BALANCE SHEET BLOG – HOLLYWOOD, FL


Hidden Taxes
May 1, 2011, 12:21 AM
Filed under: Taxes, Water-Sewer-Sanitation

Slush Funds?

In response to our April 24, 2011 post on the City’s use of enterprise funds to balance the budget, the City’s Finance Director, Matt Lalla, wrote to Commissioner Blattner, justifying the practice.

While the practice is not uncommon, as Mr. Lalla states, we do not believe it is justifiable for a well-managed city. Both views are posted below. You decide.

Matt Lalla
Finance Director
City of Hollywood

This version of the “Balance Sheet” newsletter is, in my opinion, a little misleading. The amounts transferred out of the City’s enterprise funds to the General Fund represent payments for Administrative Service Charges and Payments in Lieu of Taxes (PILOTs).

These payments are imposed on the City’s enterprise funds in order to reflect the true and complete cost of these operations. These payments are made to recapture General Fund support services provided to enterprise operations in the form of: general management (from the City Manager’s office), legal services, accounting, payroll, human resources, risk management, bond financing, cash management, etc.

In addition, these payments have been reviewed and accepted by the City’s auditors and do not reflect some sort of accounting that is less than factual (as implied in the newsletter).

If the City did not recapture the cost of such support services, then the City’s taxpayers, through the General Fund, would be subsidizing the rates imposed by the City’s enterprise operations. This situation would certainly be deemed unfair for City residents.

As I am sure you are aware, the recent water and sewer rate increases have nothing to do with administrative service charges or PILOTs. Recent (and future) water and sewer rate increases are necessary to support the Public Utilities capital improvement program in order to replace an aging infrastructure and comply with regulatory mandates.

FYI, these types of charges are not unique to Hollywood and are a common practice in most jurisdictions….

Balance Sheet

Mr. Lalla simply amplifies the techniques by which the city has balanced our budgets for years. The question is whether diverting water-sewer-garbage fees is the best method to raise the funds necessary to run the city.

The use of enterprise funds in this manner creates a burden on those least able to pay and prevents those more able to pay from taking a tax deduction. (Real property taxes are an itemized deduction on the federal income tax form. User fees are not.)

Let’s look at the Payments in Lieu of Taxes (Mr. Lalla’s PILOTs). Agreed that the water, sewer, and public works facilities sit on city owned land and do not pay property tax. If we’re going to charge them a payment in lieu of taxes, why don’t we charge parks and rec for all of the buildings and fields on city land?–or for that matter any other facility on a city owned parcel. The obvious answer is that enterprise funds differ because they are cash generators of income that can be raided.

Let’s take a quick glance at the Administrative Service Charges made against these funds. Each enterprise fund has its own budget and most conceivable administrative costs are covered in its operating budget. Why then should the General Fund remove millions from the enterprise funds for unspecified “administrative costs.” Double dipping?

Mr. Lalla states as justification only what is legal and convenient, but not what a prudent well-managed city would do. Isn’t it time to eliminate old practices that merely disguise the problems instead of trying to justify their continuance?

Instead of raiding the enterprise funds, the City should supplement the General Fund through better bargaining and streamlining operations. Any shortfall should then be covered by raising the millage rate.

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User Fees: Hidden Tax
April 23, 2011, 10:03 PM
Filed under: Budget, Taxes, Water-Sewer-Sanitation

April 23, 2011

Fees for City Services:  Hidden Tax

We’ve recently learned that the City has used for other purposes many millions of dollars Hollywood residents have been paying for water, sewer, and curbside trash pickup and recycling. In short, we are over-paying for these services and the excess money is being used to balance the city budget.

For example, in each of the three most recent fiscal years, over-charging for water and sewer allowed the City to take over $6.7 million annually out of the Public Utilities Enterprise Fund, placing it instead in the General Fund. Fees we paid for curbside trash pickup and recycling have also been removed from the Sanitation Enterprise Fund to beef up the General Fund, just under $1.5 million this year, and more in prior years

We’ve been thinking about the use of the Enterprise Funds as a means to subsidize and balance the City budget.  First, what is an enterprise fund?  In government accounting, a fund that provides services to the public for a fee that makes the entity self-supporting.  Hollywood has five such funds:  public utilities, sanitation, stormwater, golf, and parking.

