AirBnB and Uber

AirBnB (and similar services) are a hot topic for local governments.  Like other components of the sharing economy, AirBnB is disruptive to existing business models.  Local governments have developed regulations and tax schemes like hotel taxes and taxi medallions which benefit them and incumbent providers (like hotel chains and cab companies) but penalize consumers.  As often occurs, companies have lobbied local governments to protect their monopolistic positions.  Of course, this lobbying is generally couched in the terms of public safety and welfare rather than protection of monopoly profits.

As a traveler, my experience with the sharing economy has been decidedly mixed.  We have used Uber successfully to get from "Point A" to "Point B."  I think Uber works because a lift (no pun  intended) is rather uniform service.  A great cab ride or a bad cab ride aren't terribly different, as long as you end up at your destination.  Chances are that a person will forget about his or her Uber within moments of settling in at his or her destination.  Overnight accommodations, however, are quite different.  A bad experience years ago at a place called "Berg Tal" has become familial shorthand for a lousy accommodations.

Thus far, our experience with AirBnB has been unimpressive.  In fact, I'm writing this essay from a hotel room after canceling our booking at a local AirBnB in Alaska.

The essential problem of our our AirBnB experiences has been the gap between what is portrayed on the website and what exists in reality.  I'll walk through some of the issues we've encountered.  Earlier this year, we booked a small home in southern Maryland.  As anyone who has spent time in Maryland during the summer recognizes, air conditioning is a necessity.  The small house was reasonably nice but it had one small air conditioning unit in the living room.  To keep the bedroom at a decent temperature (below 80), the living room had to be kept like a meat locker.  Otherwise, the small home wasn't bad and we managed to have a decent stay.

We rented another AirBnB cottage in Pennsylvania on what was accurately portrayed as a beautiful farm.  What wasn't well described was the oddly configured floor plan that including a very steep and narrow staircase between the floors and the fact that amenities like the pool were shared with other rentals.

Our most recent experience in Alaska was a cabin near Fairbanks.  What looked charming on the website was considerably smaller and more rustic in reality.  The deal breaker for us was that the cabin had no seating save a couple of bar stools.  The hotel room we're currently in has three chairs.  The room we had earlier in our stay offered an actual sofa (in addition to a couple of chairs).  I don't want to seem demanding, but if I'm spending three days in a room, I need something more than a barstool.

AirBnB reviews seem less accurate than hotel reviews on Trip Advisor.  Maybe it's a matter of consumer expectations.  Perhaps it's a function of the personal nature of AirBnB and a greater reluctance to post critical comments, or the two-way nature of the reviews.  Whatever the reason, our less-than-stellar experiences have been at AirBnB properties with stellar user reviews.

While I haven't become an AirBnB fan personally, I do think its existence is an economic positive.  Greater competition benefits consumers.  In ensuring a free and open marketplace, the role of local government isn't to pick winners and losers (hotel chains or entrepreneurial homeowners) but to ensure a level playing field.  Hotels have a valid argument in jurisdictions where they pay taxes that AirBnB owners do not.  Local governments also may have legitimate public health and safety concerns like parking problems created by short-term rentals.

The bottom line is that the shared economy can benefit everyone.  The role of the public administrator is to ensure that the public policy conservation is honest, beginning with the motivations of the stakeholders.

Personal: Sabbatical Weeks 3 & 4 (almost)

What seems like months ago, we finished our road trip to Maine.  We stopped by Emmaus to visit the grandchildren.  Our original plan was to roll down to DC, but logistics made it easier to find a hotel in Baltimore to attend the International City/County Managers' Association (ICMA) conference.

The conference gave Becky and I a chance to explore some familiar places between Baltimore and Hunt Valley.  We also discovered a few new places like Johnny Dee's Lounge in Parvkille.

Johnny Dee's is old school Baltimore, a neighborhood joint.  It's the kind of place you come in looking for dinner and you leave with new friends.  The food was great.  The beer was cold.  The company was even better.

After wrapping up the ICMA conference, Becky and I turned north for a final visit to Emmaus.  After enjoying a great time with the kids and grandkids, we turned west to pick up our loaded utility trailer.  The long and winding road has taken us through Laramie, Wyoming, the incredible parks of Yellowstone and the Grand Tetons, to Libby, Montana, my ancestral home.  Time to catch our breath and enjoy a few days of rest before the next leg of our trip.

It is stealing. Period.

At the annual ICMA conference, I attended a round table discussion of city/county manager contracts.  When the subject of vehicle allowances came up, my colleagues were surprised that I had deliberately omitted this provision from my recent agreements.  I also declined to use a county vehicle.  I chose to use my personal vehicle (what we called a "POV" in my military days).  During my seven-year tenure, I also did not submit a single reimbursement request for mileage.

 I doubtlessly logged thousand of miles on County business.  So why decline a vehicle allowance or reimbursement?  I have two basic reasons: One philosophical and one practical.

As a believer in "lead by example," I want to err on the side of not taking advantage of my position.  Refusing any allowance or reimbursement kept me firmly on the moral high ground.  This set a good example for not only the senior management team, but for all employees.

On a practical matter, I avoided the paperwork associated with mileage.  My time is better spent on more "value-added" tasks.  It's also one less avenue of citizen criticism.  Driving a city or county vehicle is just putting a target on a manager's back.  Better to have a vehicle available for fleet use than one for the personal convenience of the CAO.

