Thursday, April 23, 2015

Will Reconstituted Water Board Meet?

San Angelo City Council appointed four new members to the Water Advisory Board this week.  Ironically, Kendall Hirschfeld's request for the city to design and implement incentives for citizens to undertake specific strategies to conserve water remains unfulfilled.  Hirschfeld asked several times for staff to bring a program before council.  He may get to design the program as a member of the Water Advisory Board. 

Just over a year ago Water Advisory Board member Paul Alexander suggested Council ask the board to meet.  The City's webpage states "Meetings are held on an 'as-called' basis."  The water board under former Water Chief Will Wilde served as a rubber stamp.  There's too little evidence to know what it is under Super Public Works Director Ricky Dickson.

Four new members were appointed to three year terms.  It looks like they got a bonus year given the city's website states:

Board members are appointed to two-year terms by members of the City Council.
What does the future hold for our community water wise?  Given the lack of clarity on our Water Advisory Board it's hard to know.

Friday, April 17, 2015

Water Rebate Picture Muddied by CAFR

San Angelo's City Council will entertain yet another recommendation by staff to provide no rebates to water customers. The Comprehensive Annual Financial Report, presented last Council meeting, showed a $10 million profit from selling water.  It also revealed the water fund provided the city $14.5 million in cash during 2014.

The city's balance sheet showed a significant increase in water fund assets:

Total net position in the water fund was $105,537,730 in the current fiscal year, an increase of $7,878,984. Of that balance, $9,462,898 is unrestricted and $16,370,172 is restricted for primarily debt service and asset construction and acquisition. The main cause for the increase was the improvement of drought conditions in the area allowing for more usage by the citizens. 

The sewer fund had an increase of $2,429,371 in net position during the current fiscal year.
Add that Stormwater Fund went up $565,000 in 2014.

I have said before the April and November review times frames ensure a zero rebate for citizens.  In the same fiscal year both months occur before the high use season, which generates most of the city's water revenue and profits.  November occurs after the prior fiscal year close.  The city's 2014 CAFR showed $2.6 million transferred out of the water fund. 

Citizens know how our water bill changed over the last fifteen years.  A mere ten years ago the city charged citizens $22.4 million total in water and sewer fees.  Last year that number reached $39.1 million between water, sewer and stormwater fees.

There's a river of money flowing through the city's various water related funds.  Apparently it only flows one way, from citizens' pockets to city coffers.

Update 4-23-15:  City Council asked no questions about the water fund based on information from last month's CAFR.  

Thursday, April 16, 2015

County Treasurer Founds NonProfit to Lever Local, State & Federal Money

A full time Tom Green County employee making $75,000 a year started a foundation to lever local, state and federal money.  Treasurer Dianna Spieker received a 13.8% salary increase last year, bumping her salary nearly $10,000.

I find it odd that the County would allow a full time employee to start a foundation, even one with lofty aims.  The County is the fiscal agent for a state grant that Spieker administers.  San Angelo Live reported:

The Department of State Health Services has contracted with Tom Green County through the TGCPBH to implement evidence-based interventions, through a community-coordinated approach.
The aim of the foundation is to:

“Through the foundation we hope to promote education that in turn reduces the cost of indigent healthcare provided by the tax payers, and increases the quality of life for these patients,” Spieker said.
For over a decade Tom Green County has taken millions in unused indigent healthcare dollars and used the funds for reserves and other projects.  The indigent care budget of 8% general tax levy has been a longtime boon to Tom Green County treasurers.

“We knew that the grant money would expire when we had our meeting back in 2013, we wanted to have this live on beyond what was being given to the county, so we needed to set up a non-profit status. 

The Tom Green County Partnership for Better Health's website states:

After the initial 18-month trial period, the program could be implemented in other areas of the state and Tom Green County could continue to see state funding

The foundation may be needed in our community but questions remain.  Will Spieker receive any payments or salary from the foundation in addition to her full time salary with the County?  Will she serve as Treasurer for the foundation, which could receive County funding? 

This development raises numerous ethical concerns, not a new development for Tom Green County Commissioners.  After Yantis Green's embezzlement escapades one might expect county legal advice to lean toward the squeaky clean. 

Spieker could be moving County funds to her foundation, which aims to help reduce the cost of indigent care, which may result in financial gain for the county and her. 

Public officials getting into the public-private partnership business raises numerous ethical questions. They are just beginning in this endeavor.

Saturday, April 11, 2015

SEC Gives Fortenberry $900,000 Penalty & Permanent Bar

The Securities and Exchange Commission reached a final decision in its case against John Fortenberrry of San Angelo.  Fortenberry defrauded two investors of hundreds of thousands in selling equity in Premier Investment Fund, then using most of the proceeds for his personal needs. 