We understand that Florida law does not prohibit such transfers from Enterprise Funds. But we ask ourselves if this is a prudent and logical budgeting method, is it fair, and finally, is it ethical? We conclude that the answer to all these questions is “no.”

We are burdening water users, for example, with an inflated cost in order to camouflage the real true financial straits of the city. This means financially struggling homeowners may have their water shut off for failure to pay what amounts to an invisible tax that inflates the cost of the water they use. This situation not only violates the basic principle of open, transparent government, but creates an unfair and hidden method of taxation.

Political expediency can no longer be tolerated in lieu of factual accounting. Inflation of the water and sanitation costs to accommodate budget failures is something we also cannot tolerate.

The City’s revenues face additional erosion for the next several years because of the economic climate. This is not good news. But we believe that citizens are entitled to a factual statement of the true budget shortfall and how much of an increase in the millage rate along with cuts in employee benefits will accommodate revenues for at least the next three years.

Thousands of other US cities have similar if not worse situations. The economic downturn just hastened the inevitable. This is not shameful, but it will be so if city management and our elected officials continue to ignore the inevitable.

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Water Billing Nightmare: 2011
March 22, 2011, 12:17 AM
Filed under: City Commission, City Staff, Water-Sewer-Sanitation

March 22, 2011

The Cost of Water and The Water Billing Mess

Is your water costing double or triple what it used to? Over-bills, back-bills, no bills? Has Hollywood’s water billing gone crazy?  What’s going on?

Higher water rates and chaos in the billing department seem to tell at least part of the story.  Faulty meters may explain the rest. Then add to the mix the over-stressed, and bordering-on-nasty customer service, and there’s no doubt that there’s a problem.  It’s important to say that not everyone is experiencing this headache and we don’t really know why only some of us are affected.

This article is for those who are having water billing problems.

What You Can Do

1) If you have an irrigation meter, you are going to be paying a lot more for the water on that meter under the plan now in effect.  The days of cheap water in South Florida are coming to an end.  The South Florida Water Management District is requiring all cities to conserve water by adopting some sort of tiered structure. Irrigation is considered a discretionary use and is billed at a higher rate in Hollywood’s plan.  A copy of the city’s rate structure and a detailed city explanation can be found at this link on the city’s website.

2) If your bill is too high and you have your own water meter, you can check for a possible leak yourself without hiring a plumber.  Here’s how: Turn off the water in your home and then look to see if the little dial next to the string of numbers on your water meter is still running.  If it’s not running, there’s no leak.  Exactly how to do this is explained on the city website at this link.

3) If you do have to hire a plumber, or lay out money another way, to repair a leak, you may be eligible to apply for a High Use Credit from the city.  However, there is a 90-day time limit for exercising this remedy, starting from the date of the high use.  The form to use and the rules that apply are found on the city website at this link.

4) Check your water bills to make sure the meter readings cover no more than a 33-day period.  If your bill is for a longer period, it needs to be reviewed to be sure the rate is correct.

The Hollywood Council of Civic Associations (HCCA) is collecting information about billing problems to press for reform at city hall that will eliminate the confusion and chaos that has pervaded water billing.

information about billing problems to press for reform at city hall that will eliminate the confusion and chaos that has pervaded water billing.

Why We’re Having Billing Problems

The city’s finance department, along with an outsourced private contractor responsible for the physical reading of the city’s 40,000 water meters, handles water billing. In June 2009, the finance department began to implement two separate city commission-approved programs. One is a complex tiered water rate structure intended to promote conservation, and the other is automated water meter reading (known as AMR). Implementation of these two programs simultaneously upset and swamped the water billing process.

It appears our elected officials weren’t well enough informed about the changes these two programs entailed and that it would be too much for the billing department to manage all at once. Why is the commission taking action without receiving a full staff briefing that includes such potential negative consequences?  Unfortunately, many staff reports read as if written by cheerleaders for projects being proposed for commission approval.  This appears to have been the case with the AMR and tiered water rates. Suppose they had implemented these programs one at a time instead of simultaneously?  It seems likely that at least some of the problems could have been avoided with a little more foresight.

Both of these new programs began to affect the billing department immediately.  AMR required the city to purchase additional software and program it to work with the existing billing system.  Getting the two programs to communicate correctly has taken literally years of trial and error. This testing is still going on.  Additionally, the city’s 40,000 water meters (residential and business) needed new heads and meter box lids installed to accommodate the AMR.