My philosophy stand in stark contrast to the recent travel-related escapades of some federal officials.  For example, FEMA Administrator Brock Long apparently racked up $150,000 worth of personal travel on the public dime (according to the Office of the Inspector General).  This extravagant spending occurred over a period of months, not years.  I won't bother repeating the details in the report (as reported by the Washington Post), but it's a laundry list of wholesale abuse of government-funded travel.

On a positive note, Long has been ordered to repay the $150,000 to the federal government.  On a not-so-positive note, he hasn't been fired.

Abuse of government-funded travel is theft.  It's abusing the taxpayer and--like all ethically suspect behaviors--it has a corrosive effect on an organization. 

Personal: Sabbatical Week 2

As I'm writing, the Ravens and Broncos are playing in the rain.  The Ravens came to Baltimore the same year I did: 1996.  Twenty-two years (and two Lombardi trophies later), the Ravens are an immutable part of Charm City.  And in an ironic twist, I'm still here--albeit temporarily.  Baltimore is hosting the International City/County Managers' Association (ICMA) conference.  I'll be attending over the next two days.

A week ago, we were settling into our campsite at Mt. Desert Island, Maine.  During our stay in Maine, we traveled north to Lubec, the easternmost town in the continental United States.  Our route to Laramie will cause us to miss the northernmost point in Minnesota, but we shouldn't have any trouble finding our way to the far west of Point Cape Alva, Washington.

I have a photo of Becky at the geographical center of North American (in eastern Montana).  The center of CONUS is in Lebanon, Kansas.  I suppose that makes us geography geeks... or people who like odd roadside attractions.

Back to Maine, we had a great time and the weather was perfect.  We gamely tried the local specialty of lobster.  Becky is a native Marylander and I tend to agree with her: Blue crabs are the better culinary crustacean.  Crab cakes (better yet, rockfish with crab imperial) and freshly-picked silver queen corn are a better plate, at least for my money.

Rural Maine was charming; urban Maine, not so much.  Both at the campsite and in our rambling, we found few people willing to make simple eye contact and impart a traditional "Hello" or "Good Morning."  This stands in stark contrast to other regions.  And let's side aside, for the sake of discussion, the vast legion of humans who wander aimlessly looking at cell phones, utterly oblivious to anything (or anyone) in the immediate vicinity.  Doing a quick shopping run to Target today, I watched three phone watchers nearly collide, only to take different tracks.  We were once mightily impressed with robots that could navigate obstacles.  We seem to have created people with the same sensory ability and motor skills.

Personal: Sabbatical Week 1

I left my position as the County Administrator for Caroline County when my contract ended (September 9).  I'll talk more about my (our) decision to take a sabbatical in another post, but wanted to describe some of the highlights of our first week.

Because our home sold a bit earlier than expected, we needed a short-term rental.  This simultaneously made the moving process easier and harder.  Our initial thought was to go with an AirBnB for the month, but the price and distance were daunting.  Becky tracked down a landlord willing to to a one-month rental.  I'll fast forward through the painful process of emptying our home of seven years, compressing all of our worldly possessions into a 10x20 storage locker, a 16' utility trailer, and a Nissan Titan pickup..., and, of course, the odds and ends necessary to exist in our short-term rental fondly nicknamed, "The Estate."

My final few weeks of work were highly compressed between tying up the loose ends of projects, saying my goodbyes to friends and colleagues, and getting ready to "break camp" from The Estate.  Naturally, our final weekend in Maryland was rainy.  This wasn't a mist, drizzle, or light sprinkler.  It was somewhere between shower and rolling down the window at the Dunkin Donuts drive through to get a bucket of water to the face.

Our last meal in Caroline County was brunch at Turnbridge Point.  Turnbridge has served some of the consistently best meals I've eaten.  Chef Steve turns out wonderful pastries, but he and Rob close the B&B occasionally to host a brunch.  The tickets sell like a classic rock band's farewell tour.  The theme for our September 9 brunch was fittingly, "Maryland."  Unfortunately, we had to have everything packed and ready for the road.

Despite delays due to selling Becky's Mini Countryman and the process of getting new cell phones, we managed to get everything done.  We were on the road for our first "post-Caroline" stop, Emmaus, Pennsylvania.  Our daughter, son-in-law, and three grandchildren live in Emmaus.  Naturally, the rain continued, perfect for yard work and corral repairs.

A good definition of a bad day is one where stepping on a nail in a corral full of horse manure isn't the worst thing to happen.  No, the worst thing to happen that day was having the water heater burst and dewatering a basement with a shop vac while standing in my socks (and a Band-Aid).

We extended our stay a day to help the kids.  To make our schedule, we headed north landing in Vestal, New York for the evening.  The accommodations in Vestal were fine, save our finding the one hotel in the northeast still charging for Wi-Fi.  While that was an inconvenience, it was considerably better than our experience the following night in Montpelier, Vermont.  Without naming any names, our room in Montpelier smelled like damp hopelessness.  The only thing missing from the door was crime scene tape.

As I write, we've stumbled to Bangor, Maine.  It's a quick stop here before heading to a campground on Mt. Desert Island.  I'm almost nervous to say anything because today has been nice.  The rain stopped.  We went to the top of Mt. Washington and enjoyed some remarkable views.  And thus far, nothing is wrong with the hotel.  Perhaps if I save this post very quietly and close my laptop, the Fates will grant us a reprieve for a night?

