Category Archives: Commentary

Commentary

Questions for the Treasurer

City of Hartford Treasurer Adam Cloud is scheduled to meet with the Council’s Operations, Management, Budget, and Government Accountability Committee on the evening of Monday, May 2, 2016.

The Office of the Treasurer acts as a co-issuer of the City’s debt and as the investor of the pension fund. Both the debt and the pension contributions have been cited as contributing factors to Hartford’s structural budget deficit.

As City leaders work to restructure Hartford’s finances, both closing this year’s budget gap and putting the City on a more sustainable long-term path, difficult questions need to be asked. Nothing should be exempt from scrutiny.

The Treasurer’s appearance at the Committee meeting is a rare opportunity for the community, via its Council members, to ask important questions of the Treasurer.

Questions About the General Obligation Debt

Treasurer Cloud, you have appeared before previous Councils to advocate for numerous general obligation bond sales. Some sales have been new debt to fund capital projects, while others have been restructurings of the existing debt.

We’re now being told that the City has too much general obligation debt, and that the worst is yet to come in terms of repayment.

Do you believe Hartford has too much general obligation debt? If yes, why haven’t you sounded the alarm in the same way that you have about potential decreases in pension contributions? If no, what metrics do you use to gauge the appropriate level of debt?

What do you recommend Hartford do with respect to managing the debt?

Questions About the Pension Fund

The Fourth Quarter 2015 Investment Performance Analysis report for the Municipal Employees’ Retirement Fund (MERF) stated that investment performance has been very poor over the past 5 years. The MERF’s total return was worse than 80% of the other public funds in the benchmark.

Specifically, the MERF’s return is reported as 1% behind the median fund over 5 years. The underperformance has cost the MERF an estimated $10 million per year (1% of a $1 billion fund), or $50 million over five years.

Why is the MERF ranked near the bottom of Public Funds for long term investment returns?

What have you done, and what are you planning to do, to improve performance?

Commentary

Three Phases: A Restructuring Framework

1 Comment

Hartford’s financial condition has gotten to the point where it cannot be fixed in a single budget cycle. Breaking the process into phases will give the City a better chance at success.

Restructuring will require collaboration between all stakeholders; the Administration, the City Treasurer, the City Council, City employees, the State, the business community, the non-profit community, and the residents. Presumably there are others that have been left off this list; they should be included too.

It is not a process than can, or should, be handled quietly in back rooms and then presented in final form.

Phase 1: Develop Goals and Strategy

Once the community commits to making difficult changes, the first step will be to develop goals and a strategy. All stakeholders need to be involved in the conversation. There must be an extensive public discussion.

Practical concerns seem most pressing. Can Hartford find a balance between revenue, operating expenses, and long-term liabilities?

Philosophical concerns are also important, given the City’s limited resources. How much should the municipal government try to accomplish? How should municipal objectives be prioritized?

Phase 2: Implement Expense Reductions

Reducing expenses first is more conservative than trying to do everything at once. Even the most well thought out plans involve estimates. The City needs to know how effective the expense reduction initiatives will actually be before adjusting the revenues.

It could take years to fully implement the expense reduction ideas, as agreements will likely need to be negotiated with the employee unions.

Reducing expenses first will also allow the City to operate at a surplus for one or more years. The extra funds will not be needed for operations, so they can be used to pay down the bonded debt, improve the pension plan’s funding level, or fund an account for Other Post Retirement Benefits.

Phase 3: Adjust the Revenue

Once City operations have been reorganized, the revenue can safely be adjusted. In practical terms this means dealing with the split tax rate so that the mill rate can come down.

Conclusions

Hartford’s current strategy of hoping that the financial stress resolves itself has failed. A new strategy is required, and it will take years to identify and implement the necessary changes.

The first step is starting the conversation.

Stakeholders need to identify their goals and priorities for the municipal government. Ultimately, Hartford needs as much input as possible, from everyone who has a stake in the community.

Commentary

Aspiring Mayors and the 2016 Hartford Budget

Let’s get excited everyone, it’s budget time in Hartford!

Like most recent years, the stage has been set with a large budget gap to overcome. Unlike previous years, however, the landscape is different this spring.

The effort to redevelop Downtown North generated considerable public debate about City finances. Hartford has continued to increase its general obligation debt, with rounds issued in October, November, and February (via the Stadium Authority) so far this fiscal year. Finally, phase one of the SC2 Challenge provided preliminary economic development ideas.

