Tuesday, September 29, 2009

Gosling Median to be fixed

The Woodlands development company has agreed to plant trees in the median in the widened segment of Gosling from Flintridge to the post office. This will improve the aesthetics of the roadway and improve safety. Currently, automobiles cross the road from the post office and from their next door apartment neighbors to go south on Gosling. That creates a safety issue because of the mud that often is on the road bed and the limited visibility when using the open median spaces as a crossover. Automobiles have been rutting the median and each time it rains, mud is brought out of the median onto the roadway. Consistent with road design in The Woodlands, a paved crossover will not be pursued. There is a paved crossover designed for automobiles to change from a northerly to southerly direction, adjacent to the post office.

Saturday, September 12, 2009

Coming attraction - Woodlands Bond Election

Oh no! some say. More taxes! No no no no no!!! This is a case where you pay less for more. This is a yes yes yes proposition. Please vote and do it with a "yes" in the coming election. The assumption of  32.8 cents-per-$1000 value assessment on resident properties requires a yes vote. We need to sell low interest bonds to finance big ticket items like fire stations, parks and other obligatory high cost asset expenses.  Earlier, as the township contemplated how to develop an affordable budget for operations and capital expenses, it had to look into financing options. The answer is to finance parks, pathways and fire stations through the sale of bonds. That will be a  win/win for residents, investors and the township.

There are three items to be placed on the ballot. Legally, the township must have all three. Bonds must be grouped so that voters are able to select which grouping(s) they support and which they do not support. Each grouping must have a similar  purpose. Non-similar purposes cannot be aggregated as one line item on the ballot. Assets or programs having similar purposes can be aggregated. So, legal compliance requires the placement of a minimum of three items on the ballot, each having a similar purpose:
 
(1) Fire stations - $17.335 mm. (a) One fire station is required for Creekside Park Village. The temporary station there now must be replaced as soon as practical. The accommodation for the fire department personnel is not practical for long term. Personnel will be using this substandard firehouse for two+ years before we can finance and construct a permanent one. Without a fire station, those residents experienced a 25-minute average emergency response time. Their backup remains slow. A full service fire house is required in this area to protect current and future residences and future businesses. (b) One fire station is also required by Indian Springs, which is experiencing a substandard response service level in parts of that village. An average response of 5 minutes is required to receive the ISO 2 rating we now enjoy, however the actual is 8 minutes in parts of Indian Springs! The Woodlands has been planning and promising this station for the last five years, long before the township was even thought of. Both facilities are necessary investments and needed now. The union contract with the firefighters must also be honored by the township. These stations have a life of 30+ years. (c) Renovation at the Central Station is also required. A study in 2003 revealed that the construction of the current station is inadequate and below standards for renovation. It has to be totally redesigned and reconstructed. The need goes beyond just replacing the 30 year old building. The Woodlands needs to have their dispatch team located there also. This facility was originally designed for a "small" woodlands fire department and today the modern technical requirements as well as the requirements of  the community must be met. The Woodlands currently pays for rental space in Shenandoah for the its dispatch team.

(2) Parks and Pathways - $12.380 mm. These facilities also have long asset lives, 30+ years. Residents are contractually obliged to pay for 50% of their development. This commitment was part of the formation of the TWA, the homeowners association for the villages not in the older WCA. Essentially, these facilities will be part of the development of Creekside Park. This is the same obligation used to finance parks and pathways in Sterling Ridge, Alden Bridge and other recently developed neighborhoods and villages. It was part of the TWA resident assessment rate. The township inherits and must honor this obligation as part of the transition agreement.

(3) Refinance existing debts - $20.225 mm. This ballot item will enable us to reduce our interest payments by refinancing our current debt, incurred primarily from building parks and pathways in recent years in TWA - part of the transition agreement. These are short term higher interest loans, to be replaced by long term low interest bonds. This helps enable low interest bonds for 20 years instead of 5 or so years, improving our cash flow and opening the door to lower taxes that we were promised and demand from our new government entity. 