1)  Stanley Jonathan Fortenberry shall cease and desist from committing or causing any violations or future violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and Section 206(1), (2), and (4) of the Advisers Act, and Rule 206(4)-8 thereunder; b) pursuant to Section 203(f) of the Advisers Act

2)  Stanley Jonathan Fortenberry is barred from associating with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; c) pursuant to Section 9(b) of the Investment Company Act of 1940,

3)  Stanley Jonathan Fortenberry is permanently prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter; d) pursuant to Section 8A(g) of the Securities Act, Section 21B of the Exchange Act, and Section 203(i) of the Advisers Act

4)  Stanley Jonathan Fortenberry shall pay a civil money penalty in the amount of $900,000; and e) pursuant to Section 8A(e) of the Securities Act, Section 21C(e) of the Exchange Act, and Section 203(j) and (k)(5) of the Advisers Act, Stanley Jonathan Fortenberry shall disgorge $146,500, plus prejudgment interest.

The initial decision describes a con artist extraordinaire.  Consider the following conclusions from a three day hearing held October 2014 in Dallas:

Fortenberry stated "We handle transactions ranging from one million up to twenty-five million."  As it turned out, the emphasized language was false. Fortenberry had never raised $1 million, let alone $25 million.

Fortenberry never intended to do the things he committed to doing in the subscription agreement. He had no idea what it meant to use GAAP (accounting standards) and no idea what a capital account is.

He also never prepared profit and loss statements or tax information for investors.  In fact, when asked whether Premier kept a balance sheet or an income statement, Fortenberry said that he kept neither because doing so would not have been “typical of that type of organization at that stage.”  Indeed, Fortenberry boldly announced that Premier kept no records other than bank account statements.

In his view, a bank statement was sufficient because “you could easily have an accountant within a few days prepare those statements or plug [the bank account information] into a piece of software and have a statement within a matter of minutes.”  According to Fortenberry “[i]n today’s world you plug in a piece of software like Quicken, and in about 20 minutes you have a statement that would have rivaled an accounting office of 20 men just 15 years ago.”

 Fortenberry was not credible. Indeed, the record is replete with his outright false statements, many of which he attempted to explain through imaginative use of the English language seemingly inspired by Humpty Dumpty.

When he was questioned about his use of the term “showcase” in light of the fact that Premier had never invested with Mr. Bongiovi, Fortenberry said, “[w]ell, that’s why we referred to it as our showcase. It is a showcase. It is not something that’s invested in yet, according to my terminology, but it is something yet to be invested in. A showcase is an example.” But saying that something is a company’s “showcase” investment means that one is saying that the investment is perhaps the most important venture in which the company is currently investing. It would not convey the impression the venture is merely an example of a venture in which the company might invest in the future.

Fortenberry’s demeanor also suggested that he was not being truthful. He often resorted to the words “obviously” or “clearly” as if through bluster he hoped to cause the listener not to notice what had actually occurred, much like the Wizard of Oz when standing behind an opened curtain. 

Fortenberry sometimes adopted a lecturing tone as if trying to convey the impression that he was so experienced in matters of finance and securities that the Division’s attorneys were simply not intelligent enough to understand his business. He thus hoped to make his unlikely statements believable.

The report is worth the read.  It remains to be seen if criminal fraud charges will be brought against Fortenberry.   This isn't his first ripoff rodeo.

City of San Angelo to Consider Exchanging Logos

Consider the discussion between San Angelo Council member Rodney Fleming and Anthony Wilson, Public Information Officer on exploring a new citywide logo:

Fleming:  How much is this going to cost?  The general public's going to ask.  If I was watching this on TV I'd probably be sitting there saying to myself, how much is this going to cost the city for you to do this?

Wilson:  We'll negotiate with McLuaghlin Advertising.  I have a budget for this sort of thing.

Fleming:  It will be within budget?

Wilson:  Yes sir, of course.I'm probably at least as frugal as you are.

The City's Public Information Officer presented an agenda item with multiple aims and would not answer the question as to how much designing six different logo styles would cost.  Two of the three aims are below:

First, it would be an aesthetic improvement over the current logo that could help brand San Angelo as a more contemporary, forward-thinking community. The City logo represents an opportunity to make a favorable first impression

Second, it would lend the organization the opportunity to gain greater corporate consistency. This would be the logo that all departments and divisions would use so there would be no confusion among the populace of who we are and what we do. 
Watch this project as these aims require widespread use of the logo. The city's practice is to utilize police and fire vehicles, in addition to water pipes and streets, well beyond their normal useful life.  How many months before the same Public Information Officer is lamenting that City police and fire vehicles are confusing the populace with their use of different logos?

This item had the following under financial impact:

Eventually, the current City logo would have to be replaced on all vehicles, uniforms, stationary, etc. But that change would occur as those assets are replaced rather than in one fell swoop, minimizing any expense that would be involved.
Wilson provided no information on the financial impact of designing six new stylized logos for city wide use, much less the cost to achieve his two stated aims in some period of time.  