Ken

My farewell email to staff

All,

Just over seven years ago, I accepted the position as county administrator.  My wife and I wanted to be closer to aging family members on the Shore.  I also saw Caroline as an opportunity to work shoulder-to-shoulder with some remarkable people.  Personally and professionally, my time here has been incredibly rewarding.

It still puzzles me that not everyone recognizes how special Caroline County is, not only as a place but as an organization.  I have worked in the public, private, and nonprofit sectors; organizations as small as our family logging business in Montana and as large as the U.S. Navy.  What happens here doesn’t happen everywhere.  During my tenure, senior managers have passed on pay increases to give more to well-deserving people on their teams.  They’ve declined bonuses, refused reimbursement of expenses, and relinquished valuable contract provisions voluntarily.  I won’t name names to avoid embarrassing (or forgetting) anyone, but it has been inspiring for me to work with such dedicated and selfless leaders.

There is no greater evidence of Caroline’s unique culture than the budget process.  I realize not every employee agrees with “The Caroline Way.”  Some folks think it’s the job of the top person to “bring home the bacon” to a department or agency.  That’s the prevailing approach in many cities and counties.  It’s easy to recognize those places because they often have contentious budget hearings that can run past midnight.  The squabbling usually spills into the local paper.  In a zero-sum budget process where there are winners and losers but the one group consistently getting the short end of the stick is the taxpaying public.  Not here.

In Caroline, every department head and allied agency chief is a community leader first.  You won’t hear these folks asking, “What’s in it for me (or my department)?”  Instead, they ask, “How we can work together to solve the tough challenges we face?”  They advocate for a person and agency across the table.  They trust the process and one another.  This collaborative culture is Caroline’s best competitive advantage.

Let’s be honest, Caroline likely will remain among the poorer counties in Maryland.  As I've said before, coming to Caroline for the money is like moving to Kansas for the surfing.  But there are more ways than dollars to measure wealth.  Whatever Caroline lacks in financial resources is more than offset by the people.  In a word, by you.

I imagine everyone who works for the County could make more money somewhere else.  Those of you who have stayed through the lean times aren’t here for the money.  You’re here because you’ve chosen Caroline County as a place not only to work but to serve.  Through your dedication and the leadership of the Commissioners and other allied agencies, the County has earned the trust and respect of the community.  That support makes tough decisions (like last year’s income tax increase) possible.  The ability to make those tough decisions is why Caroline County will eventually pull ahead of those other counties, you know, the ones with the expensive, waterfront estates.  (I really am going to miss smack talking the other counties.)

A parting word of warning: The greatest challenge facing Caroline isn't unfunded mandates from the State of Maryland or another economic downturn.  Together, we've survived tough times and come out stronger.  No, the danger is forgetting who we are and how we've come to this point.  The County isn't simply a place or an organization.  Caroline truly is a way.  It's a way of working, doing business, and living.  It existed long before I arrived but for seven years, it has been our way.

It is my sincere hope it will remain yours for many years to come.  Thank you and all my best.

Ken Decker

Management Discussion & Analysis

I recently began my 20th year as a local government chief administrative officer (CAO).  One of my annual tasks is to write the "Management Discussion and Analysis" (MD&A) for the annual financial audit.  While many CAOs delegate this task to the Finance Director or Comptroller, I enjoy the challenge of unpacking the dense audit into readable prose.  My most recent MD&A is a first draft (which is why there are blanks for some numbers), but I think it captures my sense of what an MD&A should be:

Executive Summary

Management Discussion and Analysis

Caroline County Government, FY 18 Financial Audit

“This MD&A section of the financial report should be brief and objective and should be easily readable by an average reader, one not possessing a detailed knowledge of accounting.” Government Accounting Standards Board, Statement 34, June 1999

Very few Caroline County residents will ever read a County financial audit.  This is understandable.  Audits have a well-deserved reputation for being dry, boring, and full of numbers.  The Government Accounting Standards Board (GASB)—a rather dry organization itself—recognized this problem and adopted a requirement for every local government audit to have an introduction written in an understandable and conversational style.  This introduction—what you are reading now—is called the “Management Discussion and Analysis.”

The goal of the MD&A is to provide a plain language summary of the complex data in the audit.  It also serves other important purposes: It is a chance for the senior management team to speak candidly about the financial strengths and weaknesses of the organization, to discuss future challenges and opportunities, and to create a fiscal “trail of breadcrumbs” for future managers to follow.

 

The basic question the audit seeks to answer is: Is the County doing OK financially?  For fiscal year 18 (the period ending June 30, 2018), the answer is, “Yes.”  And “mostly.” 

The County ended the year “in the black,” accounting jargon for having higher operating revenues than operating expenses.  As a general rule, this is better than ending the year “in the red.”  The excess of revenues over expenses rolls into the County’s general unrestricted reserves.  This is accounting jargon for the County’s available cash account.

For each of the past seven years, the County has ended in the black.  During this time, the Commissioners occasionally have withdrawn money from reserves to fund capital expenses.  (Capital expenses meaning investment in vehicles, heavy equipment, buildings, and infrastructure.)  Despite these drawdowns, the unrestricted general reserves have grown to $____________.  This is a positive trend.

