CALAFCo Conference 2006CALAFCo Conference 2006

“Creating & RestoringSustainable Public Agencies”Moderator Josh Susman

City Member, Nevada LAFCo & CALAFCo Board of Directors

Panel Peter KampaGeneral Manager, Twain Harte Community Services District

Walter KieserManaging Principal, Economic and Planning Systems

SR JonesExecutive Officer, Nevada LAFCo

IntroductionIntroduction

Californians are served by over 3,400 Special Districts and over 475 Cities

Half the state’s LAFCos reported over 600 Districts serving populations of fewer than 10,000

All face fiscal and organizational challenges

ChallengesChallenges

Eroding and inflexible revenue base Statutory restrictions on revenue (Prop. 218) Increasing costs and service demands Increasing State and Federal regulatory

requirements

These challenges effect all agencies, but small agencies have fewer resources to meet them

Panel ObjectivesPanel Objectives

We hope to accomplish in this afternoon’s discussion:

Identify and Discuss Issues Related to Size Suggest Criteria to Determine Adequate

SizeSuggest Standards to Avoid Creating

Unsustainable DistrictsSuggest Options for Service Provision

LAFCo’s MissionLAFCo’s Mission

Avoid Duplication of Service ProvidersAlternatively, Expand or Modify Existing

Agencies When PossibleDetermine fiscal feasibility

Promote efficient, economical services

Promote Accountable Governance

Is Small Beautiful?Is Small Beautiful?

Small agencies are often especially responsive to their citizens, but often face size-related constraints in these areas:

FundingInfrastructureManagement Governance

Obstacles Obstacles

Inability to raise funding commensurate with service responsibilities and obligations

Inability to comply with Brown Act, Public Records Act, and other reporting requirements

Inability to meet State and federal regulations (e.g. Clean Water Act, etc.)

Inability to maintain continuity of management and elected representation

Inability to maintain infrastructure

Survey DataSurvey Data

Informal August 2006 Survey of CALAFCo Members

28 LAFCos Responded – approximately half

These LAFCos reported 607 Districts with Populations of Less than 10,000

178 with less than 500 212 with populations of 500 – 2000 217 with populations of 2000 - 10000

Survey DataSurvey Data

LAFCo Staff Reported Challenges in Four Broad Categories:

FundingInfrastructureManagement Governance

Funding RestrictionsFunding Restrictions

Revenue Sources are restricted due to a variety of circumstances:

Statutory restrictions (e.g. Prop 218) Lack of political support for raising fees and taxes Lack of State and federal grant programs

(enjoyed in the past)

Small agencies often lack personnel that could help them expand their revenue sources through grants or loans, or to raise assessments or taxes.

Consequences of Funding Consequences of Funding RestrictionsRestrictions

Restrictions on Funding Limit the Agency’s Ability to:

Fund Operations and MaintenanceProvide for Personnel Finance Administrative Costs

InfrastructureInfrastructure

Fiscal Constraints Result in Deferred or Under-funded Capital Programs:

Deferred MaintenanceDeteriorating Facilities and Equipment Inadequate or non-existent Capital

Replacement Funds Inability to finance upgrades to meet more

rigorous state and federal regulations

ManagementManagement

Insufficient or non-existent staffing

Inability to comply with reporting requirements Annual or bi-annual audits Brown Act, Public Records Act State Filings, Local and Public Requests for

information

GovernanceGovernance

Difficulty Filling Board Member Seats Inability to provide adequate training Potential conflicts of interestSmall pool of potential elected officials

IndicatorsIndicators

… What constitutes a small agency? …

Municipal Incorporation 500 Voter Minimum Statutory Fiscal Tests

Independent Special District Dependent Special District

Size MattersSize MattersDetermining When Size is a Factor

Different based on district type• <500 in cemetery, RCD, lighting district may work

(no/small staff)• <500 risky with Water/sewer districts

– requires infrastructure, management and operation staff

• <500 CSD works (barely)– With multiple services, staff, broad revenue base

• <500 Fire district costly– Equipment and station alone =$250 + per YR

Household income a factor• Retirement VS. Working family

Administrative Costs - ExampleAdministrative Costs - ExampleAssumptions:

Reclamation district with no state or federal permits Serving 200 to 500 properties No agency staff, all contract One phone line, one computer and printer Minimal leased office space 2000 annual copies and 5 mailings to customers Contract manager @ $40 per hour for 700 hours

annually (grant writing and administration, prepare policies and contracts for Board decisions)

3 hours per month clerical work to prepare meeting minutes and mailings

Baseline CostsBaseline Costs$49,110 per year

Per-capita Annual Share of the Burden:

10,000 Households = $4.91 5,000 Households = $9.82 2,000 Households = $24.56 500 Households = $98.22

Problem IndicatorsProblem IndicatorsFinancial Indicators

Are reserves depleted? Is the depletion planned?

Are reserves being used to fund operations?Has the district borrowed money to meet

operating expenses? Is the district unable to finance projects that

are critical to its mission?Are audits not being completed?Did the district receive an unfavorable audit

and management letter?

Indicators Indicators

Pending Actions Against AgencyHas the district been the subject of

ongoing regulatory body investigations which have resulted in consistent findings of mismanagement?

Has the district experienced votes of no confidence from other entities, or citizens?

Are there pending legal actions

IndicatorsIndicatorsOrganizational Indicators

Is the district unable to fund staff critical to delivery of its services?

Does the district have unusually high employee turnover?

Are there multiple HR related lawsuits?Does the district provide the services and

programs it set out to provide?Are claims or litigation increasing? Is the district unable to fill seats on its Board of

Directors?

Action OptionsAction Options

LAFCos have authority to manage size-related deficiencies of local agencies.

This authority differs between existing and prospective agencies.

Thoughtful intervention and actions can avoid documented problems of small agencies.

Action OptionsAction Options

For Existing Agencies with problems:Use the MSR & SOI process to identify

problems and optionsProvide technical Assistance or facilitate

inter-agency cooperationEncourage functional or actual

consolidation Initiate Dissolution and reassignment of

functions

Action OptionsAction OptionsFor organizing new agencies: Guide prospective applicants towards

appropriate service & governance solution(s) Follow statutory standards and procedures for

determining fiscal feasibility Expand your LAFCo’s policy regarding

formations -- Consider operational & governance as well as

fiscal standards Establish minimum size standards for various

agency types