Tag Archives: budgets

Three tips for avoiding turning a $250 million bridge into a $13 billion one

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A new book chronicling the long saga of the new Bay Bridge offers these lessons for avoiding massive cost changes/overruns:

Reference other projects. Frick points to a couple ideas for controlling mega-project costs. Scholar Bent Flyvbjerg, who has studied infrastructure cost overruns around the world—and who often boils them down to political deception—has promoted the idea of basing costs on a “reference class” of similar projects already completed. The fear with that is project leaders won’t bother to keep costs down if they know they can hit a certain number, but Frick says that possibility bothers her less than the uncertainty surrounding costs that goes on right now.

Widen early cost ranges. Giving a precise cost number out to multiple decimals, as the state legislature did with its $1.285 billion estimate in 1997, makes the figure seem more scientific and precise than it really is, and creates that much more public frustration when the costs keep rising in the future. “In the early planning stages, ranges in the projects would be really important to provide,” she says.

Track progress more closely. Frick also suggests that officials pay more attention to “transaction cost economics”—an approach that “analyzes project development over time,” she writes, in an effort to identify the precise “political and economic origins” of new costs. This fuller accounting also considers costs that often go overlooked, such as the time and energy that go into public participation. Without better cost estimates, projects will continue to suffer from the type of strategy described to Frick by one senior engineer:

“Basically at the onset of a project I think the higher ups prefer a dollar amount and schedule that doesn’t shock the public.”

Which, as the Bay Area knows, only makes the shock that much worse when it finally arrives.

The typical resident is going to look at this and ask how in the world this was allowed to happen. Large infrastructure projects have a lot of moving pieces but the change in price is still hard to understand. Of course, there may be a political penalty for adhering to this advice – a higher projected cost upfront is likely to limit support. Yet, going with an unreasonably low projection with no cost range borders on dishonesty.

Audits of Chicago budget reveal behind the scenes information about the city

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In addition to illustrating Chicago’s difficult financial situation, the 2012 budget audits also contain other interesting information about the city. Here are a few examples with some quick commentary:

The number of “physical arrests” by Chicago Police officers declined again — from 152,740 in 2011 to 145,390 in 2012. That continues a six-year trend that coincides with the hiring slowdown that caused a dramatic decline in the number of police officers. Police made 227,576 arrests in 2006. The number of arrests has been dropping like a rock ever since.

The Chicago Police Department has long argued that it doesn’t measure the success of crime-fighting strategies simply by the number of arrests.

Despite the negative media attention about crime in Chicago, arrests are down. So what has happened: less crimes are being committed? Chicago police have adopted different strategies?

Daily refuse collections declined from 3,983 tons in 2011 year ago to 3,763 in 2012. Last year’s 52-ton increase had reversed a five-year trend. The amount of garbage generated by the 600,000 Chicago households was 4,451 tons a day in 2006 to 4,240 in 2008.

Thanks to last year’s record heat and drought conditions, average daily water consumption rose by 23 million gallons — to 793 million gallons — reversing a steady decline. In 2006, Chicago’s 1.04 million households were guzzling 884.9 million gallons-a-day. Operating revenues in the city’s water fund were up by $122.1 million or 29.6 percent, thanks to Emanuel’s 25 percent increase in water rates.

Interesting contrast: less garbage but more water usage. This highlights the behind the scenes stuff that is essential to city life but doesn’t receive much attention (unlike crime). Over 3,700 tons of garbage a day! Where does it all go?

Chicago’s 165 tax-increment-financing districts had a collective balance of $1.5 billion. Most of that money is uncommitted, fueling an aldermanic demand Emanuel has rejected: to declare a TIF surplus and use the money to reduce some of the 3,000 layoffs at Chicago Public Schools.

TIFs are intended to collect money to help encourage new development. If there is such a surplus in the TIF funds, why aren’t they being used for development?

Chicago’s principal private employers were: J.P. Morgan Chase (8,168 workers); United Airlines (7,521); Accenture LLP (5,590); Northern Trust (5,448); Jewel Foods (4,572) and Ford Motor Co. (4,187). The 2012 city payroll was 33,708 — down from 40,297 in 2006.

An interesting list of companies – I was surprised by Chase leading the way and Ford so high on the list.

There are other interesting pieces of these audits including revenues and passengers at the two airports as well as the value of the city’s historical and art collection (if this figure is correct, nothing near what the city of Detroit controls). Such information not only hints at how the city really works but also provides helpful financial indicators for assessing the current state and future direction of the city.

More California communities looking to outsource certain municipal services

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Here is an update on a developing story: more California communities are considering outsourcing municipal services.

The San Bernardino City Council on Monday will consider a recommendation to seek a proposal from the San Bernardino County Sheriff’s Department on what it might cost for a contract. San Bernardino filed for Chapter 9 bankruptcy protection on Aug. 1.