To evaluate a local government’s financial health, one of the measures frequently used is unrestricted general reserves as a percentage of operating expenses.  There are numerous “rules of thumb” ranging from one month’s expenses (8.3 percent), 10 percent, two month’s expenses (16.6) percent, 20 percent, or 25 percent.

The County’s adopted policy is not to allow reserves to dip below 5 percent.  As noted by auditors, bond rating agencies, and the senior management team, this is too low.  While the policy has not been amended, a goal of the senior management team has been to build the unrestricted reserves beyond the 5 percent threshold and to encourage the Commissioners to adopt a higher number.  This recommendation is 10 percent in the short term; 16.3 percent in the longer term.

Building reserves (and prudently managing the County’s finances) relies on projecting revenues conservatively and estimating expenses aggressively.  This is how the senior management team built the FY 18 budget.  As evidenced by this audit that process was successful.  At the close of the accounting period, the County had received $___________ more in revenues than expenses.

Before going further, it is important to note that the audit is primarily a one-year snapshot of the County’s finances.  In the MD&A, the senior management team will talk about the past and look into the future, but nearly all the numbers in the audit apply to fiscal year 2018.  As with all audits, it is important not to read too much into any single year.

Revenues

To begin explaining the audit, it helps to understand the County’s sources of revenues.  The two major revenue streams are property taxes and income taxes.  The State of Maryland assesses the value of all real estate.  The Commissioners set the County’s tax rate.  With the County, there are 10 incorporated municipalities (cities and towns) that impose property taxes as well. 

In the FY 18 budget, the Commissioners left the property tax rate unchanged at 98 cents per $100 of assessed value.  Caroline has the ________th highest property tax rate among Maryland’s 23 counties and Baltimore City, essentially “middle of the pack.”  The total amount of property taxes collected in FY 18 was $___________.

Income taxes are different.  While the State of Maryland collects income taxes, the process is a “black box” for local governments.  The State refuses to give local governments raw income tax data so the revenue can be difficult to predict.  During the budget process for FY 18, the County Commissioners left the income tax rate unchanged at 2.73%.  During the year, however, the Commissioners voted to increase the rate to 3.2%, the maximum allowed by state law.

Driving the decision was recognizing the need to replace Greensboro Elementary School and to build a new building for the Caroline County Sheriff’s Office.  Absent the increase in income taxes, the County lacks the revenues to support the debt for the two major projects.  In FY 18, the County received $____________ in income tax revenues.  Overall, other revenues like user fees remained stable.

Expenditures

FY 18 was a relatively routine year for expenses.  As noted in previous audits, a majority of County expenditures are mandatory—either an obligation of state law like funding the K-12 education system or paying obligations like debt service.  Expenditures like the County’s ambulance system are not legally mandated, but most residents would consider the service essential for public health and safety.

By category, Caroline County expenditures largely parallel other Maryland’s counties.  The single largest expense is labor in the form of wages and benefits.  The County has about 160 full-time employees in its nine departments.  The County also provides payroll and human resources support for some “local” state agencies like the Circuit Court and State’s Attorney’s Office.

In the FY 18 budget, the Commissioners approved a 3 percent pay increase to employees and adopted a new grade/range pay scale.  The Board added two new positions for road deputies in the Sheriff’s Office, making another step towards the goal of adding five new officers before the end of the Board’s term.  The Board also converted four part-time EMS positions to full-time positions.  This reduced the EMS system’s reliance on part-time EMTs and Paramedics to fill shifts.  In FY 18, the County completed its transition to a “living wage.”  Under this policy, the minimum annual wage for a full-time County employee is $30,900.

The Commissioners also made some structural changes to local government services.  The Board dissolved the longstanding Memorandum of Understanding (MOU) with the Caroline Economic Development Corporation (CEDC), choosing to bring economic development “in house.”  This move allowed the CEDC Board to focus on tourism and for the Commissioners to have more direct control over economic development activities.

The Commissioners made a similar decision regarding animal control.  Traditionally, the Caroline County Humane Society has fielded the County’s Animal Control Officers (ACOs).  The Board believes that ACOs are public safety employees deserving of a pay structure and benefits on par with other similarly-situated County employees.  The three ACOs hired by the Humane Society were transitioned to County employment in FY 18.  The economic development decision was budget neutral.  The change to animal control represented an increase in costs.

The only budget reduction in FY 18 was a decrease to Delmarva Community Transit.  In FY 17, the Commissioners approved an increase of $15,000 to provide additional services.  Since these services never materialized, the Board returned the funding to the FY 17 level.

Debt

In FY 18, the County’s bond rating remained AA-.  This is essentially the County’s credit rating.  This is a lower rating than more affluent Maryland counties, but the bond rating agencies have commented favorably on Caroline County’s strong management, improving financial position, and relatively low debt.  The agencies also correctly noted that the County has a relatively small economy heavily dependent on agriculture.  Much like a credit rating for a consumer depends on income, our bond rating is limited by our modest tax base.

The County did not issue any new debt in FY 18.

Capital

In government accounting, capital expenses are commonly defined as purchase of an asset greater than $5,000 in value and with an expected useful life of five years or longer.  Common examples are buildings, equipment, and vehicles.  Setting aside K-12 schools, public libraries, and property owned by allied agencies, the County owns 399 miles of treated roads, 78 miles of dirt roads, 39 bridges and structures, over 250,000 square feet of buildings, and over $10 million in vehicles and heavy equipment.

