taxes.

“How would you like to run [for re-election] on the platform, ‘I’ve raised taxes so we can help people from surrounding counties have babies here?’” asks hospital board member and local businessman Jay Shows, who notes that only 40 percent of the babies born at Bryan Whitfield are Marengo County residents. By a 3-2 vote, the board of commissioners voted the proposal down.

As Bryan Whitfield struggles to shut down unprofitable hospital operations, the town of Thomasville, 45 miles to the south, is doing something very different. It’s preparing to open a brand-new hospital in 2016. The primary reason for doing so is economic. Thomasville is trying to supplement its paper and lumber mill economy with steel and pipe fabricators. It’s betting that the city’s location—100 miles north of the port of Mobile, which is expecting a surge in business after the widening of the Panama Canal is completed—will attract new industry. The documents on Mayor Sheldon Day’s desk make it clear where he thinks such investment will come from: A brochure touting Thomasville’s attractions is in Chinese.

According to Day, in the past seven years Thomasville has attracted $700 million in investments that Day says will create 1,500 new jobs. However, these are not low-risk jobs. Injuries are common and employers want treatment for injured workers to be readily available. “We recruited industries here with the understanding that a new hospital would be built,” Day says.

Thomasville had a small, 49-bed private hospital—until its parent company went bankrupt three years ago. Now the city is partnering with a group of investors to build a facility that will be three times larger than the old one. The new hospital, however, will have only 29 beds. Instead of inpatient hospital beds, the new facility will have a large emergency room and spaces that can be used for more profitable undertakings, such as outpatient care.

“That’s where the business is today, whether you like Obamacare or not,” says Day. “At the end of the day, Obamacare is designed to keep people out of the hospital, which means outpatient services are what will be easier to get paid for.”

The old hospital had a labor and delivery unit. The new hospital will not.

Back in Demopolis, hospital administrator Mike Marshall isn’t surprised. “I came here from the for-profit sector,” he says. “I told board members, ‘If you want me to make this profitable, I can make it extremely profitable, but there are things you will lose as a result of that.’” The challenge, says Marshall, is finding the right balance. Ultimately, he says, “it’s a community hospital, and we are trying to do everything we can to serve the needs of the community.”

Marshall’s actions in Demopolis—and Thomasville’s plans for the future—illustrate something important. At the national and state level, debates about Medicaid expansion and the impact of health-care reform on hospitals tend to portray outcomes in binary terms: Hospitals stay open or they close. Sometimes that is exactly what happens. After all, rural hospitals in states such as Alabama and Georgia, which did not expand their Medicaid program, are already beginning to fail—and more failures are a virtual certainty in other states that refuse to expand Medicaid coverage.

What is more common, however, is that the mix of services rural hospitals offer will change. Instead of offering a full range of services, hospitals will focus on revenue opportunities. Rather than operating as stand-alone facilities, hospitals will join in the hospital industry’s movement toward greater consolidation. Profitable rural hospitals, for instance, might join a for-profit chain, bringing the community the fiscal relief of a major new taxpayer but also a loss of control over what services will be available in the community. Other rural hospitals will affiliate with a larger institution that can offer technical assistance with the latest technological and quality initiatives as well as access to capital. This could bring real benefits, but it also creates the risk that facilities that once offered a full range of services become little more than glorified emergency rooms. That’s better than nothing but worse than what many communities have now—hospitals that serve their communities as their communities want to be served.

In the end, the decision about what direction health services go will be made by elected officials. To get a new hospital, Thomasville passed a half-cent sales tax increase. Mayor Day estimates that it will raise at least half a million dollars a year for the new facility. Some in Demopolis hope for something similar, among them Dan England, the sole Republican on the Marengo County board of supervisors.

“It may surprise people, me being a Republican and all, but I think the hospital is kind of like the fire department,” England says. “We don’t expect the fire department to fund itself. There has to be public support.”

But that doesn’t mean that England is wholly enthusiastic about providing it. He’d prefer that the city of Demopolis step up.

Hospital administrator Mike Marshall and the majority of his board believe they are fighting for the community too. A positive cash flow isn’t about greed. It’s about maintaining the ability to recruit doctors, invest in equipment and undertake capital improvements. In short, it’s about maintaining the hospital’s viability.

“Look at the needs of the community,” says Marshall, noting that the number of deliveries has been declining for years. The hospital, in short, is allocating $1.4 million a year to serve 145 residents. “Every year at budget time we talk about it,” he says. “It has become such a drain that it is harming our ability as a hospital to be viable as a whole.”

As for the idea that babies will die if labor and delivery closes, Marshall and his board don’t buy it. “It will be a hardship on our citizens,” says board member Shows. But “it is not the end of the world. And if they come in at 2 in the morning, we will deliver the baby.”

As for Tiffany Ward, she has made her position clear: If the labor and delivery room closes, she’s leaving. “We fell in love with this city,” she says. Still, she says, “I don’t want to waste a skill I went to school for 11 years for, either.”

Demopolis Mayor Mike Grayson admits that, from a business perspective, keeping labor and delivery open doesn’t make sense. But, he adds quickly, “I have yet to hear a good alternative.”

What does seem clear is this. The decisions to come will only get more difficult—and not just in Demopolis. As Don Williamson, Alabama’s health officer, points out, in rural areas there are not enough physicians, there is poor access to specialty physicians plus some of the more lucrative revenue-generating procedures are not available. “Keeping a rural hospital in play,” Williamson says, “is a difficult, difficult thing.”

BY  | APRIL 2014



Jacksonville, Fla., Creates Scorecard for Government Services.

Opaque governments, pay attention. Jacksonville, Fla., is showing how to do transparency right.

On March 5, Mayor Alvin Brown announced the city’s new open data webpage, called JaxScore 1.0, which provides basic metrics about various city services for all to see. This transparency effort, officials say, is a push toward Brown’s goals of improving performance and efficiency, and increasing public participation in government.

JaxScore 1.0 displays boxes in a grid format; each box shows a metric for a city agency, such as Animal Care & Protective Services, Information Technologies Division and the Jacksonville Children’s Commission. If residents want to know how many jobs were created in one year by the Office of Economic Development, for instance, it’s easy to see that the number is 1,712 (as of March 31). Clicking on that box brings up a PDF where users can view basic trend data in a graph, and a chart outlining more advanced data.

To make this data available, the city first had to begin collecting it — which has changed how employees are working.

Having the data published online is great for the public, but it also helps the city see how it’s matching up to its goals, said Karen Bowling, Jacksonville’s chief administration officer.

“We’re all used to being graded,” she said. “From first grade, kindergarten, we measure everything, so our employees really appreciate the opportunity to have this objective data so that it feeds right into the employee evaluation process. Rather than having to rely on anecdotal information, they can, on a monthly basis, know how they’re doing against their goals. It’s a thing of competence – they know where they’re at.”

How did the concept originate? From budget cuts, Bowling said. The city took a long hard look in the mirror, and decided that to make the most of their resources, it would need to benchmark its performance — something it previously had not been doing thoroughly, she said.

And it is a big change for city employees, said Cleveland Ferguson, deputy chief administration officer for the city. Pockets of government have done things in the same way for a long time, he said, so getting people to track their progress has been a bit of a culture shift — but it’s worth it to get focused around the Mayor’s goal of making government more efficient.

The data is available to the public through the JaxScore website, as well as to city employees internally through a dashboard. The data is collected by each departmental division, each of which has been assigned a data analytics person. The analytics employees along with a process improvement internal team work together to collect data each month, and that data is published quarterly. Eventually, Ferguson said, this data will build and allow them to recognize trends.

Now that employees started that habit of collecting the data and paying attention to performance, they’re getting comfortable with the process — and enjoying the benefits the system brings, Ferguson said. Each month, employees can look back and see what they’ve done and how that compares to their goals.

The system was developed internally, with no outside procurement, and there was no cost other than a time investment, Ferguson said. It took about four months of intense dedication from a small team to get the system to where it is today, he said — and the response has been positive. “We’ve gotten glowing feedback from many constituencies that are into transparency and more open government,” he said. “It has been overwhelmingly positive and we are very appreciative of that.”

The culture shift and change in work processes is important, but the technology was a big piece too, Ferguson said — and the city will keep updating and improving the system. The city is now looking at several new interfaces that would allow employees to input data themselves, which would further streamline the data collection process, he said. The city plans to eventually add that functionality, as well as more public facing data, he said. The city’s complaint system allows officials to monitor complaints, comments and questions in near-real time, and in a future iteration of Jaxscore, he said, that data will become available online, too.

Strong executive leadership from CIO Usha Mohan also was an important key to getting this project launched and having it be a success, Ferguson said. Mohan’s background in health care, a sector that places emphasis on analytics, played a critical role in her understanding the importance of the city’s transparency efforts, he said.

“We made a conscious decision to use IT strategically and not as merely providing a service,” he said. “And she’s the perfect CIO to appreciate the strategic nature of IT being change.”

By Colin Wood

BY  | MARCH 31, 2014



NYT: Beneath Cities, a Decaying Tangle of Gas Pipes.

It is a danger hidden beneath the streets of New York City, unseen and rarely noticed: 6,302 miles of pipes transporting natural gas.

Leaks, like the one that is believed to have led to the explosion that killed eight people in East Harlem this month, are startlingly common, numbering in the thousands every year, federal records show.

Consolidated Edison, whose pipes supplied the two buildings leveled by the explosion, had the highest rate of leaks in the country among natural gas operators whose networks totaled at least 100 miles, according to a New York Times analysis of records collected by the federal Department of Transportation for 2012, the most recent year data was available.

The chief culprit, according to experts, is the perilous state of New York City’s underground network, one of the oldest in the country and a glaring example of America’s crumbling infrastructure.

Most of the leaks in New York proved harmless, simply dissipating into the soil or air. But when gas finds an ignition source, the results can be deadly. Three separate episodes in Queens in recent years killed people, and a half-dozen others in the city left people injured, according to federal records dating back 10 years.

Elsewhere in the country, a rupture in a major pipeline in San Bruno, Calif., in 2010 caused an explosion that killed eight people. In 2011, a leak from an 83-year-old cast-iron main in Allentown, Pa., caused a blast that killed five people.

“It’s like Russian roulette,” said Robert B. Jackson, a professor of environment and energy at Stanford University who has studied gas leaks in Washington, D.C., and Boston. “The chances are, you are going to be lucky, but once in a while, you’re going to be unlucky.”

Striking in federal records is just how frequently there are near misses.

Last year, a Bronx woman awoke in the middle of the night to the pungent odor of gas. Her husband checked it out, but after smelling nothing unusual, he lit a cigarette. Suddenly, there was a flash of fire that left his face badly burned. In 2011, a 28-year-old man in Bayside, Queens, saw smoke coming from a basement utility room just before a small explosion blew the door open. The cause was traced to a leak in a 54-year-old steel main in the street nearby.

Nearly half of the gas mains operated by Con Edison and National Grid were installed before 1940, according to federal records. More than half of the mains are made of cast iron, wrought iron, or unprotected steel — materials that are vulnerable to corrosion and cracking, especially in cold weather. Indeed, there was another scare in the city on Saturday when a leak from a crack in a 108-year-old cast-iron main, maintained by Con Edison, in the Bronx caused the Fire Department to briefly evacuate two apartment buildings.

Communities across the country have been struggling to replace thousands of miles of these old, metal pipes with pipes made of plastic or specially coated steel that are less prone to leakage. Few, however, face as daunting a challenge as New York City.

To replace all of the old mains in its network right now would cost as much as $10 billion, Con Edison estimates. Much of that expense would fall on the residents and businesses that use the gas for heating and cooking.

Despite the high cost and logistical hurdles, alarmed regulators at the state’s Public Service Commission have ordered the company to significantly step up its replacement schedule, from 50 miles of pipe a year to 70 by 2016, in the city and in Westchester. Even at that rate, it would still take nearly three decades for the utility to finish swapping out what regulators have identified as the most leak-prone pipes.

As a result, infrastructure experts say there could easily be more explosions like the one this month in East Harlem.

After the blast, federal investigators identified a leak in the gas main, but they are still not certain what caused it or if it was the source of the gas that exploded.

Federal records show the New York City utilities have been able to cut into their leak numbers as they have replaced mains. National Grid, in particular, has made improvements. Its rate of leaks per 100 miles of gas mains still ranks among the highest in the country, but it is significantly better than Con Edison’s.

Con Edison has made progress, too. But last year, when regulators were considering whether to let Con Edison raise its rates, the commission’s staff voiced concerns about the company’s attitude toward safety.

The staff testified that Con Edison had 695 violations of the state’s gas pipeline safety regulations over the previous three years. Not all of those violations were classified as “high risk,” but the regulatory staff said any failure to follow the rules was “a serious issue that could either directly or indirectly lead to an incident causing serious public harm.”

A spokesman for Con Edison, Michael Clendenin, responded by saying the company “takes compliance with the commission’s regulations very seriously.” He added that the complexity of New York City’s infrastructure probably accounts for the utility’s high rate of leaks, but added, “We attend to hazardous leaks immediately.”

Deaths Over a Decade

In order to ignite, gas has to pool in a confined space until it makes up at least 5 percent of the air. Then, any flame or spark — even the flipping of a light switch — can set it off.

In the last decade, The Times identified from federal records 22 significant gas ignitions in the city; a dozen of these were categorized in federal records as full-fledged explosions.

Not counting the blast in East Harlem, gas-related episodes have killed three people in the city in the last decade and injured 22 others, according to a tally by The Times.

The East Harlem gas explosion, which also injured dozens, was the first fatal one in the city in nearly five years.

In April 2009, Ghanwatti Boodram, 40, a nurse and mother of three, was killed when an explosion leveled her house in Floral Park, Queens. A state investigation concluded that, among other failures, a Con Edison worker had not adequately checked for gas leaks in the area. The investigation found that faulty electrical wiring had set off a chain of events that created holes in the main, installed in 1950, allowing gas to escape and pool inside the house.

The year before, just minutes after Con Edison crews had restored gas service to a building in Flushing, Queens, Edgar Zaldumbide, 43, tried to light the pilot of his stove. An explosion followed. He died several weeks later; his 2-year-old daughter was badly burned, and 15 others were also injured. A state investigation concluded that, among other failures, a Con Edison worker had failed to adequately check for gas leaks in the area.

In 2007, as Con Edison workers were searching for the source of a gas leak that had forced residents in Sunnyside, Queens, onto the street, one resident, Kunta Oza, 69, was told by firefighters that she could return to her home. But minutes later, an explosion occurred, killing Ms. Oza.

State regulators concluded that corrosion, as well as overall wear, had contributed to a crack in the gas main, which had been installed in 1927 but was not on Con Edison’s priority list to be replaced.

Gas-related incidents that result in fatalities garner the biggest headlines. A review of federal records, however, shows that there have been many smaller, yet still frightening, incidents that attracted no news media attention at all.

One such event occurred on March 6 last year in the Bronx.

At 4 a.m., Ping Ching Li, 57, and his wife, Cindy, were stirred from their sleep by the strong smell of gas in their two-story house. Both went to the garage to investigate, spraying water on the joints of the pipes that feed into the gas meter to check for bubbling. Nothing. They thought, perhaps, that the smell was emanating from their car, so they moved the car to the street.

Later, after Ms. Li returned upstairs, Mr. Li decided to check the garage again, to see if the car had been the source of the smell. He flicked his lighter to smoke a Marlboro Light, then suddenly, Whoosh! There was a blast of fire, and flames circled his head and arms, he recalled in an interview this week. He suffered second-degree burns and was hospitalized for two days at nearby Jacobi Medical Center. Today, Mr. Li said his vision in one eye remains blurry, and his hearing in one ear is greatly diminished.

“I feel very, very lucky,” said Mr. Li, who plans to file a lawsuit against Con Edison next week. “If the car were still in the garage, the whole house would have exploded.”

Con Edison workers later visited the couple’s house and explained that the leak had come from somewhere under their garage. A crack in a six-inch cast-iron main, installed in 1953, was to blame, according to federal records.

Pipe Replacement

Replacing aging mains is the surest way to reduce the number of hazardous leaks. But getting the old metal pipe out of the ground takes serious time, labor and money.

Last Thursday, a dozen employees of National Grid were digging four feet beneath Troutman Street in the Bushwick section of Brooklyn to uncover a cast-iron gas main. Over the course of a few days, working with a backhoe on the street, they intended to replace a 50-foot segment of that main with a yellow plastic pipe six inches in diameter.

The old main was not leaking badly, but city workers had opened up the street for a separate project, so National Grid, which supplies natural gas to Brooklyn, Queens and Staten Island, took the opportunity to swap out the pipe.

The utility has doubled the pace of its replacement program, to more than 40 miles a year, said William Akley, the company’s senior vice president for maintenance and construction. Still, it will take as long as 25 years to get rid of all of the “vintage” pipes, made of iron or bare steel, in the system, he said.

Some other cities, mostly in the Northeast, are proceeding at rates far slower than New York in replacing aging cast-iron pipes, according to Dr. Jackson, the Stanford professor. Baltimore is on track to replace its pipes in 140 years, while Philadelphia will not be done for 80 years, he said.

By contrast, one place that has been among the most aggressive in the country is Ohio. Beginning in 2002, one of the state’s major utilities, Duke Energy, which serves the Cincinnati area, was granted approval by state regulators to begin a 10-year, $700 million program to replace about 1,200 miles of cast-iron and bare-steel gas pipes, said Donald L. Mason, a commissioner at the time with the Public Utilities Commission of Ohio.

The number of leaks per miles for Duke Energy now ranks among the lowest in the country, according to The Times’s analysis.

And in 2007, Dominion East Ohio, which chiefly serves Cleveland and northeast Ohio, initiated a 25-year, $2.7 billion program to replace 4,000 miles of pipe. The amount Dominion spent on leak repairs dropped to $6 million a year from $10 million, Mr. Mason said.

No catastrophic event led to the Ohio push. Instead, utility executives and state regulators were concerned that the original 40-year schedule to replace pipes that were already 50 to 75 years old was too slow.

“We felt that we needed to cut this in half, because 40 years was too long,” Mr. Mason said.

Restrictive Rules

Con Edison, however, faces a unique conundrum when it comes to the heart of its territory, Manhattan, where the rules on when and how it can disrupt traffic are much more restrictive than elsewhere. As a result, the utility says it can cost as much as $2,000 a foot, or well over $10 million a mile, to replace a gas main.

“Some of this aging infrastructure has reached the end of its useful life,” said Brigham McCown, a lawyer who was the administrator of the federal pipeline safety agency until 2007. But, he added, “It’s a major ordeal in a city like New York to just start digging things up.”

Felim McTague, a construction manager for Con Edison, said it was taking about two weeks per block to upgrade the gas mains in the meatpacking district of Manhattan. A crew of seven has to thread the new pipe — coated steel at the intersections, plastic in between — through a maze of steam pipes, phone lines, TV cables, and sewer and water mains. Every night, they have to cover the hole in the street with thick steel plates that can bear the city traffic.

“It’s a tedious process,” Mr. McTague said.

Because of how long an overhaul in New York City will take, some experts believe more effort needs to be devoted to detecting leaks and addressing them before they become serious.

Con Edison performs its own leak surveys of its mains at least once a year, sending teams out with sensors to measure the amount of methane in the air, according to officials, and more often in severe weather. The utility is still not doing enough, said Mark McDonald, who investigates gas explosions for insurance companies and property owners.

“Accelerated replacement is not the answer to today’s problem; it’s the answer to tomorrow’s problem,” Mr. McDonald said. “What needs to be happening is increased vigilance, increased leak surveys to spot these problems before it gets into someone’s house.”

Utility companies now largely rely on the noses of their customers to alert them to danger. The gas that flows through the network of pipes under the streets is naturally odorless, so a compound known as mercaptan that smells somewhat like rotten eggs is added.

In the case of the East Harlem explosion, Con Edison officials said a customer’s call less than 20 minutes before the explosion was their only warning about a possible leak. The utility quickly dispatched two crews.

They arrived too late.

By ,  and  



IBM Designates 16 Places for SmartCity Projects.

Whatever the politics or geography, it’s a safe assumption that most mayors love innovation. What’s not assured, however, is the funding and resources to implement it.

Acting on this holdback and to develop the market in government data solutions, IBM has stepped in to offer aid through its Smarter Cities Challenge, an initiative to volunteer its expertise to 16 cities and counties around the world. As in previous years, the objective will be to provide solutions to civic challenges such as clean water, healthy food, revenue generation, job creation, efficient transportation and other issues.

The four areas selected in the U.S. for the Challenge were Dallas, Baton Rouge, La.; Birmingham, Ala.; and Suffolk County, N.Y.

Outside the U.S., cities included Abuja, Nigeria; Ballarat, Australia; Brussels, Belgium; Dublin, Ireland; Durban, South Africa; Jinan, China; Mombasa County, Kenya; Niigata, Japan; Perth, Australia; Tainan, Taiwan; Vilnius, Lithuania and Zapopan, Mexico.

This year will mark the fourth iteration of the competitive grant program and will mobilize IBM teams to the winning jurisdictions across the globe. Pro bono work includes consultation, months of issue-centered research, collaborative outreach and comprehensive recommendations to solve or improve problems facing regions and cities.

Speaking for Suffolk County, Justin Meyers, the assistant deputy county executive, said Suffolk is eager to enlist IBM’s expertise against its challenge of a widespread water contamination from unsewered homes.

In Suffolk, Meyers said the county has about 360,000 homes, or 70 percent, without sewage connections that have been connected to Nitrogen ground and water contamination. The impact has resulted in a high cost sanitation effort, and for drinking water, major losses of wildlife and inadvertently causing the region to be susceptible to raging waterfronts that have no sea vegetation to slow it down.

“We got slammed by Superstorm Sandy and we’re susceptible to any storm that comes up along the East Coast,” Meyers said. “We looked at the IBM’s Smarter Cities Challenge as an opportunity to partner with a private sector company that may have resources and abilities that we might not necessarily have.”

Meyer’s said his team will be waiting for IBM’s team of consultants with current research and open access to county land and water data.

“IBM offers us an opportunity to expand on that and continue to hone our decision-making in the smartest way possible,” he said. “Public-private partnerships are always important. Any opportunity that a government entity has, especially one such as this is a win-win.”

Meryers also credited County Executive Steven Bellone for pursuing the IBM’s support and other answers to the Nitrogen problem, which has daunted others in the past due to the sheer size of the costs, estimated to in the billions in terms of infrastructure.

“We’re very excited to have won this,” he said.

Jennifer Crozier, the vice president of the IBM’s global citizenship initiatives, said the program has helped 100 jurisdictions since it began — every team effort valued at roughly $500,000 for each jurisdiction. Crozier said her teams at IBM recognize it’s hard work to navigate the politics of local governments and want to help grant recipients with ideas that will bring community projects to life.

A significant challenge she said IBM observes is that municipalities struggle to making sense of data. Cities and regions often already have the raw information that measures community trends and needs, Crozier said; the difficulty lies in sharing this information among different agencies and interpreting information to make it actionable.

IBM hopes to realize tangible projects that offer big gains. As with past projects, Crozier said she’d like to take buzz words like big data, mobile, social and cloud technology and turn them into practical solutions for citizens and officials.

In a look back, the initiative is known for a wide range of urban improvements. In Syracuse, N.Y., IBM created a land bank for the city that enabled it to reclaim and work with the private sector to revitalize vacant properties. In Providence, R.I., it simplified and shortened the process of permit and construction plan applications. In the agricultural city of Date, Japan, IBM helped officials publish food safety information for consumers after Fukushima’s tragic earthquake and nuclear reactor leak that contaminated much of the country’s lands.

BY  | MARCH 26, 2014



Can Results-Based Preschool Funding Work?

Six hundred 3- and 4-year-olds are attending preschool in Salt Lake County and Park City, Utah, this year thanks to an innovative financing model that is catching the attention of government officials and lawmakers across the country.

Under “results-based financing,” also known as “pay-for-success” or “social impact bonds,” private investors or philanthropists provide the initial funding for social programs that are expected to save taxpayer dollars down the road. If the policy goals are met and the savings materialize (according to third-party evaluators), the investors receive their money back with interest. However, the government doesn’t have to pay out more than it saves.

In Utah, the investors are Goldman Sachs and Chicago philanthropist J.B. Pritzker. They are putting up a combined $7 million for at-risk children to attend high-quality preschool. Researchers expect that attending preschool will make the children far less likely to require expensive special education services, which in Utah cost about $2,600 per year. The students will be tracked through the sixth grade. For the first group of students in the program, the United Way of Salt Lake and Salt Lake County have agreed to pay the investors if the goals are met.

Last week, Utah lawmakers allocated $3 million to help repay the investors in results-based financing programs such as the one in Salt Lake County and Park City, and to provide grants to early childhood providers to improve the quality of their programs.

“The taxpayers are the ultimate beneficiary,” said Janis Dubno, early childhood and education senior policy analyst at Voices for Utah Children, which co-developed the financing model and provided the research and analytic support to the program. “It’s a great way to shift funds from remediation to prevention.”

Among the critics of the Utah legislation were those who believe young children should learn at home, rather than at preschool.

Britain Was Pioneer

Britain pioneered the idea of social impact bonds in September 2010, with a program that aims to reduce recidivism at Her Majesty’s Prison Peterborough by providing prisoners and their families with intensive support to integrate back into their communities. Initial results have been promising.

Since then, some U.S. cities and states outside of Utah have begun using the model:

  • In 2012, New York City announced the first social impact bond in the United States. Goldman Sachs invested about $10 million to finance a program that provides education, job training and counseling for teenage inmates to help them avoid a return to prison.
  • Last December, New York state kicked off the nation’s first state-led pay-for-success project, raising $13.5 million for a program to provide employment training and job placement services to 2,000 former inmates. Under that program, institutional and wealthy individual investors will be repaid only if the number of people sent back to prison is reduced by at least 8 percent or the percentage of former inmates employed grows by at least 5 percentage points.
  • In January, Massachusetts launched a seven-year, $27 million pay-for-success initiative to reduce recidivism among at-risk youth. Under the program, a nonprofit will provide more than 900 young men who are either in the probation system or leaving the juvenile justice system with outreach, life skills and employment training to try to reduce recidivism.
  • Fresno, Calif. is leading a two-year demonstration project for the nation’s first social impact bond in the area of health care. The effort aims to cut the number of emergency room visits by lower-income children with asthma.

To help pay for their programs, the Obama administration is giving grants of about $12 million each to Massachusetts and New York state, through the U.S. Department of Labor’s Pay for Success competition.

The Rockefeller Foundation, which has spent about $9 million in grants and program-related investments since 2009 to support pay-for-success financing, was among the earliest promoters of the idea in the U.S.

“Fiscal austerity in state and local governments has led to cutbacks to vital social services, and prevention-oriented services are usually the first to go,” said Rehana Nathoo, a program associate at the foundation. “Pay-for-success models allow states to protect tax dollars by paying for programs based primarily on successful outcomes. They also provide an opportunity to develop solutions for emerging social issues earlier, instead of incurring higher costs down the road.”

Dubno, of Voices for Utah Children, said the model appeals to philanthropies who typically give money without expecting any financial return because “you can really magnify your impact by recycling those dollars.”

But the pay-for-success model also appeals to private investors such as Goldman Sachs, which has invested about $23 million of firm and client capital in the New York City, Massachusetts and Utah projects and is considering others. Andrea Phillips, vice president for the firm’s urban investment group, said there has been strong interest from clients to make investments that not only offer a financial return but also help to improve communities.

“It’s hard to size the market because it’s a relatively new instrument, but we do see it growing,” Phillips said. “We’re optimistic we’ll be able to move to both larger investment sizes and more standardization of deals, which will help us get this market to scale.”

According to the Center for American Progress, a liberal-leaning think tank in Washington, pay-for-success financing is in use or being considered in more than a dozen states. A number have introduced legislation to allow pay-for-performance financing and some are working with partners such as the Harvard Kennedy School Social Impact Bond Technical Assistance Lab, which provides pro bono help to governments considering social impact bonds.

Focus on Preschool

While many of the first pay-for-success projects have focused on reducing recidivism rates, early childhood education is quickly drawing interest as well.

ReadyNation/America’s Edge, an organization of business leaders who want to strengthen the economy by investing in children, is hosting a technical assistance meeting later this month in North Carolina to help those interested in implementing results-based financing for early childhood education. Representatives from 26 states and the District of Columbia have signed up. [ReadyNation was created by The Pew Charitable Trusts in 2006. It no longer receives funding from Pew.]

“People are hungry for new ways to finance a service that is now widely acknowledged as being effective at helping children grow to be productive adults,” said Sara Watson, director of ReadyNation/America’s Edge. “There is still a great deal of advocacy around traditional financing mechanisms but in any environment in which budgets are tight, there’s always going to be a hunger for new ideas. The idea of shifting funds to prevention services appeals to a broad array of decision makers on both sides of the aisle.”

In Utah, Voices for Utah Children, the Granite School District and the United Way of Salt Lake began working together in 2010 to engineer the results-based financing model, from setting up a study to show the impact of preschool to finding investors to fund the project.

A study of the Granite School District preschool program between 2006 and 2009 found that 32 percent of low-income preschool students scored so low on assessments taken when they entered preschool that without intervention, they likely would have needed special education services in kindergarten and beyond. But among the children who participated in the preschool program who remained in the district, almost all of those 32 percent wound up not needing special education.

The impact of attending preschool appears to stay with students for many years. In 2013, only 57 percent of economically-disadvantaged fifth grade students in the Granite School District were rated proficient in language arts, compared to 78 percent of the fifth graders in the study who had attended preschool, all of whom were from low-income families. In math, 59 percent of economically disadvantaged students districtwide scored proficient compared to 73 percent of those who had attended the district’s preschool.

Brenda Van Gorder, director of preschool services for the Granite School District, said those numbers are a result of the school district constantly working to improve its program, taking steps such as aligning standards with the kindergarten curriculum, providing ongoing professional development for staff, limiting class sizes to 20 children per class and involving families.

The district has cut preschool costs to $1,500 per child per year by limiting the program to three hours a day, four days a week for 4-year-olds, and by relying on child development associates for two-thirds of the preschool staff. The associates, who receive training but do not have college degrees, work 29 hours a week and receive no benefits.

Van Gorder said she tells people that anyone can replicate their success, as long as they focus on what improves the quality of a preschool and stop doing the things that don’t work.

“Families say this has been a life changer,” Van Gorder said.

By Adrienne Lu



Is There a Better Model for Housing Vouchers?

A Baltimore program that requires participants to use their government rental aid in low-poverty, mostly white suburbs sheds light on how government can implement housing vouchers more effectively.

American public housing authorities have tried for decades to lift families out of poverty by offering them vouchers they could use for rental units in the suburbs. These programs, however, have met with limited success. Now two academics say an outlier, the Baltimore Mobility Program, may hold lessons for making them more effective.

A new article from Stefanie DeLuca, a sociologist at Johns Hopkins University, and Jennifer Darrah, a lecturer at the University of Hawaii at Manoa, suggests that a cocktail of intensive counseling, aggressive landlord outreach and slightly higher financial aid may help more housing voucher programs succeed. The authors reached this conclusion after conducting in-depth interviews with 110 Baltimore families who participated in or applied for the Baltimore Mobility Program (BMP), which has helped move more than 2,000 low-income African-American families from high-poverty, highly segregated city neighborhoods to more diverse, higher-income suburbs since 2003. The program is similar to the federal Housing Choice Voucher program, but includes additional court-ordered requirements to ensure that destination neighborhoods are not predominantly poor, black and on public assistance.

DeLuca and Darrah found that more than two-thirds of family participants chose to live in their new neighborhoods for longer than the required period — one year — and some remained there eight years later. That’s important because past empirical studies of housing vouchers have found that families usually don’t move to higher income, more diverse neighborhoods and if they do, they soon return to poor, segregated city neighborhoods.

But the bigger finding, according to Deluca, was that parents said their decision-making process for choosing neighborhoods had changed. After families had relocated, about 60 percent of parents experienced a shift in how they decided where to live, placing a higher value on certain criteria, such as high-quality schools, quiet neighborhoods and a diverse community.

I spoke with Stefanie DeLuca about what made Baltimore’s experience different and what other housing authorities could learn from the city’s program. What follows is a transcript of our conversation, edited for clarity and length.

I was hoping you would explain how this specialized Baltimore program is different from the traditional housing choice program that people may already know about.

Sure. There’s really one main housing choice voucher program, which we used to call Section 8. It doesn’t require families to live in any particular type of neighborhood. In theory, you could take your voucher and go anywhere. In practice, that rarely happens. What we see is, among black families in particular, families tend to cycle between poor, segregated neighborhoods. The Baltimore Mobility Program was different because it requires residents to relocate to neighborhoods that are low-poverty and mostly white for a period of one year, after which the voucher can be used anywhere.*

In the Baltimore program, there are counselors to help families move to these neighborhoods. These counselors organize briefings about the benefits of living in low-poverty neighborhoods with low crime and good schools. Families are counseled to repair their credit, which will help them manage their finances in the long run. The families are taken on tours of suburban neighborhoods to show them what these places are like because most of the families have never lived outside of the city. Counselors also help families think about saving up money for a security deposit toward the unit.

One other difference from the traditional voucher program: The Baltimore vouchers are already regionally administered. They’re portable. Families can use them in any jurisdiction. Without this, if you’re a Baltimore city resident and you want to live in Anne Arundel County next door, you would have to apply to the Anne Arundel County Housing Authority. That can be a bureaucratic nightmare for families, so they don’t want to even bother. This program streamlines that process.

The article mentions the importance of working with landlords, can you talk more about that?

Counselors reach out to landlords who have rental housing in more middle-class neighborhoods in the metropolitan region around Baltimore to help them understand the benefits of renting to families in the program. Some of these are landlords who might not otherwise be inclined to rent to families with a voucher. The counselors explain to the landlords that they’ll get their rent on time every month. It’s a way of helping a landlord feel more confident about renting to a family they might not have in the first place. That’s important because it’s perfectly legal in all but a handful of states to discriminate against families with housing vouchers. Landlords do not have to rent to these families.

Your study mentions that the actual value of the voucher is a little higher than a traditional housing voucher. How much higher? What is the standard?

The Baltimore Mobility Program pays up to 120 percent of area fair market rent. The traditional voucher pays between 40 percent and 50 percent of area median rent for a metropolitan area, which is how the U.S. Department of Housing and Urban Development (HUD) calculates an area’s fair market rent. What that means is you’ve got a voucher and that voucher is pegged at 50 percent of area median rent, and that’s going to go a lot farther in a high-poverty neighborhood in East Baltimore than in Hunt Valley, Md., in northern Baltimore County. That makes it easier to rent in a poor neighborhood, discouraging moves to high-opportunity areas.

Could you see other cities copying the Baltimore program? What are the trade-offs they would have to think about?

A housing authority might have to choose between devoting resources to help fewer families move to better neighborhoods or helping more families move in general. Usually what housing authorities are trying to do is house as many families as they can, wherever they can, in part because that’s how they’re evaluated. They’re evaluated on the lease-up rate. They are not evaluated on the quality of the neighborhoods where families get placed. You can get bonus points from HUD for leasing to families in low-poverty neighborhoods, but you’re really getting evaluated based on successfully housing families somewhere.