The Hartford Commission on the Restructuring of City Government met for the first time on January 5, 2015, after a six month delay. Meaningful recommendations are unlikely to be made in time for the current budget cycle, but could be available in future years.

This is also an election year; the residents will select the next Mayor in November. The race has already drawn a considerable amount of attention, and numerous potential candidates.

The Mayoral race could serve to elevate the budget debate. Serious candidates know that the City has an unsustainable financial model. They know that the City needs a new forward-looking vision.

This is an opportunity for candidates with legitimate ideas to lead the conversation. Residents are poised for debate after months of discussing the Downtown North project, and the media has an apparently insatiable appetite for Hartford politics.

Hopefully the aspiring Mayoral candidates will engage in the budget discussion to bring new ideas to the table about how to move the City forward.

Commentary

Hartford Can’t Borrow its Way to a Balanced Budget

Hartford’s elected leaders restructured the City’s debt in March 2013 in an attempt to address a structural budget gap. It was an effective way to address short-term concerns, but will ultimately be an expensive temporary measure as the bill comes due.

The chart below attempts to show graphically how scheduled debt payments were manipulated. It compares scheduled payments as of June 30, 2012 (green bars in the background) to scheduled payments after the November 2014 issue (purple bars in the foreground).

The color at the top of the bar indicates the direction of the change. A green top means the scheduled payment was higher as of June 2012, while a purple top means the scheduled payment was higher as of November 2014.

2015-02-17 Evolution of the Hartford Debt Profile

The Hartford Citizen’s model estimated that Hartford owed about $29 million in the current fiscal year (fiscal 2015). This total is over $8 million less than the City was scheduled to owe as of June 2012. The decrease illustrates the impact of the restructuring.

While arguably an effective short-term strategy for balancing the budget, postponing debt into the future is a poor long-term strategy. The debt will ultimately need to be repaid, with interest.

If a balanced budget depends on annual debt service costs of about $29 million, then what will that mean for the future? Debt service payments are projected to remain above this year’s $29 million level until 2028. They are projected to peak at $44 million in 2019.

Since fiscal 2004, the City has averaged $39.4 million in new debt issued per year. It is highly unlikely that Hartford will stop issuing debt altogether in order to pay down the current balance.

The chart below shows the year-by-year totals, and excludes debt used to restructure or refinance. So far this year (fiscal 2015), Hartford has issued $82 million in debt, more than double the average of the 2004 to 2015 time period.

2015-02-17 Recent History of Bond Issues

When a person, or a company, or a municipality borrows money, they need to have a plan pay it back. Money is not free.

Borrowing money can delay expenses, but it cannot reduce them. Loans are not a long-term solution to a structural budget gap. Additional debt will make a persistent budget deficit worse.

How do the City’s elected officials plan to pay back the money Hartford already owes?

Commentary

Actually, That’s a Budget Conversation

The City’s financial position is rarely discussed directly. It’s not a sexy topic, and can be discouraging.

However, the restrictions it imposes influence all other decisions and priorities. Most discussions about Hartford’s goals are really conversations about the budget.

Want to improve the educational environment for the City’s children? Great, figure out how to fund the changes.

Hope to improve public safety? Super, let’s look at what that might cost.

Plan to encourage job creation within the City? Excellent idea, though don’t overlook the impact of the mill rate on commercial property owners.

Hartford cannot make meaningful and sustained progress on any issues without first addressing the budget.

Commentary

Interactive Hartford

1 Comment

What if all of Hartford became an interactive museum?

Suppose you could walk through the City and see historical photos from exactly where you’re standing. Or learn the story behind a prominent landmark as you’re looking at it. Or experience an event from years ago where it happened.

Suppose all this was available for free via your phone or tablet.

Technology has the power to create new and unique experiences. This proposal is a basic version of augmented reality, adding layers of information on top of what is experienced in real life.

The implementation could be relatively simple. Once a mapping platform is selected, a variety of content could be linked to locations on the map.

Start with photos, like those published regularly in the the Old Hartford Facebook group, allowing pedestrians to walk the City and compare now and then in real time. Partner with local institutions, and other content owners, to identify additional historical items.