FY 18 marked the second consecutive year the County funded a normal capital budget.  The FY 18 capital improvement plan (CIP) totaled $6.69 million but that number may be misleading.  About $594,000 represented unspent capital projects rolled over from the prior fiscal year.  Some of the CIP reallocated $562,000 of unspent bond funds recovered from the Preston Elementary Renovations.  About $1.8 million are expenditures related to sources like grant funds or dedicated revenues.

What is important to note is that FY 18 capital investment was funded by a $2 million drawdown of the County’s unrestricted general reserves.  The Commissioners made a similar decision to fund capital in the FY 19 budget.  These were necessary measures to continue capital investment and address the “deferred maintenance” challenge, however, it is not sustainable in the longer term.  Given the County’s total infrastructure—vehicles, equipment, buildings, roads, and bridges—the capital budget should be between $3 million and $4 million per year, and that money should come largely from operating revenues.

Unfunded Liabilities

“Unfunded liability” is an accounting term.  It is essentially a promise to pay something in the future where the necessary funds have not been set aside yet.  This term is most commonly used when referring to pension plan and retiree health care plans.

Unfunded liabilities are a big deal, particularly for local governments—so much so that the Government Accounting Standards Board (GASB) adopted Statements 67 and 68.  These statements updated the standards for local governments reporting pension liabilities.  This occurred because some local governments were not reporting liabilities accurately.

Caroline County has its own pension plan and retiree health care benefit plan.  This is somewhat unusual in Maryland where many counties participate in the State of Maryland’s plans.  The pension plan is supported by the County’s pension fund.  Retiree healthcare is funded through the Other Post-Employment Benefits (OPEB) fund.  As noted in previous audits, the County has made steady progress improving the pension fund by: 1) reforming the pension system; 2) phasing in employee contributions; 3) paying more into the pension fund than the required annual contribution.

As you may read later in the audit, the County’s total pension liability was $____________ at the end of the fiscal year.  The pension fund had $____________ in assets.  This means the County has an unfunded liability of $____________ and that the plan is ________% funded.  The goal of the County’s Pension Board is to reach 100 percent funding with a lower expected rate of return on investments.

It’s important to note that the pension liability is an estimate based on some best guesses.  These guesses are made by an independent professional actuarial firm, not the senior management team.   

The most important guess is the rate of return the pension fund will earn on its investments.  The current estimate is 7.15 percent although the Pension Board has voted to slow reduce the number to 7 percent.  This slow reduction in the expected rate of return makes the County’s pension fund seem less well funded, however, making the estimate more conservative means the pension fund is better funded.

Caroline County is the only jurisdiction in Maryland whose OPEB plan is over 100 percent funded.  This is due to two reasons.  First, the County offers only a modest Medicare supplement plan and does not subsidize health insurance for employees under age 65.  Second, the County set aside money for the OPEB fund before the Great Recession.  Careful management of those funds has resulted in a plan that is ________% funded.

Over the past seven years, the County has addressed other unfunded liabilities like the past policy of cash payouts for accrued sick leave on retirement.  The previous Board of Commissioners paid employees for some accrued sick leave and changed to pension plan to allow conversion of all unused sick leave into pension service credit at retirement.

Along with the improvement in unrestricted cash reserves, progress on unfunded liabilities has been a major financial accomplishment for the County.  It bears mentioning, however, that both the pension and OPEB funds are comprised of a mix of investments including equities.  The U.S. stock market is in the midst of the longest “bull market” in history.  Sooner or later, the economy will cool and the stocks will tumble in a “bear market.”  The senior management team strongly believes the County should continue decreasing unfunded liabilities to allow the pension and OPEB funds to endure a market correction.

Municipal Property Tax Differential

Property owners in Caroline’s five largest towns receive a break on their County taxes.  While not required by law, the Commissioners have continued to provide this benefit, foregoing about $_________ million cumulatively in property tax revenues over the past six years.  The five smallest towns receive support in the form of direct payments.  For the FY 18 budget, the Commissioners followed the differential formula established in 2012.

Summary

The goal of this executive summary is to explain the annual audit—the snapshot of the County’s FY 18 fiscal year—in plain language.  If you have read to this point, congratulations!

Buried amid the mountain of data is a simple message.  FY 18 was a good year.  The County continues to improve financially.  Services have been expanded and, in some instances, restructured.  The Commissioners have continued a focus on public safety.  The collaborative budget process—the Caroline Way—has minimized conflict and competition.  The relationships between the County and allied agencies is as strong as in any county in Maryland.  After the pain of the Great Recession, the collapse in housing prices, cost shifting by the State of Maryland, and draconian cuts in funding, the County has largely recovered.

The Commissioners made a critical decision to increase the income tax rate during the year, a financially prudent measure necessary to build a new building for the Sheriff’s Office and to replace Greensboro Elementary School.  Of all Board decisions made in the past decade, that likely will prove the most significant.

Like every Eastern Shore county, Caroline faces some significant challenges.  The regional labor market has tightened.  Some departments have struggled to recruit and retain entry level employees.  There are signs of inflation—the general increase in prices.  Interest rates are increasing and some expenses are increasing at a higher rate than the County’s tax base is growing.  Perhaps the biggest challenge for the County is truly balancing the budget, i.e., funding a sustainable capital improvement plan without drawing down reserves.  The senior management team is hopeful that the income tax increase will allow this to occur.