Are there components of the Baltimore Mobility Program that housing authorities could adopt without incurring a large added expense?

I would argue, yes and no. It also depends on how a given housing authority operates. I think relatively low-cost options would be to vet rental housing units that are available — and meet the cost parameters for the voucher — for their location and the quality of local schools. What I’ve learned is that before participating in the Baltimore program, the families would use GoSection8.com, or a print-out list at the housing authority with some units listed from landlords who are participating in the program. Guess where those units are? They’re in poor, segregated neighborhoods. If the housing authorities listed units that were already vetted for being in less poor neighborhoods with better schools, and if the families had the transportation to go check them out, that could be a relatively low-cost option.

More aggressive landlord outreach is also possible. That is, finding landlords who are willing to lease to tenants with a voucher. Those are things are not totally cost free, but only cost something in terms of time for a staff member.

On the other hand, it costs money to do this well and we’ve seen the benefits of running a mobility program with strong counseling supports and an innovative administration — neither of which are features of the federal housing choice voucher program.

You mention in the report that families were willing to make difficult trade-offs to stay in these new communities. I was wondering what are some of those things that were hard to give up, but they did give up once they were out in the suburbs.

The typical story we hear is familiarity, being around people you know. So I have some of these woman in the study saying, “I didn’t want to move out there. I didn’t want to move somewhere where I didn’t know anybody. I didn’t want to go, but I thought I would just stay for as long as the voucher tells me I have to stay and then I’m going to move back. But here it is seven years later and I’m still here.”

After they’re there for a while and they see it’s peaceful, then it comes down to things like transportation and having to commute back to the city for a job. A lot of the women in these families work in the kinds of jobs that are more common in the city. The trade-off is commute time and having to spend more money on gas or vehicle maintenance. But what we hear from some of these women, they say it’s worth it because when they come home at night, it’s somewhere peaceful where they feel safe and they know their kids love the schools.

Critics of relocation programs say that when the families leave, they disrupt the existing communities. Does that apply to this Baltimore program?

We talk a lot about social networks. People think if families are leaving neighborhoods it’s disrupting networks, and I think that’s absolutely true, except when it’s not. Families that have child care arrangements, have kin, have familiar institutions — that’s certainly something that can be disrupted if they leave. On the other hand, we’ve had parents tell us they want to get away from their families because every time they get ahead, they have to give away money to somebody in greater need. Or somebody’s a recovering addict and they want to get away from the networks that were keeping them hooked. So, there’s definitely trade-offs to networks and network ties.

I’ve been studying mobility programs for a while and I think they are one policy lever we should make available. But it’s not the only way to try to handle urban poverty. I would also argue that we need to figure out how to do community development and urban revitalization right.

You use the term “residential choice framework” to explain part of why the Baltimore program is successful. What does that mean?

A lot of public policy is premised on the idea that if we increase choice, we can reduce inequality. When we think about low-income families, we say they don’t have as many choices. But just opening up choice isn’t enough. To say to a family, now you can make a choice, you can go to any neighborhood you want, you can go to any school, that’s an abstract understanding for a lot of families. They don’t have any real experience with higher-quality settings to truly understand how they could benefit. So when the difficult trade-offs have to be made, whether you want to live far away or live somewhere totally unfamiliar — the decision-making doesn’t play out quite the way you would assume. Sometimes when you see choice-based policies fall short of their goals in reducing inequality, we often assume it’s because poor people don’t want the same things middle-class people want. I would argue that the very inequality that led to the interventions also have given these families a lifetime of limited exposure to high-quality settings. So, their preferences, their choices and their decision-making are a function of that inequality. It’s important to remember that poor families are not just middle-class families without as much money. They’ve learned to adapt to environments that are very different.

Let me push back on that a little bit. I’ve heard education reformers reject the idea that poor mothers want anything different from schools than wealthier mothers. Some of the options you’re talking about, whether it’s good schools or a safer community, seem intuitive to me, regardless of your income status.

When you ask low-income families what a good school is, a good school is often where there are security guards and metal detectors. These are things that I’ve been told for over a decade in talking to families for my research. What I’ve virtually never heard is anything about the school’s test scores, the teachers’ qualifications, the type of academic programming, the college acceptance rates. What a good school looks like for poorer families looks very different than the metrics middle-class families use. Everybody wants good schools for their kids. That’s 100 percent true. What that looks like varies by class.

*Editor’s note: Up until 2012 –the last year of data studied by DeLuca and Darrah — families were required to stay at least one year before relocating with their housing vouchers. Now the requirement is two years.

BY  | MARCH 25, 2014


The Soft Infrastructure of Smart Cities.

Cities serve as crucibles of civilization. Throughout history they’ve provided defining images of our advances in engineering and design but also reflections of our worst industrial and technological imperfections. Cities have been characterized in many ways. Only recently, however, have we begun to call them “smart.”

In fact, “smart” is getting applied to all manner of infrastructure, from buildings and lighting to transportation and even electrical grids. One concept unifies all these diverse subjects under the “smart” label: the ability to send and receive information across connected systems.

To better describe these connections, researchers, designers and planners are drawing parallels between them and living organisms, using terminology like “urban metabolism” (the dynamics of community resource flows) to “living buildings” and “connective tissue.” “Intelligent” buildings are “occupant-aware” with adaptive control systems to adjust lighting, heating and cooling to match use patterns. More broadly, as the era of Big Data and the Internet of Things progresses, so will engineered systems with real-time and even predictive abilities. These systems will help us solve problems on the fly based on prevailing conditions.

There are, however, vast differences between smart cities and nature’s infrastructure. While natural infrastructure abounds in connections, flows and feedback loops, it doesn’t have centralized management or data centers, and it most certainly doesn’t have a system of governance to direct its activities. Even more fundamentally, natural infrastructure doesn’t run on ideas. So what one might call “soft” infrastructure — purposes, insights, designs, policies, regulations, education — is a defining element of any man-made system.

Governing columnist Alex Marshall, in his book Beneath the Metropolis: The Secret Lives of Cities, brings this point home when he writes that while cities “are often thought of as self-operating organisms” that “seem to have just happened,” in reality “the complex water, sewer and transportation systems that public officials control and operate are always the result of specific choices, usually by government.”

As much as technology promises to automate our world, “soft” infrastructure will remain the domain of humans and civic leaders. Anthony Townsend writes in his book Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia of an emerging contest over design control of these smart cities.

That contest pivots on the question of whether the design will be guided by a top-down, engineered approach or a bottom-up, organic one. On the top-down side, Townsend cites the effort of Songdo, South Korea, to scale building automation up to an entire city. He describes Songdo as the “world’s largest experiment in urban automation with millions of sensors deployed in its roads, electrical grids, water and waste systems to precisely track, respond to and even predict the flow of people and material.”

Just how functional, inviting and livable such a fully networked and automated city will be remains to be seen, and Townsend suggests that the purposes and uses of these connections — the soft infrastructure — ought to be turned over to residents and their civic leaders rather than to the engineers who build the system.

Reflecting the bottom-up approach to soft infrastructure, perhaps it is most fitting that San Francisco, with its links to Silicon Valley and “Big Data” companies, should be among the cities that are breaking new ground as incubators of civic-focused entrepreneurship. The city’s Entrepreneurship-in-Residence program, says Mayor Ed Lee, “brings together government and startups to explore ways we can use technology to make government more accountable, efficient and responsive.”

A city’s soft infrastructure is “owned” by its residents and its civic leaders, and it’s heartening to see San Franciscans engaging in such an innovative approach to the design and function of their city. After all, the “smarts” of any community will be judged in large part by how well its citizens use technology to make their city a better place to live. The evolution of the smart city will be fascinating to watch.

Bob Graves  |  Associate Director of the Governing Institute

bgraves@governing.com  |



A ‘Wraparound’ System of Care for Schools.

Several school systems are implementing so-called wraparound programs in an effort to help troubled kids, families and communities.

If you’ve spent any time following education policy these days, you probably know that Common Core Standards are the topic du jour. Depending on political leanings, people either love them or hate them. But even the most brilliant, focused and politically embraceable education reform initiative will fail if kids flat out aren’t ready to learn when they show up at school each day because they’re not getting what they need at home.

The importance of supporting potentially troubled kids in school was a key part of an interesting panel conversation on education reform held last month duringGoverning‘s annual Outlook in the States & Localities conference in Washington, D.C. The panel featured Roy Romer, former governor of Colorado; Randy Weingarten, president of the American Federation of Teachers; and Elaine Weiss, head of the Economic Policy Institute’s Broader Bolder Approach to Education initiative, which is aimed at moving the educational debate beyond didactics and to the ground-level realities of the well-being of kids and families.

As everyone on the panel pointed out, kids who show up at school hungry, tired, scared or in poor health — and whose home lives might be in shambles — aren’t going to learn very well, regardless of the core course work or the quality of the teachers. Making matters worse, there’s a good chance that these kids will be flat out disruptive in school, compounding the problem.

Fortunately, there are some school districts that are tackling this problem: In Cincinnati, the district has fully embraced the concept of “wraparound schools,” or schools that house a variety of support services aimed at getting kids everything from food to health care to counseling in order to ensure that all students are ready to pay attention and perform in the classroom.

But true wraparound schools are much more than that, says Weiss of the Economic Policy Institute. As a first step, she says, wraparound schools certainly do look at the “opportunity gaps” that exist for some students, whether it’s as basic as getting them a backpacks to carry around school work and supplies, or as complicated as ensuring they get decent dental care. But the best wraparound programs are those that involve families and whole communities in looking out for the complete health and well-being of students and their families.

“A lot of educators complain that they can’t engage parents,” says Weiss. “So you have schools that are open from 8 a.m. to 5 p.m., and teachers say they can’t get parents involved? Well, maybe that’s because the parents are working.” As a solution, Weiss points to wraparound schools that have a coffee and meeting room for parents who walk their kids to school, along with schools that have evening hours so that working parents have a chance to engage.

Good wraparound programs go even further. A lot of parents in many school districts never graduated from high school or don’t speak English, so some wraparound programs offer English and high school equivalency classes. “Some are even offering things like tax preparation clinics in the evening,” says Weiss.

Ultimately, it’s all about engagement and coordination. Schools that are serious about the wraparound movement actually have dedicated staff who do nothing but coordinate parent and community involvement, social and health services, and the day-to-day learning environment. So while the educational world may at presently consumed by the debate over Common Core Standards, several schools are addressing the real building block to learning: Ensuring kids are healthy and secure.



Massachusetts' Hard Look at Hospital Mergers.

As consolidations have become increasingly more common across the country, Massachusetts has the nation’s only independent state agency focused on evaluating their effects.

A new and unique commission in Massachusetts is bringing greater scrutiny to hospital mergers, which have grown steadily across the country in recent years and fueled fears of price hikes for consumers.

The Massachusetts Health Policy Commission, which came to life with a landmark 2012 law that sets caps on health spending increases and attempts to move away from the fee-for-service payment system, is the nation’s only independent state agency that makes reform recommendations and reviews merger proposals. Its first major merger action came last month, when it discouraged a merger between Partners HealthCare and South Shore Hospital, the two largest medical providers in southeastern Massachusetts. The commission concluded that it would lead to an increase of up to $26 million in spending and give the combined system considerable leverage negotiating prices with insurers.

Mergers between major hospital systems are increasingly more common, in part because of the Affordable Care Act’s demands for greater coordination between networks of health-care providers. In three years, the number of consolidations almost doubled from 55 in 2009 to 105 in 2012, according to Irving Levin Associates, a business research firm.

A growing body of research argues hospital consolidations lead to higher prices for consumers, particularly in areas where there are already few competitors. But hospitals and lobbying groups contendthat only a small percentage of mergers occur in markets that lack enough independent hospitals to maintain competition and those transactions often lead to new investments that benefit consumers or improve the finances of the smaller partner in the deal.

In the case of Partners HealthCare and South Shore Hospital, the two argued a deal would allow them to combine more services to better monitor patients across the system and improve their health through new investments in electronic records and care coordination. But the commission—which can only review mergers and send reports to the state attorney general—decided those initiatives and others won’t outweigh new costs from higher prices.

“This was its first real challenge for the commission as a new public entity, and so people were watching to see if it would call the shots as it saw it or [whether it] would pull its punches and play it more politically — and they didn’t [do that]”, said John McDonough, a professor at the Harvard School of Public Health.

Even without the authority to halt a merger, the commission is the nation’s only independent state agency that’s focusing on hospital consolidation. States have always exercised some power over mergers through licensing authority, but after decades of inactivity, they’ll start looking harder at mergers either through agencies or attorneys general, McDonough said.

“It appears there’s some momentum here because people understand with a lot more evidence that these mergers have consequences with health system costs, so the states that aren’t afraid of government intervention are looking more seriously at these activities,” he said.

Idaho’s attorney general recently won a judicial victory against a merger with the help of the Federal Trade Commission (FTC), and Pennsylvania’s attorney general joined the FTC to stop a deal late last year. In the Massachusetts case, Partners can’t move forward with its deal for 30 days, giving the attorney general until late March to file a suit. But it’s also possible the attorney general will work out a deal that extends that window to allow for negotiations that address the state’s antitrust concerns.

Each merger case needs to be considered on its own merits and the nature of the market where the hospital systems are based, said Robert Huckman, a professor of business administration at Harvard who specializes in health care. The ACA encourages hospital coordination and large investments in electronic health records, but those goals often require some level of consolidation, he said.

“The flip side of that is greater market concentration,” Huckman said. “There’s a balance that needs to be struck between encouraging integration but discouraging excessive consolidation.”

BY  | MARCH 18, 2014



Facing Obamacare Mandate, Governments May Turn to Temps.

Many states and localities are cutting their employees’ hours to avoid having to offer them health insurances  Some say they’ll make up the workload by hiring more temporary workers.

The city of Mason, Ohio, faced a dilemma last year. Looming mandates from the Affordable Care Act required employers with at least 50 workers to provide coverage for those working an average of 30 hours per week. About half of Mason’s 400 employees were part-timers not receiving health benefits; they would have to be covered under the new mandate. Expanding coverage would cost the city an additional $3.4 million annually, a large sum in a city whose general budget has only been around $24 million in recent years. But by not complying, Mason could be hit with hefty federal fines.

In the end, officials took a different tack. The city set a cap of 25 hours a week for part-timers, trimming their hours to avoid the mandate.

Other localities and states are making difficult decisions of their own to comply before the rule takes effect next year. Many agencies, particularly state colleges and universities, are cutting hours for those not currently receiving health benefits. In other cases, personnel offices are changing workers’ status or reshuffling other categories to comply. For example, Virginia last spring capped all nonsalaried wage employees at less than 30 hours a week.

The move, which the state says keeps it from spending an additional $110 million a year on health coverage, affects some 10,000 state workers, mostly on college campuses but also in agencies such as the Department of Conservation and Recreation and in state-run liquor stores.

In some places, the changes have involved employees who wouldn’t have used the government insurance plans anyway. Many of the affected Mason employees, for example, are students or retirees already covered by other plans. “I had a number of them come to me and say, ‘I don’t want health care, I just want a paycheck,’” says Assistant City Manager Jennifer Heft.

Will all these cutbacks and caps lead to more temporary and part-time public workers? Possibly, although it’s too soon to know for sure. Certainly governments will have to find some way to make up the workload. (States and localities employ about 4.7 million part-time employees nationwide, accounting for a third of their workforce, according to the Census Bureau’s most recent survey estimates.) Heft says that Mason has already hired between 30 and 50 part-timers. In Virginia, state human resources Director Sara Wilson says she expects agencies to respond by either hiring more temporary workers or converting some part-timers to full-time status.

Some states haven’t had to take such drastic measures.

In Delaware, for example, part-time permanent state employees working more than 15 hours per week can already receive health coverage. A much smaller number of seasonal workers—about 600 by state estimates—do work more than 30 hours and don’t receive benefits. Brenda Lakeman, Delaware’s director of human resources management and benefits, says the state is coordinating with agencies to conduct reviews and limit the number of temp employees they’ll need to cover.

“The key issue we’ve been stressing,” Lakeman says, “is that we’re trying to manage this without cutting any hours.”

BY  | MARCH 2014



New Orleans’ Winning Strategy in the War on Blight.

 A city with one of the nation’s worst blight problems is now considered a national leader in reducing vacant and dilapidated properties.

Few urban problems are more insidious than blight. Vacant or dilapidated properties suppress property values, threaten public safety, chase away investment and hurt quality of life.

Blight was a challenge for New Orleans even before Hurricane Katrina flooded nearly 80 percent of the city’s housing stock in 2005. By 2010, New Orleans had perhaps the country’s worst blight problem, affecting an estimated 43,755 properties — nearly one-quarter of the city’s residential addresses.

So it might be something of a surprise that the city now is considered a national model for blight reduction. What might be even more surprising is how that turnaround has been accomplished in little more than three years.

What wasn’t surprising at all was that blight was a big issue in the 2010 mayoral race. The winner of that contest, Mitch Landrieu, had promised to reduce the number of blighted properties by 10,000 by 2014. Landrieu quickly went to work, strengthening the city’s enforcement powers, streamlining the process for remediating blighted properties and implementing a new computerized system to track code enforcement and permitting.

The new blight remediation process begins with property inspection. It then moves to a hearing in which the property owner is either found guilty or in compliance. If guilty, the owner must remediate the problem or the property is either demolished or goes to a sheriff’s sale, which allows for a clean transfer of ownership.

Elected officials are generally reticent to take people’s property, but the old approach just wasn’t working. “Before, owners of blighted properties just ignored city fines, and peer pressure didn’t change their behavior,” said Deputy Mayor and Chief Administrative Officer Andy Kopplin. “But once they know you’ll seize their property, they get religion.”

To coordinate the blight-reduction efforts of various city agencies, the Landrieu administration created BlightSTAT, a process in which representatives from the Department of Code Enforcement, the Office of Community Development, the Office of Information Technology and Innovation, the Law Department and the New Orleans Redevelopment Authority meet to set goals and report on progress. The city’s Office of Performance and Accountability acts as an ombudsman, presenting data and holding the agencies’ feet to the fire.

But no one does a better job of holding feet to the fire than New Orleans’ residents. The BlightSTAT meetings are open to the public, some have drawn over 100 attendees and each concludes with a question-and-answer period. (For two years after the first meeting in November 2010, the meetings were held twice a month; now that the initial surge of dilapidated properties has been addressed, they’re held monthly.) Residents can also find out the status of specific properties on a “BlightStatus” website.

Feedback from residents and the New Orleans police department is used to set priorities among the dilapidated properties. BlightSTAT prioritizes properties whose remediation can stabilize a neighborhood as well as those in high-crime areas and major commercial corridors. Blight remediation is also the top priority when federal assistance is made available.

By early this year, Mayor Landrieu had more than made good on his promise, reducing the number of blighted residential properties by about 13,000. The average time from initial inspection to hearing has been cut in half, and one of the nation’s former blight leaders is now reducing it faster than any other American city.

Just as blight threatens public safety and harms quality of life, eliminating it creates a virtuous circle. BlightSTAT can’t claim sole credit for an extended real-estate boom in New Orleans or for the new confidence investors are demonstrating in the city, but it’s hard to imagine that New Orleans’ comeback would be nearly as robust without it.

BY  | MARCH 18, 2014



Grays Harbor County School to Build first U.S. Vertical-Tsunami Refuge.

A new scenario for a Cascadia megaquake and tsunami warns that more than 10,000 could be killed and 30,000 injured. But a school district near Westport, Grays Harbor County, is doing everything it can to keep its students safe.

A new scenario for a megaquake and tsunami off the Washington coast warns that the death toll could top 10,000 — but Paula Akerlund is doing everything she can to keep her kids safe. All 700 of them.

The Grays Harbor County school district Akerlund oversees on the Washington coast is preparing to build the nation’s first tsunami refuge.

Residents of Westport, Grayland and other communities in the Ocosta School Districtapproved a $13.8 million bond issue earlier this year to replace a flimsy elementary-school building with a complex that includes a gym strong enough to withstand tsunami surges, tall enough to stay dry and big enough to shelter more than 1,000 people on its roof.

“We’re probably less than a mile from the Pacific Ocean, and we have no hills to run up or other natural high ground,” Akerlund said. “Our only alternative is to get as high as we can, as fast as we can.”

In the wake of a magnitude-9 quake on the Cascadia Subduction Zone — a 700-mile-long offshore fault — the resulting tsunami is expected to slam into Westport and other parts of Washington’s outer coast within 20 to 30 minutes.

Ocosta Elementary and Ocosta Junior/Senior High School sit side by side on a highly vulnerable peninsula, connected to the mainland by a bridge that is likely to be damaged in the quake.

During Thursday’s statewide earthquake drill, the Great Washington ShakeOut, the children will follow their current evacuation plan, which calls for gathering on the second floor of the high school. But that building isn’t very tall — and was constructed before the risk of megaquakes and tsunamis was known, Akerlund said.

The new gym will be built on a small hill, and its roof will sit about 55 feet above sea level. That’s well above the tallest surges tsunami modelers predict for the school site, said Chuck Wallace, deputy director of emergency management for Grays Harbor County. “We’re pretty much using our worst-case scenario for height.”

Two previous bond measures to upgrade aging school buildings had failed when Wallace, Akerlund and other local officials decided to fold the tsunami refuge into their plans. “We just thought it made a lot of sense, since we needed to rebuild anyway,” Akerlund said.

Even though Grays Harbor County has one of the state’s highest unemployment rates, the measure passed overwhelmingly.

“The community really stepped forward to say: We’re going to do this for our children,” Akerlund said.

The gym will also provide a refuge for nearby residents.

Several other coastal communities in Washington and Oregon have considered so-called vertical-evacuation towers, berms or other structures, but Ocosta’s is the only one with a guaranteed source of funding. Akerlund said construction is expected to start next summer.

“It’s really exciting that the first tsunami vertical-evacuation refuge in the United States is going to be built here in Washington,” said John Schelling, earthquake and tsunami program manager for the Washington Emergency Management Division. “My hope is that this really serves as a catalyst up and down the coast.”

Making the gym sturdy enough to survive a tsunami will add about 20 percent to the cost, said Cale Ash of Degenkolb Engineers, which is helping design the project. The building must be constructed on deep pilings, in case the tsunami scours out the foundation, he explained.

The gym will be bolstered by reinforced concrete cores at each corner with staircases leading to the roof. Even if the walls are ripped away, the cores should remain intact through both the quake and the tsunami, Ash said.

The school district and county have applied for a $2.25 million Federal Emergency Management Agency (FEMA) grant to help defray the extra cost and allow for a larger building capable of sheltering up to 1,500 people.

“We are committed to doing this, but it would sure help us to have some additional funds,” Akerlund said.

The new megaquake scenario, released Monday by CREW — the Cascadia Region Earthquake Workgroup — underscores the need for better preparedness across Washington, Oregon, British Columbia and Northern California.

The last Cascadia megaquake and tsunami struck in 1700. The average interval between the most powerful quakes is about 500 years, but geologic records show that some were separated by as little as 200 years.

The report estimates more than 30,000 people will be injured in the region’s next magnitude-9 quake and tsunami. Damage in Washington and Oregon alone is likely to exceed $80 billion.

Though the tsunami itself isn’t expected to do much damage inside Puget Sound, the intense ground shaking — which can go on for five minutes — could unleash landslides and undermine ports, ferry terminals and fuel terminals. It could also do serious damage to tall buildings, which are particularly vulnerable in the biggest quakes, the report says.

In areas like Renton and the Kent Valley, loose soils will liquefy, causing buried water and sewer lines to rupture — and the damage could take several years to repair, Schelling said.

Roads and bridges are also vulnerable, but the experience from Chile’s 2010, magnitude-8.8 quake proves the value of being prepared, Schelling added. Though the country’s Route 5 — the equivalent of Interstate 5 — was badly damaged, an alternate route was opened within 24 hours, complete with portable refueling and comfort stations.

By Sandi Doughton

Seattle Times science reporter

Sandi Doughton at: 206-464-2491 or sdoughton@seattletimes.com



Why Is Government Still Using Windows XP?

Vanderburgh County, Ind., with a population of just over 180,000, faces a bill between $500,000 and $1 million to upgrade its computer systems from Windows XP.  The police department in Washington Township, N.J., faces $70,000 in upgrade costs. Over in Monroe Township, the police department there is looking at upgrade costs in the vicinity of $100,000. That’s a lot of money for small counties and municipalities still trying to crawl out from under years of fiscal hardships.

 On April 8 – one week before the annual tax filing deadline – Microsoft will no longer support its long-running operating system (OS) known as Windows XP.  What that means is that Microsoft will stop all technical support for the software, including updates and security patches. Windows XP has been running since 2001, and has become the workhorse operating system for major enterprises, including all levels of government. Today, nearly 30 percent of the computers in the world still run XP, including 95 percent of the world’s automatic teller machines, according to NCR Corp. Nobody knows how many computers in government still rely on XP, but the fear is that far too many will still be using it when the deadline passes.

The biggest concern for the laggards is the potential for security breaches. With Microsoft no longer providing security updates, Windows XP increasingly will become vulnerable to hackers, thieves and even foreign agents interested in disrupting government operations. Just one compromised computer on a government agency network exposes the other machines to attack. “There’s no way I would encourage anyone to use Windows XP,” Trey Ford, a security strategist with Rapid7, a Boston-based data security company, told the Boston Globe. “I won’t let anyone in my family run XP.”

But as cash-strapped state and local governments are finding, the desire to upgrade faces the cold reality of funding.  “I think government’s situation is unique compared to other sectors, given the funding challenge,” said Brian D. Kelley, CIO for Portage County, Ohio. “It’s not as simple as replacing a box.”

Kelley points out that any time an operating system is upgraded, IT managers have to make sure a host of peripheral devices, including printers and barcode scanners, for example, are compatible. If not, they will require upgrading as well. Besides devices, the upgrade will also force investments in new versions of application software, some of which is unique to the public sector. Kelley, who sits on the board of directors for GMIS International, the largest membership organization for government IT managers, says the phase-out of Windows XP is a hot topic among the membership. “There’s a complexity to this that goes beyond the basics,” he said.

Microsoft says the 12 year-old operating system no longer addresses today’s business or technology needs, nor does it address security threats. The newer OS, such as Windows 8, released in 2012, has dramatically enhanced security and better support for government’s growing mobile workforce, according to Stuart McKee, chief technology officer for state and local government at Microsoft.

“We have been working with all of our state and local government customers very closely over the last 24 months to cooperatively plan their migration strategies,” said McKee. “For customers still using Windows XP, we are proactively working with them on how best to ensure support, which is going to be unique to each one.”  Microsoft’s large state and local government customers have custom support agreements in place that will ensure the systems still running XP are as safe as possible, according to McKee.

But small government entities don’t have the clout or funds to pay for such custom support. In Washington Township, police Chief Rafael Muntz said an upgrade is needed so that the department can access critical, Web-based databases, such as the National Crime Information Center database that tracks stolen property, court systems to search warrants and the county’s public safety network. All would be cut off because of security concerns. Without access to those databases, the township’s police department would basically shut down, he told the news outlet NJ.com.

Microsoft is offering a number of special upgrade offers and programs to help reduce costs and deal with the transition, including up to $350 back per device when a government agency purchases a device running Windows 8.

Kelley says that government IT managers all agree that migrating to the next operating system is a necessity. “Unfortunately, everyone is in different stages,” he said. “It’s not happening at once or on time. Some governments are far ahead on this, while others continue to struggle because of funding issues.”

BY  | MARCH 17, 2014
 This article originally appeared in Government Technology magazine.


The First City to Limit the Number of Ride-Sharing Drivers.

 Seattle Monday became the first city in the country to limit drivers for Lyft, uberX and Sidecar, in what will eventually be an overhaul of all of the city’s ride-service rules.

The regulations, approved unanimously by the City Council, will limit each company to 150 drivers on the road at the same time, collectively capping them at 450. UberX, Lyft and Sidecar — which together have at least 2,000 drivers in the city — say the limitation destroys their business model and ability to maintain quick service.
Three of the nine council members at the standing-room-only meeting — Tom Rasmussen, Sally Bagshaw and Tim Burgess — attempted to amend the regulations so there be no caps placed on drivers. Thousands of emails have poured into council members from fans of the companies, which use smartphone applications to dispatch drivers using their personal vehicles.
The City Council’s taxi committee considered regulations for almost a year before Monday’s vote. But Councilmember Sally Clark emphasized at the meeting that the council has a lot more regulation and deregulation to debate.
“What we’re doing today is not a complete fix,” said Clark. “But it’s a start.”
The regulations allow for the council to reconsider driver limits — and maybe getting rid of them altogether — in a year.
Mayor Ed Murray said in a statement Monday that he hopes to phase out limits after the council approves of fair ways to deregulate the local taxi industry.
“I remain concerned about the issue of caps on rideshare vehicles, which I believe is unreasonably restrictive and unworkable in practice,” Murray said.
The regulations would take effect 30 days after Murray signs them into law; he has 10 days to sign the bill after he receives it. The rules also would apply to any new companies that are formed.
No one has yet been able to say exactly how the law will be enforced yet. The City Council’s proposal included a recommendation to hire at least three more staff members to help with enforcement. Right now, there are three enforcement officers handling almost 700 taxis and about 200 other for-hire vehicles.
Seattle is the second government to officially legalize the operations of Lyft, uberX and Sidecar, which operate in dozens of cities nationwide. California was the first when it legalized the companies statewide last year. Several other cities and states are still debating what legal conditions they would allow the companies to work under, if at all.
Lyft and Sidecar officials said Monday they will continue operating in Seattle after the rules go into effect, despite earlier threats to shut down. UberX representatives have made the same threat, but did not say Monday whether they intended to follow through.
UberX Seattle manager Brooke Steger said she still urged Murray to “reject the anticompetitive and arbitrary caps that will slingshot Seattle’s transportation ecosystem back into the Dark Ages.”
But Clark pointed out that the number of drivers set in the law is arbitrary now because Lyft, uberX and Sidecar all have been uncooperative in sharing key data with the city, such as how many drivers they have or what their master insurance policies cover.
“You are doing so many things right. You have so much to teach regulators,” Clark said. “If only you would communicate and collaborate a little bit more. How many wars can you wage with cities and states across the United States? It’s incredible.”
The council also required Lyft, uberX and Sidecar to meet state insurance requirements for for-hire cars. As of Monday, none of the companies have proved to the city that they meet those requirements.
That means Lyft, uberX, Sidecar or their drivers will have to purchase commercial insurance, which the companies have been letting drivers work without since they entered the Seattle market about a year ago.
UberX driver Chamji Sherpa, 43, of Renton, said he purchases commercial insurance that costs him $5,000 — a good deal he gets because of his clean driving record.
He hopes he’ll be able to continue driving for uberX after the rules go into effect, not because he makes more money than he did as a Yellow Cab driver but for the scheduling flexibility.
Sherpa said he expects the rideshare companies’ customer service to nose-dive when the new rules go into effect.
“In rush hour, 150 drivers each is not going to be enough,” said Sherpa. “It’s not even enough for downtown.”
He also said he thinks the new rules will force out part-time drivers because the cost of insurance won’t pencil out. Many of his friends, including Lhakpa Gelu Sherpa, a former world-record holder for fastest Mount Everest climb, drives for uberX when the local mountain-guide business slows down.
Many uberX drivers who showed up to support the company said they drive part time while starting businesses or working freelance jobs.
“I don’t want to take anyone’s job,” uberX driver Todd Gentry said of the local taxi industry. “I want them to do their job better.”
A city-commissioned study last summer showed dissatisfaction with the local taxi industry, which the city hasn’t allowed to grow in numbers since 1990. As a concession to the tightly regulated taxi industry, the council’s new rules also call for the release of 200 more taxi licenses over the next two years.
Taxi and for-hire vehicle owners and drivers breathed a sigh of relief when the caps were approved.
Eastside for Hire manager Samatar Guled said the new rules will make it easier for all the companies to compete on a level playing field. His company has been working with a third-party app called Flywheel that has the same basic dispatch and payment functionality as the apps for Lyft, uberX and Sidecar.
“It’s been a long and painful year,” Guled urged before the council vote. “Level the playing field today — no delays, no excuses.”
Now the Seattle City Council will start collaborating with the Metropolitan King County Council on how to regulate the companies countywide. Until the County Council votes on regulations for the companies, there has been no indication that the county will try to shut down Lyft, uberX and Sidecar operations outside of Seattle.
 BY  | MARCH 18, 2014
By Alexa Vaughn
(c)2014 The Seattle Times


Can Cities and Suburbs Work Together?

One Arizona mayor argues it makes more sense to fund cities and their suburbs as large metro areas, rather than as politically separate entities.

 The federal government has all the money, states have all the power and cities have all the problems. This is a favorite saying of former District of Columbia Chief Financial Officer Natwar Gandhi (now a Governing Institute senior fellow) and the complaint has been getting louder recently among big city officials. They say cities can no longer function well in a financial model that pits them against their surrounding counties.

Scott Smith, mayor of Mesa, Ariz., argues that it makes more funding sense to think of cities and their neighbors as part of metropolitan areas, rather than as separate entities. Mesa has a population of about 450,000 and is located in the Phoenix metro area, which boasts a total population of 3.6 million.

The post-World War II model for cities as self-enclosed economic centers is outdated, he said.

“They’re no longer suburbs – they’re more like villages in this entire metro area,” Smith said of his region during a recent visit with Governing’s editorial staff in Washington, D.C. “Those systems have not caught up with reality and now there’s a frustration among cities that other levels of government have sort of been dinosaurs.”

Smith is referring to the way cities get their money. Back to Gandhi: he says the federal government has all the money because it runs the printing presses. The Feds dole it out to states, which have all the power because they funnel it down to local governments and can increase taxes if they need to. Local governments are left to compete with each other for dollars while they are responsible for directly serving their constituents’ needs.

It’s a system that’s getting on the nerves of all kinds of leaders. More than 2,300 miles away, in upstate New York, Syracuse Mayor Stephanie Miner noted in a recent interview that the underlying economic model for cities is dated to the 1950s. “Property [taxes] to fund new services – that doesn’t work anymore,” she said. “We have to come up with a new model.”

Commuter taxes, which exact an additional income tax on people who live outside of the jurisdiction in which they work, are a natural part of the discussion. But they’ve been a part of the debate for half of a century without much change. In fact, the movement has slowed. As early as 1969, a white paper prepared by an advisory commission on intergovernmental relations noted that a total of 3,476 jurisdictions, including school districts, imposed a local income tax. Thirty years earlier, there had been none (Philadelphia became the first in 1939). In 2011, more than 40 years following the white paper, the number had only increased to a total of 4,943,according to the Tax Foundation.

Miner said that cities and their surrounding suburbs should share more (services, revenues, etc.) and acknowledged that they are not operating in isolation.

A big sticking point, however, is that cities and suburbs have competing interests. Cities bear the brunt of the region’s population and are responsible for keeping up services accordingly during the day. Washington, D.C., for example, swells to about 1.2 million people during the day – its tax base is about half of that. But as the cost of living has soared in cities, poor people are moving from cities to suburbs and suburban social services are straining to keep up.