This isn’t a new idea for Hartford. A couple years ago a small group of volunteers created an audio tour of sites in and around Bushnell Park. It continues to be available as downloads on the iTunes Store or directly on the internet. Link these resources into Interactive Hartford too.

I throw this out as a business idea for others to consider, as I’m not tech savvy enough to make it happen on my own.

Maybe it’s a proprietary app that allows users to be notified when they pass a site, or when new points of interest are added near them. Or maybe it’s a layer on someone else’s mapping platform … I don’t know. I would be more helpful with product usability and business planning than technical design and development.

Give it some thought Hartford creatives. I’m happy to talk it through, and would love to be involved at some level if anyone wants to give it a go.

Interactive Hartford would enhance the experience of visitors to the City. If done well, Hartford could serve as the pilot site, and the technology could evolve into a business serving other cities too.

Commentary

Opposed to Downtown North

2 Comments

The Hartford City Council has held numerous public hearings and committee meetings in an effort to better understand the Downtown North proposal. They have dramatically increased the amount of information available to the public.

I’ve followed the discussion, and see many positives to the proposal. Yet, I still find myself opposed to the project. I see building out the site as a luxury, and as a distraction.

Hartford has a more important priority right now; restructuring municipal finances and operations to put the City on a sustainable path. My primary concern is that if Downtown North is approved that it will be much more difficult to make the hard choices that a restructuring will require.

There are positives to the proposal, and the first phase of Downtown North seems likely to achieve meaningful goals. There is a good chance that the main benefits would be realized. Baseball would expand and diversify the City’s entertainment options. A grocery store would address the food desert in the northern neighborhoods and provide a new option for the increasing number of Downtown residents. Main Street would be transformed north of the highway. Clay Arsenal would be reconnected with Downtown. There would be more construction jobs. Hopefully phase one would also create momentum that would ensure the entire project is completed.

The Downtown North business case for the City is approximately revenue neutral. The business case has been portrayed as a positive, though I see it as a negative. The Administration is projecting that the City can achieve the benefits listed above without increasing the property tax. The ancillary development can create new revenue that will more-or-less offset the expected costs of the land preparation, stadium construction, and public infrastructure improvements.

Unfortunately, Hartford is in a position where it has to do better than financially treading water. Increasing expenses at the same pace as revenues doesn’t improve the City’s financial position.

Other criticisms of the proposal also resonate.

Stadiums, in general, are regional assets. They provide entertainment to all of the surrounding towns while generally losing money. Asking the City of Hartford, a financially stressed municipality with very low median income residents and a highly taxed business community, to take on the facility alone doesn’t seem appropriate.

The financial model of professional baseball, specifically, has regions paying for the privilege of hosting a team. Again, it does not seem appropriate for the City of Hartford to subsidize this entertainment option on behalf of the entire region.

There has been virtually no discussion about how the XL Center is impacted by the proposed baseball stadium. Hartford needs to ensure that the XL Center, which is the more important of the two sports venues and is already funded at the state/regional level, continues to be successful and remains a top priority.

When looking at the big picture, Downtown North seems like an acceptable project, but not a great one. Choosing to move forward will not expose the City to an unreasonable amount of risk, and would bring some positives.

However, committing time and money to Downtown North will distract from a higher priority effort that the current political leaders have already agreed is necessary.

Approving Downtown North will send conflicting messages to stakeholders that will need to make concessions in the form of higher taxes, fewer services, or fewer benefits as the City works to find a sustainable path.

The best course of action is to put Downtown North on the back burner until the City has an opportunity to reorganize.

It could take years to get Hartford’s proverbial house in order, and at that point the environment may be different. The numerous early-stage Downtown construction projects will be much further along, if not complete. The influx of new residents may even change the priorities for the Downtown North site.

Hartford needs to set sustainable municipal goals. Hartford needs to agree on primary strategies for working towards those goals. Hartford needs to organize and focus its operations around the goals and strategies.

Once those steps are complete, the City will be in a much better position to consider proposals like the one currently on the table for Downtown North.

Commentary

Implications of the Moody’s Credit Rating Downgrade

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Moody’s Investors Service downgraded of the City’s credit rating in the midst of an active debate about a significant construction project on the Downtown North site.

The Mayor interpreted the downgrade as highlighting the importance of economic development. He also implied that the financing structure currently proposed for the Downtown North project is the best available option.