Despite the challenges, Caroline County has proven exceptionally resilient.  A fiscally conservative governing body is supported by a capable management team.  While not readily evident in the audit, the strength of Caroline is its team of leaders committed to collaboration, cooperation, and community.  As long as this unique culture exists, the senior management team believes the County financial progress will continue.

The predictable fate of the newspaper

While not one often to admit it in mixed company, one of my degrees is in journalism.  When I arrived at university, I told my Jesuit advisor I wanted to write and was thinking about majoring in English.  He tartly observed that English majors study what other people have written; journalism majors write.

Not long ago the Baltimore Sun's editorial board responded to a request from the Boston Globe to opine on the dangers of an assault on free press.  A snippet from that editorial:

"So that’s the goal: to assess, analyze and uncover truth. That’s obviously easier said than done, and our profession’s “truths” do not always reflect the entire public’s — particularly those on the right. While we try to keep our personal feelings out of our work, they can still unintentionally influence the things we cover and the way we cover them. And to many, that’s a failure on our part — one we’ve largely been given a pass on in the past. But not in today’s partisan climate."

Newspaper circulation has dropped below what it was in 1940.  Newspapers had it good for decades, but when technology changed the nature of mass communication, they were slow to adopt as an industry.  One of the reasons is arrogance.  Newspapers largely survived the advent of television news albeit with no small measure of diffidence towards the purportedly less serious medium.  What happened along the way, however, was the vast diminishment of "two paper towns."  As newspapers settled into comfortable local monopolies, they did what monopolists do.  They stopped caring about innovation, customers, and costs.  They lobbied Congress to block electronic classified ads and other competition.  Newspapers attempts to transition to the digital medium was inevitably ham-handed.  When the lower transactional cost of the Internet and low/no cost sites like Craigslist, newspapers simply lumbered along like dinosaurs looking for a tar pit.

Another factor is that newspapers began drifting away from the role of informing into the role of opining.  Pick-and-shovel journalism is hard work, and often tedious.  During my nearly 20 years leading local governments, I've often apologized to reporters covering public meetings with a version of, "I'm sorry you had to sit through that."  And I've been quick to praise lucid, well-written news stories about rambling, difficult-to-follow public discussions.  Great local reporters are rare and incredibly valuable.  On that note, a tip of my hat to Abby Andrews, local government beat reporter for the Times Record who has proven one of the best.

Tip O'Neill is most often given credit for the phrase, "All politics is local."  I think there's an argument to made be that all journalism is local.  Great reporting will always be great reporting.  And there will always be a market for accurate, timely, local information.  What the editors at the Baltimore Sun dismiss is any recent assault on the free press pales in comparison to the damage newspapers have done to themselves.

Dude, Where's My Car?

The City of Albuquerque has it!

Some of New Mexico's cities have a penchant for seizing vehicles, so much so that the State Legislature changed the law to prevent its municipalities from financially benefiting from civil forfeitures.  Albuquerque did not "get the memo," but they received a new one from U.S. District Court Judge James Browning on Monday.

Judge Browning found the City's vehicle forfeiture program unconstitutional.  Specifically:

"The Court concludes that the City of Albuquerque has an unconstitutional institutional incentive to prosecute forfeiture cases, because, in practice, the forfeiture program sets its own budget and can spend, without meaningful oversight, all of the excess funds it raises from previous years. Thus, there is a 'realistic possibility' that forfeiture officials’ judgment 'will be distorted by the prospect of institutional gain.'”

The case that precipitated the legal decision involved a woman who lent her car to her adult son.  The son was arrested for DUI and the City seized the car.  In a Kafka-esque twist the City apparently offered to sell the mother her car for $4,000 if she agreed to have it booted for a year-and-a-half.  So, an innocent woman lends her car to a family member.  The family member (allegedly) breaks the law and, in turn, a municipal government tries to extort $4,000 and an agreement to immobilize a car she is still making payments on?

Albuquerque has a Chief Administrative Officer: Sarita Nair, JD, MCRP.  Ms. Nair not only is an attorney, she is reportedly "AV-rated by Martindale Hubbell, and has been recognized by Best Lawyers, Southwest Super Lawyers, and Chambers & Partners USA."  So, how exactly does a municipal government with an annual budget of nearly $1 billion managed by a "super lawyer" end up running a program that flouts state law AND the Constitution?

I'll let economist Steven Landsburg provide the answer:

“Most of economics can be summarized in four words: “People respond to incentives.” The rest is commentary.”

Local governments are--contrary to the suspicions of some citizens--organizations comprised almost entirely of people.  Individually and collectively, those people respond to incentives.  And there is something more going on.  The average citizen is likely to recoil in horror hearing the story of an innocent woman having her car seized by the government.  The average third-grader would find it patently unfair.  But something happened in the City of Albuquerque, a change in the culture that allowed the unacceptable to become acceptable, commonplace, routine.

One of the jobs of the local government CAO is to remain ever watchful and vigilant of an organization's culture, to ask the difficult moral questions, to challenge complacency and the "this is the way we've always done it" trap.  And the wise CAO understand the power of Landsburg's observation.  We all respond to incentives, so it is critical that the structure of our organizations reward us for doing the right things.

The Van Gogh House

From the Orlando Sentinel:

"In a bizarre ending to a quirky story, Mayor Nick Girone will have to publicly apologize on behalf of the city to a couple who racked up more than $10,000 in fines for painting their home in the likeness of Vincent van Gogh’s famous painting 'Starry Night.'"