At the same time, the Finance Department was installing and testing the new, more complex tiered rate structure that requires, believe it or not, a total of 1,149 different rates for water and sewer services.  Teams of city staff worked tirelessly to test that new rates were set up correctly, but a host of problems came to pass despite all their efforts.

Without going further into the whole mess, there are three particularly vexing problems.

1) It is doubtful the wi-fi network itself can be made to work reliably. To the extent the network fails, so too AMR based on wi-fi fails. The city now recognizes that the wi-fi network will not work city-wide, so meters in significant sections of the city will have to be read another way.

Wi-Fi Project on the Brink

None of the proposed wi-fi programs is working. Since contracting with Johnson Controls in 2008 to create a citywide wi-fi network, the city has spent countless hours of staff time and effort trying to bring this program online. The result has been one failure after another.
The city took out a loan in 2008 to pay Johnson Controls close to $14 million up front. The city is obligated to continue paying the debt service on this loan while achieving none of the cost benefits it anticipated from this project. The contract with Johnson Controls requires that company to reimburse the city each year that specified savings are not achieved. As a result of this provision, Johnson Controls provided the city with a check for some $926,000 in January 2011.
But the payment from Johnson Controls comes nowhere near compensating the city for the enormous amount of staff time — every week, every month, all year — spent trying to correct the costly unanticipated consequences of this doomed project.

2) The tiered rate structure is a complex set of escalating rates depending on how much water is used in a 33-day cycle.  If the meter reading is delayed for any reason and covers more than 33 days, we have “off-cycle billing,” which is likely to push the water usage into a higher rate tier, resulting in an inaccurate, higher water bill.  At one point, the water billing staff was struggling with 4,438 accounts in off-cycle billing.

3) Hollywood’s AMR requires a special wi-fi-readable lid that sits on top of the meter box.  In many of our low-lying neighborhoods, the lids dislodge or float away when it rains.  This problem has yet to be solved, though a number of different lids are being tested. When the lids are dislodged from the meter box, no automated reading can occur.

Please help us identify water billing problems so the city can correct them. Report yours to HCCA. If you’ve already reported your billing problems to your civic association, HCCA will have them.

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$1 Million Water Bill Glitch Undetected: 2010
December 3, 2010, 12:25 AM
Filed under: Budget, City Staff, Water-Sewer-Sanitation

December 3, 2010

The Sun-Sentinel reported on its Dec. 2, 2010 website that the City of Hollywood let 12 Hollywood condos rack up some $1 million in unpaid water bills. In fact the condos received no water bills and the city did not discover its error for almost a year. The Sun-Sentinel reported that most of these condos are now on payment plans so it appears the lost revenue will be made up. But there are issues here that need to be examined.

The city is quoted as attributing its billing failure to a “computer glitch.” What’s serious here is not the computer glitch but the city’s failure to detect it promptly. City staff apparently did not miss the unpaid revenue for close to a year. This lack of control over city billing and the consequent revenue drain raise questions that were not considered in the Sun-Sentinel article.

Are Escalating Water Rates Unnecessary?

1. Previously, the city commission adopted a five-year plan to raise water and sewer rates every year for five years. We are in the middle of that rate-increase plan now. But why are ever higher rates needed when the city does not miss a million dollar water revenue shortfall for almost a year?

Proper Controls Lacking

2. Why would this long-standing undetected glitch be limited to 12 condos on the beach? How can we be assured that the city is properly billing all other water users?

3. What controls are being put in place to eliminate such glitches and even more important to detect promptly any that do arise?

Finally, it is perhaps instructive to compare the speed with which Broward County Revenue Department handled its potentially revenue-draining computer glitch last month. The county discovered That error in 19 days, as explained on the Property Appraiser’s website.

IMPORTANT: 12,000 TAXPAYERS WERE MISTAKENLY NOT SENT TAX BILLS ON NOVEMBER 1.
The Revenue Collector learned on November 19 that approximately 12,000 property owners…

We hope our elected officials take a serious look at our city’s lack of billing controls. We hope, too, they will soon be able to assure us that the city has taken specific corrective steps and water billing is now under control. Until then, we are left with a shaky feeling that all is not well in Hollywood billing land.

