CSMFO Magazine November 2016

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NOVEMBER 2016 #9



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M A G A Z I N E NOVEMBER 2016 #9


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2016 Board of Directors President John Adams, City of Thousand Oaks President-Elect Drew Corbett, City of San Mateo Past President Jesse Takahashi, City of Campbell David Cain, City of Fountain Valley Jimmy Forbis, City of Gilroy Brent Mason, City of San Bernadino Marcus Pimentel, City of Santa Cruz Karan Reid, City of Concord Chu Thai, City of Monterey Park Executive Director Melissa Dixon, MBA, CAE Editorial Designer & Photographer David Blue Garrison Interim Editor Joan Michaels Aguilar, City of Dixon Additional Photography Pexels, Pixabay and Stocksnap The California Society of Municipal Finance Officers is the statewide organization serving all California municipal finance professionals. We promote excellence in financial management through innovation, continuing education and the professional development of our members. CSMFO members are deeply involved in the key issues facing local agencies. We value honesty and integrity, and adhere to the highest standards of ethical conduct. Thank you to all the authors in this issue for sharing with us their time and expertise. If you have an idea for a future article, please contact Melissa Dixon at the CSMFO office at melissa.dixon@staff.csmfo.org. Disclaimer: The views and opinions expressed in these articles are those of the authors and do not necessarily reflect the official policy or position of CSMFO.

1 Source: PLANSPONSOR, Top 10 Recordkeepers, 2015 Core securities, when offered, are offered through GWFS Equities, Inc. and/or other broker-dealers. GWFS Equities, Inc., Member FINRA/SIPC, is a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. Empower Retirement refers to the products and services offered in the retirement markets by Great-West Life & Annuity Insurance Company (GWL&A), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York, Home Office: NY, NY; and their subsidiaries and affiliates. The trademarks, logos, service marks and design elements used are owned by GWL&A. Š2016 Great-West Life & Annuity Insurance Company. All rights reserved. PT257076 (2/2016)


For more information on CSMFO or this Magazine, please contact the CSMFO office at 916.231.2137 or visit the website at www.csmfo.org.



6 President’s Letter

32 Meeting Your Continuing

8 Executive Director’s Letter

Disclosure Obligations: Developing the Right Policies

10 Changing in a Changing World

38 Setting The Stage For

14 Whose Money Is It, Anyway? 19 Do you have the Power(of Fiscal Policies)? 21 Sidebar: The Power of Fiscal Policies 22 Sponsored Article: How Capitola Improved

Council-Administration Relations With OpenGov

Water Rates

42 Building Sustainability in Public Finance

45 2017 Host Committee Running Diary

47 Career Opportunities

26 CSMFO 2017 Board of Directors Election 29 Membership Has Its Privileges





Favorite Thanksgiving dish is his mother’s Green Bean Casserole. He also loves Ocean Spray Jelly Cranberry Sauce.

As a government finance officer, I love well developed policies & procedures. From my perspective, they provide a framework of how an organization works and provide clarity to the employee when performing activities that are important to the organization. When monitored, they help ensure accountability in critical areas that are important to the agency, such as health and safety, legal, and regulatory areas. This month, the CSMFO Magazine fiscal sustainability. Policies or Policy focuses on Best Practices and Policies Statements in the areas of Infrastructure, & Procedures for Government Finance. Compensation, Long-Term Liabilities For finance departments, policies are (OPEB/Pensions) and Economic critical in our normal operations and are Development, can be the next steps for needed in every area your organization. in government finance, ...you should If you need assistance in including: debt, budget, this area, CSMFO provides focus on accounting, purchasing, great resources, including audits, grants, treasury policies that an exceptional training and investments. Luckily, will potentially course called “The Power most organizations have of Fiscal Policies” taught the required policies to transform your by Bill Statler. I highly ensure a well-established recommend the course. In agency and foundation for their addition, GFOA, CMTA agency. The work, ensure longand CDIAC provide however, does not stop great resources including term fiscal in just the creation of training and policy guides the policy, but continues sustainability. for government finance in the constant review professionals. There are a and improvement of lot of resources available and so there those policies. Annual reviews can is no excuse not to have policies and ensure your policies are matching procedures that follow best practices best practices and adapting to your and push your organization to be the changing organization. best it can be.

The articles this month cover a wide range of topics, from debt to water. The theme is centered on new areas where policies are lacking and needed. Hopefully you find value in each article and are able to focus on the importance of improving your policies. If you are like me and believe your agency has strong policies, then you should focus on policies that will potentially transform your agency and ensure long-term


As we enter into the holiday season, I want to wish everyone a Happy Thanksgiving. Remember, Thanksgiving Day is a day to gather with family and give thanks for all the blessings in your life.