I had not heard about the story until this denouenment.  Mount Dora, Florida, is home to about 12,500, large enough to have a professional city manager.  According to the City's website, that manager is Robin R. Hayes.  It's impossible to know what Ms. Hayes provided in the way of professional guidance to Mayor Girone.  Hopefully, it was that the city's dogged bullying of homeowners Lubomir Jastrzebski and Nancy Nemhauser was doomed, particularly when the couple decided to retain legal counsel.

The judicial branch indulges a good bit of tomfoolery from local governments, but takes a dim view on trampling the First Amendment, particularly when a citzen's expression is creative/artistic.

I have no doubt that neighbors and local scolds found the "Van Gogh House" irksome.  And apparently the reason the couple chose to make their home into an objet d'art--an autistic son--did not thaw the ice of disapproval.  But Mount Dora is not a homeowner's association where individuals can agree contractually to a color palette approved by an architectural committee.  It is a city where its citizens enjoy the protections of the Bill of Rights.

Mayor Girone presumably will deliver a public mea culpa, but he owes an apology to the Constitution, not just his constituents.

Risk matters

(Not the game by Milton Bradley)

I open with a passage from an email I sent senior staff a few years ago:

"I’m strongly committed to providing a safe and healthy workplace for employees.  I’m also committed to maintaining public access to our public buildings.  A perfectly safe environment simply does not exist.  Our job is to carefully the real risks against the real costs and make thoughtful decisions.  While we may have employees worried about a mass shooting or act a violence by a member of the public, the odds of that occurring are incredibly low.

Our responsibility—as department heads and professionals—is to build “the management case” for our decisions.  In my experience, people do a terrible job of assessing risk.  Psychology Today agrees.  (Bonus points to anyone who gets 100 percent right on the quiz.)   If you prefer something more academic, you might try “Overreaction to Fearsome Risks.”  Or for a middle ground, this blog page by Bruce Schneier."

Why do administrators--who generally advocate a calm, data-driven approach to evaluating risk--become speed bumps in legislative overreactions to unfounded fears?

There are some obvious answers.  Legislative bodies are more influenced by voter perceptions (valid or not) than by data.  If the vox populi demands things that make them feeler safer (rather than actual being safer), they are entitled because "democracy."  Failing to take action against a perceived threat--however unlikely--opens one up to the accusation of "not caring."  Perhaps the most obvious... people regardless of education and training are not good at evaluating risk.

Delving a bit deeper, there are more satisfying answers.  Every public policy--no matter how ill-advised--benefits someone.  For example, the United States spends over $7 billion a year on the TSA for security theater rather than actual security.  That sum goes to far more than rank-and-file employees.  Entire industries are built around monetizing fear.  This is less an issue in the private sector.  In corporate America, money spent on security is weighed against other potential investments.  The issue is far more pronounced in government where the few who benefit greatly speak more loudly than the many who pay slightly.  Perhaps the biggest obstacle to rational decision-making in the face of fear is the pervasive expectation for government to "do something," even when the most pragmatic approach is to do nothing.

After all, one might think, why does government exist save to do something?  And in no small measure that is why the hammer of government sees every problem as a nail... even when the "problem" is a barely visible crack in a beautiful stained glass window.  As public administrators, we cannot fall victim to the "what if" game, playing perpetual defense against threats less likely than winning the lottery.  We need to lead discussions on risk, not simply react to them.

Anthony Bourdain, RIP

According to the news this morning, Anthony Bourdain, 61, died in Paris today reportedly by his own hand.  He gave an interesting interview for Reason magazine in December 2016 one can find here.

Speed traps

According to Vermont Public Radio:

"Law enforcement issued more than 24,000 tickets worth upwards of $4 million in fines to drivers in Vermont in 2017. A quarter were issued in just three Vermont towns: Plymouth, Bridgewater and Mount Tabor.

The top two towns, Plymouth and Bridgewater, have a couple of things in common. They both contract the Windsor County Sheriff's Department for speed enforcement services, and that department issues nearly three times as many tickets as any other law enforcement agency in the state."

My favorite quote from the pieces is from Windsor County Sheriff Michael Chamberlain who said, “There are no sidewalks,” he said. “It wouldn’t take much for someone to go off and hit a child, or hit a family.” Given his four decades plus of law enforcement experience, he may have delivered that line with a straight face.

Let's be honest.  Plymouth, Bridgewater, and Mount Tabor are not champions of pedestrian and motorist safety while the rest of Vermont is engaged in a sensible Volvo version of Death Race 2018.  These municipalities have created and perpetuated speed traps for the money.  

In Maryland, all revenues from traffic citations go to the state.  In neighboring Delaware, municipalities keep the money.  Where do you think speed traps are more common?  Ask anyone from the Free State who routinely travels to beaches in the First State.  Economics 101, people (including local governments) respond to incentives.

Yes.  Speed traps may enhance traffic safety, much as red light cameras, speed cameras, or school zones adjoining building that haven't housed students for years.  The real motive, however, is money.  Traffic enforcement should be driven (no pun intended) by legitimate safety concerns, not balancing a budget.  The Maryland model of citation revenues going to the state minimizes the profit motive for local governments and that's better for everyone. 