All three propositions are needed for us to go forward with the lowered tax rates. Why, we ask, do we need to vote on it if it is simply a financial process and not a decision to incur the debt nor a decision to construct the assets? It is the law that in order to finance anything with general bonds, a governing entity must put the bonds out to the voter. It is a broad law and does not differentiate between bonds of choice vs bonds of election. For us it is a slam dunk. Some political circles feel bond commitments introduce additional risk for changing to a municipality in the future. I do not see this as a valid argument to vote no. There could be some hurdles in order to transfer debt to a municipality, but even if there are difficulties, our legislative representatives will deal with that if they have to, in the future. We already had one bond sale for the township, as it is. Laws are meant to be changed when a valid need arises. It might mean we will be required to have the bonds reassessed for risk to protect investors, but I would not expect any bond measure to disable the feasibility of becoming a city. Leave that as a separate issue.

There is a cost to bonds. We are expecting to pay 3.16% issuance fees. This allowance is included in the proposal which will total $49.490 mm. Timing of the sale of bonds is unfortunately more distant than one might desire.  The bond money would not be available until June 2010, so construction could not start until then.

A yes vote for the fire station bonds simply means that the schedule of constructing the fire stations will provide the relative service level in the Village of Creekside Park about July 2011 and in Indian Springs on Jan 1st, 2012. Otherwise, there is no project contingency plan that I know of yet. I would expect that we would do as the TWA - use bank loans of higher interest, likely requiring us to adopt higher taxes. It is possible that the township would defer one of the fire stations. Deferring the Creekside Park fire station could result in a lawsuit. 

A yes vote for the pathways and parks should enable us to retain the current tax rate as well. Otherwise, its financing falls to the same strategy as the fire stations - finance through a bank and use whatever funds we can until the next tax rate, then hike it as required.  Taxes are set on the obligations and needs of the community.

A yes vote for the current debt simply means that we save money through lowered interest rates and by financing for a much longer term, improving cash flow and reducing the tax rate. Otherwise, the tax rate will have to be increased to pay down the debt much earlier than if we financed through general bonds.

We expect to get AAA rating for the sale of our bonds. That will get us favorable rates. The township is anticipating that bond rates will remain low into mid-year 2010. November 3rd will be the date for the election this year. The bond election details have been submitted for inclusion onto the November ballot.

Related article
1. Development of the first budget of The Woodlands Township

Friday, September 11, 2009

Development of the first Budget of The Woodlands Township is now history

We have our first budget now. It is finished. The board listened to the concerns of vocal citizens in The Woodlands and altered the staff's proposed budget plan to bring forward the new policing plan to the beginning of 2010, instead of implementing it in two phases over two years. That impacts the budget by a whopping $2.5mm! However, the 32.8 cents per $100 of assessed home value was retained. That means some programs and projects will have to be deferred. One program to be terminated is a contract with Shenandoah and Oak Ridge for policing the boundaries of The Woodlands. That program was cut in half so that a transition could be made between the old and new policing contract with the Sheriff department. Six months of patrolling the I45 corridor will be displaced with Sheriff deputies after the transition is complete. Unfortunately, the board chose to continue to spend more money on those contracts than what I and others believe is necessary, even with the knowledge that inadequate service level information had been provided. Lack of information should have generated a "insufficient reason to retain the contracts". Our board should spend money for value, not political rationalization nor unknowns, which appears to be the case with these contracts. There are other projects where this money would produce better value. The budget process seems to be lacking  value-driven input. One can formulate numerical value to anything. Corporations do that, I would think a government could also. But this is the first budget.  

All in all, I would rate the budget as excellent, missing the very excellent grade because of a few issues,  such as  the one above. This being the first budget for the township, it appears that all the operational necessities have been accounted for and we will receive no loss of value as a result of the new government.   In fact, we gain considerable value. We will have lowered annual costs through operating efficiency, derived  from the sales taxes, which we pay through local business purchases. We also continue to build valued assets. Although I believe the 2010 budget continues to retain some fat, having some discretionary money will not hurt for the first year. The township will have to prioritize what they spend, not just spend what they have budgeted. Already, the board is planning to tap financial reserves where they should be planning to create reserves at this stage of budget planning. Tapping the reserves was the solution to not raising the tax rate to 33.5 cents. There are various projects being deferred in order to accommodate the police acceleration plan. Deferring some other items was also considered, but the board voted to keep everything still remaining in the budget. There were several proposals to balance the budget but in the end, they all failed to get a majority vote.