Sara Case
December 3, 2010

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Water/Sewer Rates Increasing: 2009
June 16, 2009, 12:12 AM
Filed under: Infrastructure, Water-Sewer-Sanitation

June 16, 2009

The Cost of Water

The City’s explanation for recent water rate increases:

“Why is the increase so much? There are several factors driving the new rate structure and increases. The old rates would not have allowed the City to pay for system improvements needed to meet newly adopted state and federal regulations. Additionally, the majority of Hollywood’s water and wastewater infrastructure was built before 1970. This means in the years ahead much of this infrastructure will need to be replaced.”

The City’s explanation for how our new, higher water payments are used.

“What do water and wastewater base charges pay for? The base charges pay for the fixed costs associated with managing the water and wastewater accounts.    The base charges also cover a portion of operating costs.”

“What do water and wastewater consumption/usage charges pay for? Consumption charges cover capital costs, repair and maintenance costs and the portion of operating costs not covered by base charges. This includes expenses such as debt service (bond or loan repayment), engineering and administration costs and regulatory compliance costs.”

The Commissioners said the city needs to raise rates to generate money to pay for more than $200 million in upgrades to Hollywood’s aging infrastructure. Sun Sentinel_ 10/21/09

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Post from Commissioner Furr
December 2, 2008, 12:48 AM
Filed under: City Commission, Water-Sewer-Sanitation

Garbage & Recycling

December 2, 2008

The Balance Sheet has received this letter, dated Dec. 2, on the subject of sanitation from Commissioner Furr.

First of all, I want to thank everyone for their input. This is a work in progress and the discussion is very helpful.

As a city, we are responsible for providing the best services for the best price. Last spring, we put the garbage pick-up contract out for bid in an attempt to compare costs and service. Since then, we have received bids, analysis of bids, options, proposals and a myriad of different ideas.

The more I looked into the issue the more I came to the conclusion that going out to bid was not a good idea. In retrospect, it was short-sighted and failed to deal with the waste stream in its entirety. We should have done a request for proposals (RFP) that would have asked for a comprehensive plan to cover all aspects of garbage AND recycling. This bid did not consider recycling at all. Nor was it going to provide any incentive to divert more waste into the recycling stream. We currently recycle only 7% of our garbage. The state has mandated that we achieve 70% recycling by 2015. By simply continuing with our present arrangement we will not reach that standard.

My support of keeping the sanitation department in house was based on a number of different reasons. First and foremost, I was not prepared to lock the city into a 10 year contract that didn’t envision or encourage a more progressive attitude toward waste management. There is the need to be nimble and flexible in these changing times. The Resource Recovery Board of Broward County (they oversee the Inter Local Agreement that exists between all the cities in the county) is presently in the middle of negotiations that have far reaching ramifications for all the cities involved. I am convinced that in the long run we can do better both economically and environmentally.

We have been paying $98 a ton for tipping fees to unload our garbage. Presently, we are receiving a little over $50 a ton for recycled material. That should be changing in the near future to almost $58 a ton. As I mentioned before, we are currently recycling only 7% of our entire stream. There are tremendous economies of scale that are reachable by tipping that balance in our favor.

The only way we are going to get to that level is through a restructuring of our entire organization. We need an interim plan, however, to get us through to next year. I would like to throw these ideas out for discussion.

Beginning immediately, changing sanitation workers from 4-10 hour days to 5- 8 hour days now. Four days will continue to be used for picking up trash.

The extra day of work will allow for picking up recyclables when the present contract is up with Waste Management (August 2009). In the meantime, that extra day (Wednesday) can be used for brush pickup.

This gives us time to prepare to bring recycling back in house. We already have the trucks. We currently outsource our recycling for almost $1 million a year. The present contract with Waste Management is up in August.

From now until August 2009, we will have the opportunity to purchase and distribute 96 gallon rolling containers for recycling, retrofit the trucks to weigh recyclables and prepare the public for this plan.

Also, by that time we will be ready to institute the program by Recyclebank that will provide incentives for those to recycle. (For those wanting more details on the program, please view the presentation at the last commission meeting)[Editor’s note: brief description of program is here.]

In August, it would make sense to consider going to one day a week garbage. For those who create more garbage than one bin’s worth, it might mean an added cost for an extra container. For the rest of us, the one day a week pick up will encourage us to divert our garbage into our recycling bin. This, by itself, will help tip the scales in our favor.