Downtown North supporters using the rating downgrade as evidence the project should move forward need to be absolutely sure that the proposal grows the taxable Grand List without earmarking those new tax receipts to pay for the development. Otherwise the project doesn’t address the City’s financial situation.

Others saw the downgrade as a warning that the City is stretched too thin, and a reason to reject the current Downtown North proposal as an imprudent financial commitment by the City.

Opponents need to realize that the downgrade is independent of the ballpark-centered proposal. Stopping the Downtown North project doesn’t speak to Moody’s concerns either.

There are a limited number of ways that the City’s financial position can be improved – increasing revenue, reducing spending, or improving operations are the most common. Concern about the credit downgrade needs to translate into constructive action to address the problem.

Does this mean that it’s time to get serious about reviewing Hartford’s goals, strategies, and overall business plan?

Fortunately, the Hartford Committee on the Restructuring of City Government was created to start this exact conversation.

Commentary

Leverage in the City

Hartford residents have a lot of leverage via their municipal government. But what is the best way to describe, and understand, the type of leverage?

Residents of Hartford elect a Mayor and nine members to the Court of Common Council. These ten officials directed about $941 million in spending during FYE 2013. Over that same period, the residents contributed about $72 million in property taxes to the City.

Via their elected representatives, the residents of Hartford directed the spending of about 13x as much money as they contributed. Leverage.

This financial set-up is an opportunity. Hartford is able to work towards goals that would otherwise be financially out of reach.

This financial set-up has risks. Hartford’s ability to pursue those goals depends on the funding, which in turn depends on the financial position and attitude of others.

Most importantly, this financial set-up comes with responsibility.

In order to take advantage of the opportunity that leverage provides, and to minimize the risk that comes along with it, Hartford has the responsibility of creating plan. What is the City trying to accomplish, and what strategies will be used to reach those goals?

That responsibility ultimately falls to the residents, who elect the Mayor and the members of City Council. The residents, via their elected officials, have the power to lead the discussion and shape the conversation.

Commentary

Message Board Jujitsu

Note: The list below is adapted from other sources, which are provided at the bottom.

It is important to have a variety of opinions in every discussion. Diverse opinions provide perspective. They make us think. They help us grow. Without a variety of opinions there is nothing to discuss. But strongly held opinions, when forcefully argued by any means possible, usually undermine a debate.

Many discussions take place online in this day and age. Online discussions have a different character than face-to-face conversations. One of the downsides of online discussions is that they more easily stray off topic.

I frequently encounter comments online that disrupt the productive debate of ideas. Some of these comments are intentional attempts to avoid the issues or manipulate; others are made in good faith but have the same effect.

Disruptive comments bother me. My sense is that they also bother other people. Here is a strategy to deal with them … flag them as examples of a way that issues are dodged, or a discussion is disrupted.

When involved in a discussion and someone uses one of these strategies, point it out. Link to this article and lightheartedly say something like, “Nice example of a Shout Down (#6)!” Once enough people in the group understand and recognize these techniques, they will lose much of their disruptive power.

1. Name Calling and Ridicule. Associate opponents with unpopular labels such as ‘kooks’, ‘right-wing’, ‘liberal’, ‘left-wing’, ‘terrorists’, ‘conspiracy buffs’, ‘radicals’, ‘militia’, ‘racists’, ‘religious fanatics’, ‘sexual deviates’, and so forth. This makes others shrink from support out of fear of gaining the same label.

2. Emotionalize, Antagonize, and Goad. Chide and taunt your opponents and draw them into emotional responses which will tend to make them look foolish and overly motivated, and generally render their arguments somewhat less coherent. Not only will you avoid discussing the issues in the first instance, but even if their emotional response addresses the issue, you can further avoid the issues by then focusing on how ‘sensitive they are to criticism.’

3. Suggest Extreme, Counter-Productive Solutions. Ideas that are wholly disproportionate to what is being discussed distract from the conversation and discredit the attempt to spread the facts and work towards a resolution.

4. Become Incredulous and Indignant – “How dare you?!” Focus on side issues that can be used to show the topic as being critical of some otherwise sacrosanct group or theme.

5. Polarize. Segregate the participants into groups by raising emotional or partisan issues. This prevents the conversation from moving forward through cooperation and collaboration. Push any and all hot buttons available.