The budget reducing process apparently is new to the board. Generally, it is more acceptable to cut across the board (usually consistently across organizations) and not to differentiate capital project spending. There is no means that I can see to balance project deferrals among the Town Center and the villages or whatever other competing projects that  may exist (e.g., between villages). There was a clear statement by some of the board members that projects in Town Center seemed to be prioritized over village projects since village projects were deferred and there was not a clear rational reason some of the Town Center projects could not be deferred.  That appeared to be the case, but perhaps some were cut from the Town Center that I am unaware.  Other board members believed those concerns were unfounded and not taking the entire economic picture into account, favoring the villages, a "dangerous" view. It was late in the process, and it really does seem to me that the process was lacking. This conflict will be a challenge going forward. The Township Finance organization might be able to help in the future with an agreed process for cutting the budget. That should have been established long in advance, but with the complexity of just getting the budget together, it probably was not feasible. The debate on what should and should not have been deferred was avoidable, and hopefully, contingency measures can be facilitated by such a predetermined process in the future, facilitated by the township staff.

The adopted tax rate of 32.8 cents was a bit high in my opinion. It should have been capped at 32 cents, but that is not far from the adopted rate. I am hopeful that the township will attempt to drop it to 32 cents next year, seeking ways to lower the tax burden on the residents in subsequent years. Visioning a fixed rate of 32.8 over many years does not seem appropriate to me. The tax rate needs to be driven by community requirements, not by a continuing target strategy. The target strategy should seek a cap but promote minimizing the cost to the community. I will have more to say about the budget in a separate article on the bond election. The board did squeeze the budget twice and made significant improvements as a result, aligning the budget to the wishes of the residents.  I do not know how many unemployed residents exist in The Woodlands, but there is likely a higher number than usual who will have difficulty paying their taxes this year, as the result of economic stress in this recession. Every penny helps. After the next election, hopefully the board will be even more sensitive to resident issues about the tax rate. Some members of the board expressed the thought that we have a low rate and should not be tightening our belt so much, but when you look at the remaining fat, one wonders.

It is clear that The Woodlands must remain The Woodlands. We should not take away amenities nor service levels, unless of course their existence no longer makes any sense for us to remain a highly respected community, where we pride ourselves to live and have the services we need. Service levels are already generally minimized in order to keep the values of our community in place. It is debatable whether some of the contracts can be negotiated down and I have to assume that will be done as discussed earlier. We need excellent metrics from the Township in order to understand what the amenities are and how they are perceived to affect our lives. As we move forward, we likely need to change the way we measure amenities relative to our needs, measure  services relative to cost and benefit, and measure our government's role as it affects the community.

Hats off to board members for asking questions and exposing some of the issues in the budget. Hats off to the staff for their hard work and pursuit of excellence in building the budget.  I am pleased that we have a plan now to get on with the new policing organizations. This will help the community to be more unified and know that police staffing is aligned with normal police staff levels and with expected service levels. I was also pleased that the new fire station for Indian Springs has been accelerated and the dependency constraint on waiting for the Creekside Village fire station has been removed. Indian Springs' residents have to wait an additional year than previously planned, but the project is now on the books to be operational January 2012, only one year later than we had previously hoped. Now we have to move on to a budget dependency - the bond election. Without that, this entire exercise must be altered.  

Resources
1.  Township Budget Meeting Videos 

Thursday, September 10, 2009

Water Restriction lifted in The Woodlands Texas

In the WCA association meeting last night, it was announced that the mandatory watering restriction has been lifted. We remain on an advisory to refrain from using more than one inch per week on the lawn and to continue to voluntarily use the assigned days by even and odd house numbers. Our water supply is being drawn down, only partially replenished, so we must use it wisely! The subsurface water level is dropping.