This is the level of public information the City now delivers.  Image is everything.

Thursday, April 09, 2015

Volunteers: Neighborhood Blitz vs.City Animal Shelter

What if city staff removed the shingles a Goodfellow Air Force Base volunteer group just hammered into the roof of a Neighborhood Blitz home?   What if they rammed down the door of the new frame your church group just hung?  What if they fired shotguns into the new siding Angelo State athletes just installed?  Besides counteracting the good work performed, the city would never see those volunteers again.  

The City of San Angelo invited interested volunteers to attend an Animal Shelter orientation.  Sixty showed up, an exciting prospect for leaders looking to save money. 

The thirteen basic needs of every volunteer:
1. A specific, manageable task with a beginning and an end.
2. A task that matches interests and reasons for volunteering
3. A good reason for doing the task.
4. Written instructions
5. A reasonable deadline for completing the task.
6. Freedom to complete the task when it is convenient for the volunteer and most beneficial to those receiving the work (slightly altered by this author)
7. Everything necessary to complete the task without interruption.
8. Adequate training
9. A safe, comfortable, and friendly working environment.
10. Follow-up to see that the task is completed.
11. An opportunity to provide feedback when the task is finished.
12. Appreciation, recognition and rewards that match the reasons for volunteering.
13. Value added to encourage employer to support volunteer efforts.

City leaders need to ask those sixty volunteers how their 13 needs are being met.  If volunteers aren't given the opportunity to express their skills and talents they'll leave.  If they aren't appreciated they will leave.  If their work is actively countermanded, trashed or ignored by shelter leaders then the city has set up an adversarial situation for community volunteers, a virtual no-win.

Does the city have what it takes to collaborate on animal services?  The City knows how to plan for and work with volunteers for its annual Neighborhood Blitz.  That knowledge should be put to use at the Animal Shelter.  That is if the shelter really wants volunteers. 

Odessa reformed their animal shelter, which faced the very issues confronting San Angelo's.  Our shelter faces significant issues in curable disease prevention/management, reducing our horrific euthanasia rate and successfully placing adoptable animals through a multitude of means. 

Volunteers can be a huge plus if the city truly intends on collaborating.  If not, let's save everybody's time.   Leadership is required. 

Sunday, April 05, 2015

Planning for City's Unfunded Pension Liability

San Angelo's City Council will hear financial audit results this Tuesday.  The Comprehensive Annual Financial Report will cover the state of the city's finances as of the end of its last fiscal year, 2013-2014.  The partner presenting last year alluded to a monstrous pension liability, one that would be revealed in 2015.

Employee pay made the list of strategic plan priorities but benefits/retirement did not.  The City of Houston faces a $3.2 billion pension deficit.  Their City Controller wrote:

As I wrote in the city's most recent Comprehensive Annual Financial Report, the options - service and employee reductions, increasing property tax, restructuring the pension plans - are not easy choices for elected officials.

San Angelo faces other needs, in addition to funding pensions and retirement health benefits.  Streets and water pipes will require hundreds of millions to update and repair.   The pursuit of new water sources will be similarly expensive.  Recall the Hickory Water project cost $120 million.

Houston wants to kick their problem to the Texas legislature:

Clearly, at some point (hopefully, sooner rather than later) the city's administration and City Council, pension boards and Texas Legislature will need to work together to ensure fair pensions for city employees who have invested years of dedicated service, at a price that is not an unfair burden upon taxpayers.
I look forward to hearing what the auditor cites as San Angelo's unfunded pension liability, why council has been quiet on this looming obligation and options for addressing this gap.  Consider what the city wrote while seeking audit bids last August:

What do you consider the most significant risk at this time facing the City?

Grants have been an area of risk in the past. However, there were no findings or questioned costs in the FY 2013 audit. Part of the reason for the improvement is that the City hired a Grant Manager who now has the role of grant oversight and compliance monitoring. Pension funding, while not necessarily a risk, will be an upcoming issue.

I anxiously await former Police Chief Russell Smith's advice for Council.  It's the last item on the agenda before their customary closing.

Update 4-9-15:  Auditors stated the net pension liability is "unknown at this time."   One of their pension tests showed a $97 million unfunded pension liability.  We'll find out next year the estimated number.  How much debt will be committed to other purposes (streets and water) by that time?  Employees, especially those that helped the city come in under budget, should pay attention.

Update 4-10-15:  For every issue there is a time.  San Angelo's pension situation has been worthy of discussion for years, but City Council kept kicking the can down the road, much like our street situation.  Council will have no choice but to face its pension situation next spring.  The City may benefit from a national campaign to reform pensions, one orchestrated by a former Enron trader and hedge fund manager.   That bit of information alone tells you who wins in reform.  It's not the little guy. 

Update 4-12-15:  GASB states on the new pension accounting requirements:  "This Statement is effective for fiscal years beginning after June 15, 2014. Earlier application is encouraged.