Smith said that in an ideal world, federal funding for programs wouldn’t filter through states, metro areas would instead have a direct line to the source. It’s a longshot – distributing such funds to 50 states is much easier than distributing them to hundreds of metro areas.

And that sort of mentality would also require a more unified effort between cities and their suburbs – perhaps an even longer shot.

“We haven’t done a great job of conveying that message,” said Smith. “It’s always been about us, us, us.”



Renewable Energy Sources May Drive Many Off the Grid Permanently.

As solar and battery technology improves, widespread “grid defection” may begin to set in.

Two weeks ago, Rocky Mountain Institute, HOMER Energy, and CohnReznick Think Energy released The Economics of Grid Defection, which assesses when and where distributed solar-plus-battery systems could reach economic parity with the electric grid, creating the possibility for defection of utility customers. Theresults of our analysis have been startling to many: continued rapid declines in the cost of solar and the start of the same trend for storage mean that grid parity may come much sooner than previously thought—and well within the 30-year planned economic life of typical utility investments.

This blog post explores why cost parity doesn’t necessarily equate to widespread customer defection, why defection would create a suboptimal electricity system, and why even the specter of customer defection is relevant.

We selected the pairing of solar PV and batteries—and, for commercial scenarios, the addition of diesel gensets—to explore one set of economics around the trend. There are other disruptive challenges to the grid, including grid-tied solar PV, distributed gas microturbines, and integrated resource microgrids. If anything, these multiple potential disruptors increase the urgency to plan and execute a purposeful electricity system transformation. That transformation is already under way, and the approaching date of grid parity for solar-plus-battery systems is an important consideration.

Economic parity doesn’t necessarily mean customers will defect

Our report does not predict if, when, or how many customers will choose to defect. Rather it projects the economics of several current (and possibly, accelerating) trends that are reshaping the electricity landscape: dramatically declining costs for solar and batteries; increasing customer demand for clean electricity, resilience, and other value-added services; and recent upward pressure on retail electricity prices. Ultimately, the impact of these trends depends on a number of factors, including how customers, utilities, regulators, technology providers, and society choose to respond.

The economics that were the subject of our analysis are one of many factors that influence any customer decision to defect (or not) from the grid, or even to adopt grid-tied distributed resources. Other factors customers consider include transaction costs, the relative convenience or hassle associated with the decision, upfront capital and time requirements, confidence a given solution will reliably meet their needs (including the risk that a distributed generation and storage system’s capacity would be sized either too small or too large to closely match a customer’s demand), uncertainty about their long-term electricity needs, and more. Very few customers, especially in the commercial sector, know with certainty their electricity demand for the next twenty years.

Service providers—utilities or third parties intent on winning customers over from grid-supplied electricity—will need to create integrated service packages to overcome adoption barriers that have plagued efficiency and distributed generation providers. Regardless, in addition to the rapidly growing grid-connected distributed solar market, we’ve already seen early adopters working with service and technology providers either to go entirely off-grid or install grid-tied solar-plus-battery combinations that similarly impact (and reduce) their demand from the grid.

Defection wouldn’t be the best outcome

Customers will make decisions that serve their best interest based on the many factors referenced above, and while for a very few defection might ultimately be the best outcome, mass defection from the grid is almost certainly suboptimal. Distributed resources such as solar and storage can generate more value and have better economics for customers and society both if they are connected to the grid. The challenge is that today’s utility business models and regulatory environment don’t incentivize the rapid evolution of those solutions, something that needs to change if society is to capture that value.

There is tremendous potential system value in identifying where grid-tied distributed energy resources can create new sources of value and how to access that value. But does most or all of the new value accrue to customers? Or can these resources also create important new sources of value for the grid and ultimately for society? The answer to the latter question can be a resounding yes, so any sustainable solution will need to find a way to equitably share value created through distributed investments.

So how would widespread grid defection create undesirable outcomes?

For one, large numbers of customers going it alone for their electricity generation introduces all manners of economic inefficiency. Each customer faces the risk of over- or under-investing in capacity. Over-investing especially—via necessarily larger systems sized to individual peak demand—would result in significant overbuild and sunk capital. Instead, markets (via a connected grid) provide for greater economic efficiency by allowing customers and suppliers to readily make transactions to balance their own supply and demand, including optimizing distributed generation and storage investments across larger pools of customers rather than one by one, each for their own. Grid-based solutions reduce this economic risk and allow assets to be utilized more efficiently.

For another, grid defection raises social equity concerns. With widespread defection, utilities operating under legacy business models would be forced to significantly raise retail electricity prices to recover costs of grid infrastructure. Those higher prices would unfairly burden remaining grid-connected customers who cannot or choose not to invest in distributed generation and storage, including low-income families who can’t afford system upfront costs and apartment residents who logistically can’t install systems.

An entirely off-grid system would only become a reality if customers are not given an opportunity to participate, through new business models, in the business of generating, storing, and balancing electricity needs. Or if customers’ requirements, including for resilience and clean energy, are not being met by their central provider. That’s a future that would be suboptimal for all.

Why potential defection matters—customer choice and empowerment

But if a grid-defected future is so suboptimal, why then is it so important to understand the economics of grid defection?

First, there is strikingly little quantitative analysis to inform the discussion. It’s critical to know the facts and underlying analytics to support productive conversations about how to move forward in the face of powerful trends and a dramatically shifting electricity landscape.

Second, the option to defect—whether or not it is ultimately exercised in part or in full—adds urgency for utility business models and regulations to change and identifies when scaled solutions that properly value distributed investments need to be in place. Empowered customers, ones with the ability to choose how they purchase, generate, store, and/or use electricity, have a more important seat at the electricity table. That empowered customer is a force of change.

Customers, utilities, grid operators, regulators, and technology providers must work together to develop business models that stave off the need or even desire for customer grid defection. The electricity system needs to give customers an opportunity to transact with the grid in a way that meets their desires (for clean, reliable, affordable electricity) and be compensated for any value they are able to bring to the system at large (through contributions to peak shaving, investing in local reserve supply through distributed storage, through distributed generation that can supply feeder-level power needs, and others).

Going beyond the either/or of grid-connected or grid-defected

We need not face an electricity future with an either/or dichotomy of two extremes: total utility/centralized dependence and total defection/independence. There exists another path, one in which central and distributed resources are complementary, connected and supported by a nimble grid. That’s why RMI’s high-renewables (80 percent) Transform scenario in Reinventing Fire envisions a future and a grid powered by equal parts distributed and centrally generated renewables.

In such a future, the utility evolves to play a critical coordination and stewardship role, one that helps balance various distributed resources and supports them with low-cost central generation. Customers, utilities, regulators, and technology providers have an urgent need to shape this future, or we could in fact run the risk of the defected extreme.

A commitment to collaboratively forging solutions

Disruptive challenges-cum-opportunities won’t go away. Distributed solar PV is scaling rapidly. Battery costs are declining, with breakthrough innovation accelerating. And third-party service providers are making these systems financially and logistically accessible to bigger pools of customers. RMI’s historic and current activities on energy efficiency, balance of system solar cost reduction, system financing innovations, and storage integration have helped propel the economics of distributed resources forward. An electricity future that includes significantly higher percentages of distributed renewables offers many benefits. But to access those benefits, the entire electricity system must evolve … with utilities and the grid, not in spite of them or without them.

That’s why RMI is committed to collaboratively forging solutions. To achieve the optimal energy future, our Electricity Innovation Lab (e-Lab), for example, brings together utilities, regulators, NGOs, technology providers, and other stakeholders to collaborate on practical solutions to the challenges today’s electricity system faces. In addition, we work hand-in-hand with these and other stakeholders on key components of an integrated solution through direct engagement. Our work on these solutions will be the focus of a forthcoming blog.

This feature originally appeared on the Rocky Mountain Institute website and was republished with permission.



U.S. Sues Philly School District Over Beard-Length Rule.

The U.S. Department of Justice has filed a federal civil rights lawsuit against the School District of Philadelphia, claiming a rule regulating the length of employees’ beards constitutes religious discrimination.

According to the suit filed Wednesday, the district in October 2010 instituted a new grooming policy preventing school police officers and security guards from having beards longer than a quarter of an inch.

School police officer Siddiq Abu-Bakr maintained an untrimmed beard for the 27 years he worked at the district, the suit states. Abu-Bakr is a member of the Islamic faith, which he says requires that he not cut his beard.

When Abu-Bakr notified his supervisor his religious beliefs precluded him from complying with the new policy, he was allegedly issued a written reprimand cautioning that continued violation of the rule would result in “further disciplinary action.”

Though, according to the suit, Abu-Bakr provided district officials with a letter from his imam confirming his religion prohibited him from trimming his beard, the district allegedly responded his request was outweighed by “the integrity of the policy.”

The lawsuit claims the district failed to consider Abu-Bakr’s request for “reasonable accommodation” to its grooming policy. The district instead denied the request without showing that complying would cause undue hardship, according to the suit.

Prosecutors said Abu-Bakr filed a religious discrimination charge with the Equal Employment Opportunity Commission, which referred the matter to the Justice Department after determining there was reasonable cause to support the allegation.

View Full Story from The Philadelphia Inquirer:

http://www.philly.com/philly/education/US_.html



Seniors Create Their Own Communities in Cities.

More and more seniors are creating naturally occurring retirement communities, forcing cities to rethink zoning laws and how they provide services.

Why do people live in cities? Well, obviously, there are a lot of reasons, from work opportunities to cultural amenities. But for our purposes, one of the reasons is independence. Unlike rural or suburban locations where movement is largely dependent on owning a car, people who live in cities have so many more options for getting about, thanks to dense, walkable neighborhoods and extensive public transit.

Independence is a key reason why people tend to enjoy aging in cities, too. This desire has led, in part, to a growing trend whereby seniors cluster together in cities. These clusters, first noted in 1986 by University of Wisconsin-Madison professor Michael Hunt, are called naturally occurring retirement communities. NORCs, as they are known, aren’t purposely built for seniors. Rather, they evolve naturally, as adult residents age in place.

Nationally, about 17 percent of America’s seniors currently live in a NORC, according to the Administration on Aging. Some organizations have that number as high as 36 percent. Either way, the figure is only expected to grow in the decades ahead. By 2030, the 65 and older age group will exceed 72 million, up from about 40 million in 2010.

Not surprisingly, New York City is the epicenter for NORCs: It has 27 across four boroughs. While most are clustered in high-rise developments, such as Co-op City in the Bronx, some have spread into entire neighborhoods. These horizontal NORCs have morphed into “senior villages”, which today can be found in more than 120 cities and towns across U.S. Senior villages are different from NORCs in that people over a certain age band together and form a nonprofit organization that can provide a range of services from transportation and home maintenance, to medical and care management services. Members pay a fee ranging from $500 to $1,000 annually, with discounts for low-income elderly.

One challenge faced by senior villages and NORCs alike is how to retrofit and upgrade housing so that it is senior friendly. For example, much of Philadelphia’s housing stock is old and not easy to renovate. More than 70 percent of Philadelphia’s seniors are homeowners, according to the Philadelphia Corporation for the Aging. They also tend to be poor — Philadelphia’s poverty rate is the 7th highest in the country — and therefore don’t have the resources to adapt their homes as they age. One solution is to change the city’s code so that homeowners can convert the first floor or a garage into an apartment that could be become senior-friendly housing, according to the Philadelphia Inquirer. The other is to make sure that 10 percent of any new housing development is designed to be accessible by wheelchairs.

A particular challenge facing just NORCs is a lack of community support. To address this, several cities have started creating supportive services programs (SSP), which are essentially partnerships between local organizations to provide services, such as transportation, to seniors. Once a NORC meets certain criteria it can be eligible for local, state and federal aid for support services. One of the first SSPs was set up by the New York chapter of the Jewish Federations of North America; it’s now considered one of the templates for what a SSP should provide to an aging community.

As the number of seniors in cities grow, the concept of NORCs will likely become more mainstream, leading to some tensions between residents and businesses and the seniors who have chosen to remain and create their own natural community there. Take, for instance, the McDonalds in Queens, N.Y., which decided in January to enforce a 20-minute dining limit on patrons in an effort to compel a small, but regular group of senior Koreans who congregated there during peak hours, to leave the premises. The restaurant said the group of seniors wasn’t using the dining room for eating, but for socializing. The seniors said the McDonalds was convenient and allowed them to stay together.

Michael Kimmelman, a columnist for The New York Times, called the McDonalds a “ready-made NORC,” that allowed the group to overcome the problems of loneliness seniors face. “They were drawn there by proximity and price, and they have stayed for the companionship.”

BY TOD NEWCOMBE | MARCH 7, 2014

Tod Newcombe  |  Senior Editor

tnewcombe@governing.com @tnewcombe



Los Angeles Enacts Strict Regulations on E-Cigarettes.

E-cigarettes have been promoted as a safer alternative to cancer-causing tobacco products that can wean heavy smokers off their habit.

But on Tuesday, Los Angeles officials joined a growing list of cities that treat e-cigarettes just the same as regular cigarettes, banning their use in parks, restaurants and most workplaces.

The decision came after an impassioned and at times highly personal debate at the City Council that highlighted the backlash the smokeless cigarettes have generated as their popularity grows.

Critics warn that the electronic devices, which produce a nicotine-laced vapor inhaled by users, could pave the way for a resurgence in tobacco use among young adults.

Dr. Jonathan Fielding, director of the Los Angeles County Department of Public of Health, said the growing acceptance of “vaping”– as e-cigarette use is known — threatens to undermine decades of public education efforts aimed at stigmatizing smoking.

Other e-cigarette opponents said they do not want to risk the possibility that the secondhand vapor will be found to be harmful.

“We have a right to … choose to breathe clean air,” Councilwoman Nury Martinez told her colleagues. “And if this device turns out to be safe, then we can always undo the ordinance. But if this device proves not to be safe, we cannot undo the harm this will create on the public health.”

Five states and the District of Columbia have already included e-cigarettes in anti-smoking bans or moved to restrict where they can be used. Last year, New York City passed an ordinance applying traditional anti-smoking rules to e-cigarettes and Chicago recently moved to prohibit vaping in bars, restaurants and most indoor public places.

The e-cigarette crackdown has come “much faster than what happened with smoke-free ordinances,” said Tim McAfee, director of the federal Centers for Disease Control’s Office on Smoking and Health, which has yet to release data on the potential harm of secondhand vapors.

Los Angeles’ decision means that within weeks, e-cigarettes users will have to camp out with smokers relegated to sidewalks outside their jobs and smoking porches at bars and nightclubs. The devices will be permitted in vaping lounges, where customers can sample flavored e-cigarette liquids. But they will be outlawed in outdoor dining areas of restaurants and at city-sponsored farmers’ markets. Geraldine Monroy, who works at Downtown Vape, said she doesn’t use e-cigarettes in restaurants out of respect for other customers. But she voiced dismay that vaping will be outlawed in bars.

If e-cigarette users are forced outside, “you leave your friends, you leave the excitement,” she said. “Regulating them would take away a lot of the enjoyment we have in smoking them.”

Cities are acting but, at the federal level, e-cigarettes are still treated far differently than tobacco products. Americans haven’t seen a cigarette ad on TV for decades. But e-cigarette manufacturer NJOY — which hired lobbyists to influence the outcome of Tuesday’s council vote — has run spots during the Super Bowl, one of the most watched television events of the year.

“You know what the most amazing thing about this cigarette is?” says the narrator in one NJOY ad. “It isn’t one.”

That is the argument made by Jeff Stier, a senior fellow with the National Center for Public Policy Research, a conservative think tank focused on free market policies. The push by cities to restrict e-cigarettes limits access to an alternative to smoking — and could have the unintended effect of slowing progress on public efforts to combat harmful tobacco use, he said.

“Within a decade, e-cigarette sales will outpace cigarette sales,” he said. “I think that’s a victory for public health that we should not get in the way of.”

The long-term health effect of vapor on those who are in close proximity to e-cigarette users remains unclear. The lack of federal data on the question has given ammunition to supporters of e-cigarettes who assert that the council is acting prematurely. Tuesday’s City Hall debate quickly turned personal. Councilman Mitch O’Farrell, who pushed for the new restrictions, recalled his days breathing secondhand smoke as a waiter in a downtown restaurant. Martinez, who sided with O’Farrell, described her husband’s unsuccessful battle to quit smoking.

Councilman Joe Buscaino led an unsuccessful attempt to exempt bars and nightclubs from the ban, a measure sought by lobbyists for the e-cigarette industry. He too invoked a family member while making his arguments.

E-cigarettes “are not tobacco,” he said. “I don’t think they should be regulated exactly the same way. And I’ve heard from so many people, including my cousin Anthony, that they’ve stopped smoking from the help of e-cigarettes.”

Buscaino’s bid to allow the devices in 21-and-older establishments was supported by five other council members: Bob Blumenfield, Mitchell Englander, Felipe Fuentes, Curren Price and Paul Krekorian.

But Council President Herb Wesson balked at the exemption, telling lawmakers that he has been hooked on cigarettes for nearly 40 years — and will probably die because of them.

Calling himself “the council’s No. 1 smoker,” Wesson said he took up the habit as a 20-year-old factory worker because he wanted to be “cool.”

“I’m telling you, the high percentage of kids that smoke, smoke because it’s cool. And when you’re 15 you want to be cool,” he said. “I will not support anything — anything — that might attract one new smoker.”

Some council members expressed frustration at the lack of research on the effects of e-cigarette vapor. Manuel Suarez Jr., owner of Golden State Vape Shop, said fear about the devices is based on misunderstanding.

“We cater to people who’ve been smoking for over 20 years,” he said. “We’re here to help them quit.”

BY MCCLATCHY NEWS | MARCH 5, 2014

By David Zahniser and Marisa Gerber

(c)2014 the Los Angeles Times



Cities Consider Taxing Commuters to Drive Up Revenue.

Taxes on commuters (and reverse commuters) represent a largely untapped source of revenue that cities may begin to target more aggressively — particularly if they’re struggling. View data showing the cities with the most outside workers and reverse commuters.

Buried deep in Detroit Emergency Manger Kevyn Orr’s restructuring plan released last month was a single line that caught the attention of one group of taxpayers. For the first time, the city publicly stated it was weighing an ordinance requiring employers to withhold city income taxes for reverse commuters.

The vast majority of U.S. cities don’t impose a local income tax, but Detroit and some that do struggle to collect all that they’re owed from reverse commuters, people who work outside the city where they live. More commonly, central cities seek ways to tax nonresidents working downtown – known as commuter taxes – as property tax bases dwindle. Taken together, these two groups of taxpayers represent a largely untapped source of potential revenue that cities may begin to target more aggressively, particularly if they’re struggling.

While New York City’s commuter tax expired more than a decade ago, political arguments for its revival continue to persist, as recently as last year’s mayoral election. Last week, officials in Johnstown, Pa., which participates in a state program for distressed cities, told a panel of judges that they either needed to implement a commuter tax or scale back services. In Indiana, state legislators are mulling their own commuter tax for counties.

Governing compiled data published for the Census Bureau’s American Community Survey to compute localities’ estimated nonresident workers. Across all cities with at least 50,000 workers, nonresidents accounted for slightly more than half – 52 percent – of the total workforce.

 

This share is far higher in some areas than others. Nonresidents account for more than three-quarters of the workforce in Irvine, Calif. (79 percent), Orlando, Fla. (77 percent), Salt Lake City (75 percent) and Miami (75 percent).

In some jurisdictions that aren’t as large, residents make up an even smaller fraction of the employment base. Nearly 96 percent of those working in Tysons Corner, Va., live outside the unincorporated area near Washington, D.C. – higher than any other city or Census-designated place with at least 50,000 workers.

Calls for commuter taxes are most common in declining central cities surrounded by wealthier enclaves.

Only select jurisdictions in 17 states impose local income taxes, according to the Tax Foundation. Often, these localities tax residents and nonresidents at different rates, as is the case in Detroit.

Detroit’s problem stems from the fact that many of its reverse commuters fail to pay local taxes. Employers in Michigan aren’t required to withhold local income taxes if they’re not levied by the jurisdiction their employees work in. Twenty-two cities in the state levy local income taxes. Detroit’s tax rate is the highest, set at 2.4 percent for residents and 1.4 percent for nonresidents for 2013.

About half of working Detroit residents are employed outside city limits, and many of them aren’t paying local income taxes. A study published by consulting firm McKinsey & Co. estimated that Detroit residents commuting to jobs outside the city failed to pay more than $140 million in local income taxes owed in 2009.

Brad Williams, the Detroit Regional Chamber’s vice president for government relations, said most of the area’s larger employers with automated payroll systems already collect local income taxes.

Some worry that commuter taxes or taxes on reverse commuters could drive businesses out of cities. The local chamber’s Williams, though, said there’s no evidence that Detroit’s local income tax on nonresidents — higher than all other Michigan localities — led employers to look elsewhere. The chamber’s larger concern, he said, is ensuring that any collection of local taxes isn’t overly-burdensome for employers.

“I think there’s a proper way to do it, but we just haven’t seen the details yet,” Williams said.

Another option is for the state to help administer the local tax. Michigan Gov. Rick Snyder said in December that the state was studying the possibility of adding a Detroit tax schedule to state income tax forms. That’s how the local tax is already administered in Maryland, for example.

Kim Rueben, a senior fellow at the Urban Institute, said efforts to tax commuters gain more traction in central hubs with a local income tax that lack the population base to provide services for businesses and their workers.

Of course, it’s far easier politically to approve tax hikes on nonresidents than those residing in a city. “As places are hard-pressed to raise the money they feel they need to provide services, there is always an attractive aspect to taxing nonvoters,” Rueben said.

Commuter taxes, Rueben said, also tend to be more prevalent in areas with fragmented jurisdictional boundaries. So cities occupying vast land areas, such as Los Angeles and Phoenix, wouldn’t benefit from commuter taxes as much as a place like Pittsburgh might.

City Commuter Data

The following table lists computed totals for residents living and working in a city and those who work in the city and reside elsewhere. Data is shown for jurisdictions with at least 50,000 workers.

City

Nonresidents % of workforce

Total working in city

Workers from city

Nonresidents working in city

Tysons Corner CDP, Virginia 95.6 65,088 2,871 62,217

Auburn Hills, Michigan 93.3 51,903 3,481 48,422

Beverly Hills, California 91.6 54,491 4,575 49,916

Southfield, Michigan 91.3 76,747 6,649 70,098

Doral, Florida 90.9 67,569 6,142 61,427

Carson, California 88.8 55,202 6,208 48,994

Rockville, Maryland 88.5 69,186 7,970 61,216

Marietta, Georgia 88.3 75,551 8,855 66,696

Towson CDP, Maryland 88.2 60,780 7,192 53,588

Troy, Michigan 87.9 83,273 10,107 73,166

Palo Alto, California 87.5 83,740 10,481 73,259

Bethesda CDP, Maryland 87.5 81,244 10,163 71,081

Harrisburg, Pennsylvania 86.3 56,472 7,739 48,733

Schaumburg, Illinois 85.7 71,277 10,163 61,114

Dearborn, Michigan 84.7 78,493 11,973 66,520

Santa Clara, California 84.4 101,014 15,749 85,265

Fort Myers, Florida 84.2 67,480 10,673 56,807

Bloomington, Minnesota 83.9 82,376 13,270 69,106

Rancho Cordova, California 83.9 51,642 8,321 43,321

Alpharetta, Georgia 83.6 81,153 13,273 67,880

Reston CDP, Virginia 83.6 59,845 9,799 50,046

Farmington Hills, Michigan 83.6 50,505 8,303 42,202

Sandy Springs, Georgia 83.3 77,399 12,962 64,437

Santa Monica, California 83.2 100,672 16,954 83,718

Walnut Creek, California 83.2 51,497 8,655 42,842

Greenville, South Carolina 83.1 92,283 15,622 76,661

Warren, Michigan 83.0 80,571 13,680 66,891

Mountain View, California 82.9 67,661 11,552 56,109

Burbank, California 82.7 95,296 16,524 78,772

Redmond, Washington 82.7 86,262 14,961 71,301

Orange, California 82.0 94,826 17,049 77,777

Richardson, Texas 81.8 83,653 15,240 68,413

Livonia, Michigan 81.7 66,145 12,108 54,037

Paradise CDP, Nevada 81.5 249,447 46,103 203,344

Hartford, Connecticut 81.2 109,191 20,577 88,614

White Plains, New York 81.2 58,504 10,972 47,532

Eagan, Minnesota 80.9 52,306 9,989 42,317

West Palm Beach, Florida 80.7 92,087 17,791 74,296

Sugar Land, Texas 80.6 52,242 10,137 42,105

Renton, Washington 80.5 56,752 11,081 45,671

Newport Beach, California 80.3 74,010 14,557 59,453

Ontario, California 80.2 98,904 19,571 79,333

Sterling Heights, Michigan 80.2 52,474 10,408 42,066

Sunnyvale, California 80.1 85,864 17,101 68,763

Torrance, California 79.9 104,021 20,936 83,085

Sarasota, Florida 79.6 58,593 11,924 46,669

Wilmington, Delaware 79.4 61,046 12,558 48,488

Boca Raton, Florida 79.2 103,463 21,480 81,983

Tempe, Arizona 79.1 161,809 33,793 128,016

Redwood City, California 78.9 52,857 11,176 41,681

Irvine, California 78.7 224,105 47,635 176,470

Newton, Massachusetts 78.6 52,327 11,174 41,153

Waltham, Massachusetts 78.5 51,994 11,158 40,836

Cambridge, Massachusetts 77.9 118,669 26,212 92,457

Fort Lauderdale, Florida 77.6 163,152 36,512 126,640

Bellevue, Washington 77.6 118,018 26,417 91,601

Orlando, Florida 77.4 320,527 72,404 248,123

Fullerton, California 77.4 54,407 12,307 42,100

Centennial, Colorado 77.4 50,022 11,318 38,704

Beaverton, Oregon 77.3 58,566 13,309 45,257

Costa Mesa, California 77.0 80,116 18,422 61,694

Albany, New York 76.9 110,749 25,624 85,125

Pasadena, California 76.9 110,154 25,402 84,752

Pleasanton, California 76.8 52,482 12,202 40,280

Columbia CDP, Maryland 76.5 68,143 16,024 52,119

Arlington CDP, Virginia 76.4 192,828 45,530 147,298

Pomona, California 76.4 52,838 12,466 40,372

Pensacola, Florida 76.1 53,985 12,883 41,102

Everett, Washington 75.6 98,497 24,024 74,473

Pompano Beach, Florida 75.5 58,003 14,227 43,776

Salt Lake City, Utah 75.4 251,376 61,948 189,428

Miami, Florida 75.3 411,805 101,888 309,917

West Valley City, Utah 75.3 50,977 12,594 38,383

Irving, Texas 75.2 185,136 45,856 139,280

West Des Moines, Iowa 74.9 50,062 12,571 37,491

North Charleston, South Carolina 74.6 82,883 21,019 61,864

Newark, New Jersey 74.3 159,816 41,028 118,788

Hayward, California 74.3 63,390 16,320 47,070

Kent, Washington 74.1 58,662 15,208 43,454

San Bernardino, California 74.0 94,175 24,467 69,708

Carrollton, Texas 74.0 64,910 16,904 48,006

Anaheim, California 73.6 172,360 45,490 126,870

Carlsbad, California 73.6 59,103 15,598 43,505

Alexandria, Virginia 73.5 96,292 25,472 70,820

Ocala, Florida 73.5 55,709 14,786 40,923

Santa Ana, California 73.3 156,250 41,648 114,602

Atlanta, Georgia 73.0 464,557 125,618 338,939

Carmel, Indiana 73.0 50,664 13,667 36,997

Birmingham, Alabama 72.8 181,415 49,291 132,124

Chapel Hill, North Carolina 72.6 52,028 14,246 37,782

Melbourne, Florida 72.4 54,088 14,912 39,176

Fort Hood CDP, Texas 72.3 51,630 14,295 37,335

Fontana, California 72.1 60,523 16,910 43,613

Franklin, Tennessee 72.0 56,686 15,845 40,841

Dayton, Ohio 71.8 90,033 25,395 64,638

Hollywood, Florida 71.4 62,135 17,768 44,367

Kalamazoo, Michigan 71.2 56,278 16,188 40,090

Columbia, South Carolina 71.1 145,593 42,120 103,473

Lakewood, Colorado 70.9 76,248 22,165 54,083

Grand Prairie, Texas 70.8 66,347 19,399 46,948

San Mateo, California 70.8 53,890 15,748 38,142

Washington, District of Columbia 70.7 796,601 233,411 563,190

Charleston, West Virginia 70.7 56,976 16,705 40,271

Corona, California 70.5 71,174 20,979 50,195

Naperville, Illinois 70.3 80,700 23,989 56,711

Hillsboro, Oregon 70.3 65,076 19,315 45,761

Clearwater, Florida 70.0 65,105 19,526 45,579

Glendale, California 69.8 91,477 27,610 63,867

Frederick, Maryland 69.8 54,587 16,478 38,109

Glendale, Arizona 69.6 77,779 23,674 54,105

Scottsdale, Arizona 69.5 165,529 50,543 114,986

Lansing, Michigan 69.4 79,183 24,237 54,946

Rochester, New York 69.3 150,381 46,220 104,161

Cleveland, Ohio 69.2 265,013 81,651 183,362

Concord, California 69.1 55,497 17,156 38,341

Cincinnati, Ohio 68.7 242,052 75,715 166,337

Overland Park, Kansas 68.6 118,915 37,286 81,629

Rancho Cucamonga, California 68.6 62,871 19,737 43,134

Tampa, Florida 68.1 327,583 104,570 223,013

St. Louis, Missouri 68.1 252,303 80,431 171,872

Round Rock, Texas 68.0 55,764 17,840 37,924

Pasadena, Texas 67.9 51,274 16,483 34,791

Fremont, California 67.7 79,967 25,822 54,145

St. Paul, Minnesota 67.6 176,439 57,235 119,204

Lakeland, Florida 67.6 71,664 23,218 48,446

Jersey City, New Jersey 67.4 123,052 40,104 82,948

Berkeley, California 67.0 74,307 24,554 49,753

Plano, Texas 66.5 175,721 58,924 116,797

Providence, Rhode Island 66.4 120,330 40,465 79,865

New Haven, Connecticut 66.4 90,307 30,338 59,969

Richmond, Virginia 66.2 161,610 54,646 106,964

Allentown, Pennsylvania 66.2 53,526 18,097 35,429

Elgin, Illinois 66.0 53,342 18,151 35,191

Pittsburgh, Pennsylvania 65.9 289,682 98,695 190,987

Portland, Maine 65.9 66,719 22,725 43,994

Portsmouth, Virginia 65.9 51,926 17,707 34,219

Ogden, Utah 65.8 56,049 19,177 36,872

Grand Rapids, Michigan 65.5 117,304 40,436 76,868

Syracuse, New York 65.5 102,965 35,510 67,455

Minneapolis, Minnesota 65.1 306,041 106,735 199,306

Roseville, California 65.1 68,864 24,021 44,843

Macon, Georgia 65.0 54,528 19,068 35,460

The Woodlands CDP, Texas 64.8 51,709 18,195 33,514

High Point, North Carolina 64.7 61,504 21,727 39,777

Kansas City, Kansas 64.1 76,889 27,633 49,256

South Bend, Indiana 64.0 59,118 21,267 37,851

Asheville, North Carolina 63.1 81,380 29,995 51,385

Ann Arbor, Michigan 62.9 106,251 39,382 66,869

Charleston, South Carolina 62.9 88,469 32,792 55,677

Tacoma, Washington 62.8 108,836 40,537 68,299

Boston, Massachusetts 62.6 572,520 214,193 358,327

Garland, Texas 62.5 70,248 26,367 43,881

Huntington Beach, California 62.3 74,881 28,225 46,656

Metairie CDP, Louisiana 62.2 67,378 25,442 41,936

Sacramento, California 61.9 287,815 109,789 178,026

Cary, North Carolina 61.9 74,428 28,337 46,091

Detroit, Michigan 61.6 263,057 100,946 162,111

Knoxville, Tennessee 61.6 167,228 64,164 103,064

Chattanooga, Tennessee 61.6 159,201 61,172 98,029

Riverside, California 61.6 138,995 53,425 85,570

North Las Vegas, Nevada 61.6 51,792 19,909 31,883

Buffalo, New York 61.1 152,816 59,479 93,337

Miami Beach, Florida 61.1 65,071 25,320 39,751

Akron, Ohio 61.0 105,520 41,197 64,323

Frisco, Texas 61.0 50,304 19,641 30,663

Oakland, California 60.9 191,273 74,874 116,399

Elizabeth, New Jersey 60.8 51,316 20,103 31,213

Chandler, Arizona 60.7 107,405 42,248 65,157

Springfield, Massachusetts 60.7 73,200 28,769 44,431

Stamford, Connecticut 60.6 80,796 31,838 48,958

Roanoke, Virginia 60.4 70,843 28,036 42,807

Johnson City, Tennessee 60.3 52,706 20,945 31,761

Long Beach, California 60.2 180,295 71,718 108,577

Boulder, Colorado 59.9 97,921 39,311 58,610

Joliet, Illinois 59.9 55,546 22,271 33,275

Vancouver, Washington 59.8 85,730 34,455 51,275

McAllen, Texas 59.7 83,231 33,527 49,704

Las Vegas, Nevada 59.5 312,520 126,448 186,072

Lafayette, Indiana 59.5 51,706 20,942 30,764

Green Bay, Wisconsin 59.1 65,091 26,638 38,453

Jackson, Mississippi 58.9 107,227 44,046 63,181

Denver, Colorado 58.4 461,854 192,318 269,536

Thousand Oaks, California 58.1 64,634 27,076 37,558

Bowling Green, Kentucky 58.0 53,418 22,410 31,008

Baton Rouge, Louisiana 57.8 179,731 75,867 103,864

San Buenaventura (Ventura), California 57.7 58,176 24,612 33,564

Hialeah, Florida 57.4 79,713 33,922 45,791

Aurora, Illinois 57.4 67,344 28,673 38,671

Yonkers, New York 57.2 58,935 25,225 33,710

Lynchburg, Virginia 56.6 55,363 24,002 31,361

Savannah, Georgia 56.5 104,223 45,314 58,909

Gilbert, Arizona 56.5 59,718 25,976 33,742

Baltimore, Maryland 56.4 360,471 157,059 203,412

Des Moines, Iowa 56.3 132,714 58,028 74,686

Kansas City, Missouri 56.2 307,101 134,533 172,568

Aurora, Colorado 56.2 119,940 52,547 67,393

Worcester, Massachusetts 56.2 100,486 44,023 56,463

Norfolk, Virginia 56.1 187,299 82,264 105,035

Manchester, New Hampshire 56.1 62,141 27,287 34,854

Olathe, Kansas 56.1 57,976 25,438 32,538

Peoria, Illinois 55.8 77,765 34,347 43,418

Erie, Pennsylvania 55.5 58,917 26,224 32,693

Rockford, Illinois 55.4 91,757 40,889 50,868

Little Rock, Arkansas 55.3 160,499 71,802 88,697

Jacksonville, North Carolina 55.2 66,873 29,992 36,881

Champaign, Illinois 55.0 51,353 23,093 28,260

Dallas, Texas 54.8 795,719 359,598 436,121

Tuscaloosa, Alabama 54.3 63,079 28,850 34,229

Durham, North Carolina 54.2 155,482 71,230 84,252

Springfield, Missouri 54.2 145,710 66,784 78,926

Lafayette, Louisiana 54.2 97,224 44,575 52,649

Hampton, Virginia 53.8 64,815 29,976 34,839

Wilmington, North Carolina 53.5 79,638 37,056 42,582

Santa Clarita, California 53.3 65,887 30,755 35,132

Huntsville, Alabama 53.2 139,466 65,277 74,189

Santa Barbara, California 53.2 64,164 30,008 34,156

Evansville, Indiana 53.1 91,545 42,980 48,565

Tyler, Texas 52.8 73,381 34,620 38,761

Chesapeake, Virginia 52.3 94,971 45,281 49,690

Chula Vista, California 52.3 62,488 29,783 32,705

Salem, Oregon 51.9 91,515 44,014 47,501

Newport News, Virginia 51.7 107,917 52,079 55,838

Gainesville, Florida 51.7 92,061 44,482 47,579

Beaumont, Texas 51.6 74,322 35,995 38,327

Santa Fe, New Mexico 51.6 54,932 26,598 28,334

Bloomington, Illinois 51.4 56,843 27,599 29,244

Houston, Texas 51.3 1,638,995 797,826 841,169

Fort Smith, Arkansas 51.1 63,673 31,157 32,516

Longview, Texas 51.1 53,690 26,275 27,415

Mobile, Alabama 51.0 126,221 61,881 64,340

Raleigh, North Carolina 50.9 276,164 135,477 140,687

Modesto, California 50.7 83,119 41,013 42,106

Bloomington, Indiana 50.4 57,968 28,734 29,234

Mesa, Arizona 50.3 152,180 75,586 76,594

Iowa City, Iowa 50.2 59,798 29,798 30,000

Fayetteville, Arkansas 50.0 51,736 25,886 25,850

St. Petersburg, Florida 49.9 127,366 63,806 63,560

Murfreesboro, Tennessee 49.7 59,621 29,975 29,646

Madison, Wisconsin 49.6 189,632 95,631 94,001

Fort Worth, Texas 49.3 408,538 207,003 201,535

Arlington, Texas 49.0 143,041 72,930 70,111

Provo, Utah 49.0 68,030 34,663 33,367

Lancaster, California 49.0 51,344 26,209 25,135

Urban Honolulu CDP, Hawaii 48.9 283,963 145,241 138,722

Greensboro, North Carolina 48.9 180,490 92,280 88,210

Waco, Texas 48.9 80,113 40,942 39,171

Springfield, Illinois 48.8 90,519 46,344 44,175

Davenport, Iowa 48.8 60,760 31,111 29,649

Henderson, Nevada 48.6 78,488 40,368 38,120

Greenville, North Carolina 48.4 57,145 29,488 27,657

Seattle, Washington 48.2 500,946 259,461 241,485

Winston-Salem, North Carolina 47.6 140,360 73,552 66,808

Portland, Oregon 47.4 427,396 224,692 202,704

Denton, Texas 47.4 64,368 33,868 30,500

Fayetteville, North Carolina 47.2 130,505 68,902 61,603

Spokane, Washington 47.0 123,658 65,575 58,083

Milwaukee, Wisconsin 46.2 284,320 153,062 131,258

Augusta-Richmond County consolidated government, Georgia 46.0 119,748 64,683 55,065