If we go to one day a week pick up, we will then be able to use the other days for brush pickup as well as hard junk. Hard junk, however, will have to be “pay as you throw.” This pricing schedule needs to be refigured, ie. so much for 1 cubic yard, a little more for 2, etc… There will need to be places to drop off stuff for free.

Hopefully, by that time, we will also have figured out a place to recycle the brush to mulch. This mulch could be made available to citizens. This was very successful only a few years ago and many residents took advantage of this service.

Over the coming year, we will be renegotiating union contracts and benefits to more reflect the private sector. The comparative analysis done by the city’s consultants illustrated the gap to be far too wide between the costs of services and benefits of the public and private sectors. We are all aware of the unfunded liabilities that face us as a city. There are some major changes that need to happen across the board for all city employees, not just one department.

We will see if it is possible to not only cut costs, but to also restructure in creative ways that will do right by the citizens as well as the environment. This is a transition period. It will take cooperation. It will take a change of priorities. It requires an understanding that we can do a lot better than we have been doing. These discussions can go a long way toward achieving that goal. Thanks for listening. I look forward to your feedback.

Beam

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Proposed Service Cutbacks
May 29, 2008, 12:30 AM
Filed under: Budget, Water-Sewer-Sanitation

May 29, 2008

Sanitation Services Cutbacks

As you will see below, numerous Hollywood residents wrote in response our article on the proposal to eliminate brush pick-up and otherwise reduce sanitation services while increasing the fee. We heard from June Clarkson, Paul Klein, Joe Mumpower, Daniel Koehler, Susanne Phelps, Ken Crawford, Sara Wolfer, Bunny Mestel, Annette Novack, Susanne Phellps, Christian Mulack, and Commissioner Dick Blattner. Excerpted below, in no particular order, are some of their comments.

“This is one area that we should not cut back on…doing so would bring more rats, etc to the neighborhood.”

“What about the elderly who have no way of hauling the trash?  What about unauthorized dumping in your own alley way or swale at night by someone else, that will be a big problem.  A “My brush is now YOUR problem” attitude will certainly prevail in plenty of peoples’ minds.  We pay our taxes and deserve basic city services, and this is one of them.  You can rest assured that there will not be a shortage of city employees/staff out there writing fines.  One large palm frond could cost $45.00 to have hauled away, that is insane.  If we can’t afford it, then privatize it.”

“This city takes and takes and gives little to nothing back to its residents.  We just had elections in this city, and yet, it all remains the same.  The real problem here is not being addressed, we need to restructure the City’s budget from the top down and overhaul the way pensions and salaries are paid and how the funds are allocated for services.  But that is a whole other can of worms.”

“Thank you … for keeping us informed about the mess we seem to always be in with the City.”

“I am appalled to learn that the city of Hollywood is contemplating increasing the fee for garbage collection while reducing the service to the taxpayer residents. The Commission should realize that city government was not created to provide jobs, but to provide necessary services at the lowest possible cost to the taxpayers. Every avenue should be explored to provide garbage collection at the lowest possible cost while providing the most service. I also object to linking employee pay with the CPI to provide automatic salary increases. The question of medical and pension liabilities is also a knotty issue that the city has not addressed in this case, and is also an equally knotty issue for all the other city workers as well.”

“Something that some did not appreciate is that in the event we did go private, the union would encourage their members to bump “innocent” unrepresented workers who probably earn less than the sanitation workers, when the fact is that Waste Pro and others all said they would hire all workers who successfully completed the pre-employment process.  The benefits were comparable, except for the fact that the city offers a defined benefit [pension] plan we cannot afford any longer, and Waste Pro offers 401K plans.” [editor’s note: Waste Pro is the private hauler that the city commission was about to select when commissioners decided instead to keep sanitation in-house.]

“Another aspect of eliminating brush pickup is THE ADDITIONAL COST OF CODE ENFORCEMENT. Code enforcement, as you know, has a hard time as is to keep up with all the many current violations. Imagine the additional effort that would have to be made in time and hiring additional manpower to enforce thousands of additional brush related  violations. The city will incur new cost items in dealing with the messy alleyways and code violations as a result of excessive piles of brush.”

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