IDEAS FOR 50 MILLION CARROT STICKS

This is a reader-submitted piece by Miguel Jose Matos, Hartford resident of twenty years. This fits in with our Suggestion Box series and addresses the recent pledge of $50 million over five years to the City of Hartford by Aetna, The Hartford, and Travelers.

by Miguel Jose Matos

by Miguel Jose Matos

 

Three of our local corporations have stepped up as committed partners to back Hartford to the tune of $50 million dollars over five years, if the City can get its financial house under control and come up with a workable plan for a viable future.

Funding the money hinges on the City putting forth a comprehensive and sustainable set of solutions for Hartford. The key piece of language in the corporate announcement was to be “part of” a plan, this was the clue. But based on media reports, the “when and how” have not been clearly spelled out, so it’s a great carrot but as yet no one is sure how long the stick is, and what will it take for our community to come together. A little over three million a year from each company is a great start.

“Push the corporate folk to drop their dime, while the City hammers out some fixes, use their dimes now to fund fixes; that without money remain unfixable”.

$10 million over 5 years is a good first step when having to climb out of a sinkhole fifty million dollars deep. But to get grounded we must back into the numbers, because the City is crippled with debt and limping with weak cash flow. It will be difficult to concoct a financial plan strong enough because of the City’s weak cash position, only making it harder to satisfy the conditional $50M Corporate Offer.

Corporate leaders are good community folks doing their part, protecting their investment and their workforce, but they understand risk and do not want to throw good money after bad. This narrative puts the City in a tricky position.

This point in time is a good opportunity to show the local corporations that the City has a plan that can be funded bit by bit with the corporate funds that are being offered. A project-by-project funding process based on a pay for performance system may mitigate some the upfront risk that has tied these moneys with a tough condition.

This tactic has relevance because it is not meant to only address the corporate funding offer, but to serve as the foundation for an annual Business Challenge Fund. Let’s get back to the corporations and be as corporate in approach as they are. Corner their attention by putting forth a recovery plan that is based on a return on their money and their participation. The approach is in many ways how corporations look at investing themselves.

The City should come up with a set of projects, benchmarked each year over the five-year corporate offer. The conversation must focus on challenging, yes, but doable projects that can be funded with their money, now, not later. The tricky part is that the doable projects need to offer a return that both the City and the Corporations can guide, follow and watch, in a short period of time.

The Mayor and his team have done a great job of putting a leash on the finances, and are now facing the cash flow reality that entails. Recent news on the City’s need to borrow money, to meet short-term bills, further complicates the situation because it adds an empty pockets situation into the mix.

The City is blessed to have professional staff that work hard and believe in our City but are besieged by the operational challenges of running a city with some tough problems. So please set relevant project goals that are narrowly focused, so that we stop doing too many things at once, and instead work steadily step by step. The chance to call this corporate offer the first business challenge fund makes sense, because it is driven by a benchmarked plan that provides a chance for the players to engage and develop a sense of ownership. It could provide the confidence the residents, the State and our corporate community needs.

by Miguel Jose Matos

by Miguel Jose Matos

So to get started here are some doable project ideas that could be the first set of goals for the first year of the Business Challenge Fund. These doable projects show the City’s sense of urgency by diving into the healing process now. These projects, mostly operational, are not overly complicated nor do they need a bunch of money to get them started. The key piece to these projects is that they all produce a dollar return to the money we are asking the Corporations to fund now. It also satisfies the corporate need to be part of the solution by including them in the work of monitoring and funding of each project.

In this approach the City is not reneging on the corporate need to have a plan that softens their worries, but taking the opportunity to make sure that these projects happen hand-in-hand with the Corporations. Submit these projects ideas with a price tag; show the Corporations how the initial funding of these projects can ignite some traction by creating revenue for the City, then set the Corporate table so that the new revenue is seen as a concrete dollar return on their money. Putting forth doable projects can justify early funding when based on an incremental pay for performance system. This strategy may be a welcomed entrée to set the stage for specific and tangible project talks between the City and Corporate folk.