Cedar Rapids, Iowa 45.6 93,924 51,094 42,830

Columbus, Ohio 45.5 468,052 255,184 212,868

New Orleans, Louisiana 45.3 207,368 113,505 93,863

Toledo, Ohio 45.2 130,634 71,524 59,110

Santa Rosa, California 45.1 80,219 44,068 36,151

Tulsa, Oklahoma 44.7 265,756 146,916 118,840

San Francisco, California 44.4 605,275 336,695 268,580

Phoenix, Arizona 43.9 770,189 432,447 337,742

Boise City, Idaho 43.9 145,561 81,689 63,872

Tallahassee, Florida 43.5 137,132 77,519 59,613

Eugene, Oregon 43.2 87,533 49,728 37,805

Bellingham, Washington 43.0 52,164 29,735 22,429

Athens-Clarke County unified government, Georgia 42.9 69,728 39,785 29,943

Indianapolis city, Indiana 42.4 504,209 290,547 213,662

Fargo, North Dakota 42.4 89,447 51,534 37,913

Memphis, Tennessee 42.3 391,232 225,553 165,679

College Station, Texas 42.3 53,590 30,940 22,650

Duluth, Minnesota 42.2 56,378 32,559 23,819

Omaha, Nebraska 41.9 293,183 170,327 122,856

Reno, Nevada 41.9 139,772 81,259 58,513

Las Cruces, New Mexico 41.6 51,460 30,056 21,404

Oklahoma City, Oklahoma 41.4 372,770 218,370 154,400

Stockton, California 41.0 103,446 61,034 42,412

Topeka, Kansas 41.0 83,880 49,453 34,427

Charlotte, North Carolina 40.4 498,231 297,001 201,230

Los Angeles, California 40.0 1,905,120 1,142,167 762,953

Shreveport, Louisiana 40.0 113,696 68,256 45,440

Nashville-Davidson metropolitan government, Tennessee 39.8 392,649 236,397 156,252

Oxnard, California 39.8 62,329 37,511 24,818

San Jose, California 39.6 382,074 230,688 151,386

Montgomery, Alabama 39.5 127,323 77,079 50,244

Visalia, California 39.4 51,693 31,348 20,345

Louisville/Jefferson County metro government, Kentucky 39.2 330,171 200,725 129,446

Rochester, Minnesota 39.0 84,325 51,426 32,899

Columbia, Missouri 38.9 78,370 47,866 30,504

Salinas, California 38.7 61,091 37,467 23,624

San Diego, California 38.2 815,539 503,939 311,600

Tucson, Arizona 37.7 274,623 171,107 103,516

Fort Collins, Colorado 37.5 86,693 54,197 32,496

Fort Wayne, Indiana 37.4 140,619 88,025 52,594

Norman, Oklahoma 37.4 50,654 31,715 18,939

Fresno, California 37.0 214,741 135,250 79,491

Austin, Texas 36.8 585,103 369,969 215,134

Philadelphia, Pennsylvania 36.4 706,553 449,532 257,021

Columbus, Georgia 35.9 110,252 70,662 39,590

Chicago, Illinois 35.6 1,394,957 898,956 496,001

Clarksville, Tennessee 34.9 52,983 34,492 18,491

Bakersfield, California 33.1 143,501 96,001 47,500

Lexington-Fayette urban county, Kentucky 29.1 182,938 129,711 53,227

Sioux Falls, South Dakota 28.2 107,389 77,089 30,300

Billings, Montana 27.9 65,023 46,861 18,162

Midland, Texas 27.8 58,006 41,878 16,128

Colorado Springs, Colorado 26.8 218,644 160,069 58,575

San Antonio, Texas 26.7 719,084 527,112 191,972

Virginia Beach, Virginia 26.7 194,331 142,508 51,823

Wichita, Kansas 26.3 199,747 147,204 52,543

Lawton, Oklahoma 26.3 52,393 38,611 13,782

Albuquerque, New Mexico 25.8 286,985 213,058 73,927

Wichita Falls, Texas 25.0 56,006 41,995 14,011

Brownsville, Texas 24.9 64,868 48,734 16,134

Jacksonville, Florida 24.8 452,404 340,353 112,051

Abilene, Texas 21.9 59,590 46,538 13,052

New York City, New York 21.5 4,304,757 3,378,793 925,964

Amarillo, Texas 18.6 92,353 75,220 17,133

Lubbock, Texas 18.3 124,307 101,512 22,795

Lincoln, Nebraska 17.5 148,991 122,926 26,065

El Paso, Texas 17.3 277,176 229,138 48,038

Corpus Christi, Texas 16.4 148,291 123,918 24,373

Anchorage municipality, Alaska 9.0 163,754 148,998 14,756

Laredo, Texas 7.2 92,328 85,687 6,641

Source: American Community Survey, 2010-2012 estimates

Reverse Commuters Map

Here’s a map showing cities where more residents reverse commute, shown as a share of the total workforce.  Figures represent residents living in a city, while the table lists those who work in a city.

http://www.governing.com/gov-data/transportation-infrastructure/reverse-commuters-map-data-for-cities.html

BY MIKE MACIAG | MARCH 5, 2014



12 Ways to Transform Downtown.

Concise explanations of strategies that will make your downtown more vibrant and one or two examples of cities that have successfully implemented the strategy.

http://www.futurestructure.com/news/12-Strategies-That-Will-Transform-Your-Citys-Downtown.html



Infographic - Anatomy of a Smart City: Curious About What Makes a City Smart?

Explore this stunning and detailed infographic from Postscapes.

http://www.futurestructure.com/news/Infographic-Anatomy-of-a-Smart-City.html

Mike Maciag  |  Data Editor

mmaciag@governing.com @mmaciag



How Mayors Used the Stimulus for Energy Efficiency Projects.

A new survey shows how cities used money from the 2009 stimulus package to invest in energy efficient infrastructure.

A one-time infusion of federal funds five years ago enabled cities across the country to build charging stations for electric vehicles, wind turbines and other energy-efficient infrastructure, according to a new survey conducted by the U.S. Conference of Mayors.

The association examined how cities took advantage of the federal Energy Efficiency and Conservation Block Grant Program, which received $2.7 billion under the economic stimulus package, officially known as the American Recovery and Reinvestment Act of 2009. About half of the money went directly to cities, with an average grant per city of about about $1 million.

“What the survey shows is that cities made very good use of these funds,” said Shane Bemis, mayor of Gresham, Ore. “[Cities] moved in many new directions in terms of energy and climate.”

The survey went out to nearly 1,400 mayors. Between late November 2013 and mid-January, 204 of them answered questions about the block grant program. Mayors from cities as large as Los Angeles and as small as Redmond, Wash. — population 54,000 —  participated in the survey. The sample spanned cities across country, from Fairbanks, Alaska to Tallahassee, Fla.

About 62 percent of respondents said they used the federal funds to invest in new programs that weren’t in their existing climate or energy plans. The report’s authors highlighted the statistic to demonstrate that mayors leveraged federal aid to make new progress on energy efficiency and conservation. “The prevailing view at the time [the stimulus bill passed] was that many cities would simply substitute EECBG dollars for allocated local funding to existing city energy initiatives,” the report said.

The vast majority of mayors (87 percent) said federal funds went to city projects and operations, such as making city-owned buildings more energy efficient and upgrading streetlights. Retrofits of government buildings were the most common use of the funds, though write-in responses detailed a variety of other projects, such as putting a wind turbine on top of a building and buying a solar-powered garbage and recycling container.

Bridgeport, Conn., used about $70,000 from the grant program to pay for a feasibility study on constructing an anaerobic digester, which recovers methane from food waste and other types of biodegradable material and converts the gas into heat and electricity. Now Anaergia, a biogas energy company, plans to build the digester next to the city’s sewage treatment plant. Currently, Bridgeport pays more than $2 million a year to haul its sewage to New Haven, where it is burned. The project is currently in a design phase, but eventually the digester could save the city about $1 million in trucking fees and energy fees, said Bill Finch, the mayor of Bridgeport.

“We’re all trying new things,” said Jim Brainard, mayor of Carmel, Ind., where the federal grant program paid for replacing almost all the city’s streetlights with LED bulbs. “The best ideas are going to be copied and repeated.”

On a conference call Feb. 27, Bemis, Brainard and Finch — two Republicans and a Democrat — said the survey results underscore the effectiveness of the grant program and should persuade Congress to allocate more money in the future. Mayors needed to talk with their representatives in Congress and point to specific projects that demonstrate a return on investment, Bemis said. Both Republican mayors stressed that energy efficiency should not be a partisan issue.

Though the mayors pushed a policy agenda that would yield environmental benefits, such as improving water and air quality, they did not mention the phrases “climate change” or “global warming” on the 20-minute call. Instead, they emphasized how mayors could save money through energy efficiency and conservation. “Sometimes it’s a little more difficult to talk about climate in different parts of the country,” Bemis said. “But it’s always open and available to talk about saving money and return on investment.”

http://www.usmayors.org/pressreleases/uploads/2014/0227-report-eecbgsurvey.pdf

J.B. Wogan  |  Staff Writer

jwogan@governing.com @jbwogan



Columbia Mayor Steve Benjamin appointed chairman of Municipal Bonds for America.

Columbia Mayor Steve Benjamin has been selected to lead Municipal Bonds for America, a nationwide nonpartisan coalition of state and local governments along with brokers and dealers to protect and promote the value of tax-exempt municipal bonds.

Those bonds, which are the chief tool used by state and local governments, help build and maintain roughly 75 percent of the nation’s infrastructure.

“It became clear to us that a lot of folks in Washington and across America didn’t understand just how important this tool is in providing vital services to our citizens and how devastating it would be to lose it,” Benjamin said. “Our job is to change that by educating policy makers, the media and the public and promoting reasonable and fair regulation that preserves the municipal bond market’s integrity and supports our cities, counties and states for generations to come.”

Benjamin already has served on the organization’s executive committee and now will replace outgoing MBFA chairman and president of the New York City Housing Development Corp. Marc Jahr.

MBFA was created in response to last year’s sequestration debate on Capitol Hill after lawmakers discussed eliminating the tax-exempt status for municipal bonds, a move that would have increased significantly the cost of necessary infrastructure improvements and led to widespread utility rate and tax increases.

According to a June 2013 report from the National Association of Counties, the debt service burden for countries would have topped $9 billion if municipal bonds had been taxable over the last 15 years.

Municipal bonds typically are used to finance various projects including roads, bridges, public housing, hospitals, schools, public utilities and water and sewer systems. If structured properly, they should come at a low cost to taxpayers.

The two most commonly used bonds by municipal governments are general obligation bonds and revenue bonds. General obligation bonds are secured by the full faith and credit of the issuer and supported by the government’s ability to use its taxing power. Often times, they are voted in by citizens through bond referendums.

Revenue bonds are supported through various funds generated by the facility financed from the bond. Those could include tolls, rents or charges.

Bonds typically have a life-span of 20, 30 or 40 years.

Municipal bonds could be of particular interest to Benjamin as he looks to finance the Bull Street development and baseball stadium with a combined $92 million in cash reserves, as well as hospitality and installment purchase revenue bonds.

Benjamin has said that the huge investment by taxpayers would provide a big return by putting the 180 acre property on the city’s tax rolls.

“Tax-exempts municipal bonds represent a century-old compact between the federal government, state and local government, the public and investors that has built much of our nation’s core infrastructure,” Benjamin said. “I am honored to have this opportunity to protect that promise and help cities like ours continue to invest in roads and bridges, improve water and sewer systems and create tens of thousands of jobs.”

February 25, 2014 By Kelly Petty



WSJ: Chicago Has Problems, but It’s No Detroit, S&P Says.

The Windy City has problems, but they’re far from those of Motown.

That’s the gist of a report out Thursday from Standard & Poor’s concluding the finances of Chicago and Detroit have “more differences than similarities.”

After Detroit filed for bankruptcy last year, the fiscal woes of Chicago drew more attention, particularly since its pension system is one of the most underfunded among U.S. cities and a big jump in payments looms. One local TV station posed the question: Is Chicago on the same financial path as Detroit?

S&P in the new report delivers some good news for Chicago, where leaders bristle at the comparison. The city’s economy is in far better shape because of its size and diversity. The ratings firm projects per capita income, for example, in Chicago at 93% of the national average, while putting it at 57% in Detroit. And while Chicago has seen population declines, they haven’t been nearly as sharp as Detroit, and the city continues to attract people in their 20s and 30s.

And while there’s plenty of complaints about Chicago politics, S&P analysts say the city has benefited from stability in the long-tenure of Mayor Richard M. Daley and the transition to Mayor Rahm Emanuel. Detroit has seen more turnover at city hall and plenty of political gridlock, the ratings agency says.

A spokesman for Mayor Emanuel wasn’t immediately available to comment.

Still, there’s plenty to worry about in Chicago, and S&P sees one of the things the city has going for it is its ability to raise taxes.

Like Detroit, Chicago has limited capacity to cut costs with an estimated two-thirds of spending tied to public safety. Chicago also has what S&P describes as very weak budget performance with the city in past years relying on one-time maneuvers to balance its annual spending plan. Budgeting will become even more difficult in the coming years with Chicago’s annual contributions to its deeply underfunded pension system set to more than double if it doesn’t push unions and state lawmakers to change retirement benefits.

Going forward, S&P says one major difference between Chicago and Detroit is the Windy City can raise basically any tax without voter approval — an option Detroit didn’t have. But Mr. Emanuel and other elected officials have been hesitant to turn to tax hikes, which isn’t a favorite of voters and raises fears people will exit the city.

Overall, Jane Hudson Ridley, an credit analyst at S&P, says “Chicago’s growing economy and taxing flexibility provide it with the resources to avoid a fate similar to Detroit’s.”

Recent trading in government bonds suggests the market essentially agrees with S&P, says Dan Berger, senior market strategist at Thomson Reuters Municipal Market Data.

“Chicago will trade cheaper than a lot of other credits, but clearly Detroit and Puerto Rico are in their own league,” he adds.

By MARK PETERS

–Mike Cherney contributed to this article.



WSJ: For Storing Electricity, Utilities Push New Technologies.

SAN FRANCISCO—From backyard tinkerers to big corporations, inventors have been struggling to find a way to store solar, wind and other renewable energy so it can furnish electricity when the sun doesn’t shine or the wind doesn’t blow.

Now California is offering businesses a big incentive for success—contracts that the utility industry estimates could total as much as $3 billion for successful, large-scale electricity-storage systems.

Starting this year, big utilities that do business here must begin adding enough battery systems or other technology so that by 2024 they can store 1,325-megawatts worth of electricity—nearly 70 times the amount that the handful of mostly experimental systems in the state store now. Regulators are also requiring municipal utilities to buy or lease energy-storage equipment.

The storage systems California wants don’t exist on such a scale, so the new rules amount to a big bet—paid for by utility customers—that creating demand will produce workable new technology. If so, other states are likely to follow suit, experts say.

“We’re not talking about lab experiments anymore,” said Nancy Pfund, managing partner of Silicon Valley venture-capital firm DBL Investors. “We’re talking about a real solution to a growing issue as renewables become a bigger percentage of everyone’s grid. The whole world is watching this.”

Like most states, California has an electric system that was built around big power plants that cranked out electricity around the clock. But utilities here are on track to get a third of the electricity they sell from intermittent resources like solar panels and wind turbines by 2020.

Nationally, renewables accounted for 37% of the new generating capacity added last year, according to the Federal Energy Regulatory Commission.

Utilities now use small natural-gas plants to fill gaps when power generation and demand aren’t in balance, but the state thinks storage systems would be more efficient and produce less pollution.

At least in the first few years, many of the storage contracts are likely to go to projects that use rechargeable batteries, like the ones in electric cars and buses, industry officials say. Batteries have been tested for durability and safety by the automotive industry, and they are in widespread use.

“Battery technology is probably going to be the immediate, short-run leader,” said Jeff Gates, managing director of commercial transmission at Duke Energy Corp. DUK +0.57% in Charlotte, N.C. Duke built a large battery-storage facility near one of its Texas wind farms, and the company plans to build similar projects in California and other states, he said.

While utilities have installed a handful of battery-storage systems in California and other places, many of them were designed to store less than an hour’s worth of electricity to provide extra power to transmission lines. Under the new program, California utilities are likely to want systems that can store at least two or three hours of power to fill in gaps left by solar panels after sunset, Mr. Gates said.

Different types of batteries are already being made by manufacturers including General Electric Co. GE -0.59%  , of Fairfield, Conn., and LG Chem Ltd. 051910.SE -1.17%  of South Korea.

Some people hope that California’s bet on energy storage will create opportunities for technologies that currently exist only in the lab or in one-off projects, including storage based on compressed air or giant flywheels. Gravity Power LLC, a startup in Goleta, Calif., uses deep underground bore holes, filled with water, to create energy when huge pistons are dropped down central shafts.

Among the questions the California experiment may answer is where storage devices should be installed. Some experts think they should be built next to wind farms, for example, as Duke did. Others suggest they should be located along transmission lines or installed next to businesses and homes with solar panels.

“I don’t think we understand the function of storage on the grid [enough] yet to know where it would have the highest value,” said Mark Nelson, a power-planning manager at Southern California Edison, based in Rosemead, Calif.

SolarCity Corp. SCTY -4.16%  , of San Mateo, Calif., in December began offering commercial customers rechargeable batteries—the same ones that are used in Tesla Motors Inc. TSLA -3.91%  electric cars—along with solar panels. Tesla, of Palo Alto, Calif., said Wednesday that it plans to build a U.S. battery factory to supply its Fremont, Calif., car factory and SolarCity’s energy-storage business. “Storage is important because the sun only shines part of the day, but we use electricity all of the day,” Elon Musk, who is chairman and chief executive of Tesla and chairman of SolarCity, said Thursday during an appearance in San Francisco.

Southern California Edison recently installed stacks of lithium-ion batteries at an Irvine, Calif., parking garage that has solar panels on the roof and a row of electric-car chargers on a lower floor. The panels generate electricity for the car chargers and the batteries, which help power the chargers after sunset.

Some utilities and consumer advocates worry that the technologies are expensive and aren’t ready for prime time.

Mike Niggli, president of San Diego Gas & Electric Co., a unit of Sempra Energy, said that although there are many storage technologies, “few of them are cost-effective at this time.”

The financial strength of some companies likely to offer their products is also a concern, following a series of bankruptcies by battery makers, including Xtreme Power, which filed for Chapter 11 last month, and A123 Systems Inc. and Ener1 Inc., which filed for bankruptcy protection in 2012.

California is one of 37 states that have renewable-energy mandates or goals, but the only one to require utilities to buy lots of storage.

“Energy storage is a highly specialized market now,” said Haresh Kamath, a researcher at the Electric Power Research Institute, a utility-funded group in Palo Alto, Calif. “But I expect it to become an important part of the grid’s architecture in coming years.”

By CASSANDRA SWEET and REBECCA SMITH

Feb. 27, 2014 7:32 p.m. ET

Write to Cassandra Sweet at cassandra.sweet@wsj.com and Rebecca Smith at rebecca.smith@wsj.com



Drought (and an FBI Investigation) Settled a Longtime Feud Between Los Angeles County Water Districts.

For nearly three years, two Los Angeles County water districts had been locked in an ugly feud.

The Central Basin Water District, a water wholesaler, refused to sell to its rival, the Water Replenishment District, which manages an underground storage basin in southeast Los Angeles County that serves 4 million residents. For its part, the WRD was just as happy not to buy the water, lest the purchase benefit Central Basin.

The standoff cut groundwater storage even as the state faced a looming drought.

But as Central Basin faces an FBI corruption investigation, the bad blood between the two agencies has suddenly eased.

Central Basin this month agreed to sell 60,000 acre-feet of water to the Water Replenishment District. Water experts say the sale represents a major boost to the local underground basin. It comes as the drought is forcing local agencies to rely more on the basin for water.

“I think it’s a new day where we’re finally practicing good water management in our basin,” said Kevin Wattier, general manager of the Long Beach Water Department, who has sat on the sidelines as the water war raged. “We put zero drops of water in this basin. And that, to me, is the travesty. And it was because of this war.”

Typically, the Water Replenishment District replenishes the basin with about 100,000 acre-feet of “artificially captured water” a year, most of it from rain runoff. About 20% usually comes from imported water purchased from Central Basin. But there has been very little rainfall in the last three years, which combined with the lack of imported water has concerned Wattier and others.

The detente comes amid a year of change at Central Basin, which has faced several scandals and has seen some of its top leaders depart. On Friday, former Assemblyman Thomas Calderon — a onetime consultant for the agency — was charged as part of a major federal corruption case, along with his brother, state Sen. Ron Calderon (D-Montebello).

The charges Friday alleged the brothers took tens of thousands of dollars in bribes, though not related to Central Basin. However, the FBI obtained boxes of records from Central Basin’s offices last year and is continuing to investigate.

Thomas Calderon was widely seen as a field marshal in Central Basin’s protracted battles with the WRD.

Both sides now agree the conflict did far more harm than good. Central Basin and the WRD each spent about $2.4 million in the water war. Central Basin sent state legislators and lobbyists after its rivals, in one case paying a consultant to create promotional online stories under the names, bios and photos of reporters that did not exist. The WRD bought up domain names such as “centralbasin.net” and used it to post stories critical of its rival.

Central Basin was so concerned about being sued that it secretly managed a $2.7-million fund for its own groundwater storage project without public hearings or notifications. In a deposition as part of a lawsuit filed last year against a former vendor, Central Basin’s former general manager, Art Aguilar, testified that the board wanted to pursue the storage plan but “didn’t want anybody to know what we’re doing.”

Legislation ended up precluding Central Basin from pursuing groundwater storage, but the fund is now part of the FBI investigation.

The scandals and investigation have left Central Basin humbled — and with leaders vowing reform.

Tony Perez, who became Central Basin’s general manager last spring, said the agency is doing things differently. The district has launched its own internal investigation into the $2.7-million fund, he said, and is working on reforms after an audit found “significant deficiencies” in its financial controls.

The audit cited a case in which Central Basin paid $22,000 upfront for the college tuition of Gil Cedillo Jr., the son of Los Angeles City Councilman Gil Cedillo, who had been paid $112,000 a year by the agency until he was let go last year. The audit also found that Central Basin had been lax in the contract bidding process, among other problems.

Central Basin recently dropped the last of its litigation against the WRD and also recently made about $800,000 in budget cuts to close a deficit.

Perez said the battles with the WRD were a wasteful example of turf building.

“I think it’s a cautionary tale to all members of the water community that we need to work together,” he said. “I think that both parties are reasonably going to enter into this environment of trust a little bit slowly, but both sides are going to have to take a step out of the darkness.”

He said the water sale to the WRD will help Central Basin by bringing in $4.2 million.

Rob Katherman, the WRD’s board president, said the change of leadership at Central Basin has made a major difference. Two incumbents on the Central Basin board were ousted after a series of stories in The Times about the water war and how the agency was spending money.

In an interview, Aguilar described the battle with the Water Replenishment District as a part of a “costly and nonproductive” conflict that no one party could be blamed for. He said he is glad it’s been resolved.

“The basin has gone without adequate replenishment,” he said.

Overall, southeast L.A.’s basin is a better reserve than some parts of the state hardest hit by the drought. Officials said the 60,000 acre-feet of additional water from Central Basin comes at a key time, when some cities in the area will be required to pump more water from the underground storage.

Albert Robles, a WRD board member and Carson councilman, said southeast L.A.’s water situation would have been significantly more secure if not for the feud.

“Had it not been for the war,” he said, “we would literally be laughing at today’s drought.”

BY MCCLATCHY NEWS | FEBRUARY 25, 2014

By Hector Becerra

(c)2014 the Los Angeles Times



NACO: Urge Your U.S. House Members to Vote "YES" On the Homeowner Flood Insurance Affordability Act of 2014, H.R. 3370.

The U.S. House of Representatives is poised to begin debate this week on the Homeowner Flood Insurance Affordability Act of 2014 (H.R. 3370, as amended).  Please urge your House Member to vote “yes” on the measure.

H.R. 3370 was originally introduced as a companion bill to the Senate measure (S. 1926)—also known as the Homeowner Flood Insurance Affordability Act of 2014.  However, the original legislative text has been replaced with completely new language.  The amended bill will be considered under a procedure that will require a 2/3 majority vote to pass and does not allow for any amendments.

H.R. 3370 (as amended) contains several provisions that would address county concerns::

Reinstates Grandfathering: The House bill would permanently repeal Biggert-Waters’ phase-out of grandfathered policies and thus would allow grandfathering of policies to continue.  This means that post-FIRM properties built to code at the time of construction may have the ability to grandfather into a lower premium.

Removes Sales Trigger: The House bill would discontinue the practice of fully actualizing rates at the point of sale, meaning the sales “trigger” is removed; this would ensure premium insurance rate certainty at the point of sale.

Retroactively Refunds Policyholders: The House bill would retroactively refund some Pre-FIRM policyholders if they paid a higher premium under Biggert-Waters.

Allows for Annual Surcharge: The House bill would institute a $25 annual surcharge for all NFIP primary home policy holders and a $250 annual surcharge on all second homes and businesses.  All revenue from these surcharges go toward the NFIP reserve fund, established to meet the future obligations of the NFIP.

Requires Affordability Study and Provides Additional Funding for the Study: The House bill would increase funding for FEMA to complete an affordability study from $750,000 (under Biggert-Waters) to $3 million.  The measure would also reaffirm that the study be completed in two years.

Background Information and Why This Issue Matters to Counties

The purpose of the Biggert-Waters Act of 2012 (BW-12) was to make FEMA’s National Flood Insurance Program (NFIP), which faced a deficit of $24 billion, solvent.  However, BW-12 resulted in some unintended consequences for local governments, residents and businesses.

A number of the nation’s 3,069 counties, both coastal and inland, have stated that their homeowners and business are facing drastically increasing annual NFIP flood insurance premiums due to BW-12’s phase-outs of subsidized premium rates.  According to the Government Accountability Office, properties in 2,930 counties had subsidized policies as of June, 2012.

Since selling properties with high annual insurance premiums is unlikely, people could walk away from existing mortgages, impacting both local economies and housing markets.  As more homes become vacant, counties’ property values are in turn impacted.

As the Federal Emergency Management Agency (FEMA), which oversees the NFIP program, continues to update its Flood Insurance Rate Maps (FIRMs), more low-lying areas may begin to face drastic premium rate increases in the future.

by  Hadi Sedigh  on 2/25/2014 4:45 PM



NLC: A Snapshot of Healthy Corner Store Initiatives.

Local governments across the country are coming up with creative solutions to ensure all residents have easy access to healthy, affordable foods.

For many Americans, buying fresh fruits and vegetables is as simple as walking a few blocks to the neighborhood grocery store or getting in the car and driving a short distance to the supermarket. There are many, mostly low-income people however, who do not have such easy access to healthy, affordable foods.1 For these Americans, the long distance between home and supermarket, coupled with a lack of public transportation options and/or privately-owned transportation, limits their ability to maintain a healthy diet. Communities in which residents are unable to easily overcome the geographic disparity between the location of their residence and healthy food retailers have increasingly been described as food deserts. The U.S. Department of Agriculture (USDA) defines food deserts as areas in which “at least 500 people and/or at least 33 percent of the census tract’s population must reside more than one mile from a supermarket or large grocery store.”

An estimated 23.5 million people in the U.S. live in communities without access to healthy foods.4 The USDA has developed the Food Access Research Atlas to help identify such areas. Within these areas, the primary food retailers tend to be small food stores, i.e. convenience stores, corner stores, small rural markets, bodegas, etc. A study done in 2008 by the California Center for Public Health Advocacy, PolicyLink, and the UCLA Center for Health Policy Research found that there is a 20 percent higher prevalence of obesity and a 23 percent higher prevalence of diabetes among adults living near abundant convenience stores, compared to those who live near supermarkets and produce vendors.

In response, city and community leaders are promoting healthy neighborhoods by encouraging small food shops to provide nutritious, affordable options for residents living in food deserts as a means to address the lack of access to healthy and affordable foods and contribute to improved nutrition and health outcomes.  Many city-led or city-supported programs nationwide focus on enabling corner stores and smaller markets located in food deserts to provide healthy foods. These programs vary in scope, geography, the types of incentives they provide, and the policies they utilize to improve access and consumption of healthy foods. For instance, programs that are larger in scope are able to encourage small food markets to sell healthy foods by offering training,marketing materials, technical assistance, refrigeration equipment, and even vouchers for fruits and vegetables.  Through incentives, these programs encourage stores to add new, healthier items to the shelves.  Other programs work with community leaders and interested small food shop owners to make healthier options more visible in stores and more available to the public. In addition to increasing access to healthy foods, these programs can promote neighborhood economic development because they include business development components for participating store owners.  Finally, these programs also encourage community development through engagement with neighborhood groups and citizens.

This guide highlights the efforts of four cities:

Each of these cities is taking action to increase access to healthy and affordable food in their communities. The city programs highlighted here vary in size and scope and are intended to provide a snapshot of the range of opportunities that city leaders have to address issues of healthy food access in their communities. Tupelo, Mississippi’s Health on a Shelf program provides incentives for small food owners to prominently display healthy food options in their stores. The City of St. Louis’ Healthy Corner Store Project necessitates direct engagement between local government departments, the community, and corner stores to increase nutrition education and expand access to healthy and affordable foods. As part of the Get Healthy Philly Initiative, the city and its partners work with over 600 local corner stores to provide healthier food options. And since 2008, when the City of Minneapolis passed an ordinance requiring small food stores to carry at least five varieties of fresh produce, the city and its partners have worked with these small stores on education, planning, and implementation to provide healthier food options to residents.

Download the Brief.



WSJ: Harrisburg Will Exit State Receivership.

Judge Determines Capital City’s Fiscal Emergency Is Over

Pennsylvania’s capital of Harrisburg will exit state receivership on Saturday, after a judge determined the city’s fiscal emergency is over following its sale of a troubled incinerator and the 40-year leasing of parking services late last year.

The latest step is a milestone for the city, which faced about $360 million in debt largely from the incinerator project and had teetered on the edge of bankruptcy before Gov. Tom Corbett appointed a receiver under a state law for fiscally distressed municipalities.

Municipal-finance experts said the city’s recovery plan, which also included concessions by public-employee unions, could serve as a model for other cities.

“They’re showing the way that many, many cities” have to go, said Christopher Leinberger, chairman of the Center for Real Estate and Urban Analysis at George Washington University.

The city entered receivership in December 2011, after an attempt by City Council members to declare bankruptcy was thrown out in court. This past December, under the receiver’s plan, the city completed the sale of the incinerator to a nearby waste-management authority and leased the parking system. The transactions are expected to help the city have balanced budgets for the next three years. The city received $16 million for economic development through the bond sale for the parking transaction and will receive some parking revenue each year.

The city of 49,000, however, is hardly out of the woods. It will have to find ways to address other woes, from its aging infrastructure to high crime rate.

“By working together, we overcame extraordinary challenges to create a sound plan for Harrisburg that did not include bankruptcy or bailouts,” said Mr. Corbett, a Republican, who faces re-election this year.

The incinerator project, which became mired in debt during more than a decade, has generated criticism and calls for criminal investigations. The Dauphin County district attorney has requested that the state attorney general, Kathleen Kane, investigate the project. On Wednesday, a spokesman for Ms. Kane, a Democrat, declined to confirm whether such an investigation is under way.