Stop signs

Talking about stop signs is public discourse in miniature.  Few things are more ubiquitous than the white-on-red octagonal signs.  To engineers, they are traffic control devices governed by the MUTCD--the Manual on Uniform Traffic Control Devices.

The MUTCD is exactly the thrilling page-turner you'd expect from engineers writing about inanimate objects.  A far more readable Cliff's Notes version can be found here, with the more racy title, "Speed Control in Residential Areas."

Here's an excerpt:

"Residents’ complaints are usually accompanied by a proposed solution to the speeding problem...stop signs. Traffic officials respond that stop signs installed to control speeding: (a) don’t work, (b) are frequently violated, (c) are detrimental to safety, (d) are not warranted in the Manual* and, (e) actually increase speeds between stop signs. When residents are told that stop signs are not the answer to the speeding problem, they feel they must fight city hall to get them installed. A confrontational relationship is established between residents and traffic officials and the stop sign becomes a “trophy” which is awarded to the winner of the confrontation. Solving the speeding problem becomes secondary to winning the “trophy”. The end results of this process are: (1) unhappy citizens, (2) continued complaints and requests for more stop signs, (3) increased political pressure and, (4) often, approval of stop sign installations to bring the controversy, temporarily, to an end."

Obviously, the authors have experienced the unmitigated joys of a public debate over putting stop signs at the corner of <insert random tree name> avenue and <insert random number> street.

Like the problems that occupy most of local governments' time, speeding is complex, widespread, and slippery.  And like many issues, it's only a problem when "other people" do it.  For those who doubt cosmic justice, I offer the example of the resident who was complaining most loudly about speeding in their neighborhood being the first to receive a traffic citation on the same street for <wait for it> speeding!  To add sauce to the goose, most speed studies come back showing the perceived speeding is not nearly as excessive as portrayed.

People want simple, straightforward solutions to problems they perceive.  Few pieces of painted metal are more simple and straightforward than a stop sign.  Engineers and pretty much anyone who believes in the Enlightenment prefer rational solutions to specific, real problems.  One can have an intuitive notion that stop signs make a street safer... but belief is not the same as proof.  And the expenditure of public funds and governance of public facilities--even on something as modest as a stop sign--should be governed by rational thought, engineering best practices, and scientific evidence.

The great advantage of scientific discourse is that someone eventually wins, understanding that all such victories are temporary, good only until better data, measures, or testing comes along.  We no longer argue about whether the earth is flat (well, mostly). Theological debates, on the other hand, are endless absent one side eliminating the other.  If we can't agree to follow a rational process in putting up or taking down stop signs... how much chance do we have solving much larger problems?

Pension revisited

An essay I wrote for the Maryland Reporter:

About a year ago, I wrote an essay for MarylandReporter.com  suggesting the state legislature look to local governments for ideas on how to successfully manage pension systems.  Naturally, the opposite has happened.

Del. Mary Ann Lisanti of Harford County is pushing HB 971, legislation that would require local government pensions to provide a potentially budget-breaking disability benefit for some public safety employees.

Del. Lisanti’s bill is a response to a line-of-duty injury suffered by a police officer in one of Harford County’s municipalities. There’s no question that it is a situation that tugs at heart strings. It’s also the perfect example of the old legal adage: Hard cases make bad laws.

Caroline County—the state’s second poorest—has its own pension system.  After years of hard work and sacrifice, our system is stronger that the state’s. Del. Lisanti’s well-intentioned effort to benefit a single individual will have a profound effect on thousands of local government employees including ours.

Our actuaries are crunching numbers now, but there’s no doubt the new benefit will be expensive, not only to provide but to administer.  The smaller the pension system, the greater the impact.  The reasons are much same as why small counties cannot afford to self-insure for worker’s compensation.  With a small pool of employees, even one or two unanticipated claims can dramatically increase costs.  The inherent volatility and disproportionately high administrative costs makes self-insuring impractical.

If HB 971 is passed, Caroline County faces the prospect of having to increase what employees pay into the pension, cutting spending to pay a larger employer share, and/or restructuring pension benefits for future retirees.  Since about 75% of our annual budget is dictated by state mandates, we have few options—none appealing.

The bill also backdates the benefit to 2015, presumably to benefit Delegate Lisanti’s constituent.  This is problematic not only for pension funds, but for bond rating agencies.  How can those agencies evaluate our creditworthiness if financial mandates can be imposed ex post facto?

We understand the issue.  We already provide long-term disability insurance at no cost to our employees.  We are working towards other solutions we can afford, and not just for public safety employees.  After all, other workers can be left disabled due to a work-related injury. They deserve no less consideration.

Whatever we do must be financially responsible.  It’s laudable that Del. Lisanti wants local government pensions to match the lavish benefits promised by Maryland’s Law Enforcement Officers’ Pension System (LEOPS).  The unflattering reality, however, is that state has woefully underfunded LEOPS despite an employer share of nearly 40 cents for every dollar in wages.  By comparison, the employer share for Caroline’s fiscally sustainable pension system is less than 12 cents.

It is tempting but would be intemperate to suggest the Maryland legislature fix its own pension systems before dictating how we should manage ours.  My request is more measured.  Give local pension officials time to do the actuarial work necessary to determine the impact.  It is unconscionable to ignore the plight of workers disabled in the line of duty, but no less so to blindly force local governments to make pension promises we cannot afford to keep.