(1)    HOUSING LICENSE FEE

When approximately 75% of the city housing stock is apartments, a housing license fee per apartment unit would not only generate revenue, but also improve the living conditions of families and children. This is not a tax on properties, but a point of compliance and enforcement given the amount of blighted properties in the City. Data shows the City with about 4,385 apartment units. The license fee must be set up on a cost basis, so that the City can raise a portion of the employee all-in salaries, thus leveraging the revenue.

For example, a graduated fee system, including the City housing inspector costs to enforce program would benefit tenants with safer apartments and bring City coffers much needed cash flow. Something like it is used in neighboring Stanford, i.e. for 3-9-apartment units a $60 fee + $40 costs, for 10-39 apt. units, a $75 fee + $50 costs, for 40 or more apartments a $200 fee +$70 costs. The City might want to consider a three-year payment cycle, so that the inspections all need not happen in one year and people don’t have to file every year. The initial corporate investment is to cover the total employee salary freight now, say two housing inspectors at $75,000 per year, in exchange for a measurable cash flow income stream that could exceed $1.5M per year in housing licensing fees.

(2)    SURFACE PARKING TAX

Reputable urban naysayers have told us that the taxable value of land in Hartford’s downtown hovers around $166 million. The urban gurus have also concluded that the taxable value of vacant or underused land such as parking lots is about $48 million.

Studies undertaken by UCONN show that Hartford’s parking fields have overtaken the City over the past thirty years. It could be because operating a parking lot has less risk and often is more profitable than a building with tenants, rents and repairs. Hartford needs to do everything it can to turn this situation around and impose costs on things that generate visual blight to the community.

The idea of a surface parking tax helps the City leverage the dollars that are brought in by visitors/employees and lessen the need for borrowed money to fund much needed capital improvements.

State legislation allows Connecticut municipalities to set up land value taxation districts that target vacant land and parking lots. It would be hard for property owners to argue the usual “more taxes” because when the land is built up, the land would stay taxed at the higher rate, but the building may qualify for a lower tax rate, basically amounting to a tax break for the bricks and mortar pieces.

In the real estate finance game, a lower tax burden can make more private funds available to finance construction, thus minimizing the large State subsidies that have spurred current downtown apartment development.

(3)    PLASTIC BAG SURCHARGE

by Miguel Jose Matos

by Miguel Jose Matos

A recent proposal to put a .05-cent surcharge on single-use plastic and paper shopping bags to fund State parks won approval of the Connecticut legislature.

The City’s legislative delegation should revisit the legislation seeking to have that surcharge dedicated to a restricted City Fund. For example, estimates based on Washington DC’s experience, the bag surcharge generated approximately $2 million dollars per year and residents said they would use fewer bags because of the .05-cent bag tax.

Stores and shops reported a neutral or positive impact from the surcharge and made savings through ordering fewer bags as a result of the bag surcharge. A new cash flow revenue stream of about $500,000 per year could be realized. Upfront corporate funding can cover an additional professional, for about a $65,000 year salary, to implement and manage this eco-friendly alternative.

(4)    STREET CUT FEES

This one falls off the “common sense” tree; it’s so ripe: an upfront $300 street cut permit fee. For a city the size of Hartford and given the ongoing MDC Sewer Project, the City should jump and grab the opportunity of issuing between 1,500-1800 street cut permits each year.

We need fees set high enough so that the City can properly enforce its resurfacing requirements so that our roads, so necessary for daily life and commerce, are kept in good condition. It is obvious to anyone who drives in Hartford that the condition of our roads materially impacts our neighborhoods. On top of the fee, the City would assess a bond or deposit requirement so that the City has funds to complete the resurfacing work properly.

The idea of street cut permits is not only to generate funds, but also to make utilities and other companies accountable, ensuring that our streets are re-surfaced properly. Public Works may not have a dedicated staff for inspection and enforcement, so corporate folk could ignite the program by funding two inspector salaries, say $150,000. The return is a new cash flow stream of about $450,000 per year in revenues.