By KRIS MAHER CONNECT

Feb. 26, 2014 6:38 p.m. ET

Write to Kris Maher at kris.maher@wsj.com



Making the Most of the Water You Have,

In the midst of the worst drought on record, some California communities are showing that there’s plenty that can be done.

It’s February, normally one of California’s wettest months. Yet Caltrans, the state’s transportation department, is using its huge messaging signs above freeways to announce “Serious Drought — Help Save Water.” An usual message for a transportation department, but it’s an unusual year for California: its driest on record.

Assuming rainfall doesn’t pick up significantly, a wide spectrum of repercussions will be in store for residents across the state, particularly those in northern California. While most of California’s water resources exist in the north, many communities in that region are less prepared to deal with the drought than are those in southern California.

For example, the small city of Willits, located north of San Francisco, is already at its most severe water-rationing level and is actively seeking alternate water sources. Yet rainfall for Willits averages 51 inches a year — more than three times that of Los Angeles. Under serious though slightly less critical circumstances, the city council of Sacramento in January enacted severe water rationing for residents and businesses. Sacramento sits at the confluence of the Sacramento and American rivers and has water rights to both, but major reservoirs on the rivers that capture rain and snowmelt are at less than 20 percent of normal capacity.

Meanwhile, hundreds of miles to the south, managers of the huge Metropolitan Water District (MWD) that supplies water to more than 19 million people and the majority of southern California’s cities say they have enough reserves to get the state’s most populous region through the year and even into 2015 without rationing.

Setting aside the Golden State’s fascinating and contentious water history (broadly centered on the transfer of water from north to south) there is an existing, complex supply system in place that supports residents, businesses and agriculture. None will be spared the effects of the drought, so there are lessons to be learned from water-delivery agencies and communities that have prepared more aggressively for shortfalls in supply. An array of best practices is already in place in communities across the state.

For example, the city of Los Angeles has for many years metered and charged for water use. In contrast, Sacramento is in a multiyear process of installing water meters; roughly half of its residents are still charged a flat rate independent of usage. Additionally, L.A. provides a $2-per-square-foot incentive to remove water-intensive lawns, mandates low-flow water fixtures and promotes an ongoing conservation campaign. The city’s per-capita water use has dropped from 187 gallons a day in 1986 to 123 gallons. L.A. uses less water than it did 40 years ago despite the addition of more than 1 million residents.

In terms of hard infrastructure, the MWD has invested heavily in building reservoirs to enlarge capacity. The district recently announced record storage levels throughout the system, which in addition to the reservoirs includes banked supplies underground and in Lake Mead.

The city of Long Beach has taken a technology approach: Its water department is engaged in one of the most aggressive recycled-water-system expansions in the state. Recycled water is being used to displace millions of gallons of imported potable water to irrigate city parks, golf courses, cemeteries and athletic fields. When complete, this system will more than double recycled water use in Long Beach and meet 12 percent of the city’s total water demand.

The San Diego Water Authority is taking resilience to a whole new level through the construction of a desalination plant. When the new facility is completed, it will not only provide 7 to 10 percent of the region’s water but will add an important resource to its diversification strategy. Most significantly from a resiliency perspective, water from the plant will be provided completely independent of the broader region’s seasonal snow or rainfall levels.

These examples serve to highlight that a community’s ability to withstand or recover quickly from difficult conditions — whether they be drought or other circumstances – can be vastly improved through an array of soft infrastructure (such as policies and regulations), hard infrastructure and technology. As those Caltrans freeway signs suggest, there are plenty of things that can be done.

Bob Graves  |  Associate Director of the Governing Institute

bgraves@governing.com

BY BOB GRAVES | FEBRUARY 24, 2014



Why Is Los Angeles Closing Its Libraries?

In the sun-filled space at the Roy Romer Middle School library, thousands of books invite students to stimulate their curiosity and let their imaginations soar. There is classic “Tom Sawyer” and popular “Harry Potter,” biographies of Warren Buffett and Tony Blair, illustrated books on reptiles and comets.

But the library has been locked. The tables and chairs have been empty. That’s because budget cuts in the Los Angeles Unified School District have eliminated hundreds of library aides, leaving Romer’s library unstaffed for months at a time over the last four years.

Principal Cristina Serrano said the situation has handicapped students — especially as new state learning standards require them to use more research in their papers and projects.

“The students need access to books; they need guidance on how to use the library for research,” she said. “But funding is not easy for us.”

Romer isn’t the only L.A. Unified library that has had trouble. About half of the 600 elementary and middle school libraries are without librarians or aides, denying tens of thousands of students regular access to nearly $100 million worth of books, according to district data.

The crisis has exacerbated educational inequalities across the nation’s second-largest system, as some campuses receive extra money for library staff and others don’t. It has also sparked a prolonged labor conflict with the California School Employees Assn., which represents library aides.

Since 2011, the union has alleged that L.A. Unified laid off their members, then illegally allowed parent volunteers, instructional aides and others to do their work at nearly four dozen campuses.

The district issued a bulletin last year clarifying that library work can be performed only by those with proper credentials, but the union asserts that violations are still occurring. The issue is set for a hearing by the state Public Employment Relations Board in May.

Franny Parrish, a library aide involved in the union’s unfair practice charge, said the issue is not only jobs, but the security of L.A. Unified’s $205-million library book collection. Without trained staff to make sure books are properly checked out, returned and refiled, she said, thousands have gone missing.

Aiming to stem the problems, the Los Angeles Board of Education recently agreed to form a districtwide task force to seek ways to improve access to school libraries with more dollars, alternative arrangements and collaboration with other public libraries and charitable organizations. The move was brought forward by board member Monica Ratliff, a former teacher who saw firsthand the boost that school libraries gave her students at San Pedro Elementary in the low-income downtown Los Angeles garment district.

“Children love books, love reading and love information,” Ratliff said. “But what’s happening now is an inequitable distribution of resources. Some schools make it work and others don’t. It’s extremely problematic.”

L.A. Unified paid for library staff in every school before the recession began in 2008. Today, it provides librarians in high schools but leaves most elementary and middle school campuses to make tough choices on whether to use their limited discretionary funds on library aides, nurses, counselors or other key staff. At Romer, Serrano said, parents’ first priority has been a full-time nurse. But she recently secured federal funds to reopen the library next month.

Wide disparities have emerged among the system’s seven districts. In the east and southeast Los Angeles area, for instance, 57% of libraries are unstaffed compared to 26% in the district covering south Los Angeles, according to L.A. Unified data.

Of 500 primary centers and elementary campuses, the district still directly pays for library aides at only 80 — those with significant African American student populations — as part of a 2011 civil rights settlement with the federal government.

In other schools such as Wonderland, active and more affluent parents have raised private funds to restore their library aides.

At Lorne St. Elementary in Northridge, parent April Dobson organized a successful campaign to restore their library aide, featuring 1,000 protest letters, a public “read-in” event and calls to elected officials.

“Our parents were willing to speak up because we didn’t feel it was appropriate to close our libraries and deny access to children,” Dobson said. “But it concerns me to realize that we solved the problem for our children but that so many other schools are suffering from this.”

The problem is magnified for many children in low-income neighborhoods who live in “print-deficient environments” with few books at home, Ratliff said.

A 2004 study by Stephen Krashen, a linguist and USC professor emeritus, found that children in low-income neighborhoods had access to fewer books or high-quality bookstores and libraries. Krashen said his research and countless other studies have found that library access can help reduce the effects of poverty on reading achievement. His 2012 analysis of an international reading test in 40 countries found that access to a library with at least 500 books was nearly as strongly related to test scores as poverty. At San Pedro Elementary, where nearly three-fourths of students are learning English and 85% are from low-income families, the school advisory council decided that developing literacy was so important that they chose to pay for a full-time library aide.

During a recent visit to the school’s library, first-grader Marlene Sanchez clutched a popular book about a talking dog, “Martha Speaks,” and said her weekly library visits were among her favorite parts of school.

“I don’t have a bookshelf at home,” she said. “It costs a lot of money and we can’t buy books. But I would love to fill a bookshelf with books.”

The school uses the library to promote its “million word campaign,” which features a computer program that quizzes students on each book read and tallies up their word counts. Last year, 120 of the 750 students hit the mark — an eighth-grade standard — and the school posts pictures every month of its most voracious readers. Despite the preponderance of students not fluent in English, half of those who took state standardized tests last year were at grade level in reading.

“We ask our students to read daily,” said Principal Hector Carreno, “and if the library were closed it would be hard for them to do so.”

(c)2014 the Los Angeles Times

BY MCCLATCHY NEWS | FEBRUARY 24, 2014

By Teresa Watanabe



Philadelphia City Workers Get Closer to a Contract, Finally.

A five-year stalemate, Mayor Nutter yesterday signed a tentative agreement for a new contract with the city’s white-collar union. Nutter announced the deal last night with Fred Wright, the recently elected president of the American Federation of State, County and Municipal Employees’ District Council 47. Nutter cited Wright’s replacing union president Cathy Scott as a reason the negotiations moved forward.

“This agreement, as everyone knows, has been a long time in coming, and not for a moment would I suggest that it’s been an easy process because it has not been,” Nutter said at a news conference. “The events of the last few days and months with Mr. Wright and his leadership team quite frankly have accelerated the process.”

The deal — which Wright said DC 47 would vote to ratify next week — goes until July 2017, or 18 months into the next mayor’s term. The city estimates that it will cost $122 million over the next five years, which Nutter called “a substantial challenge for our budget, but one that we believe is warranted on behalf of our employees and taxpayers.”

The 2,700 members in the union’s main bargaining unit have been working without a contract and without raises since July 2009. The city has been calling for savings through pension, health-care and work-rule changes, and Scott refused to negotiate changes she described as “givebacks.”

Wright unseated Scott in a September election by pledging to reach a deal with the city quickly and to secure wage increases. She contested his election and forced a January rerun, which Wright won by an even greater margin.

“We wanted to get in and get a deal,” Wright said yesterday. “This was a very long process, both sides have come together, they heard each other, and they came to a fair contract.”

Nutter achieved several of the major changes he sought, including a new health-care-funding arrangement and a rule that prevents employees from earning overtime during weeks when they took paid sick leave and worked fewer than 40 hours.

But he made substantial compromises as well. For instance, new employees will not automatically enter into a less-costly pension plan that his administration designed. Instead, they will have the option of choosing the new plan or paying 1 percent more of their pay into the pension fund.

The deal could put pressure on the leadership of blue-collar District Council 33, the city’s largest union, which has been without a contract or raises for the same period. DC 33 president Pete Matthews, whose union last week returned to the bargaining table for the first time in a year, was not available for comment. Here are the major terms of the DC 47 agreement, according to the Mayor’s Office:

Wages: The deal includes $2,000 bonuses and 3.5 percent raises to all DC 47 members. They get an additional 2.5 percent raise in July 2015 and a 3 percent raise in July 2016. Step and longevity increases that were frozen during the impasse will be restored.

Pensions: Current employees will pay an additional 1 percent of their pay to the pension fund. New employees will have the option of enrolling in a new plan that saves the city money. If they choose not to — as members of other unions with this option have done — the new employees will pay an additional 1 percent of their pay into the fund.

Health care: The city will give the union’s health fund a $5 million cash infusion, on top of a $2.5 million payment in December. The city also will increase its monthly contributions to the fund from $975 per employee to $1,100 per employee. In 2015, the union will switch to a “self-funding” model that the city says will result in substantial savings.

Furloughs: Nutter had sought the right to furlough workers during economic downturns. The agreement does not include a new provision for furloughs but eases the rules for temporary layoffs, which the administration says will give the city greater flexibility.

Negotiations with DC 33 are expected to resume later this week. The city is in arbitration with the firefighters union over the current contract period and soon will enter arbitration with the police officers union to replace a contract that expires in July.

(c)2014 the Philadelphia Daily News

By Sean Collins Walsh

BY MCCLATCHY NEWS | FEBRUARY 26, 2014



As Lyft Debuts in Minneapolis, City Threatens Ticketing and Impounding.

A West Coast car-sharing service is facing off against Minneapolis City Hall, and regulators say they are prepared to ticket and impound cars they encounter after the service launches Thursday.

Lyft’s unique model relies on regular people essentially becoming chauffeurs in their own vehicles, picking up passengers who request a ride through the mobile app. The service — known for its signature pink mustaches on the front of the participating cars — is already up and running in more than 20 cities, including St. Paul.

Minneapolis officials told the company several months ago that city ordinance defines Lyft as a taxi service. That requires the vehicles and drivers to be licensed and inspected as taxis, which clashes with Lyft’s business model.

Lyft spokeswoman Paige Thelen said Tuesday that the company planned to start Thursday after talking with city leaders and coming to the conclusion that Lyft’s peer-to-peer operation was not considered a taxi or for-hire business. “We feel like we’re in a good place to move forward and launch in Minneapolis and continue conversations with them to find a solution that would be permanent,” Thelen said.

But the city’s head of business licensing, Grant Wilson, said the city will enforce city taxicab regulations if it sees Lyft cars operating around town. The city has already towed three vehicles operated by UberX, a similar company that Wilson said launched about a month ago in Minneapolis.

View Full Story from the Minneapolis Star Tribune:

http://www.startribune.com/local/minneapolis/247374901.html



California's Drought Relief Package Signed into Law.

Gov. Jerry Brown signed legislation Saturday to free up the state’s water supplies and aid residents who face hardship because of the drought, according to a release from his office.

More than $687 million will go to drought relief, money that will fund housing and food for workers directly affected by the drought and projects aimed at more efficiently capturing water, the release said.

“Legislators across the aisle have now voted to help hard-pressed communities that face water shortages,” Brown said in a statement. “This legislation marks a crucial step – but Californians must continue to take every action possible to conserve water.”

The two bills Brown signed passed with wide margins in the Senate and Assembly.

View Full Story from The Los Angeles Times HERE.

MARCH 3, 2014



WSJ: Private Capital for Public Works.

A bipartisan move in Congress seeks investors for American roads, ports and bridges.

The budget deal and $1.1 trillion spending bill agreed to by Congress and the White House should help our country climb out of recession. We also hope the compromise and common sense displayed by these agreements mean Washington can next tackle what’s really needed to assure robust economic growth and full employment—the rebuilding of public infrastructure.

In his State of the Union message, President Obama proposed that money saved by enacting tax reform be used to rebuild ports and roads, pointing out that “first-class jobs gravitate to first-class infrastructure.” Promising ideas are also emerging on Capitol Hill, among them the Bridge Act, introduced by Sens. Mark Warner (D., Va.), Roy Blunt (R., Mo.) and eight others—four Democrats and four Republicans.

The Bridge Act would set up an independent, nonpartisan financing authority that would provide loans and loan guarantees to states and localities, helping them fill gaps in infrastructure funding by attracting private investment for transportation, ports, water, sewer and other projects. The authority would finance 49% or less of a project’s cost. Sen. Lindsey Graham (R., S.C.), a co-sponsor, notes that this incentivizes private investment “with the federal government as a junior partner.” The bill’s sponsors estimate that the funding authority could attract up to $300 billion with government funding $10 billion.

The Bridge Act revives House and Senate efforts of the past decade to create a national infrastructure bank, based on the idea that the federal budget should be a tool to encourage investment, as it was when Jefferson purchased Louisiana and Eisenhower built our interstate highways.

There also is encouraging movement in the House, where Transportation and Infrastructure Committee Chairman Bill Shuster (R., Pa.) called for a transportation funding bill by August. This would leave time to negotiate a final bill with the Senate before authorization of the current transportation bill, MAP-21 (the Moving Ahead for Progress in the 21st Century Act), expires this fall. Mr. Shuster also aims to end contentious, short-term extensions of highway and transit funding by establishing a national transportation plan. He will need cooperation and resolve from fellow lawmakers.

The Congressional Budget Office projects that a six-year transportation bill will need to add $100 billion to fund transportation at current levels, and U.S. Transportation Secretary Anthony Foxx warns that the Highway Trust Fund—the source of most transportation funding—could start “bouncing checks” this year.

Last year, Rep. Rosa DeLauro (D., Conn.) reintroduced legislation to create a national infrastructure bank structured much like the funding authority proposed by the Bridge Act. This would be a companion to the Senate bill if it gains traction among a majority of House members.

In addition, bicameral bipartisan legislation has been introduced—by Reps. John Delaney (D., Md.) and Jeff Denham (R., Calif.), and Sens. Michael Bennet (D., Colo.) and Mr. Blunt—that would allow corporations to repatriate a portion of their overseas earnings tax-free if they invest in bonds that would finance a $50 billion national infrastructure fund. The House bill is co-sponsored by 25 Democrats and 25 Republicans. The proposal merits careful consideration.

An improved climate for cooperation also could hasten passage of bipartisan legislation introduced in both houses of Congress—by Sens. John Hoeven (R., N.D.) and Ron Wyden (D., Ore.), and Reps. Ed Whitfield (R., Ky.) and Allyson Schwartz (D., Pa.)—that would enable state infrastructure banks to sell Transportation and Regional Infrastructure Project bonds to investors. These bonds would provide buyers with a federal tax credit in lieu of interest.

We also hope the time is ripe for Congress to allow Real Estate Investment Trusts and Master Limited Partnerships to invest in public and private infrastructure projects that produce revenue, such as ports, transportation projects, transmission lines and energy retrofits for buildings. REITs are publicly traded entities that qualify for an IRS designation enabling them to cut or eliminate corporate taxes; in return, they distribute 90% of their income to investors who pay income tax on those dividends at regular rates. MLPs also are publicly traded and do not pay federal or state taxes; MLP unit holders receive quarterly distributions on which they pay income tax at their own rates.

Pipelines and some other U.S. energy infrastructure are currently MLP-eligible. Allowing REITs and MLPs to invest in infrastructure could dramatically increase financing of crucial projects.

Each of these proposals could open a door to states, counties and cities looking to fix or replace their degraded transportation facilities. Each would use the federal government as a catalyst or tool to help localities structure projects that can be financed with private partners—benefiting both.

Ironically, global sovereign-wealth funds and non-U.S. pension funds are the largest investors in crucial infrastructure—while American mutual funds, pension funds and retail investors allocate a minuscule portion of their trillions of capital to these facilities.

In its latest report on global competitiveness, the World Economic Forum ranked America’s infrastructure 25th among nations. The country needs to do much better.

By FELIX ROHATYN And RODNEY SLATER

Feb. 19, 2014 7:05 p.m. ET

Mr. Rohatyn is an investment banker and former chairman of New York’s Municipal Assistance Corporation. Mr. Slater is a former U.S. secretary of transportation.



In a Tale of Two Muni Markets, it's Far, Far Better for Advisers to Find the Middle Ground.

Neither the best- nor worst-case scenario is accurate and that means credit analysis is more important than ever.

Charles Dickens’ famous first line of “A Tale of Two Cities” — “It was the best of times, it was the worst of times” — could have referred to investors’ views of U.S. cities and the municipal bond market in 2013. The best of times reflects the apparent laissez-faire attitude of many market participants toward credit analysis and the worst of times in the hysteria that every city could become the next Detroit.

As usual, the truth lies somewhere between the two extremes. Advisers should encourage tax-exempt bond market investors to stick to this less-traveled middle road.

In the 1970s and early ’80s, before municipal bond insurance, many states submitted financial statements less than 10 pages long — including all the notes. Investors and their advisers largely relied on the opinions of ratings agencies. Subsequently, bond insurance provided investors with an extra level of perceived protection and also boosted transparency, as bond insurers were among the first to call for greater disclosure from states and municipalities.

The downside: Investors became even more lackadaisical about credit analysis. Too often, investors said, “As long as I buy AAA insured municipal bonds, I don’t have to worry about credit risk.”

The implosion of the bond insurers in the 2008 financial crisis put a temporary end to the widespread “set it and forget it” philosophy. Today, advisers may hear investors say, “As long as I buy A or AA general obligation bonds, I don’t have to worry about credit risk.” We’ve gone two steps forward, only to take a giant step back.

What causes municipal bond investors to fool themselves into thinking credit analysis doesn’t matter? Corporate bond investors typically don’t take such a cavalier attitude toward credit risk. Perhaps events such as mergers, which can cost bonds their investment-grade status overnight, have made taxable-bond investors more circumspect in their research.

In an odd juxtaposition with the casual attitude toward credit risk, many municipal bond investors have become paranoid about the financial condition of states and municipalities. Such hysteria makes for good headlines and causes restless nights — but also misses the target.

Municipal investors have to cope with today’s elevated, sustained levels of media attention. Triggered by the 2008 financial meltdown, the municipal market has faced one negative headline after another. Bond defaults. Predictions of billions of dollars in additional defaults. High-profile bankruptcy filings by Detroit and other cities. Fearmongers see Detroit’s July bankruptcy protection filing as a harbinger of things to come. But while other cities share some of the same problems, the breadth and depth of Detroit’s issues sets it apart.

As a practical matter, it should be obvious that neither the best- nor worst-case scenario accurately portrays the U.S. municipal market. Less obvious is which scenario investors should fear most. Headline-driven hysteria may cause sleeplessness and high blood pressure, but it promotes a higher awareness of the importance of credit research.

Although the “worst of times” scenario is exaggerated, serious stresses remain at both the state and local levels. In fact, investor reliance on the “best of times” approach potentially is more damaging to portfolios. Investors who assume that all tax-exempt bonds rated A or better are safe risk exposing themselves to unwanted surprises. One doesn’t have to experience a default to feel the effects of such surprises. Deteriorating credits can whittle away at a bond’s value.

So far this year, the multiple-notch rating downgrades of several highly rated bonds, both in the general-obligation and essential-purpose-revenue categories, have cost investors as their prices fell to reflect the increased credit risk. These actions have reflected ratings agency views on deteriorating financials, poor management, and/or the lack of political will to take prudent actions, among other factors.

Advisers can best help investors through diligent, credit-centric security selection, considering all aspects of the issue before purchase and maintaining a strong surveillance system to mitigate unpleasant surprises. Investment advisers who focus on credit analysis should have a better chance of avoiding credit debacles and might even uncover issues with trends the market doesn’t yet reflect.

Bloomberg News

By Robert F. Collins

Dec 17, 2013 @ 12:01 am (Updated 4:09 pm) EST

Robert F. Collins is head of municipal fixed income at Wilmington Trust.



Lyft Lauches in Houston Friday, but with City Eyeing Enforcement.

Lyft is avoiding fines by not charging or accepting donations.

An app-based ridesharing service is charging into the Houston market without waiting for the city to revise rules that could subject the company and its drivers to fines if customers paid for their rides.

But the company, Lyft, is avoiding any immediate confrontation with city officials by temporarily refraining from charging or accepting donations. The city, meanwhile, will continue work on changes in its taxi and limousine ordinance that could enable Lyft and similar services to operate and accept payments. The service begins on Friday.

The company, which connects riders with drivers who use their own vehicles, has evaluated the city’s ordinance and believes existing law allows it to operate, Lyft spokeswoman Erin Simpson said.

The service doesn’t charge a prescribed fee – payments are made via mobile phone and are technically donations – and it conducts its own background checks of drivers.

“Lyft is not a taxi or limo service,” Simpson said. Houston officials disagree, however, saying the city ordinance covers all sorts of fees and tips.

“There are some working girls that work the streets of Houston who say, ‘We’re legal because it is just a donation,’?” Mayor Annise Parker said Wednesday. “I’m sorry, we will enforce our ordinances.”

After more detailed conversations on Wednesday, the company indicated it would – for an unspecified time – forgo any exchange of money between drivers and riders, said Christopher Newport, chief of staff for the city’s regulatory affairs department.

Anyone who accepts payment for a ride would be operating an illegal taxi service, Newport said. And Lyft could be cited for operating an unregulated dispatch service by connecting drivers and riders, he said.

Both infractions are Class C misdemeanors, punishable by a $500 fine for each occurrence.

Newport said Lyft’s decision not to allow payments stalls the conflict for a while, though the company didn’t give city officials a guaranteed date when payments would begin changing hands.

“We’re going to watch them, but for now this resolves it,” Newport said.

At the earliest, the changes in city rules could take effect about two months from next Tuesday, when two City Council committees will meet jointly to discuss the matter, Newport said.

DRIVERS, CARS CHECKED

Lyft uses a smartphone app to connect drivers and riders. The drivers’ backgrounds are checked by the company, and drivers must operate a four-door car newer than model year 1999 that has passed a 19-point safety checklist.

Each driver, when operating as a Lyft driver, is covered by a $1 million insurance policy in addition to the driver’s own liability insurance.

Riders log in and look for a ride. The driver and rider can see one another via the app, and both must agree to the trip before it is booked via smartphone.

The route is mapped, so both the driver and rider know the path before they leave. Once at the destination, the two part ways. Each then fills out a survey rating the other, respectively. The rider is also given a suggested donation for the driver, but can alter that to whatever he or she likes.

Lyft takes a 20 percent cut of all donations for its role.

Simpson said the company sees itself as a solution to traffic congestion. Solo motorists can offset their vehicle operating costs by driving others, while those interested in getting a ride can avoid paying for parking and spending money for fuel.

Paul Gutierrez, interviewed in downtown Houston, said he’s wanted Lyft as a local ride choice for some time.

“I am glad they’re finally just going to jump in,” Gutierrez said. “I’ll use it this weekend.”

Lyft will debut in Houston with service within most of Loop 610. and in nearby areas like Garden Oaks and the Galleria. As more drivers are introduced and riders respond, Lyft’s service will expand, said Simpson, the company spokeswoman.

SUCCEEDING ELSEWHERE

In similar markets, the service has grown quickly.

“I think of (Los Angeles) as a really great example where many people rely on their cars to get around,” Simpson said. “L.A. has been one of Lyft’s fastest growing cities, which really speaks to people wanting to have options.”

Houston officials agree, which is why they have spent the past few months preparing for changes to the city code. Officials have stressed safety and giving residents as many options as possible.

A study released last month found Houston’s taxi and limo industry is unlikely to suffer from the entrance of newer companies like Lyft.

BY DUG BEGLEY, MCCLATCHY NEWS SERVICE / FEBRUARY 20, 2014 0

Reporter Mike Morris contributed to this story.

©2014 the Houston Chronicle



Desalination Making a Splash in California.

California has grappled with water scarcity for generations and now the San Diego Water Authority is betting on desalination.

When thinking of California, Hollywood, Silicon Valley and even the Gold Rush are likely among the first things that come to mind. But more than anything else, water has defined the state and shaped its history. Cities throughout the state have thrived – or withered – depending on how successful they were at securing water rights.

The legendary California Water Wars of the early 1900s still elicit strong responses, especially from those who continue to call California’s Owens Valley home. Owens Valley was the epicenter of the struggle between the water-rich eastern Sierra farmers and the growing city of Los Angeles. Famously recounted in the 1974 film Chinatown, Los Angeles water chief William Mulholland engineered the Los Angeles Aqueduct that brought water to millions in Southern California while devastating the Owens Valley.

Today, water is still perhaps the most important issue California contends with. It’s such a divisive topic that it has many times over the years yielded various movements to divide California into two or more separate states. Currently a “Six Californias” plan is being touted by Silicon Valley venture capitalist Tim Draper. In Sacramento, Governor Jerry Brown’s $25 billion proposal to construct two massive water-diversion tunnels in the Sacramento-San Joaquin Delta have further polarized residents. Those in the northern third of the state, where most of the water (usually) resides tend to resist efforts by Central Valley farmers and Southern California metropolises to have “their” water taken from them.

Currently, California finds itself in the midst of a severe – though historically commonplace – drought. Talks of water diversification that extends beyond relying on the Colorado River and the California Water Project are again ramping up.

In Carlsbad, Calif., however, such talk about diversification has been replaced by action. Carlsbad, which lies about 35 miles up the coast from San Diego, is the site of a $1 billion desalination plant that is currently under construction. Under the jurisdiction of the San Diego County Water Authority, the plant is expected to come online in 2016 and provide San Diego County residents with 50,000 acre-feet of water (more than 16 billion gallons) every year.

The bulk of the funding for the plant comes via $734 million in bond financing. The plant is being built, and will be operated by, Poseidon Resources of Stamford, Conn. As part of the deal to build the plant, the authority has agreed to purchase those 50,000 acre-feet of water every year for 30 years, with a safeguard in place that the authority can reject any water that doesn’t meet its standards. At a current price of $2,000 per acre-foot, which is double what it pays for the water it receives from the Metropolitan Water District of Southern California, the authority is gambling that as water scarcity in California continues, desalinated water will pay off in the near future. The desalination plant will provide 7 to 10 percent of San Diego County’s water supply by 2020.

Historically, desalination has not been considered a viable option in the United States. Though the basic technology has been around for decades, the cost and energy requirements have not penciled out here, especially as water in the U.S. has been relatively cheap and abundant. In the Middle East, desalination plants are common and necessary. Israel, for example, has three of the largest desalination plants in the world, churning out as much as 40 percent of that country’s water supply.  Those plants are operated by Israel’s IDE Technologies. At the Carlsbad plant, IDE will share operations with Poseidon.

The first big attempt at desalination in the U.S. began in 1997 in Tampa Bay, Fla. That project, on which Poseidon also worked, was fraught with financial setbacks and wasn’t completed until 2007. Currently, the Tampa Bay facility outputs approximately 25 million gallons of fresh water every day – about half the output expected from the Carlsbad plant. Aside from a handful of small scale facilities, that’s really about it for American desalination efforts.

While the present drought in California is a handy reminder that water shortages are a regular occurrence, the Carlsbad plant has been in the works for years. Like the ever-increasing miles per gallon feats automobile manufacturers are able to conjure, desalination technology has benefited from decades of small but numerous improvements.

So why is San Diego investing a billion dollars into desalination?

“The cost of desalting seawater has come down significantly over the last two decades or so,” said Bob Yamada, Water Resources Manager at San Diego County Water Authority. “Previously, ocean desalination was not in the ballpark with other new water supplies. Improvements in the reverse osmosis technology and improvements related to energy recovery have contributed to a now cost-competitive water supply option.”

Many of the improvements Yamada cites have been shepherded at IDE’s desalination plants in Israel.

“The technology has improved incrementally,” Yamada said. “In particular, reverse osmosis technology, which was first commercialized in the 1960s, there have been incremental improvements in that technology over the last 50 years but in the last 20 years we’ve seen significant incremental improvement in things like salt rejection, the membrane area, all of these things that manufacturing processes have improved.”

In addition, Yamada said that there have been a significant changes in energy recovery technology. A company called Energy Recovery, based in San Leandro, Calif., manufactures devices called pressure exchangers, which transfer the pressure that’s produced in the desalination process to pressurize the feed water stream coming into the plant. The Israeli plants all use pressure exchangers manufactured by Energy Recovery, as will the Carlsbad plant

“These things have all come together to reduce the cost of seawater desalination,” said Yamada.

Desalination itself is a relatively straightforward process. At a very simplistic level it’s just filtering seawater. But it’s not quite that easy. Generally it takes two gallons of sea water to make one gallon of fresh drinking water. The seawater is drawn into the desalination system for the first step of the process – removing the suspended particles in the seawater. This occurs through a filtration process. In the case of Carlsbad there are large filter basins wherein the water is filtered through a combination of sand and anthracite, a type of coal. This process removes the suspended particles. The water is then further purified through reverse osmosis. In reverse osmosis desalination, water is pressurized and that pressure forces water molecules through a semipermeable membrane. The membrane rejects the salt molecules and creates two streams of water. One stream is called permeate, water that has gone through the membrane and is now essentially fresh water. The other stream created is called the brine stream. The brine stream exits the system with twice the salinity of normal sea water and still at very high pressure. The energy in that pressure is recovered by the pressure exchangers and transferred back to the feed water stream. The permeate stream is disinfected and then pumped to a storage tank where it is blended with water coming from water treatment plants. That blended water flow is then distributed within the aqueduct system.

Construction on the Carlsbad plant is more than 40 percent complete. Part of the project also includes a 10-mile pipeline that connects the plant to the authority’s water treatment site in San Marcos, Calif. More than three miles of the pipeline have been built so far.

In the early 1990s San Diego was getting virtually all of its water from the Metropolitan Water District. However, severe droughts in the late seventies and late eighties prompted water officials to set upon a diversification strategy. While the desalination plant will only contribute 7 to 10 percent of the region’s water supply, it makes up what will be one of the most diverse water supplies in the state. By 2020, the authority will get water from eight different sources, including Metropolitan but also from the nearby Imperial Valley, from ground and surface water, from recycled water, and from the desalination plant.

“The obvious benefit from a desalination project is we’ve got the largest reservoir in the world at our doorstep,” said Peter MacLaggan, Senior Vice President of Project Development at Poseidon. “It’s not subject to snow pack or rainfall. It’s truly drought-proof. It truly has some inherent reliability features that aren’t present with the other supplies in the region and as such it represents a hedge against droughts.”

It may be that the time has come for desalination to take its place in California’s water ecosystem. There are 15 proposed desalination plants for California that are in various stages of planning. Poseidon is close to beginning working on a second, similar facility in Huntington Beach, Calif. That project, MacLaggan said, is waiting on one final permit from the California Coastal Commission.

The Carlsbad plant, MacLaggan said, will be the biggest and “most technologically advanced and environmentally sensitive desalination plant in the western hemisphere.”

For more than a century and a half California has been fighting itself over water. The Carlsbad desalination plant is giving rise to optimism that there is at last a viable solution to easing the state’s perpetual water woes that amounts to more than just a drop in the bucket.

FutureStructure

BY CHAD VANDERVEEN | FEBRUARY 13, 2014



Is Solar-Powered Desalination Answer to Water Independence for California?

From Isle of Man to Saudi Arabia, renewable desalination is gaining interest around the world as solution to water scarcity and food crisis

A flock of starlings takes flight in a field north of Bakersfield in California’s San Joaquin Valley. Photograph: Eric Rorer/Getty Images/Aurora Creative

Thousands of acres on the west side of California’s San Joaquin Valley lie fallow. In official speak, the former agricultural land has been “retired”. Water supplies have always been a problem for this drought-prone region. Yet what’s pushed the area over the brink is salinity.

The problem is in large part caused by farm irrigation, which picks up the salt that naturally occurs in the rocks and soils of the Central Valley and transfers it through drainage. Compounding the problem is the tidally influenced water that is pumped into the area from the Sacramento-San Joaquin Delta. A study by the University of California estimates that, left to continue, the Central Valley could be facing reparation costs of up to $1.5bn by 2030 and the loss of up to 64,000 jobs as agricultural production slides.

A California-based startup thinks it might have the answer. WaterFX’s solution comes in the unlikely shape of a vast bank of parabolic mirrors and an advanced “multi-effect” evaporating unit. The Aqua4 system offers a renewable method of desalinating briny water, which, if its developers prove right, could put California “on a path to water independence”.

How does it work? Unlike conventional desalination, which uses a high-pressure reverse osmosis system that forces salt and other solids through a membrane, WaterFX cleans water through use of a 400-kilowatt solar “trough” – hence the mirrors. This concentrated solar still collects the sun’s energy, which heats a pipe containing natural oil, providing heat for the subsequent distillation process.

“We wanted it to be highly modular and highly scalable so the same system is usable for very small applications all the way up to very large scale,” says Aaron Mandell, founder and chairman of WaterFX, which is piloting the idea in the Californian water district of Panoche.