6. Shout Down Comments. Coordinate with a couple of others to “shout down” opponents’ comments. This is especially effective when the posters launch an avalanche of comments in quick succession … the original comment gets lost, or attacked so much that it is largely lost.

7. Quantity Over Quality. Make a rapid succession of replies to a criticism so that the opponent’s comment is lost in the conversation thread. This obscures conflicting, and potentially valid, points so that your position cannot be evaluated in any detail.

8. Use a Straw Man. Find or create an element of your opponent’s argument which you can easily knock down to make yourself look good and the opponent to look bad. Either make up an issue you may safely imply exists, or select the weakest aspect. Amplify their significance and destroy them in a way which appears to debunk all the charges, real and fabricated alike, while actually avoiding discussion of the real issues.

9. Hit and Run. In any public forum, make a brief attack of your opponent or the opponent position and then scamper off before an answer can be fielded, or simply ignore any answer. This works extremely well in environments where a steady stream of new identities can be called upon without having to explain criticism or reasoning. Simply make an accusation or other attack, never discussing issues, and never answering any subsequent response, for that would dignify the opponent’s viewpoint.

10. A Lost Cause. Paint the entire situation as unsolvable. If people talk about taking constructive action, write things to discourage them. Encourage people to be apathetic instead of trying to change things. This causes those following the matter to lose interest more quickly without having to address the issues.

11. Demand Complete, Fool-Proof and Guaranteed Solutions. Pretend that discussing any idea that is less than perfect is a waste of time. Since perfect solutions are nearly impossible, and even more rarely the initial proposal, this avoids discussing the subject entirely.

12. Change the Subject. Usually in connection with one of the other techniques, find a way to side-track the discussion with abrasive or controversial comments in hopes of turning attention to a new, more favorable topic. This works especially well with companions who can ‘argue’ with you over the new topic and polarize the discussion arena in order to avoid discussing more important issues.

13. Question Motives. Twist or amplify any fact which could be taken to imply that the opponent operates out of a hidden personal agenda or other bias. This avoids discussing issues and forces the opponent on the defensive.

14. Invoke Authority. Claim authority for yourself, or associate yourself with authority. Present your argument with enough ‘jargon’ and ‘minutia’ to illustrate you are ‘the one who knows.’ Simply assert you are correct without discussing issues, or demonstrating concretely why, or citing sources.

15. Play Dumb. No matter what evidence or logical argument is offered, avoid discussing issues. Deny that evidence or arguments have any credibility, make any sense, provide any proof, contain or make a point, have logic, or support a conclusion. Mix well for maximum effect.

16. Rehash Old News. Many ideas and proposals face early criticisms that are quickly addressed. Continue reviving the original objections as a way to avoid focusing on the current issues.

17. Ride the Coattails of Old News – a derivative of the Straw Man. Many ideas and proposals face early criticisms that are quickly addressed. When new objections arise, link them to the original criticisms (that have already been resolved) and dismiss them all as rehashing old news without addressing the new issues.

18. Ignore Proof Presented and Demand Impossible Proofs – a variant of Play Dumb. Regardless of what material may be presented by an opponent in public forums, claim the material irrelevant and demand proof that is impossible for the opponent to produce.

19. Create False Evidence. Whenever possible, introduce new facts or clues designed and manufactured to conflict with an opponent’s presentation. This is a useful tool to neutralize sensitive issues or impede resolution.

20. Create a Bigger Distraction. If none of the other strategies seem to be working, then create bigger news stories (or treat lesser stories as more important) to distract the multitudes.

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These strategies come from two primary sources, either directly or with edits.

The first source is H. Michael Sweeney’s article called Twenty-Five Ways to Suppress Truth: The Rules of Disinformation. Sweeney’s piece appears to have been initially written in 1997, before the widespread adoption of the internet, and be geared towards managing public scandals.

The second source, Washington’s Blog, adapted Sweeney’s information and pulled in some other sources in a piece titled How to Spot – and Defeat – Disruption on the Internet. This piece was first posted in 2012, and is clearly more focused on internet discussions. However, it has a national/international events bias that doesn’t apply to the online conversations I frequent.

My goal is to reframe the strategies in a more general context, so that they feel relevant to any type of online conversation. I also have attempted to be less harsh in judging those who employ the strategies. All of us have used them at one point or another – after all, they’re very effective.

Those whose participation in a group is almost entirely defined by these approaches need to understand that they are disrupting the group’s discussion.