Maywood in 2010 disbanded its police department, which had faced a myriad of lawsuits and reports of excessive force, and enlisted the county to patrol its streets. In an effort to close a $450,000 budget deficit, the city also laid off all its employees and contracted with the neighboring city of Bell to provide public services such as finance, records management and parks and recreation…

The central California cities of San Carlos, Half Moon Bay and Millbrae have also disbanded their police departments and contracted with their county sheriff over the past two years.

Fullerton debated the decision in August, but ultimately decided to stick with its own police officers.

Baldwin Park officials are waiting for the extensive second phase of its study, which could take up to six months, before making their decision on the controversial proposal. Among other things, it will look at the qualifications of Baldwin Park’s police employees and determine whether they would be able to transfer to the Sheriff’s department.

Two responses come to mind:

1. Outsourcing certain services may relieve local budgets but wouldn’t this eventually strain county-level budgets? And if so, won’t there be some way that counties then start asking for more money back from municipalities or individual taxpayers? This would seem to best work with smaller communities, say under 10-20,000 residents, who have to pay a lot just for start-up costs for services like police and whose addition to county rolls wouldn’t be too burdensome.

2. One question residents could ask about outsourcing is whether the level of municipal services will remain the same. Say a community outsources their police services to the county sheriffs; would the county have the same response time and be able to devote the same amount of energy to local issues? I wonder if the real issue in these communities as well as in many American communities is whether local residents will agree to service reductions in order to save money.

 

Charlotte columnist suggests suburbs will face four problems

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American suburbs contain the majority of United States residents (and this figure is likely to grow in the latest 2010 Census figures). And yet, there are a lot of questions about what the future of suburbs will be. A columnist/editor in Charlotte suggests suburbs will face four problems in the near future:

Demographics. Population trends favor urban-style, multifamily development. Gen Y’ers have a clear preference, at least for now, for urban living. Meantime, aging boomers will be selling houses and moving to condos or apartments. As illness and infirmity hit, many will have to give up driving. They’ll want walkable neighborhoods.

With the foreclosure crisis, the single-family home market will be sluggish for years. The nation is overbuilt on large-lot suburbia, and underbuilt in cities. The Urban Land Institute’s “Emerging Trends in Real Estate 2011” has this advice to investors: “Avoid commodity, half-finished subdivisions in the suburban outer edge and McMansions; they are so yesterday.”

Fuel prices. Remember when $4-a-gallon gas walloped the economy in 2008? Now, gas prices are over $3 again. Gas prices are likely to keep rising, and already, transportation is the No. 2 cost for average U.S. households. With pay and jobs sinking, more people are likely to want to live where they can drive less.

Carbon footprint. If we’re to avoid creating even more destructive changes in the world’s climate (more droughts, floods, blizzards or heat waves) for our children and grandchildren to live with, more of us will need to live in tight-knit, walkable cities. It turns out city dwellers have a much smaller carbon footprint.

Suburbs on the brink. Although some first-ring suburbs are thriving, others aren’t. Many suburban neighborhoods are seeing rising poverty and crime, dead or dying malls and derelict strip centers and big-box stores. We can’t just abandon them to blight.

These are all possible issues. Some thoughts about each concern:

1. We will have to see what Generation Y and the aging Baby Boomers want in the long term. Will they want to move back to cities or will they be okay with denser suburban development?

2. Fuel prices are up and American driving is down. What happens if most people can access electric cars within 10 years?

3. Carbon footprints – are people convinced that they should change their personal, residential choices based on this evidence? Do Generation Y members choose to live in cities for this reason or for other reasons such as proximity to entertainment and culture.

4. Inner-ring suburbs are experiencing many of the issues that we once thought were limited to cities. Interestingly, a number of these issues are spreading beyond the inner-ring.

The columnist suggests we need to fight the suburban blight, marked by “separate municipalities outside a city, regardless of age or form…development with a specific pattern, typically built after 1945: single-use zones (stores separated from offices and housing, single-family houses apart from apartments); lots a quarter-acre or more; car dependent.”

There are several other issues that many suburban communities face:

5. Budget crunches with the economic crisis leading to a downturn in housing growth. Not much money is coming in and this will lead to cuts in services and amenities.

6. More suburbs reaching build-out and facing questions about whether denser development can fit within a community dominated by single-family homes.

6a. Will American suburbanites want denser development that may threaten their property values?

7. Increasing minority and immigrant populations that challenge the white majority that has dominate American suburban life. Stories like that of a controversy over a proposed mosque in DuPage County could become more common.

8. Of course, lots of empty houses or homes with reduced values (here or here). This limits people’s ability to move, the ability of communities to collect money, and builders and lenders to make money.