The potential of renewable desalination is exciting interest in other corners of the globe. For example, Sundrop Farms, which is based in the Isle of Man, has installed a desalination plant near Port Augusta, South Australia. Located 100 metres from the shore, the solar-powered plant treats salt water pumped directly from the sea. As well as returning freshwater, the plant uses hot water generated during the desalination process to heat nearby greenhouses.

Interest is also on the rise in the Middle East and North Africa, which currently suffers a gap in water demand of about 42 cubic kilometres per year – a figure that could increase nearly fivefold between now and 2050, according to a recent World Bank report (PDF). Experimentation in renewable desalination is already under way in Qatar, where Norway’s Sahara Forest Project has embarked on a pilot scheme. Saudi Arabia, meanwhile, has plans to build a solar-powered plant in the Al-Khafji governorate, with talk of more besides.

From a sustainability perspective, the upside of the technology is huge. The US federal government is currently pumping in about seven million-acre feet of water into California’s Central Valley every year. Replacing a “meaningful percentage” of that figure – say, 20%-30% – would be enough to have a dramatic impact on securing water security for the area, says WaterFX’s Mandell.

The implications for sustainable agriculture are also vast. After a successful proof of concept stage, Sundrop is now building a 20-acre greenhouse, which promises to produce 2.8m kg of tomatoes and 1.2m kg of pepper a year. As well as making desert land productive, Sundrop maintains that its approach reduces pesticide use, cuts food miles and results in better tasting produce.

The arguments from a climate-change perspective appear especially attractive. Saudi Arabia’s 30 or so desalination plants, for instance, currently use about 300,000 barrels of crude oil equivalent a day. The trend in other Gulf countries, as well as in Algeria and Libya, is similar. “The status quo is not sustainable,” concludes the World Bank, which describes the elimination of fossil fuel use in desalination as “critical”.

As with all new technologies, the key consideration is whether the idea is scalable. The first question is whether the science actually works. The initial pilots look promising. WaterFX’s test facility, which started operations six months ago, is successfully producing up to 14,000 gallons of fresh water a day. Plans are now under way to expand the demonstration project, which will push up its capacity to 65,000 gallons a day over the same 6,500 sq ft area.

A big stumbling block is cost. Solar-powered desalination currently averages about $1.52-$2.05 per cubic metre of water produced, depending on technology, energy costs and location, according to the World Bank. Conventionally, alternatives typically cost half that or less. The cubic-metre costs of desalinised water in Israel’s traditional Hadera and (newer) Sorek plants, for example, are $0.65 and $0.52 respectively.

Mandell insists that the technology promises to become more price-competitive as production increases. “If 70% of your cost is fuel production for traditional desalination and you want to scale up, the cost goes up significantly, unlike solar desalination,” he says. That logic is truer still if oil and gas prices increase in the future. Advances in concentrated solar power will drive efficiency savings, too.

Either way, don’t expect renewable desalination or its supporters to go into retirement any time soon.

Oliver Balch

Guardian Professional, Tuesday 28 January 2014 12.35 EST



How the 'Private Option' Medicaid Could Hurt Local Health Centers.

In this sleepy Mississippi River Delta town in eastern Arkansas, the community health center that opened in 2012 stands out among the downtown’s mostly abandoned buildings constructed over a half century earlier.

The 15,000 square-foot brick building with its two-story lobby and green awnings was paid for through a $2.8 million grant from the Affordable Care Act — a federal investment designed to ensure the nonprofit clinic could treat hundreds of additional patients, many of whom would gain health coverage under Obamacare.

Now, though, Mid-Delta Health Systems is worried it won’t have enough money to maintain services to low-income patients because of how the state is expanding Medicaid.

Arkansas’ “private option” model is putting newly eligible recipients into the same private plans that any consumer might buy in the health law’s online insurance marketplaces. And private insurers pay the community centers far less than they have received from traditional Medicaid — in Clarendon, less than half as much.

With an estimated 200,000 Arkansans eligible for expanded Medicaid through the private health plans, the centers fear a big financial hit.

Medicaid reimburses health centers better than private doctors because federal law requires the centers be paid in relation to the actual cost of care they provide. The higher rates are supposed to reflect the sicker and poorer patients they see and the fact they can’t limit the number of uninsured or Medicaid patients they treat.

As more states look to follow Arkansas’ lead — Utah and New Hampshire are among those considering similar expansion plans — health centers are bracing for the worst.

“Medicaid is our single largest payer and if that payment rate is destabilized, then, we will start to see health centers close due to financial viability and solvency issues,” said Daniel Hawkins, senior vice president of the National Association of Community Health Centers, which traditionally treat many patients who are uninsured or on Medicaid.

The Pennsylvania Association of Community Health Centers lodged a protest in January against a draft proposal by Gov. Tom Corbett, a Republican seeking federal approval of a similar private option plan that would force centers to negotiate their rates with private plans. But the state reversed course in the final application submitted Wednesday to the Obama administration, guaranteeing that centers could keep their current rates and that health plans include them in their networks.

Iowa, the only other state currently using the private option, albeit on a smaller scale, also pays health centers at their full rate.

Medicaid is a state-federal program that covers the poor. The health law expands coverage in participating states to everyone under 138 percent of federal poverty level, or up to $15,600 for an individual, with the federal government paying the full cost through 2016 and states covering up to 10 percent of the cost in subsequent years.

State Perspective

When the federal government approved Arkansas’ plan last year, it asked the state and Arkansas’ 12 health centers to negotiate a new payment system. No deal has been reached though, so insurance plans have paid the centers the same discounted rates they negotiate with private physicians.

Arkansas Medicaid Director Andy Allison argues that Medicaid funding for health centers should be cut for the same reason the law cut federal funding to hospitals –they are expected to see fewer uninsured patients and therefore have less uncompensated care.

“We don’t agree with that,” said Alvin Sliger, Mid-Delta’s soft spoken executive director. He and other health center officials say they deserve higher reimbursements than private physicians because they will continue to treat sicker and poorer patients and under federal law, must offer broader services, including dental care, immunizations and mental health treatments. Unlike private physicians, moreover, the centers cannot limit the number of Medicaid or uninsured patients they treat. Those rules don’t change under the private option Medicaid.

Sliger also says its uncertain how quickly the uninsured will enroll in Medicaid —and, therefore, how many uninsured his clinic will still see.

Since the Medicaid expansion began in January, Mid-Delta has received $60 for routine office visits for Medicaid private option enrollees who are covered by Blue Cross and Blue Shield of Arkansas, compared to the $138 it gets from traditional Medicaid.

About 30 percent of Mid-Delta’s patients, for instance, have high blood pressure and 14 percent have diabetes—both higher than national averages. Slightly more than half are uninsured, 17 percent receive Medicaid and 90 percent have incomes below 200 percent of federal poverty level, or $23,000 for an individual — roughly the median income in the region.

The centers treated about 156,000 patients in 2011, the latest year for which figures are available, including 67,000 who were uninsured.

Massachusetts Example

Hawkins, of the national trade group, noted that in Massachusetts, more than one in five of the patients seen at health centers in 2011 were still uninsured, down from 36 percent in 2007 when the state went to near universal coverage. Despite the drop in that state’s uninsured rate, the actual number of uninsured residents receiving care at Massachusetts health centers increased by 6 percent between 2007 and 2011, as private physicians focused on those who had coverage, according to a study by George Washington University.

While health centers may lose some patients who see private physicians after they gain coverage, the Massachusetts experience suggests that many will continue to use the centers for primary care because they are nearby and offer needed services.

Health centers got a bonanza from the health law to help them gear up to treat newly insured people as well as those who still lacked coverage — $11 billion in additional federal funding over five years to expand and modernize. The nation’s 1,200 community health centers have thousands of sites and treat 21 million people a year, most of them poor.

Allison said he didn’t expect the pushback he has received. “I’m a little surprised at how they are reacting,” he said in an interview in Little Rock.

The Obama administration would likely have to approve a cut in centers’ Medicaid funding because the way they are paid is set through federal law, said Sip Mouden, executive director of Community Health Centers of Arkansas.

Meanwhile, the GOP-led Arkansas Legislature began meeting this month and it’s uncertain whether it will renew its private-option Medicaid expansion plan beyond June 30.

Despite all the uncertainty, Mid-Delta has continued enrolling its clients in Obamacare — with most joining Blue Cross and Blue Shield, the only private option plan available in the county.

“I am rejoiced and happy,” said Rosalita Lott, 60, who enrolled at the center last month. “It’s a lot of pressure off of me and I will be able to sleep tonight.”

BY KAISER HEALTH NEWS | FEBRUARY 21, 2014

By Phil Galewitz



States Aren’t the Only Ones Reforming Health Care.

Some of the most promising experiments to improve quality of care while cutting expenses are taking place at the local level.

Richard was a textbook case for Hennepin Health. The county-run Medicaid plan in Minneapolis had targeted a specific, expensive-to-treat population with the aim of reducing health-care costs and Richard—45 years old, uninsured and homeless—fit the bill. Instead of having his health problems, which included chronic back pain compounded by drug and alcohol abuse, managed through medication and therapy, Richard checked into an emergency room whenever he needed help. He had become what’s known in the emergency medicine world as a frequent flyer. Not only were his visits adding to the state’s already substantial tab for uncompensated care, the emergency room could not provide a long-term plan for his care. That’s why Richard was identified by Hennepin Health as the perfect candidate for a new, coordinated approach to handling chronic, costly users of emergency medical services.

Richard was assigned a coordinator to help him get ongoing medical attention through a regular primary care physician, as well as help in other areas of his life; it turns out that he had been homeless since he was 15. Under Hennepin Health, he’s now living in stable housing and is receiving regular preventive care for the first time in his life. Richard also is now living sober.

Multiply Richard’s experience times thousands or millions of patients, and a program like Medicaid can begin to see a substantial increase in quality of care for its beneficiaries and a decrease in the costs of providing that care.

The Hennepin approach is one of many cost-control experiments taking place nationwide. Such customized pilot programs have the backing of the Affordable Care Act (ACA), which specifically bankrolls ideas that shake up the way health care is delivered and providers are paid. There are three big ideas gaining interest and acceptance to attack persistent problems: the lack of coordinated care to treat the whole person, not just medical issues; the misuse of health care among people who have trouble navigating the complexities of the system; and the poor level of collaboration between health-care providers and the public and private sectors. Cost-containment efforts by states, including pilot programs in Arkansas and Oregon, have been widely reported. But some of the most promising experiments are taking place at the local level.

The driving goal behind Hennepin Health, which began as a pilot two years ago, is to provide holistic care for the urban poor and do it in a way that motivates everyone involved—from medical providers to county health-care officials—to save money. The incentives certainly seem right: Under Hennepin Health, the state gives the county a set amount of money per Medicaid client each month. Whatever the county manages to save goes back to the doctors in its network and also to future investments in the model.

The key to the approach is straightforward. It involves identifying frequent users of emergency rooms, such as Richard, and then steering them into primary care and other services. Hennepin officials use data from partner hospitals to identify individuals who regularly visit emergency rooms and who, in the past, weren’t connected to a primary care physician when they left. These individuals are now assigned a service coordinator, essentially a health-care and social services “quarterback” who oversees all of a patient’s health and social services needs. The coordinator then matches clients to clinics or health-care networks that offer a wide variety of services, from dental to mental health care. In fact, dental services alone have proved so attractive to clients that it has been a useful tool for keeping sometimes unreliable, unpredictable patients in the system, says Jennifer DeCubellis, area director of the Hennepin County Human Services and Public Health Department.

But the goal of creating a truly comprehensive, integrated system that meets more than just the clinical needs of patients requires a high level of coordination and cooperation among medical providers, government officials and other service providers. That’s never been easy to accomplish. Hennepin County had to persuade providers to allow it to embed county human services staff in hospitals, where they are now responsible for connecting patients with housing, employment and transportation, in addition to coordinating their care. “The biggest thing was getting people to see that each system didn’t have to build its own resources, and actually that [doing so] was detrimental,” DeCubellis says.

The experiment appears to be paying off. In its first year, Hennepin reduced projected costs by more than 5 percent per patient, and the county will put $1 million into new programming that’s expected to return another 30 percent in savings next year. For the costliest patients—the top 5 percent, who used 64 percent of program funding—the county has already saved between 40 and 95 percent per client. Those are the kinds of numbers that have drawn the interest of not only other localities in Minnesota, but health-care officials and providers nationally.

This more holistic, coordinated and preventive approach to health care isn’t new. North Carolina won an Innovations in American Government award in 2007 for Community Care of North Carolina, which consists of 14 regional health-care networks organized by community physicians, hospitals, and health and social services departments as a way to focus more coordinated and preventive care on high-cost users. Now the approach pioneered by North Carolina is catching on in places as varied as rural Minnesota and the urban northeast.

Southern Prairie Community Care, a 12-county consortium of health-care providers and county agencies in southwest Minnesota, is launching its own North Carolina- and Hennepin-style integrated, collaborative Medicaid program. In calculating whether it was feasible to introduce such a program in an area characterized by its far-flung geography, Mary Fischer, the group’s executive director, says that whatever challenges the group faced logistically were more than offset by long-established relationships among agencies and providers, which made the whole notion of coordination and cooperation feasible. “We will never be a place that can co-locate everything, but we see lots of opportunities in just aligning the various services and decreasing fragmentation through closer communication,” says Fischer.

The next step for Minnesota is using a statewide ACA innovation grant to move beyond Medicaid and Medicare patients and on to the rest of the state’s population by involving private health insurance companies. That will take negotiating with the insurers that have to structure the payments, but it will also require threading the needle with private doctors, says Scott Leitz, assistant commissioner of health care for the state Department of Human Services. “We’re not there yet.”

A key challenge in establishing a coordinated, cooperative and preventive program is tracking down the people who ought to be in it. Camden, N.J., tried an unusual approach: bringing aspects of police “citystat” programs to health care. Dr. Jeffrey Brenner, who had become familiar with mapping crime hot spots as a citizen member of a police improvement commission in the city, decided to see if the stat method might be applied to honing in on the city’s costliest patients. What he and Camden officials found was startling: 20 percent of patients accounted for 90 percent of hospital costs, and nearly half of the 77,000 city residents visited an emergency department at least once a year.

Using that data, Brenner in 2007 teamed up with a nurse and social worker, and they started making individual house visits in areas of high hospital utilization. The team then helped connect people to the services they needed to keep them out of emergency rooms. With the help of support from funders like the Robert Wood Johnson Foundation, Brenner ultimately created the Camden Coalition of Healthcare Providers. Today the organization’s staff numbers about 65 and is expanding with the aid of a grant from the Centers for Medicare & Medicaid Services. It’s also bringing the idea of medical “hot spotting” to new communities both urban and rural.

The approach that has evolved out of Brenner’s first hot-spotting visits remains simple: Teams made up of nurses, community health workers, dieticians, social workers—whoever is needed—are dispatched to patients who frequently visit the hospital. While the work can start in the hospital, home visits are typically an integral part of the hot-spotting approach. The work runs the gamut: helping patients understand their medicine regime, arranging for transportation to follow-up appointments, and connecting clients to primary care. Coordinators might even help a client obtain a gym membership or set him up with volunteer opportunities as a way to move him back into the mainstream and, potentially, a paying job.

Offering a range of services is critical to the success of such an approach, says Andrea Miller, the Camden Coalition’s senior program manager for new hot-spotting initiatives. “There’s such a stigma around high utilization [with the sense that those patients] are just not compliant,” says Miller. “But the truth is there are many barriers preventing them from getting what they need.”

With its first 36 patients—who as a group averaged 62 hospital and emergency room visits per month—Camden reduced average monthly health-care costs for the group from $1.2 million to about $500,000. Other communities have seen the same kind of hot-spotting success. A group based in eastern Maine, for example, started hot spotting in January 2012. Among the 44 patients who have 12-month post-intervention data, there’s been a 76 percent reduction in emergency department use and an 86 percent reduction in hospital admissions.

Last month, Maryland’s Howard County Health Department became the first government entity to launch its own hot-spotting team, with guidance from Camden. Using a $250,000 state grant, Howard is now hiring a nine-member team of registered nurses, community health workers and data managers to intervene with people who make frequent trips to the county’s general hospital. If Howard County realizes the same savings as other jurisdictions, the hope is to make the pilot a permanent fixture by getting both public and private insurers—as well as providers—to help fund the program, says Dr. Maura Rossman, Howard County health officer. “We think this might be something where anyone from insurers to hospitals may be interested in partnering,” she says.

One of the most obvious avenues for applying a more comprehensive and prevention-focused approach to the high cost of health care is to focus on such chronic conditions as asthma, diabetes, congestive heart failure, depression and chronic obstructive pulmonary disease.

Take Akron, Ohio, where about 11 percent of adults have Type 2 diabetes, several points above the most recent national median as calculated by the Centers for Disease Control and Prevention (CDC). That number alone may not seem jaw-dropping, but the trend is: If Akron and surrounding Summit County do nothing and the growth rate in Type 2 diabetes continues, fully one-third of the population will be diabetic by 2050. Compounding the problem is the fact that many of those with Type 2 diabetes don’t seek medical care until the situation is dire, and 31 percent of the diabetic population has no insurance. With hospitals losing more than $50 million a year in unreimbursed care costs, and with a widespread concern in the community that disease prevalence is a drag on the workforce, the city and county launched an initiative to tap the resources of as many groups as possible.

A research group, called the Austen BioInnovation Institute, took the lead as coordinator between more than 70 groups that cut across government, the health-care sector, religious organizations and nonprofits—each with a role in prevention as well as managing the care of people who are already diabetic. The institute, funded by Akron’s three major hospital systems, was the logical choice to lead the effort since it was created to do research and advance community health. With the help of a $500,000 CDC grant, what Akron calls its Accountable Care Community launched in 2011.

The core of the concept is to bring public health and clinical medicine together on a community level. “If you looked at a community,” says Dr. Frank Douglas, Austen BioInnovation’s president, “and mapped out whatever opportunities there were for care and prevention and could bring together resources on a local basis, then anyone living in a particular set of ZIP codes could reach out to an identified source who could triage them into an appropriate place so they don’t wait until an emergency [to seek care].”

Three competing hospitals offered the data to help make that possible. They’ve also lent their staff to teach nutrition and wellness classes, to host screenings at churches and to offer free care at libraries and elsewhere. Nonprofit community health groups have redeployed staff to monitor the cases of diabetics and ensure they’re managing their disease in cooperation with their primary care provider. The Summit County Public Health Department is also boosting its efforts, embedding staff in low-income housing to meet with people flagged by the hospital system. “You spend an hour at the doctor’s office and the other 23 hours at home,” says Donna Skoda, deputy commissioner of the Summit County Public Health Department. “That’s where those supports have to be.”

Government efforts aimed at encouraging healthier habits among citizens haven’t been limited to only public health or social services departments. Planning and transportation officials have also helped by making areas more walkable and providing greater access to public parks. Austen BioInnovation took a page out of Camden’s playbook, finding high-concentration areas of diabetes and then getting city planners to implement “road diets”—reducing the number of car lanes while adding bike lanes.

As in other jurisdictions that are trying to reduce health-care costs among their citizens, the early results in Akron are encouraging. Among a sample of 2,000 diabetics after the first 18 months, average monthly costs for health care have gone down more than 10 percent, saving $3,185 per person a year. More than half of participants lost significant amounts of weight, and emergency room visits were lowered by a range of one-third to one-half.

The program picks up on the lessons of others that have come before it: linking patients to their next step, and thinking beyond what they need from their doctors to stay healthy.

“It’s teaching people to lift up your head, look at what services are available around them, and finding ways to partner when we can,” Hennepin’s DeCubellis says. “If you’re not connecting people to their next location, their next program, they’re going to fall apart after they leave.”

Governing

Chris Kardish  |  Staff Writer



After Setbacks, Municipal Bond Sector Is Looking Up.

THE municipal bond market has been judged lately more by its failures than its successes, and the judgment has been harsh.

Interest rates on municipal issues rose last year, taking the yield on the Bond Buyer 20-bond municipal bond index to 4.75 percent from 3.85 percent, the largest increase in more than 30 years. And as prices move in the opposite direction from yields, the average municipal bond mutual fund tracked by the research firm Morningstar lost too much on its holdings for interest payments to make up the difference. Investors withdrew a net $58 billion from muni mutual funds last year as returns deteriorated.

A similarly sharp rise in yields on long-term Treasury bonds played a big role in the poor performance of municipal issues, analysts say, but so did some civic bankruptcies. The California cities of Stockton and San Bernardino filed for protection from creditors in 2012, and Detroit did the same last summer in the largest case of its kind ever.

Investors’ faith was shaken further when prices plunged on bonds issued by Puerto Rico. The American territory has $70 billion in debt, a prodigious amount relative to the size of its economy, which has been inundated with difficulties.

Interest on Puerto Rican munis is exempt from federal and state income tax, no matter where a bondholder lives. That has made them popular with well-off investors nationwide, especially in high-tax states like New York and New Jersey, who otherwise receive the state tax deduction only on bonds issued in their home state.

But Puerto Rican issues became far less popular last year, with some yields doubling to about 10 percent in the face of concern that the island’s credit rating would fall to junk status. It fell to that level last week when two ratings agencies downgraded it.

Developments on Wall Street and in Puerto Rico and Detroit have depressed municipal bonds, but their tax advantages and safety, compared with stocks or some other assets, almost always make them suitable holdings for investors of a certain age and a certain income, whatever the short-term outlook, financial advisers say. And the market is expected to improve in 2014 as fundamental financial conditions that influence it become more favorable.

“I’m more optimistic this year,” said Alan Schankel,  a municipal bond strategist at Janney Montgomery Scott. “I think the rising-rate environment will continue, although not dramatically. I think municipals will do better than other fixed-income investments.” He said that while downgrades have exceeded upgrades for the last few years, “I think that will reverse toward the end of the year.”

What investors are facing right now, he noted, are tax increases that went into effect a year ago but are likely to become palpable only in April, when the first returns are due that take the increases into account. Among the changes are a jump in the top federal income tax rate to 39.6 percent from 35 percent and a new 3.8 percent tax on investment income for high earners that was included in the Affordable Care Act. The increases will make well-off taxpayers “realize how valuable the tax-free status of municipal bond income is,” Mr. Schankel said.

At the same time, state and local governments have adjusted to their straitened circumstances since the financial crisis by curbing spending, he said. That helps munis in two ways, by improving their ability to meet bond payments and by limiting their need to float new issues. Add it all up, he said, and “the supply-demand dynamics are a little more favorable for municipals.”

Strategists at Citigroup also anticipate a healthier market. “We remain cautiously positive on our outlook for municipal credit over the next year, though some issuers will face their share of challenges,” they wrote in a recent note to clients. “Most state and local governments will continue to take the steps needed to balance available revenues with needed expenditures, minimizing the magnitude of actual payment defaults.”

They also highlighted the prospect of increased tax receipts as the economy recovered.

States are also addressing more effectively one of the biggest threats to financial stability that they and their cities face: runaway pension obligations. A report by Evercore Wealth Management noted that several states passed laws to limit their liability for retirement benefits to government employees.

California is expected to go further and place an initiative on the November ballot to amend the state Constitution to “enable cities to modify their existing pension programs, preserving only the vested earnings for existing employees,” the report states. “From the investor’s point of view, it would at last tackle what has become a major — and increasingly detrimental — factor in the long-term credit viability of municipal bond issuers.”

Whatever developments may affect the market, financial advisers recommend a healthy allocation to municipal bonds for almost anyone with a moderate to high tax liability.“If you’re paying 40 percent federal and state combined, at least half of your bond allocation should be in munis,” said David Molnar, a partner at HighTower San Diego, part of the HighTower nationwide advisory firm. “If you’re in higher tax brackets, then I would go higher, even to 85 percent.”

Elizabeth Ruch, a financial planner at Waddell & Reed in San Diego, counsels anyone middle-age or older and in higher tax brackets to keep about 20 percent of total investment assets in bonds, with all or nearly all of it in munis. Most investors should own funds rather than single bonds in the interest of creating a broad mix of issues, she added, and because professionals have better knowledge of what can be an opaque market with limited information available to novices.

Ms. Ruch finds municipal bonds especially good for well-off people past 70 1/2, who are required under federal law to take minimum distributions from their retirement plans. She contends, though, that most young investors should emphasize capital growth over the tax-free income of munis. “No one under 30 needs munis unless they’re as rich as Bill Gates,” she said. “They can take the risk of the stock market.”

As municipal bonds demonstrated last year, owning them can be risky too, but not as much as some think, Mr. Molnar said.

“Everything we’re hearing from Wall Street in the past six months is that bonds are bad,” he said. “Our view is that that’s overdone. You should own stocks, too, but munis and other bonds provide steady, consistent income and diversification.”

By CONRAD DE AENLLEFEB. 10, 2014



San Antonio Gives Up on Groundwater Plan.

More than three years after San Antonio Water System asked the private sector to develop plans for a new water supply for the growing, thirsty region, the utility has decided not to use any of them.

Instead, SAWS announced on Thursday, it will shelve three groundwater pumping projects that had made it to the final round of consideration in favor of expanding existing plans to desalinate brackish water in southern Bexar County.

One of the three proposals includes a controversial plan to pipe 16 billion gallons of water each year to San Antonio from underneath Val Verde County in West Texas. The plan had generated fierce opposition from water users along the Rio Grande, whose groundwater-fed flow could have been affected.

But the Val Verde County project may have actually been the most feasible, at least from a legal standpoint, because no groundwater conservation district exists in that county. The other two proposals San Antonio was considering were deemed unfeasible because they lie within groundwater districts that could could restrict pumping in the future. The utility said it was not worth paying tens of millions of dollars for infrastructure that may ultimately not have water to deliver.

“Groundwater law in Texas leaves too much uncertainty and risk for the private and public sectors,” said Robert Puente, the president of SAWS. “I hope that the proposers and cities across the state will join SAWS in calling for the Legislature to change the law so Texans can build projects to meet growing future demand.”

The move came as a surprise to John Littlejohn, founder of the Val Verde Water Company, who had submitted the proposal to pump groundwater from Val Verde County. Asked on Thursday whether he would try to sell the water to another city, he said he would have to weigh his options.

It was also a surprise to San Antonio officials who had been told by SAWS last year that their residents would likely have to pay at least 10 percent more for water in the short term to finance such groundwater pumping projects.

“It just goes to show you how quickly things change,” said SAWS spokesman Greg Flores. “We are conserving water better than we had planned, which means we can stretch our current resources out further.”

He added that a desalination plant SAWS plans to build could also treat more water than the utility had originally thought. The plant had been expected to provide 9 billion gallons of water each year, but Flores said SAWS may now be able to treat more than twice that amount.

Still, that won’t be easy. SAWS had planned to pump brackish groundwater from southern Bexar County, where no groundwater conservation district exists. To expand the capacity of the desalination plant, the utility will have to increase its pumping area to include land governed by the Evergreen Underground Water Conservation District, which has resisted SAWS’ efforts to take its brackish groundwater.

BY THE TEXAS TRIBUNE | FEBRUARY 7, 2014

By Neena Satija



Cradle-to-Grave Debt Load Leaves No Chicagoan Unburdened: Bloomberg.

Chicago is now the city of big debt, where each of its 2.7 million residents — from infants in diapers to senior citizens on fixed incomes — is on the hook for about $20,000 in long-term pension promises and bond obligations. Like the relentless snow clogging the city’s streets, it just keeps piling up.

Chicago isn’t bankrupt Detroit, junk-status Puerto Rico or New York at the brink of insolvency in 1975. Yet the city of gleaming skyscrapers along Lake Michigan’s shore tripled its debt load from 2002 to 2012, as it ignored annual pension payments and borrowed for capital and operating expenses. A $590 million payment for retirement obligations is due next year, threatening cuts in everything from police to garbage collection, a tax increase, or both.

The rescue Chicago Mayor Rahm Emanuel needs will have to come from another financial leaky boat, the state of Illinois, which has the lowest credit rating among U.S. states. Lawmakers in Springfield, the capital, on Dec. 3 approved retirement-benefit cuts to address a $100 billion state pension shortfall. Not, though, for Chicago.

“The legislature and the city council and the mayor need to come to fiscal reality and recognize this is not sustainable,” said Laurence Msall, president of the Civic Federation, a nonprofit research group based in Chicago. “They’ve created a bigger problem down the road, and now we are down that road. And there is very little road left.”

More Debt

The city is about to pile on more borrowing, worsening its status as the biggest carrier of per-capita debt among the nation’s most populous cities. Chicago plans to sell $650 million of bonds in the coming weeks, adding to liabilities that soared in the past decade.

In the 10 years starting in 2002, the city increased its bonded debt by 84 percent, to $7.8 billion, according to the Civic Federation. That added $1,320 to the tab of each city resident. Among the 14 major cities surveyed by the group, only New York recorded a higher per-capita increase, $1,555 in that period. The average jump was $324.

At the same time, Chicago’s per-capita pension obligations for teachers, police, firefighters, transit workers and other employees almost quadrupled, topping $11,800 in fiscal 2012. The combined debt burden from pensions and borrowing reached almost $19,600 per person in 2012, the federation said.

‘Fiscal Cliff’

It took years for Illinois lawmakers to address pension shortfalls. Chicago doesn’t have the luxury of a long debate. Like all other municipalities in the state, it must make higher retirement-fund payments next year, as required by a 2010 law.

“The work is far from finished,” Emanuel said in a December press release after lawmakers approved the bill cutting state pension benefits, saving Illinois an estimated $145 billion during the next 30 years. Chicago is “standing on the brink of a fiscal cliff.”

Moody’s Investors Service made a similar observation in July when it cut the city’s grade three steps to A3, six levels below the top, and tagged its general obligations with a negative outlook. A reduction of that magnitude was unprecedented for a U.S. city as populous as Chicago, according to Moody’s data since 1990.

The New York-based ratings company cited “large and growing pension liabilities and accelerating budget pressures” stemming from them.

Detroit Road

“Chicago is on the road to Detroit,” declared the headline on a Feb. 5 editorial in the Chicago Tribune. That’s an exaggeration, said Rachel Barkley, a municipal credit analyst at Morningstar Inc. (MORN) in Chicago.

“It is much more akin to New York — a diverse economy, third-largest city, economic heart of the Midwest, a stable population and a considerable tax base,” Barkley said. “However, they still need to address that liability.”

In a Jan. 16 report, she showed that Chicago’s debt load per person was the biggest among the 25 most-populous U.S. cities — and almost twice that of Puerto Rico, the U.S. territory that is groaning under $70 billion of bonds.

‘Flashing Yellow’

The downgrade means “flashing yellow lights for the investor,” said Richard Ciccarone, chief executive officer of Hiawatha, Iowa-based Merritt Research Services, which analyzes municipal finance.

“The good news is the breadth of their tax base and leadership, but they need some help from the state,” Ciccarone said. “They need the legislature to act — yesterday.”

Investors are demanding higher interest rates to own some Chicago bonds since the July downgrade. The extra yield buyers require over benchmark municipal debt on general obligations maturing in January 2022 has averaged about 3 percentage points since August, data compiled by Bloomberg show. That spread averaged only about 1.6 percentage points in the five months before the Moody’s cut.

Chicago plans to sell $650 million in general obligations by early March, Kelley Quinn, a spokeswoman for the mayor, said yesterday. Proceeds would go toward infrastructure, repaying debt and legal judgments against the city. The city hasn’t considered issuing pension bonds to meet retirement obligations, Quinn said.

‘Streaming Out’

In his annual budget address in October, Emanuel painted a portrait of residents and businesses “streaming out of Chicago” if the legislature doesn’t restructure the pensions.

“We will not preside over a city in which garbage is not picked up, graffiti is not removed, and libraries and other vital services must be shut down,” Emanuel said.

The city’s population shrank about 7 percent from 2000 to 2010, while New York and Los Angeles both grew at least 2 percent, Census data show.

Chicago’s debt-load challenge is complicated by a lawsuit filed last month by a coalition of labor unions claiming the state’s pension restructuring law violates constitutional protections against reducing benefits. Discussion with state lawmakers on how to resolve the city’s liabilities have included elements of the bill passed in December.

The outcome of the lawsuit is critical to easing the city’s debt load without driving away tax-paying citizens and businesses, said James Spiotto, a municipal bankruptcy specialist in Chicago.

“If you cut services and increase taxes, people will leave,” said Spiotto, managing director of Chapman Strategic Advisors. “And if you keep repeating it, you get into a death spiral. Eventually there would be fewer workers and fewer people to pay the pension debt.”

By Tim Jones  Feb 13, 2014 10:00 PM PT

To contact the reporter on this story: Tim Jones in Chicago at tjones58@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net



California Welcomes Insurance Coalition for Ride Sharing, Uber Joins In.

SAN FRANCISCO, Calif. — On Feb. 10, ride sharing companies took another major step toward establishing a foothold in the world of urban transportation when the California Public Utilities Commission (CPUC) officially recognized and welcomed the creation of the first ever Peer-to-Peer Rideshare Insurance Coalition.

The CPUC, the governing organization of ride-sharing civic technology companies such as Lyft, Uber and others, released a statement of welcome to the coalition that aims to collaborate with the insurance industry to support peer-to-peer ride sharing growth.

On Feb. 10, Lyft announced the list of members slated to attend the first Peer-to-Peer Rideshare Insurance Coalition meeting during the last week of February. The members are:

Though announced by Lyft in a blog on Feb. 5, this is the first time the CPUC has formally recognized its involvement as a participating observer in the coalition.

“I’m happy to see this diverse set of participants come together to find a market solution that will enhance insurance for the Travel Network Companies,” said CPUC President Michael Peevey, the commissioner assigned to TNC proceedings, in a CPUC release.

“I will keep a close eye on this, and if there is an insurance gap that has been identified and confirmed, then I will propose regulations that could close the gap if the market has not stepped in to do so,” Peevey said.

Marzia Zafar, director of the CPUC’s Policy and Planning Division, also confirmed today that Uber, which had not initially signed on as a founding member, was now a part of the coalition as well. A notable development, considering the company is currently defending itself in a liability lawsuit after a 6-year-old girl was killed on New Year’s Eve in San Francisco by a driver who claimed to be a part of Uber. The lawsuit, filed on Jan. 27 by the girl’s family, has pushed liability issues of ridesharing companies into the forefront of public debate.

On Sept. 19 the CPUC confirmed itself as the regulatory agency and set insurance regulations for ride sharing companies in addition to regulations such as criminal background checks, driver training programs, zero tolerance for drugs and alcohol, and 19-point vehicle  inspections. The current insurance coverage amount is $1 million per incident for ride sharing vehicles.

Leading up to the Sept. 19 decision, Uber was one of the few ride sharing organizations to advocate against the CPUCs authority over transportation networks, according the CPUC Decision Document. Uber argued the regulation may inhibit innovations within the industry and that “no public policy or public interest is advanced by such an extension of the law.”

The coalition’s first meeting is scheduled to take place in February, and a full list of members will be shared later this week.