(5)    SELL REAL ESTATE

We need to examine what businesses we need to be in and how we need to go about operating them. Is this a City with a population that really makes use of the 227-acre Keney Park Golf Course? Or does it benefit only a small percentage of the City residents? Like anyone, give them space and you’ll find a use for it, but we need to examine whether we need a 30-acre Department of Public Works depot with the former police headquarters, or whether some of that land can be sold to a job-creating business.

Sell the Batterson Park acreage in Farmington and sell an 86-acre strip along Fienemann Road (Both of these may have to go into the parks fund, always seemed that way, but you rid the City of the costs of maintenance and operations). In addition, there is a loose collection of largely undeveloped City-owned parcels in West Hartford, New Britain, and Plainville.

Ask the Corporate partners to help the City by paying for and monitoring a good real estate group to look at ways in which all of this land can be sold promptly. It has been estimated, that over a 12 to 18 month period, a one-time cash injection to the City could approximate $20 million dollars.

(6)    FIRE TRUCK VS. FIRE VAN AS 1ST RESPONDER

by Miguel Jose Matos

by Miguel Jose Matos

The local Fire Department is the first responder for all 911 calls. Current data shows that a very large percentage of 911 calls are not fire related. For most responses the Fire Department sends out a full flotilla of manned fire trucks. The City could save good chunks of money by having the corporate partners fund buying three or four SUV-sized vehicles equipped for first response scenarios.

(7)    SET UP A PRODUCTIVITY BANK

The local corporations should consider a $20 million funding, now.

A Productivity Bank is an internal revolving loan program that allows City departments to do unaffordable up front investments in projects in return for longer-term cost savings, revenue gains and service improvements. The Productivity Bank can provide loans to City departments for individual or collaborative projects that normally would cause a spike in annual operating expenses.  The corporate partners can serve as an Advisory Board to the Productivity Bank to help with early implementation and its sustainability into the future.

For example, Philadelphia created its Productivity Bank using a capital base of $20 million. The Bank proved to be a significant management tool in reforming the operations of the government, especially for technology upgrades. Well managed, these projects create innovations that make cities a better place to live. Well-run productivity banks sustain themselves well into the future and provide good operating outcomes.

(8)    Bring back HARTSTAT

HARTSTAT was an acronym used to name the process of when, why, what and how the City staff looked at themselves. It made the staff focus on how it was getting its job done.  Every two weeks staff from all operating departments would sit with the Mayor’s Office and Chief Operating Officer to review operating results as compared to industry performance benchmarks. This way of looking at yourself, in front of your peers and bosses, is not new to progressive city governments. Over time the discipline makes employees own their jobs not just do their jobs, a critical piece. Strong work synergies are created because staff can experience the value of open book management and kill duplicative tasks that burn time and money. Many cities around the country have used the Stat format over the last 20 years, because it works. It appears that the Hartford Fire Department is the only City operational department that is practicing a “stat” approach and consistently has made operational analysis its driver.

Please urge a $360,000 corporate funding to hire a well paid dedicated group of 3-4 data scientists. Their job is to examine all cross-functional and cross-division performance. Crunch and analyze data leveraged from the 911, 311, MUNIS (a management software used by the City) and other systems on how City divisions respond to public requests for service, along with Department internal work metrics generated by MUNIS.

Biweekly HARTSTAT meetings must be reborn because they create a space to think critically about the costs of actions and corrections. In Louisville KY, the performance management team achieved self-sufficiency in its first year and has since generated annual savings that exceed staff costs by a ratio of 5 to 1.

These project ideas are not meant to be all-inclusive but serve as a point of takeoff for some things that can be done now. Using these examples to get at the idea of having the Corporations put up some of their funds now, to partner with the City, on making these projects happen. On a pay as you go system, the risk for both the City and the Corporations are reduced while providing the City with some anxiously needed cash flow. The whole discipline that can be born out this approach will be good for the City and Corporate staff that will invest their sweat, equity and effort, by doing this well.

For about an initial cash drop of $875,000 by the corporate partners along with a commitment from the City, these projects can make real about $2.45 million dollars per year in cash revenue.   Simple math shows about a thirty-six percent (36%) return on the initial funding by the corporate partners.

The math adds up, it doesn’t lie and that’s good for the City of Hartford.

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