Governing

BY NEWS STAFF / FEBRUARY 10, 2014



Pittsburgh Along for Ride with Lyft, Uber, but PUC Not.

Lyft users book a ride from an app and pay a suggested donation by credit card through a smartphone. DriverS use their personal cars with a pink mustache hooked on the front as identification for the car service.

The Pennsylvania Public Utility Commission is ready to take a razor to giant pink mustachioed cars that are offering rides in Pittsburgh.

The PUC said Wednesday the agency looking into complaints against Lyft, a driving service booked through a smartphone app, and other unlicensed transportation services and is “preparing to take action” to curb the practice.

PUC spokeswoman Jennifer Kocher said the agency has been made aware of Lyft’s operations in Pittsburgh, which began on Friday. She couldn’t say where the complaints originated.

“Generally speaking, we could file an internal PUC complaint or we can file criminally. Many times, we do both,” Kocher said. “The companies and drivers alike could be cited because (the drivers) are providing the actual service.”

“We’ll be heading in that direction.”

Lyft’s entrance to the Pittsburgh market reached the City Council Building this week when competitors, including Yellow Cab, asked the city to pass an ordinance authorizing police to cite unlicensed transportation services.

Jamie Campolongo, CEO of Pittsburgh Transportation Group, which owns Yellow Cab, was one of the people requesting the ordinance. Campolongo said last week Lyft’s operation is illegal and establishes an uneven business environment, because his company has to adhere to PUC rules and licensing. He could not be reached for comment on Wednesday.

Mayor Bill Peduto’s chief of staff, Kevin Acklin, said the mayor supports the new company and that it will provide needed competition to what he called “duopoly” among taxi services in the city.

“This is something we want to see. Other cities have adopted this,” Acklin said. “Whatever licensing happens is a judgement the Public Utility Commission has to make. We’re not going to make that judgement.”

Acklin said Peduto does not support having police ticket Lyft or other app-based driving services. He said the city would get involved only if the company did not pay the proper business taxes. Uber, a similar transportation service, lists Pittsburgh as one its operating cities.

“We’re not going to just come out of the box and say ‘no,’” Acklin said.

Lyft users book a ride from an app and pay a suggested donation by credit card through a smartphone. Drivers, who typically greet passengers with a fist bump, use their personal cars with a pink mustache hooked on the front as identification for the car service. The tech-savvy company is based in San Francisco and offers services in 20 other cities.

“Despite being Lyft’s newest market, we have already seen a very positive response from Pittsburgh community members, who see Lyft as an additional transportation option that is safe, affordable and reliable,” said Lyft spokeswoman Paige Thelen. “By supporting innovation and technology, Mayor Peduto and the city of Pittsburgh are paving the way for providing sustainable transportation options that make our cities safer and better connected.”

Fights over state and municipal regulations are nothing new to Lyft. There have been clashes with traditional cab companies in Atlanta, Dallas and Seattle as government leaders grapple with how the company should be regulated.

BY BOBBY KERLIK, MCCLATCHY NEWS SERVICE / FEBRUARY 13, 2014

©2014 The Pittsburgh Tribune-Review (Greensburg, Pa.)



Blackstone-Fueled Single-Family Home Boom Lifts Chicago: Bloomberg.

The tan, three-bedroom house on Chicago’s North Side sits half a block from a Family Dollar store and a pawn shop — an unlikely patch of gold to mine for Blackstone Group LP (BX) in the single-family rental market.

The world’s largest alternative-asset manager is among investors buying distressed properties in the Chicago area after private-equity and hedge-fund firms helped send property values surging in hard-hit markets such as Phoenix and Atlanta. That demand, along with low mortgage rates and a growing economy, is now fueling a recovery in the third-biggest U.S. city as it joins the housing resurgence that already has bolstered much of the country.

Chicago home prices climbed 11 percent in November from a year earlier, the biggest jump in almost a quarter century, according to S&P/Case-Shiller data. While gains are slowing across the country, the Windy City was one of nine areas in the group’s 20-city index to show a year-over-year increase in housing values.

“They flocked in the early recovery to places such as Phoenix and Las Vegas and parts of California, and Chicago and some other markets lagged behind a little bit,” said Lance Ramella, a senior vice president at John Burns Real Estate Consulting in Naperville, Illinois. “Chicago just wasn’t providing that yet and now it is.”

National Purchases

Institutional investors, led by companies such as Blackstone’s Invitation Homes and American Homes 4 Rent (AMH), have bought as many as 200,000 U.S. properties in the last two years, taking advantage of real estate prices that fell as much as a third from the 2006 peak, and rising demand for rentals among Americans who lost their houses in the foreclosure crisis. Their reach has stretched from the hard-hit regions of California to small Ohio towns to the sprawling suburbs of Atlanta.

Chicago trailed some other markets for attracting investor interest because Illinois is a judicial foreclosure state, meaning home repossessions require approval by a court, slowing down the process, and there were fewer opportunities to buy distressed real estate in bulk, Ramella said. Prices in other cities fell further than in Chicago, making them more appealing.

Now that values in other areas have bounced back so much, buying there isn’t as attractive and investors have turned to other areas, such as Chicago, for better pricing, Ramella said.

“They’re looking for distressed property and a lot of runway for appreciation,” Ramella said. “We’ve got a lot more room to appreciate here.”

Investor Purchases

In Chicago, investors accounted for about 20 percent of purchases in the first half of last year, according to Geoff Smith, executive director of the Institute for Housing Studies at DePaul University in Chicago.

Like the portfolios of other investors, Invitation Homes’ Chicago-area holdings are mostly filled with properties in suburbs such as Barrington and Oak Park. The smattering of houses they own in the city itself is evidence that the rebound is starting to broaden. Even in some neighborhoods where prices fell more than the rest of Chicago during the foreclosure crisis, values are climbing.

“Those hard-hit areas are seeing some improvement recently,” Smith said. “But they have a ways to go and they’re in a really big hole.”

Invitation has a reddish-brick, four-bedroom, 1,147-square-foot home for rent on tree-lined Moody Avenue for rent for $1,850 per month. The house is about 10 blocks west of Chicago Midway International Airport and about 15 miles from the Chicago home of President Barack Obama.

Chicago Trailing

Chicago has trailed the rebound of the majority of metropolitan areas in the S&P/Case-Shiller index, including Phoenix, Las Vegas, Atlanta, Los Angeles, San Francisco, Minneapolis, Miami, and even Detroit, which is mired in the largest municipal bankruptcy in U.S. history. Its 11 percent gain in November prices, while the city’s biggest since December 1988, was still less than the national average of 13.8 percent.

High unemployment and an overhang of foreclosed homes have helped contribute to Chicago lagging behind the housing recovery, said Brad Hunter, the chief economist at housing-research firm Metrostudy. The area’s jobless rate was 8.3 percent in December, the latest available figures, and reached as high as 11.9 percent in January 2010. The U.S. rate was 6.6 percent in January, according to the Labor Department.

Areas such as Phoenix and Las Vegas were among the first markets to come back after the housing bust as private-equity funds and other buyers sought bargain prices. In the Chicago region, investors weren’t a big part of the buying market in 2012 and the early part of 2013, Smith said.

Invitation Homes

Invitation Homes entered the market in September 2012, according to Andrew Gallina, a spokesman for the Dallas-based company. Its house near the Family Dollar (FDO) on North Central Park Avenue on the North Side is in the Albany Park neighborhood. It sold for $380,000 last year, according to a warranty deed filed with the Cook County Recorder of Deeds in November. Invitation Homes’ website earlier this year listed the monthly rent as $2,800.

For competitive reasons, Invitation Homes doesn’t disclose specific data such as number of homes owned or occupancy rates, said Gallina, a spokesman for the company.

“We enjoy healthy occupancy in Chicago, as we do in all of our markets,” Gallina said.

Highest Incomes

American Homes 4 Rent, the largest single-family rental company after Blackstone, owned 1,443 homes in the Chicago region, valued at $211 million, in the third quarter. The average annual rental income from the properties is $19,171, the highest of the Agoura Hills, California-based company’s markets.

The publicly-traded company, founded by B. Wayne Hughes, has acquired more than 21,000 rental homes across at least 22 states in the U.S. The shares have returned 5.1 percent since the July initial public offering, including reinvested dividends.

The Chicago area’s real estate swings have been less severe than in other locales. Phoenix home prices fell 56 percent from their peak in June 2006 to their trough in September 2011, according to S&P/Case-Shiller indexes. Since that bottom, prices rose 45 percent. In Las Vegas, which peaked in August 2006, prices dropped 62 percent until bottoming in March 2012. They’ve since climbed 42 percent.

By comparison, Chicago home prices declined 39 percent from the peak to their trough in March 2012. Since then, they’ve risen 23 percent.

Demand Rebounding

Sales demand is rebounding as buyers take advantage of low mortgage rates before expected increases as the Federal Reserve unwinds its stimulus program aimed at reducing borrowing costs. The average rate for a 30-year fixed mortgage was 4.23 percent last week, up from a near-record low of 3.35 percent in May, while still below the historical average of more than 6 percent over the past 20 years, according to Freddie Mac.

Home sales rose 8 percent to 8,126 in December from a year earlier in the Chicago metropolitan area, the Illinois Association of Realtors said Jan. 23. The median sales price jumped 18 percent to $177,000. Across the U.S., the annual pace of transactions declined from a year earlier.

In the city itself, sales climbed 12.5 percent from a year earlier, and prices rose 13.5 percent to $210,000, according to the Realtors group.

Investor purchases play “a real role” in boosting the market, said Jim McClelland Jr., a partner and chief operating officer at MACK Cos., which owns about 1,100 rental units in the Chicago area, mainly in the south suburbs, 95 percent of which are single-family homes.

Business Backbone

McClelland said MACK buys about 30 houses a month and that plenty of supply remains for the company to expand. Single-family home rental is the “backbone of our business,” he said.

Home prices are still down 25 percent from their peak in September 2006, according to S&P/Case-Shiller data. Foreclosures and short sales accounted for 31 percent of home sales in December in the Chicago area, compared with a national average of 14 percent, according to Lanny Baker, chief executive officer of ZipRealty Inc., based in Emeryville, California.

The relatively high number of foreclosures remain a scourge for the market, said Dory Rand, president of the Woodstock Institute, a Chicago-based nonprofit research group that studies foreclosures and housing.

“Too often, people read the headlines and hear the news about the economic recovery, the housing recovery,” she said. And “they think it’s happening everywhere, when in reality it’s not.”

For all the interest from investors, they might not be enough to maintain the recovery if prices rise too much, said Smith of DePaul. In that case, the question becomes if there will be enough owner-occupiers to fill the gap.

“That’s kind of the big question in terms of how sustainable the recent price gains in the housing market are,” he said. For investors, “they see opportunity, but if prices go up then the math so to speak might not work as well for them.”

By Brian Louis  Feb 14, 2014

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net

To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net; Rob Urban at robprag@bloomberg.net



What Government Can Learn from Colleges about Transportation Policy.

A new report details transportation policies on college campuses that could help municipalities promote public transit, biking and car-sharing services.

Cities should learn from college campuses for setting transportation policy, according to a new report by Frontier Group and the U.S. Public Interest Research Group (PIRG) Education Fund.

The report highlights the city of Palo Alto, which is studying options for a transportation plan that would encourage drivers to switch to mass transit, biking and car-sharing services. The city’s goal is to reduce single-occupant car trips by at least 30 percent. As the Palo Alto Weekly reported last September, the city is likely to borrow ideas from nearby Stanford University, which successfully reduced solo driving by offering “a fleet of about 60 shuttle buses, free Caltrain passes, and cash incentives through the Commute Club, whose 8,000 members shun solo driving.”

The report’s authors argue that city leaders have some of the same incentives for de-emphasizing car-related commuting as their college counterparts. Some colleges are supporting pedestrian, bike and transit-related options as a way to free up real estate that would otherwise go to parking lots. Expanding transit options may also serve as a way to attract and retain a young workforce — the authors point to research by the Urban Land Institute last year that found members of the demographic group known as Generation Y breaks from older Americans in placing a higher value on walkable communities and access to public transit.

In some cases, colleges have become more experimental than cities in implementing transportation policies that are mindful of environmental impacts and efficient in using land, said U.S. PIRG senior analyst Phineas Baxandall, the report’s lead author. “Some of the motivations [for universities] are more direct,” he said. “Their land is even more limited. They don’t have any powers of eminent domain to deal with land problems. They’re even more focused on young people than cities are.”

Much of today’s college transportation experiments happen around bikes. For example, the University of Madison-Wisconsin has increased its share of students biking to campus by investing in on-campus bike repair services, subsidizing membership in the city’s bikeshare program and increasing the school’s supply of bike racks. The University of Dayton went a step further by offering free bikes to a random selection of freshmen who pledged not to bring a car to school for their first two years. The University of Colorado, Boulder, has contributed funding to city construction of underpasses with bike lanes and pedestrian walkways, so students, faculty and staff can reach campus without using a car.

The report also details a number of university programs that reduce the cost of using buses, subway cars and trolleys. About 104 colleges offer a Universal Transit Pass, better known as a U-Pass, which gives students unlimited and free access to local transit, according to the Association for the Advancement of Sustainability in Higher Education (AASHE). The map below shows the distribution of those discounted and free transit fare programs across the country; however, Baxandall said college representatives have contacted U.S. PIRG after the report published Feb. 5 to say that many more colleges offer discounted and free college transit than what AASHE captured.

For schools with a high proportion of commuters who live too far to bike to campus on a regular basis, the report points to another best practice at the University of California, Davis (UC-Davis), which offers incentives to carpool. UC-Davis has a carpooling program called goCarpool, with a variety of perks including discounted parking permits, reserved spaces and a pre-tax payroll deduction for the cost of parking permits.

J.B. Wogan  |  Staff Writer

jwogan@governing.com @jbwogan



Jersey City Joins Paid Sick-Time Movement.

Across the country, only a handful of state or local governments require businesses to offer paid-sick days. Now two cities in New Jersey have joined the pack. Jersey City became the first city in the state to pass a sick-days ordinance last September. Newark’s interim mayor, Luis Quintana, signed a similar measure Jan. 28.

Paid-sick time is but one response among elected officials to the current national debate over income inequality and poverty. Jersey City Mayor Steve Fulop was also a prominent voice in support of New Jersey’s minimum wage ballot measure last year. While requiring paid-sick days and raising the minimum wage have been popular responses among Democrats, some states have seen bipartisan support for creating or expanding state-level tax credits for working poor.

So far, Connecticut, the District of Columbia, Seattle, Portland, Ore., and San Francisco have paid-sick-leave laws. Jersey City’s ordinance went into effect Jan. 24 and both New York City and Newark have ordinances set to take effect later in the year. Each law is different in terms of which businesses must comply with the law, how long before an employee qualifies and how many days of paid-sick time a worker can accrue. To date, cities have been more active in passing paid-sick laws, though lawmakers in Vermont, Washington state, Hawaii and South Carolina are considering legislation this session.

In Jersey City, any business with 10 or more employees must offer paid-sick time to any employee who has worked for at least 90 days. Workers can earn up to five paid-sick days per year. The law also requires that businesses with fewer than 10 employees offer up to five days of unpaid-sick days per year.

Governing spoke with Fulop Jan. 31 about the ordinance. The following transcript has been edited for style and clarity.

I was curious if you did any kind of survey of businesses. Was there any effort to see what the impacts would be ahead of time?

The agreement with the business community and the labor community was Jersey City would pay for a study via Rutgers University a year after initiation to understand the impact and to see what needs to be changed. We’re committing money towards that.

We want to make sure that we have a model that works for everybody and our goal is to lead the state of New Jersey in job creation. We don’t want to hinder that, but at the same time, we want to make sure we have policies in place that are meaningful to working families. So we’re trying to have that balance.

I know that the District of Columbia initially passed a partial paid-sick-leave ordinance, but it left out people in the fast food industry. Your version would apply to those workers, right?

Yes, absolutely, it would. If you employ 10 or more in Jersey City, you are required to provide paid sick leave. It’s earned. It’s not a giveaway. It’s not additional vacation days. There’s an education component. There’s a recourse component. It’s based on time spent working for the employer.

Were there any adjustments you made to the law based on business concerns?

We tweaked the number of days. We tweaked the number of employees. We think what we’ve implemented is very fair and balanced for where we’re situated in the region.

What about seasonal workers? Did you have a provision for, say, a company that hires teenagers every summer for all four years of high school?

No. We’re not separating out different types of employees. We didn’t make exemptions. The rules are the rules.

Prior to this law being passed, what was the city’s own policy regarding sick time?

Our workers are union workers, so they are entitled to sick time. It’s all contract negotiated for us.

What about this moment seemed like it was the right time to test this out?

You know, as the expression goes, ‘It’s always the right time to do the right thing.’ When the economy is perfect or great, people are going to say, don’t do anything to disrupt it. When the economy is recovering, people are going to say, don’t do anything to disrupt it. Your special interests are always going to take a position saying that now is not the right time. So, I view it as now is as good a time as ever. It’s going to be a net benefit to families.

BY J.B. WOGAN | JANUARY 31, 2014

jwogan@governing.com @jbwogan



Long Bonds Gain in Best Month Since ’12 With Yields: Bloomberg Muni Credit.

The longest-maturity municipal bonds have gone from market laggards to the best-performing area of local-government debt, a boon to issuers locking in borrowing costs for decades.

Municipal obligations due in 22 or more years have earned 3.6 percent in 2014, beating shorter maturities and surpassing the 2.4 percent gain for the entire $3.7 trillion market, Bank of America Merrill Lynch data show. January was the best month for the longest-dated debt in two years.

As the Standard & Poor’s 500 Index (SPX) extends losses to a fourth straight week while inflation remains subdued, investors have renewed confidence in lending to municipalities for lengthier periods. Issuers last month sold tax-exempt, 30-year bonds to finance a home for sharks at the New York Aquarium, and for a National Football League stadium in Minneapolis.

“For investors that want income, the long end of the market looks a lot more attractive than the shorter end,” said Clark Wagner, director of fixed income in New York at First Investors Management Co., which oversees about $1.5 billion of munis.

The increased demand for longer maturities is a reversal from 2013, when the securities lost 6 percent, the most since 2008, and trailed other market segments, Bank of America data show. Investors are finding value in longer munis when comparing yields with those on Treasuries as well, Wagner said.

Fund Appetite

Last month, mutual funds focusing on longer-dated local-government debt received the most money since September, according to U.S. Lipper Fund Flows data.

The S&P 500 dropped the most since June yesterday after a private report showed U.S. manufacturing slowed more than forecast in January, fueling questions about the strength of the economic recovery. The index of shares set a record high last month.

Meanwhile, the Federal Reserve’s preferred inflation gauge has been below the central bank’s target since April 2012. Subdued inflation preserves the value of longer-maturity bonds’ fixed payments.

“The relative value is much better out long because it performed so poorly last year,” said Daniel Solender, who helps oversee $15 billion of munis at Lord Abbett & Co. in Jersey City, New Jersey.

Extra Yield

Investors receive about 3.5 percentage points of extra yield when buying 30-year benchmark munis rather than those maturing in two years, exceeding the five-year average spread of 3.3 percentage points, Bloomberg data show.

“The short part of the market did well last year,” Solender said. “So there the yields are low and the opportunities are not as great.”

Compared with federal debt, longer-dated munis are the cheapest part of the local-bond market.

Thirty-year bonds yielded 3.9 percent yesterday, close to the lowest since June and compared with 3.53 percent for similar-maturity Treasuries. The ratio of the interest rates, a measure of relative value, was about 110 percent, the highest since November. The greater the figure, the cheaper munis are relative to federal debt.

Shark Home

New York City’s Trust for Cultural Resources on Jan. 31 sold about $44 million of tax-exempt revenue debt rated three steps below benchmark munis to finance expansion of the aquarium in Coney Island, Brooklyn. More than half the debt matures in 2038 and 2043, Bloomberg data show.

The plans include a new 57,500-square-foot building that will house 40 sharks and other species of fish and invertebrates, according to bond documents.

Minnesota last week sold $462 million of bonds repaid with annual appropriations from the legislature for a new stadium in Minneapolis for the NFL’s Vikings. The debt is rated two levels below top-rated obligations.

A June 2043 maturity priced to yield 4.12 percent. The tax-exempt bonds have gained since their sale, trading yesterday with an average yield of 3.87 percent, Bloomberg data show.

Signs the economy may be losing momentum have cooled speculation for higher interest rates, Solender said.

Interest rates on 30-year Treasuries will climb to 4.24 percent in the fourth quarter, according to the median forecast of 52 analysts in a Bloomberg survey. In September, the median forecast was for 4.35 percent in the fourth quarter of this year. Bond prices move in the opposite direction of yields.

“The economic numbers have not been as strong as some might have anticipated,” Solender said. “The stock market performed so well last year and is not doing as well this year. All those factors are making some reassess that outlook.”

By Michelle Kaske  Feb 3, 2014 5:00 PM PT

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net



Illinois Pension Fix Ends Bleeding Before Bond Sale: Bloomberg Muni Credit.

Illinois’s borrowing costs have fallen to the lowest level in six months as investors join Governor Pat Quinn in wagering that a law bolstering the worst-funded state pension system has “stopped the bleeding.”

The extra yield demanded on 10-year Illinois debt relative to AAA munis reached 1.43 percentage points on Jan. 30, the least since July 18, as the state prepares a $1 billion general-obligation bond sale this week, according to data compiled by Bloomberg. The fifth most-populous state already spared taxpayers more than $20 million on an offering in December, less than two weeks after legislators passed a pension bill that saves $145 billion over 30 years.

Illinois is returning to the $3.7 trillion municipal market after being spurned by investors over a pension-funding ratio of 40.4 cents on the dollar, the weakest of any U.S. state, and a credit grade that’s the lowest. Investors are signaling they agree with Quinn, a 65-year-old Democrat, who in his State of the State address last week said Illinois is making a fiscal comeback.

Illinois “is perceived as being on the right trajectory,” said Konstantine “Dino” Mallas, who helps oversee $20 billion of munis at T. Rowe Price Group Inc. in Baltimore. “I wouldn’t say they’re out of the woods, but maybe they’ve stopped digging themselves into a deeper hole.”

Python Slain

The state has become one of the most prominent examples of governments across the U.S. that face swelling retiree obligations, which forced officials to allocate tax dollars away from services such as education and infrastructure. Quinn has likened the pension expense to a python strangling the state’s finances.

“We can tell the people of Illinois we stopped the bleeding,” Quinn said in his address. “We turned the corner.”

Adjusted net pension liabilities increased for 38 states in the 2012 fiscal year, Moody’s Investors Service said in a report last week. Though Illinois’s burden is the highest among states, rising interest rates and gains in stocks reduced the obligation by about 9 percent, according to preliminary 2013 data collected by the New York-based company, which ranks the state A3, four steps above speculative grade.

Updated projections show Illinois’s new pension law will save $145 billion over 30 years, according to offering documents for this week’s sale. That’s down from an initial $160 billion estimate. Even so, the system is expected to be fully funded by 2039, earlier than forecast, the documents show.

Appreciative Investors

“Investors indicate a significant interest in Illinois’s bond offering,” John Sinsheimer, the state’s director of capital markets, said in a statement. “They tell us they understand and appreciate the hard work that went into the passage of our pension reform law.”

The most frequently traded Illinois securities are taxable pension bonds due in June 2033, according to data from the Municipal Securities Rulemaking Board. The debt traded last week at an average yield of 5.36 percent, for a spread of about 2.22 percentage points, close to the narrowest in at least a year.

The measure hasn’t changed Illinois’s negative outlook from Moody’s and Fitch Ratings. Standard & Poor’s said the state’s grade could be raised or cut in the next two years, depending on how the law is implemented. S&P and Fitch both confer an A-ranking to the state, equivalent to the Moody’s rating.

Catching Up

Illinois has outperformed a broad municipal-bond rally as investors bet its fiscal health is improving. Its bonds have gained 2.6 percent over the past three months, the most among the 27 states tracked by S&P index data.

“Given that the spread is wider in Illinois than other states, the potential for Illinois to outpace is greater — to catch up to other states,” said Robert Amodeo, head of munis in New York for Western Asset Management Co., which oversees $28 billion in local debt. “Illinois’s fiscal condition is better today than it was a few years ago.”

Proceeds from this week’s deal will fund school construction and transportation projects under the Illinois Jobs Now capital program. Quinn said in his address last week that the state has invested more than $31 billion into roads, bridges and highways through the initiative.

Legal Challenges

The state may have to boost yields to find enough demand for such a large offering, Amodeo said. While the spread to AAA munis is already wider than any other state’s, investors will demand compensation for the risk that the pension law will be overturned in court and that lawmakers won’t extend tax increases set to be phased out in fiscal 2015.

“They will find sufficient demand to match that size; it may just cheapen up a bit,” Amodeo said.

A union coalition filed a lawsuit last week claiming the December pension bill is unconstitutional and amounts to “theft.” It joins retired teachers and state employees in challenging the legislation. Illinois acknowledges in offering documents that more groups may follow.

The plan lawmakers passed last month addresses the $100 billion public pension shortfall through smaller cost-of-living adjustments and later retirements.

“Teachers, nurses, emergency responders, and other workers and retirees will not stand by while politicians try to take away their life savings illegally,” state AFL-CIO President Michael Carrigan said in a statement.

Tax Hurdle

The Democratic legislature raised the individual income tax rate to 5 percent from 3 percent in 2011. The levy is scheduled to drop to 3.75 percent after Dec. 31. Including the promised reduction in the corporate tax rate, Illinois’s collections would fall by as much as $5 billion annually, offering documents show.

“One of their largest hurdles is on the revenue side,” Mallas of T. Rowe Price said. Should lawmakers fail to extend the higher tax rates, it would be “very disappointing” for investors, he said.

Illinois may benefit from a lack of supply. States and cities issued $12.6 billion through Jan. 24, down 33 percent from the same period last year, data compiled by Bloomberg show.

As withdrawals from muni mutual funds have abated, yields have fallen to close to the lowest levels since June. That was when the state last issued tax-exempt general obligations, amid the worst monthly rout for state and local bonds since the financial crisis in 2008.

By Brian Chappatta  Feb 2, 2014 5:00 PM PT

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net



D.C. Council Decriminalizes Marijuana Possession.

The D.C. Council voted Tuesday to eliminate criminal penalties for possession of marijuana but left smoking it in public a crime, keeping alive concerns about racial profiling in pot arrests in the District.

With an 11 to 1 vote, several council members reversed their previous support for a more far-reaching measure, weakening an effort to join the quarter of U.S. states that have decriminalized small amounts of marijuana.

While they stuck with their plans to drop possession to a civil offense — akin to a parking ticket — council members decided not to decriminalize public smoking. They did, however, reduce the maximum jail sentence from six months to 60 days.

“I do not want the public smoking of marijuana around my kid — I do not,” said the council’s chairman, Phil Mendelson (D), raising his voice to press his point. “I do not want to have to somehow rationalize to her why that’s okay . . . and I dare say that I’m not alone as a parent.”

Mayor Vincent C. Gray (D) also withdrew his unconditional support for decriminalization. In a letter Tuesday to the council, he and Police Chief Cathy L. Lanier warned that removing the threat of jail time could lead to widespread public smoking of the drug in the District.

But proponents accused the council of thwarting the original measure’s intended effect of protecting low-income African Americans, who because of crowded quarters in city apartments or public housing are more apt to smoke outside and be targeted by police.

According to recent studies, blacks account for nine out of 10 arrests for simple drug possession in the District, although they account for less than half of the city’s population. Rates of drug use among adolescents differ marginally by race.

FEBRUARY 5, 2014

View the full story from the Washington Post:

http://www.washingtonpost.com/local/dc-politics/dc-council-weakens-bill-to-decriminalize-marijuana/2014/02/04/508eaabe-8d27-11e3-95dd-36ff657a4dae_story.html?hpid=z6



What Happens to Riverside's Magic Wi-Fi System?

The future of Riverside, Calif.’s Wi-Fi network remains undecided after a contentious discussion during a Jan. 28 City Council meeting. Chief Innovation Officer Lea Deesing presented a summary of the network’s history, which dates back to 2006, along with the costs of several options the city has going forward. Deesing recommended “winding down” the existing network and focusing new Wi-Fi efforts on more high-use areas. The City Council, however, had concerns about costs and possible lapses in service, while several residents shared concerns that their neighborhoods have no other way to access the Internet.

The one thing everyone agreed on was that the people want Internet access – the problem is finding a cost-effective solution that makes good on Riverside’s promise to provide Internet to the people.

“As technology rapidly advances, we are now facing a difficult decision of what to do with the network,” Deesing said during her presentation. The equipment that’s needed to replace broken or damaged equipment in the network is no longer manufactured, and the city hasn’t budgeted enough money for continued operation. Riverside’s Wi-Fi network also does not technically reach broadband standards as download speeds are only 1 Mbps, while broadband specifies minimum speeds of 6 Mbps download and 1.5 Mbps upload.

Several city services also rely on the Wi-Fi network for video feeds, including eight police cameras, four cameras used by the Riverside Downtown Partnership, three public works cameras and one public utilities camera. The cost to continue using these cameras without the existing Wi-Fi network would be $25,000 one-time and $15,000 ongoing, Deesing said.

The camera issue is one of the cheapest and simplest problems to solve where the city’s Wi-Fi is concerned, however. Riverside spends an estimated $718,000 per year to maintain the Wi-Fi network, but there’s only $378,000 budgeted for this fiscal year, which means the city has a decision to make. Deesing presented several options, including: keeping the network as it is now; maintaining it in-house rather than paying a contractor; building a new network; discontinuing the network; or winding it down and refocusing on high-traffic areas. The last option was Deesing’s recommendation.

Taking over in-house was not found to be more expensive the first two years, Deesing said, and overall was not found to be a cost-effective option. Keeping the network the same carries a high risk of incurring additional costs because the equipment is old, which is why she didn’t recommended this option. Deesing also provided statistics showing that the network is used less than officials had expected, which makes continued financing difficult to justify.

Deesing provided statistics for 2013 that showed that 42,000 devices connected to the city’s Wi-Fi network each month, accounting for about 147,000 logins. More than half of all users log in just once per month. A program offered through SmartRiverside gives students computers and a wireless card to access the free Wi-Fi network to help close the digital divide, but the city found that fewer than 5 percent of those devices actually connect to the network. “We were surprised by that,” Deesing said.

A survey of about 6,500 student households by the Alvord Unified School District and Riverside Unified School District found that 4 percent of households used the city’s network for home Internet use, while about 2 percent used it while away from home.

Building a new Wi-Fi network would cost the city about $6.5 million, not including software and maintenance costs, Deesing said. She also pointed to Seattle and Houston as examples of administrations that canceled Wi-Fi programs because they were too expensive.

Discontinuing Riverside’s network would take six to nine months and cost about $175,000 if decided this year, Deesing said. If undertaken the following fiscal year, discontinuing the network would cost $200,000 to $250,000 because of electricity costs in the interim time.

Deesing pointed out that many businesses already provide free Wi-Fi to customers that overlaps with the city’s network. She recommends winding down the network and refocusing city efforts on hot spots like the mall, convention center, city libraries, community centers and museums. This could eventually cost as much as $500,000, she said. Deesing recommended that the city begin winding down the network on July 1 in order to give everyone time to prepare for the change.

One concern raised by the City Council was a possible lapse in service if Riverside doesn’t start building the new hot spots before the existing network is wound down. Deesing estimated that the cost to eliminate a lapse in service would be about $400,000 and did not recommend such a course.

One citizen who spoke after Deesing’s presentation said he was “very disappointed” that service would be discontinued because in his neighborhood many young students wouldn’t have access to the Internet in their homes if not for the city’s Wi-Fi network.

Another citizen complained that the city is overly focused on the downtown area, while ignoring the neighborhoods and people who lack Internet access. “Riverside is a whole area! Not just a downtown speck and a few libraries,” the woman said.

The motion was continued, meaning the decision has been delayed until an unspecified date.

BY GOVERNMENT TECHNOLOGY | FEBRUARY 5, 2014

By Colin Wood



How Municipal Bond Dividend Cuts Impact NAV Performance And Investor Sentiment.

Last year, we penned an article about why we thought Municipal bond CEFs were about to suffer numerous and painful distribution cuts. The key data that suggested the cuts to our firm was a downward move in average Relative UNII (underdistributed net investment income) from +23% to -18% in only seven months. For more detail, you can read the article on our blog under the December 2012 section.

What is UNII? UNII is a balance sheet item for a closed-end fund that helps account for retained or overpaid income distributions. Relative UNII is calculated as the funds UNII balance divided into the amount of one-year income-only yield. We have used this data point to normalize our UNII analysis for the past 6 years. We believe it allows for better fund-to-fund comparisons. Our firm’s primary research is based on comparing various data on CEFs to peer-group data and to themselves over time. In fact, UNII was the data point we wanted access to when we originally created our CEF Universe report in early 2008.

CEF Advisors argues that the direction of UNII over time is more important, than if for example, the balance is reported as +$0.10 per share vs. -$0.10 per share. To read an earlier article on UNII and UNII trend, please visit our blog under the March 2013 section. This data point trending down, suggested that Muni funds, as a group, were pulling from all available UNII to meet their dividend policies until forced to make a dividend change. Earnings coverage for these funds was maintained at about 98%, without a significant number of National Muni Bond CEF dividend cuts during the same time period, averaging only 2 dividend cuts a month.

What is Earnings coverage? It is the average earnings of the fund dividend by the current distribution amount (net investment income is the primary source for most muni bond funds). It is then adjusted to cover the same time period. For example, if average earnings covered a three month time period at the fund, we would compare it in percentage terms to three months’ worth of distributions.

We suspected these funds would pull UNII to meet their dividend policies for as long as possible. If and when they ran out, we believed that Fund’s board of directors would have to start adjusting distributions downward to meet the manager’s investment results and market expectations. Two factors contributed to the timing of when we expected the dividend changes to occur.

First, we noticed for the first time since we tracked the data in 2009, that a few National Muni Bond CEFs were reporting some of their distributions as return of capital (ROC). RoC is a somewhat common occurrence for equity CEFs, and has pockets of acceptable reporting for taxable bond CEFs. However, to our understanding, has been historically absent from the municipal bond sector. In our opinion, this was the distress at the fund level that suggested UNII balances had generally been eroded and that cuts should be coming. We covered return of capital in an article posted to our bog in the October 2013 section.

Second, we noticed that 45, or almost half of national muni CEFs were expected to announce their next distribution amounts in the next week. All but 7 National Muni funds were expected to announce their next dividend amount during the month of December. Almost a third (30%) of those funds ended up reducing their distribution levels by an average of -6% according to fund press releases that week. This meant that for every dollar that investors were expecting of income, they would end up receiving on average $0.94 going forward. This was the first round of widely painful dividend cuts to muni bond CEF investors.

The Aftermath? In January 2014 we thought it would be interesting to see how discounts and performance had been impacted by the stress and market reaction to the December 2012 dividend cuts. In our experience the more homogeneous the data analyzed, the easier it is to see what is actually going on and to filter out some of the noise caused by outside, sometimes unknown factors. We searched for a core group of CEF national municipal bond funds that were highly similar to each other. We started with the 101 non-Build America Bond National Muni Bond CEFs. We required Leverage over 20% of assets, Liquidity over $333 per day, Average Duration between 6-16, Rated Bonds averaging A or AA (investment grade, no BBB or BB). This reduced the list down to 56 core funds. Making things easy, all but one of these funds existed in November of 2012 (and met the same screening metrics). We used our CEF Universe data to produce these results (CEFuniverse.com) with a summary table below.

This group of example funds had a relative movement of -8.24% to NAV as seen in the dramatic widening of the discount during 2013. With both discount widening and net asset values falling, the average yield increased to 6.8% (even with dividend cuts lowering distribution levels). Not all funds cut, but of the 97 National Muni CEFs in existence on November 30, 2012, about 48% of Muni CEFs reduce their yield by an average of -6.5% during the year.

As seen in the next above, Municipal CEF’s that cut distributions had a 1 year average NAV TR of -8.85%% and the muni CEFs with increases have an average 1 year NAV TR of -5.81% over the same time period, even beating the average fund with no changes of -7.00% NAV TR. This does suggest that for the muni funds forced to make dividend changes in the past year, it had a negative impact on the investment portfolio.

I believe it also refutes the sometimes held belief that dividend cuts don’t hurt investors in the long run. The thought that, NAV performance will make up for the difference in yield. The current average discount for the muni CEFs without a cut is -3.8% and for those with a cut it is -6.98%. This suggests the market is giving CEFs with cuts a relative -3% extra discount simply because they had to cut the distribution vs. other factors impacting the fund’s pricing.

Remember from the first table above, that muni CEF yields are up. However, funds that cut have NAV yield up 7% and those that maintained or increased their distributions have seen an average 17% increase. This shows a 10% extra relative yield boost for successfully avoiding dividend cuts.

To our firm, it is clear that some fund managers were forced into income only vs. NAV total return investment decisions. This can be seen as the CEFs that had to cut distributions lagged by -3% to funds that increased and -1.3% to funds that maintained levels. The Market (through average discounts) is now asking funds that cut for -3.5% more of a relative discount for funds that cut their dividend levels.

We think this is why it is important to track NAV total return, UNII trend and Earnings Coverage levels especially for muni bond closed-end funds. We would also argue that if you add discount analysis you will have the tools to maintain a municipal bond portfolio. For our clients, we seek to find good performing NAV’s, avoid dividend cuts. Selling CEFs that are expensive and buying when they are rationally cheap vs. just cheap. You will have a chance at better portfolio (NAV) total return, better market perception (discounts) and more forward looking cash flow (yield). With the thought that bonds are no longer capital appreciation vehicles we think covering all three bases is crucial.

You should experience more day-to-day price volatility (in CEFs), but we believe you can have better principal performance (the value of the holdings) and more consistent stable tax-free income. Municipal bonds are not for every investor and usually not for a majority of their assets. However, we think, though clearly biased, a well-educated investor or advisor can better use CEFs to meet this objective than other potential option. Many funds report portfolio and financial data monthly and there are about 100 national muni bond CEFs and 100 state specific funds to choose from. This gives you more choices (a third of all CEFs) than in any other closed-end fund sector. Good luck, and best wishes.

Additional disclosure: The views and opinions herein are as of the date of publication and are subject to change at any time based upon market or other conditions. None of the information contained herein should be constructed as an offer to buy or sell securities or as recommendations. Performance results shown should, under no circumstances, be construed as an indication of future performance. Data, while obtained from sources we believe to be reliable, cannot be guaranteed.

Seeking Alpha

Feb. 6, 2014 5:48 AM ET



Is Solar-Powered Desalination Answer to Water Independence for California?

From Isle of Man to Saudi Arabia, renewable desalination is gaining interest around the world as solution to water scarcity and food crisis

Thousands of acres on the west side of California’s San Joaquin Valley lie fallow. In official speak, the former agricultural land has been “retired”. Water supplies have always been a problem for this drought-prone region. Yet what’s pushed the area over the brink is salinity.

The problem is in large part caused by farm irrigation, which picks up the salt that naturally occurs in the rocks and soils of the Central Valley and transfers it through drainage. Compounding the problem is the tidally influenced water that is pumped into the area from the Sacramento-San Joaquin Delta. A study by the University of California estimates that, left to continue, the Central Valley could be facing reparation costs of up to $1.5bn by 2030 and the loss of up to 64,000 jobs as agricultural production slides.

A California-based startup thinks it might have the answer. WaterFX’s solution comes in the unlikely shape of a vast bank of parabolic mirrors and an advanced “multi-effect” evaporating unit. The Aqua4 system offers a renewable method of desalinating briny water, which, if its developers prove right, could put California “on a path to water independence”.

How does it work? Unlike conventional desalination, which uses a high-pressure reverse osmosis system that forces salt and other solids through a membrane, WaterFX cleans water through use of a 400-kilowatt solar “trough” – hence the mirrors. This concentrated solar still collects the sun’s energy, which heats a pipe containing natural oil, providing heat for the subsequent distillation process.

“We wanted it to be highly modular and highly scalable so the same system is usable for very small applications all the way up to very large scale,” says Aaron Mandell, founder and chairman of WaterFX, which is piloting the idea in the Californian water district of Panoche.

The potential of renewable desalination is exciting interest in other corners of the globe. For example, Sundrop Farms, which is based in the Isle of Man, has installed a desalination plant near Port Augusta, South Australia. Located 100 metres from the shore, the solar-powered plant treats salt water pumped directly from the sea. As well as returning freshwater, the plant uses hot water generated during the desalination process to heat nearby greenhouses.

Interest is also on the rise in the Middle East and North Africa, which currently suffers a gap in water demand of about 42 cubic kilometres per year – a figure that could increase nearly fivefold between now and 2050, according to a recent World Bank report (PDF). Experimentation in renewable desalination is already under way in Qatar, where Norway’s Sahara Forest Project has embarked on a pilot scheme. Saudi Arabia, meanwhile, has plans to build a solar-powered plant in the Al-Khafji governorate, with talk of more besides.

From a sustainability perspective, the upside of the technology is huge. The US federal government is currently pumping in about seven million-acre feet of water into California’s Central Valley every year. Replacing a “meaningful percentage” of that figure – say, 20%-30% – would be enough to have a dramatic impact on securing water security for the area, says WaterFX’s Mandell.

The implications for sustainable agriculture are also vast. After a successful proof of concept stage, Sundrop is now building a 20-acre greenhouse, which promises to produce 2.8m kg of tomatoes and 1.2m kg of pepper a year. As well as making desert land productive, Sundrop maintains that its approach reduces pesticide use, cuts food miles and results in better tasting produce.

The arguments from a climate-change perspective appear especially attractive. Saudi Arabia’s 30 or so desalination plants, for instance, currently use about 300,000 barrels of crude oil equivalent a day. The trend in other Gulf countries, as well as in Algeria and Libya, is similar. “The status quo is not sustainable,” concludes the World Bank, which describes the elimination of fossil fuel use in desalination as “critical”.

As with all new technologies, the key consideration is whether the idea is scalable. The first question is whether the science actually works. The initial pilots look promising. WaterFX’s test facility, which started operations six months ago, is successfully producing up to 14,000 gallons of fresh water a day. Plans are now under way to expand the demonstration project, which will push up its capacity to 65,000 gallons a day over the same 6,500 sq ft area.

A big stumbling block is cost. Solar-powered desalination currently averages about $1.52-$2.05 per cubic metre of water produced, depending on technology, energy costs and location, according to the World Bank. Conventionally, alternatives typically cost half that or less. The cubic-metre costs of desalinised water in Israel’s traditional Hadera and (newer) Sorek plants, for example, are $0.65 and $0.52 respectively.

Mandell insists that the technology promises to become more price-competitive as production increases. “If 70% of your cost is fuel production for traditional desalination and you want to scale up, the cost goes up significantly, unlike solar desalination,” he says. That logic is truer still if oil and gas prices increase in the future. Advances in concentrated solar power will drive efficiency savings, too.

Either way, don’t expect renewable desalination or its supporters to go into retirement any time soon.

Oliver Balch

Guardian Professional, Tuesday 28 January 2014



Bloomberg: Chicago Cabbies Sue Over Unregulated Uber, Lyft Services.

Chicago-area taxi operators claim in a lawsuit that the city is violating their rights by allowing the unregulated ride-share services run by Uber Technologies Inc. and Lyft Inc. to operate on its streets.

The failure to apply taxi and limousine rules to the two San Francisco-based companies threatens to devalue the more-than 6,800 operating permits issued by the city, which have a total market value of $2.38 billion, according to a complaint filed today by the cabbies and their trade association in federal court in Chicago.

Uber, Lyft and other companies that provide smartphone applications to connect drivers with people looking for a ride have spurred lawsuits from coast to coast, including a wrongful death case over a child pedestrian’s death in San Francisco and a complaint in New York similar to the one in Chicago.

The companies typically take a cut of fees from transactions booked through their apps. They say they’re different from taxi dispatchers and shouldn’t be compelled to comply with existing regulation.

Not enforcing the taxi rules against the companies violates federal constitutional guarantees of equal protection under the law and breaches the taxi operators’ contracts with the city, according to the complaint. It also enables unregulated drivers to discriminate against the elderly or poor who may not be able to use a smartphone to summon one of their cars.

The lawsuit comes one day after Chicago Mayor Rahm Emanuel sent the city council a proposed ordinance that would require the licensing of transportation network providers. Licenses would cost $25,000 each plus $25 for each driver registered with the network on the day the application is submitted.

The legislation also includes insurance provisions, minimum vehicle standards and signage requirements.

A lawsuit seeking to block the ordering of rides via smartphone applications was filed last year against the New York City Taxi and Limousine Commission and was later dismissed. A 12-month TLC pilot program was later allowed. An appeal of that dismissal is still pending.

‘Unlawful Transportation’

The cabbies are seeking unspecified money damages and a court order compelling Chicago to enforce the rules against operators the cab companies call “unlawful transportation providers.”

Roderick Drew, a spokesman for Chicago’s law department, said the claims have no merit and the city will move to dismiss the case.

“Plaintiffs’ various complaints raise questions of public policy that are properly addressed through the legislative process, not legal claims that should be litigated in court,” he said in an e-mailed statement.

While discussed in the complaint, Uber, Lyft and a third San Francisco-based company, Side.Cr LLC, which does business as Sidecar, aren’t named as defendants.

“After years of neglecting Chicago drivers and passengers alike, the taxi industry has resorted to name-calling and frivolous lawsuits,” Uber said today in a statement. “While they spend time in court, we’ll be working with Mayor Emanuel to design a forward-looking regulatory regime that creates economic opportunity, prioritizes safety, and ensures access to the best, cheapest rides ever available in the city.”

Uber was sued in a California state court in San Francisco by the parents of a 6-year-old girl who was struck by a car linked to the company. Uber said Jan. 1 that the driver was “a partner of Uber” who wasn’t providing services on the Uber system during the time of the accident.

Paige Thelen, a spokeswoman for Lyft, said the company had no comment on the taxi operators’ suit.

“We are glad to see the mayor is committed to crafting a framework to allow for multiple transportation options to exist in Chicago,” she said in an e-mailed statement. “As it stands now, the proposed ordinance would not support the continued operation of Lyft.” The company will continue its ongoing dialog with city officials, Thelen said.

Sidecar’s media relations staff didn’t immediately respond to an e-mailed request for comment on the lawsuit.

The case is Illinois Transportation Association v. The City of Chicago, 14-cv-00827, U.S. District Court, Northern District of Illinois (Chicago).

By Andrew Harris  Feb 6, 2014 5:56 PM PT

To contact the reporter on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net



Bloomberg: California Drought Impact Seen Spreading From Fires to Food Cost.

The drought that’s gripping California may soon have the rest of the country seeking relief.

The emergency, which follows the state’s driest year on record, is likely to boost the prices of everything from broccoli to cauliflower nationwide. Farmers and truckers stand to lose billions in revenue, weakening an already fragile recovery in the nation’s most-populous state. And California and other Western states are seeing a surge in wildfires.

As lawmakers rush to enact measures to help farmers and ranchers contend with the immediate threat to the nation’s most productive agricultural region, the prolonged dry spell is sparking calls for a radical rethinking of how the state, and much of the West, distributes water to residents.

“We are at that point the risks for the future are really significant,” said Peter Gleick, president of the Oakland-based Pacific Institute, a nonpartisan research organization. “We have to fundamentally change the way we manage water.”

The drought is a stark reminder that California built the world’s 10th-largest economy, the nation’s top farming industry, and Silicon Valley, the epicenter of information technology, in a semi-arid environment that’s struggling to sustain the water needs of 38 million people.

While rain doused San Francisco yesterday and more rain and snow are forecast in Northern California through the weekend, 17 rural communities are in danger of running out of water in as little as two months. Farmers may be forced to prune almond trees back by 90 percent, affecting yields for years.

Food Prices

The fallout may be felt on grocery shelves throughout the country in the coming months as prices of artichokes, celery, broccoli and cauliflower could rise at least 10 percent, said Milt McGiffen, a vegetable specialist at the University of California at Riverside. The state grows more than 80 percent of the nation’s supply of these crops.

California saw an almost 50 percent increase in wildfires last year from 2012, setting a record. Governor Jerry Brown has ordered 125 additional firefighters hired for the northern part of the state and will keep seasonal firefighting forces in the south on the job longer.

Lost revenue in 2014 from farming and related businesses such as trucking and processing could reach $5 billion, according to estimates by the California Farm Water Coalition, an industry group.

Brown’s Plan

Water specialists say state legislators must add to a system that includes 34 reservoirs, lakes and storage facilities and more than 700 miles of aqueducts championed by Brown’s father, the late former Governor Edmund G. “Pat” Brown.

The State Water Project, as it is known, sends water from the Sierra Nevada Mountains in the north to Central Valley farmers and Southern Californians. For the first time in more than half a century, state officials said on Jan. 31 that they were unable to make deliveries through the project to 25 million Californians and about 750,000 acres of irrigated farmland.

Brown is championing a controversial plan to build two 30-mile (48-kilometer) water tunnels under the Sacramento-San Joaquin River Delta, an ecologically sensitive confluence of two rivers that’s the hub of the state’s water-distribution system. The $15 billion tunnels are intended to ship water from Northern California to farms and cities in the south and bolster the delta ecosystem that’s on the verge of collapse.

“We live in this ‘Cadillac Desert’ where we have a chronic undersupply of water,” said David Goldhamer, a water-management specialist, referring to a 1986 book that criticized government-driven development policies in the West for degrading the environment. “We need to add water-storage capacity.”

Not Alone

California isn’t alone. Portions of 11 states have been declared disaster areas by the U.S. Department of Agriculture. Oregon is experiencing extreme or severe drought in more than 75 percent of the state as is about 80 percent of Nevada.

The drought in the West is forcing water managers to cope with new risks, such as tinder dry forests prone to wildfires that threaten to burn utilities built to collect runoff from snowpack. It may also foul stored water.

“It denudes the landscape and you get rain or erosion afterward, and it puts a lot of sediment or carbon in the water,” said Holly Hartmann, director of the Arid Lands Information Center in Tucson, Arizona. “You’re looking at tens of millions of dollars to get the system back to where it was.”

Changing Agriculture

If California is to rethink its water policy, it has to include shifts in agriculture, which consumes 80 percent of the water supply.

That won’t be easy. Water wars have been waged in the state for more than a century. William Mulholland’s land grabs at the turn of the century prompted a violent reaction by ranchers.

In the early 1980s, environmentalists, farmers and ranchers, oil companies, land developers and water and power utilities took sides in a fight over the proposed Peripheral Canal, the predecessor to the tunnel that Brown is pushing now. Voters rejected that project 63 percent to 37 percent.

Now, as California reservoirs drop to 60 percent of their average and researchers report the lowest snowpack water content since records have been kept, Brown has called on residents and businesses to voluntarily cut water use by 20 percent. Mandatory water restrictions could follow.

Some residents don’t have a choice. Two reservoirs serving Willits, a town of 5,000 nestled in the redwood trees of Mendocino County 135 miles north of San Francisco, hold an 89-day supply of drinking water.

Restricted to 150 gallons of water per day, residents are using paper plates and limiting showers to five minutes by timing them on smart phones.

‘Learning Experience’

In nearby Brooktrails Township, Stephanie Willcutt’s family is on a water budget. When they need hot water, they capture in jugs the cold water that comes out of the tap first.

“It’s been a learning experience,” said Willcutt, 40.

The drought’s impact is being felt unevenly, with residents in the usually water-rich north facing $1,000 fines for water violations and ranchers in the Central Valley selling cows they can’t feed, while Southern Californians continue to wash their cars.

“To place restrictions including fines on us while residents in Southern California have no restrictions makes no sense,” said Karin Ignasiak, a retired state worker living outside Sacramento, where mandatory rationing is in place.

‘Wake-up Call’

Even as residents try to conserve, water specialists said the drought calls for reconsidering the way the state uses water.

“It’s going to be a wake-up call for some of the larger communities in Northern California,” said Ellen Hanak, a water specialist at the San Francisco-based Public Policy Institute of California. “They haven’t made as many investments in diversification as communities in the Bay Area and the south.”

California voters in November will consider an $11 billion bond measure approved by lawmakers in 2009 to shore up the state’s aging water infrastructure.

Democrats, who control the state legislature, have signaled they intend to modify the proposal, which polls show isn’t likely to pass. Republicans have said any final bill should include funding for more reservoirs and dams.

In the short-term, the drought could cause California to lose some of the 1 million jobs Brown says he added since 2010 to help bring the state back from its worst recession since the 1930s.

“Given direct and indirect impact, you could see a loss of 37,600 jobs, about 24,000 of those from agriculture,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

Lost Wages

Employees in health care, real estate, and retail trade could also be let go, he said, equaling $1.5 billion in lost wages and salaries. Businesses could also be forced to budget additional millions for rising energy costs.

Californians must consider their long-term water habits, said Kevin Starr, author of the seven-volume “Americans and the California Dream.”

“They invented California through water engineering — which is great as long as you have water to engineer,” said Starr, a history professor at the University of Southern California. “The greater Palm Springs area has over 700,000 people in it and what did Mother Nature intend? Probably 7,000.”

By Jennifer Oldham and Michael B. Marois  Feb 6, 2014 9:00 PM PT

To contact the reporters on this story: Jennifer Oldham in Denver at joldham1@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net



Bloomberg: Dayton’s Minnesota Thrives as Land of 10,000 Levies.

Almost two dozen states cut taxes last year, most in the belief that lower levies stimulate the economy. Not Minnesota, which raised them on high-wage earners, business sales taxes and cigarettes by $2.1 billion.

“We’ve never been a low-tax state,” said Governor Mark Dayton, great grandson of the founder the company that became Target Corp. (TGT), the second-largest U.S. discount retailer, behind Wal-Mart Stores Inc. “We’re a high-value state.”

Not least for companies. Dayton and the legislature, controlled by the Democratic-Farmer-Labor Party, have lavished hundreds of millions of dollars of incentives on employers such as electronics maker 3M Co. (MMM) and the Mayo Clinic. Last week the state sold $468 million in taxpayer-backed bonds to build a stadium for the Vikings of the National Football League.

As U.S. states including New York, California and Florida debate what to do with projected surpluses — cut taxes, bolster education spending — Dayton defies the stereotype of a Democratic governor who scrimps on assistance to corporations. Still, he doesn’t want Minnesota to emulate low-tax Texas or embrace the formula that government should put private-sector interests first.

“That’s the stuff of fairy tales,” Dayton said in an interview in his office in St. Paul, the capital.

Washington’s nonprofit Tax Foundation, which studies policy, in a July 2013 analysis said Minnesota had the seventh-highest tax burden among U.S. states, which would “discourage productive behavior.” It parodied the Land of 10,000 Lakes as “The Land of 10,000 Taxes.” But if the increases and spending have hurt, it’s not evident.

Moody’s Assessment

Minnesota has the nation’s seventh-lowest unemployment rate, a figure that has dropped steadily to 4.6 percent in December, compared with 6.7 percent nationwide. Moody’s Investors Service cited “strong financial management” in an October report, and said the state’s diverse and stable economy is “expected to out-perform the nation over the long-term.”

Minnesota now projects a $1.1 billion surplus, prompting Dayton to propose the repeal of three sales taxes on business when the legislature returns this month. That has provoked charges that the increases were overkill.

“Rather than raising taxes and cutting sweetheart deals with businesses, how about we just create a more welcoming environment so we don’t have to do special favors for business?” said Senator Dave Thompson, who is seeking the Republican nomination to challenge Dayton in November.

“I’m convinced that if you tax more and spend more, you depress the economy,” Thompson said.

Economic Driver

While few make the case that higher taxes stimulate economic activity, the effect of lowering them can be overstated, said Art Rolnick, former senior vice president and director of research at the Federal Reserve Bank of Minneapolis.

“This is not what drives the economy — you can’t just look at taxes,” Rolnick said. “There’s no such thing as a good tax, but you’ve got to look at both sides of the ledger.”

“You got very low taxes in Mississippi, but what does the economy look like?” Rolnick said.

Mississippi’s median household income from 2008 through 2012 was $38,800 and its poverty rate was 22 percent, according to the Census Bureau. Over the same period, Minnesota’s median income was $59,100 and its poverty rate 11 percent.

Minnesota is a northern outpost of prosperity, a land where residents have higher levels of education, and per capita income is 8 percent above the national average, according to Standard & Poor’s.

Governor Ventura

With a population of 5.4 million, the state is home to 19 Fortune 500 companies, including UnitedHealth Group (UNH), Best Buy Co., U.S. Bancorp, Medtronic Inc. and General Mills Inc., as well as 3M and Target. Those companies have given the state stability despite its recent history of political swings and government gridlock, Rolnick said.

In the past 15 years, the governor’s office has been led by independent Jesse Ventura, Republican Tim Pawlenty and now Dayton. Legislative control has changed hands, and budget gridlock paralyzed the government twice since 2005, with a shutdown lasting 20 days in 2011.

“The economy is fundamentally very strong and it can take some bad political hits,” Rolnick said.

The Minnesota Chamber of Commerce argued against Dayton’s tax increases. Bill Blazar, the chamber’s senior vice president of public affairs and business development, said the state’s progress is a reflection of Pawlenty’s holding the line against a higher burden.

New Path

“We should have stuck with the austerity, but they chose the other way, to go back to where Minnesota was in the 1970s and ’80s, when we put a gazillion dollars into the public sector,” Blazar said of Dayton and his legislative allies. “It remains to be seen if the path we’re on will work.”

Dayton, a former one-term U.S. senator elected governor in 2010, said he is convinced of the wisdom of what he calls “the Minnesota model.”

Tax breaks for expansions of the Mayo Clinic in Rochester and the Mall of America in Bloomington are investments that will deliver, he said. As for public money for the Vikings stadium — committed after the team threatened to leave — Dayton said he understands the resentment.

“The economics of professional sports are so skewed that any deal looks ridiculous to any normal person whose applying normal laws of economics, but in this case we’ll get enormous returns,” he said.

“We’re not dummies. If they were negative investments or had a negative effect on cities, there wouldn’t be this clamor for them,” he said. “It’s part of the fabric of life.”

By Tim Jones  Feb 6, 2014 9:00 PM PT

To contact the reporter on this story: Tim Jones in Chicago at tjones58@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net



Bloomberg: Detroit Cancels Swaps Forbearance Deal With BofA, UBS.

Detroit won’t take legal action for now against Bank of America Corp. and UBS AG (UBSN) over a costly swaps deal, even after canceling a forbearance agreement it reached with the banks in July.

While they continue trying to negotiate an end to the swaps, which cost taxpayers about $4 million a month, the city and the banks will refrain from taking court action against each other, according to Bill Nowling, a spokesman for Detroit’s emergency financial manager, Kevyn Orr.

“We basically have a gentleman’s agreement,” Nowling said in an interview yesterday after the city told U.S. Bankruptcy Judge Steven Rhodes it canceled the forbearance deal on Jan. 31.

The forbearance agreement, reached days before Detroit filed the biggest U.S. municipal bankruptcy, was a kind of truce. Detroit agreed not to sue to cancel the swaps and the banks agreed not to declare the city in default of the contracts, which would have allowed them to try to seize casino tax revenue.

The city and the banks have been trying to reach a settlement that Rhodes will accept. Last month, he rejected a proposal to buy out the swaps for $165 million, saying it was too costly.

Detroit’s 4.5 percent sewer bonds that mature in 2035 rose about 3.6 percent today to 84.9 cents on the dollar, according to data compiled by Bloomberg.

$18 Billion

Detroit filed for bankruptcy on July 18 after decades of decline, listing $18 billion in liabilities and saying it couldn’t pay creditors while also providing basic city services. Orr has been in court-supervised mediation with creditors including bondholders and pension funds to seek an agreement on cuts.

The swaps were designed to protect against rising interest rates by requiring the banks to pay the city if rates climbed above a certain level. When rates fell, Detroit was required to make monthly payments.

Under a draft debt-adjustment plan sent to creditors last month, Detroit would pay nothing to Bank of America and UBS. While the city said in the plan that it disputes the legitimacy of the swaps, it said it may set aside about $4.2 million a month in a reserve fund in case a court finds them legal. Orr said he may file a debt plan with the court this month.

Last week, the city sued to cancel more than $1.4 billion in pension debt underlying the swaps. That lawsuit didn’t seek to cancel the swaps themselves, which have cost taxpayers more than $200 million since 2009.

Casino Revenue

The swaps contracts give the banks the right to seek control of Detroit’s casino taxes, which the city pledged as collateral, in the event of a default. In December, Corinne Ball, a lawyer for the city, told Rhodes the casino revenue was one of Detroit’s best sources of money.

Ball, a partner at Jones Day, didn’t immediately respond to a phone call seeking comment on the termination notice.

Megan Stinson, a spokeswoman for Zurich-based UBS, and Bill Halldin, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment.

The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).

By Steven Church  Feb 7, 2014 9:41 AM PT

To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net



Detroit Plan Revives Investor Scrutiny of Michigan: Bloomberg Muni Credit.

Detroit’s plan to reduce its $18 billion of liabilities may derail the biggest wave of Michigan debt issuance since 2009 and elevate borrowing costs as investors renew focus on the state’s approach to bondholders.

A proposal last week from Detroit Emergency Manager Kevyn Orr would pay pensioners at more than twice the rate of some bondholders and give 46 cents on the dollar for general obligations backed by the city’s unlimited taxing power.

Issuance from Michigan has just started to revive after Detroit’s July filing. The state’s municipalities sold $464 million of debt in January, the most for the month in five years, data compiled by Bloomberg show. They did so at a price: The developments since July have boosted yields as much as 0.5 percentage point, according to research firm Municipal Market Advisors. Michigan itself pays the second-highest yield spread among states, Bloomberg data show.

“The bottom line as an investor in Michigan debt is you have a governor and leadership there who are complicit in subordinating” bondholders to pensioners, said Adam Mackey, head of munis in Philadelphia at PNC Capital Advisors, which oversees about $6.5 billion in local debt. “There will have to be more compensation for us as a lender.”

Favoring Michiganders

Detroit’s bankruptcy may set precedents for how retirees and bondholders are prioritized when a locality in the $3.7 trillion municipal market falls into distress. The episode is testing the assumption that bonds backed by the full faith and credit of states and cities are the safest among local debt.

Fitch Ratings said in a report last week that Republican Governor Rick Snyder was contributing to a mentality of “us versus them,” in part by a plan that would favor retired state workers, and even artwork, over bondholders. He proposed last month that the state pay $350 million over 20 years specifically for Detroit pensioners.

Snyder said this week that it was “premature” to conclude that borrowing costs would rise for Michigan issuers because of how bondholders have been treated in Detroit’s bankruptcy proceedings.

“Bankruptcy is something I hope no one aspires to be in, because it’s very difficult for anyone involved,” he said at a press conference to discuss his budget plan.

Repayment Menu

Under Orr’s latest plan, pensions would get 45 to 50 cents on the dollar, though retiree health-care liabilities would recoup just 13 cents. Investors who loaned $1.4 billion to shore up the two pension funds would receive 20 percent of their claims. Holders of $369 million in unlimited-tax general obligations would recover 46 percent, and the $161 million of limited-tax general obligations would get 28 percent.

The plan to cut payments to general-obligation holders and the governor’s proposal for Detroit retirees “means higher costs for municipalities that don’t deserve higher costs,” said John Mousseau, who helps manage $1.8 billion of munis as director of fixed income at Cumberland Advisors in Sarasota, Florida.

Mousseau also estimated a penalty of about 0.5 percentage point for localities in the state.

In the face of higher borrowing costs, Genesee County, Battle Creek and Saginaw County postponed a combined $131 million of issuance in the month after Detroit’s bankruptcy filing. All three eventually sold their debt.

School Finances

In January, about 20 school districts and Fenton Township joined Saginaw County in offering a combined $464 million of bonds, compared with $175 million in January 2013, according to Bloomberg data. They borrowed amid the municipal market’s biggest monthly rally since September.

In one example of the penalty Michigan issuers have paid, Dearborn School District nine miles (14 kilometers) west of Detroit priced about $68 million of bonds on Jan. 15 with an Aa2 grade from Moody’s Investors Service, two below the top. The 10-year segment yielded 3.4 percent, or 0.71 percentage point more than benchmark munis.

By comparison, Hermantown Independent School District No. 700 in Minnesota issued $49 million of bonds on Jan. 23, with the 10-year portion yielding 0.15 percentage point more than AAAs. In Washington, Auburn School District No. 408 sold about $44 million last week with a segment due in about 10 years priced to yield 0.1 percentage point more than the benchmark.

The former issuer has a Moody’s grade equivalent to the Dearborn district, while the latter is one level higher.

‘Cumulative Penalty’

Minnesota and Washington, like Michigan, have school-bond enhancement programs that help districts access capital markets and reduce borrowing costs.

In Michigan, “small school districts are going to pay another half a percent more than they would need to pay otherwise,” Mousseau said. “That’s fine if you’re a bondholder and you’re capturing incremental yield for no additional risk, but there’s a cumulative penalty that the surrounding areas pay.”

Investors “look at each entity individually and judge them on their own credit ratings and history,” said Terry Stanton, a spokesman for the Michigan Department of Treasury, which oversees the school bond qualification and loan program. “There continue to be an abundance of sound, smart investments to make in Michigan and in our local communities.”

Michigan debt trailed the broader market last month. The yield on 10-year state general obligations fell 0.15 percentage point, compared with a drop of 0.32 percentage point for benchmark bonds, Bloomberg data show.

Trailing California

The state’s average yield spread since Detroit filed for bankruptcy protection is almost double what it was in the first half of 2013.

The eighth-most-populous state pays the second-highest yield relative to benchmark munis, with only Illinois facing a higher cost, Bloomberg data show.

That wasn’t always the case. Before Detroit’s filing, investors demanded a higher yield to own bonds from California, which has a Standard & Poor’s rating two levels below Michigan’s.

“Michigan has made it clear — in actions related to Detroit’s bankruptcy — that it views municipal bondholders as effectively subordinate to pensioners and less important than protecting artwork,” Concord, Massachusetts-based Municipal Market Advisors said in its report.

Four Michigan issuers are offering new bonds this week, Bloomberg data show. The $17 million of debt would be the least for a non-holiday week since November, the data show. The localities are borrowing as benchmark 10-year yields are the highest since Jan. 16.

By Brian Chappatta  Feb 6, 2014 5:00 PM PT

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net



Lawyers, Consultants Making Millions off Detroit Bankruptcy.

Lawyers, accountants and other professionals racked up about $13.3 million in fees and an additional $348,000 in expenses from July to September in the early stages of the battle to restructure the bankrupt city of Detroit.

And that was before the legal ranks were called out in full force for fall hearings into whether the city was in fact eligible to file for Chapter 9. Considering that, there likely will be even larger fees when the next quarterly report comes due covering October through the end of the year.

The city has approved $62 million in contracts with lawyers and consultants as it grapples with about $18 billion in debt and projected long-term liabilities. And the city has budgeted $93 million to cover restructuring costs, Bill Nowling, spokesman for emergency manager Kevyn Orr, said Tuesday.

Detroit filed for bankruptcy on July 18. To try to contain professional costs, the court appointed Chicago attorney Robert Fishman as a fee examiner. He takes all invoices and pores over them to ensure they meet strict guidelines and then provides a redacted version of the authorized costs to the city to pay.

U.S. Bankruptcy Judge Steven Rhodes has been mindful of legal costs throughout the process and worked to strike a balance between allowing all parties to have their say while keeping proceedings moving at a fast clip and encouraging mediation for a speedier resolution to Detroit’s problems.

Fishmam, who is paid $600 an hour, must submit quarterly reports with the fees and expenses. This is his first reporting, and while it is months late, the report notes that all questions have been resolved satisfactorily although one firm, Ernst & Young, which provided a cash-flow analysis for the city, had to resubmit revised invoices.

When they are reviewed, they will be filed as a supplement to the report, which will bring totals up because the original fee requests for August and September total about $2.5 million.

Nowling said the city pays 85% of the bills it receives. Now that the final fees have been authorized by Fishman and small adjustments made where there were questions or discrepancies, the city will pay the remaining balance and the books will be closed for that period of the bankruptcy.

The city pays its own professional costs and also covers the expenses of a retiree committee that was established to ensure retirees had a voice at the table.

The largest bill for the quarter was from the city’s main legal firm, Jones Day, which had $6.6 million in fees — even with more than $1.5 million in agreed-upon discounts — and an additional $143,000 in expenses.

Local restructuring firm Conway MacKenzie had almost $2.3 million in fees and $1,200 in expenses. Miller Buckfire, whose co-president Kenneth Buckfire is the city’s lead financial adviser, billed $1.2 million and had $51,000 in expenses. A breakdown of specific expenses is among the information that is redacted.

The four firms hired by the retiree committee cost the city just under $2 million in fees and another $61,500 in expenses.

“Clearly, the professional fee expenses incurred during the reporting period were substantial,” Fishman said in his report. But he notes that “due to the magnitude and complexity of the case, the novelty of the legal issues, the extremely tight time frames imposed by the court and the strong differences in opinion between the various parties about what to do and how to do it, it was and continues to be inevitable that the costs associated with the services provided by the various professionals were going to be significant.”

Nowling said that while the costs are high, “there is a level of comfort that they are being watched closely, the fee examiner is going over them with a fine-tooth comb and looking at everything.”

When Fishman was appointed, a court document carefully spelled out allowable fees, the discounts firms were expected to include and the parameters of what constitutes a legitimate expense.

At this point in the calendar, the money set aside for professional costs should prove to be enough, Nowling said. If the $62 million in retainers for legal contracts with the various firms runs out, further bills cannot be submitted without amending the contracts.

By Alisa Priddle

Detroit Free Press Business Writer

12:11 AM, February 5, 2014

Contact Alisa Priddle: 313-222-5394 or apriddle@freepress.com. Follow her on Twitter @alisapriddle. Staff writer Joe Guillen contributed to this report.





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