EAT, LOVE, POLICY I like policies. Always have. I’m sure governing documents of our agencies it’s a product of my childhood (let’s progress with the times. When leave that can of worms something isn’t working closed, shall we?) that doesn’t reflect current Policy provides or I’ve always had a special normalities, it’s our duty to place in my heart for adjust accordingly. structure and anything that provides You all have the power stability, and a me with guidelines to do that for your level field from organizations. Develop and boundaries. Not sure how much the which our staff policies that will allow organization should have staff and your boards can function and your in reserves? Let’s create to function in the manner a policy for that. How our leaders can that is most efficient ‘bout who should have and effective for your signature authority on govern. constituents. And when the bank accounts? That those policies become can be solved with a policy too. Any outdated or ineffective, you have the question an organization can have while power to affect change. conducting its everyday operations can Use that power wisely. be answered with a policy. A policy sets a standard. A policy tells the current group of leaders how to handle uncertainties—not just for this group, at this group’s whim, but for the next group and the group after that. There’s no worry about remembering what one Board may have done or why, and whether or not it should be done the same way this time. There’s no change based on the sitting President. Policy provides structure and stability, and a level field from which our staff can function and our leaders can govern.



For Thanksgiving, Melissa loves her husband’s Roasted Root Vegetable dish. This is a big deal because veggies used to be a no-go for her!

This doesn’t mean policies can’t change. They absolutely can—and should—when changing times require. It was once a general policy for most nonprofit associations that Bylaws amendments be voted on in person at the organization’s annual meeting. Or that elections had to be by certified USPS mail ballot. In the advent of the electronic age, should we continue to function within these arcane confines merely because it’s policy? Of course not. It’s our duty to ensure that the





Innovation Award Program CAFR Award Program

While the Budget Award Programs deadline has now passed, CSMFO has additional award programs that are currently accepting applications. The CSMFO Professional Standards and Recognition Committee encourages all municipal members to consider applying to these Award Programs: Innovation Award Program CSMFO established the Innovation Award Program to recognize innovation within the field of public sector finance in the areas of: • Accounting • Budgeting • Treasury • Debt administration/issuance • Procurement • Risk management • Technology Applicants are required to complete the online application and include documentation related to the innovation. Completed applications and documentation are due by December 31, 2016. There is no fee to apply to the Innovation Award Program. CAFR Award Program CSMFO established the CAFR Award Program to encourage and assist local governments who do not participate in the GFOA Certificate of Achievement for Excellence in Financial Reporting Program to prepare outstanding financial reports. The intent of the program is to provide local governments a review at a lower cost than the GFOA program. In doing so, local governments will become more confident in their ability to apply for the GFOA program. Completed applications and reports are due within 6 months of the local government’s fiscal year-end – for applicants whose fiscal year-end date is June 30, 2016, the deadline this year is December 31, 2016. If your financial reporting year-end date is different, please contact the Professional Standards and Recognition Committee. How to Submit an Application In order to submit an award application, CSMFO members must be pre-registered as an applicant in the award management software. If you are not yet registered as an applicant in the award management software, please contact Craig Boyer at craig.boyer@acgov.org. Feel free to contact us with any questions regarding the award programs.




Changing in a Changing World

Michael Coleman, CSMFO Local Government Consultant


For financial officers of today, maintenance is not enough. Successful governments, their systems, policies and professionals must move with the times. It’s a changing world and we’ve got to change too. That means paying attention and adapting, anticipating and accommodating. There are many changes in society and technology that are shaking the designs of California local government finance. And our ability to adapt to those changes is made all the more difficult by arduous approval procedures in our state constitution. But in many ways these procedures simply force us to better governance: better communication with our citizens, more democratic inclusion, and more care with the effects of our decisions. We are feeling the effects of major social and technical changes in nearly every category of our local revenues. • Fuel efficient and electric motor vehicles are becoming more common. But much of our transportation system funding comes from taxation based on fuel volume: gasoline taxes. Any CSMFO MAGAZINE NOVEMBER 2016

adequate revision to our state transportation funding system likely requires two-thirds approval of each house of the state Legislature.

outside the designs of a local utility user tax ordinance. A revision likely requires voter approval.

• Online taxable sales transactions. • Hotels are increasingly booked Concentration of sales and use online and online booking tax allocations to warehouse services often locations, often with “tax remit local hotel sharing” agreements that ...better tax based on kick-back portions of local communication revenues to consultants their discounted purchase rate with our citizens, and corporations. from the hotel Home sharing more democratic • rather than the businesses operating rate paid by the inclusion, and without payment of online purchaser. more care with applicable hotel taxes, This depends in business license taxes or part on how the the effects of our proper permits, skirting local Transient health, safety and zoning decisions. Occupancy Tax rules. ordinance is • Ride sharing businesses operating written and enforced. A revision without payment of business of the local tax ordinance to cover license taxes or proper local the full rates charged by online health and safety permits. resellers likely requires voter approval. • The legalization of medical and now non-medical marijuana with • Telecommunications technologies new state and local regulatory including wireless and modern and taxation rules. Local excise billing structures that may fall taxes on marijuana, which may


apply to both medical and nonmedical marijuana sales, require voter approval. Proposition 64 exempts medical marijuana from the state/local sales and use tax but not state or local excise taxes (such as a business license tax). How does a successful government professional navigate all this? • Stay informed on new technologies and business practices and how your local fee and tax collections may be affected. • Stay informed on new state and federal laws and budget actions and how these affect your agency.

need to be made to cover new private activity that was previously provided through other technologies or practices. • Work thoughtfully with your chief executive on the implementation of any revision or new interpretation of your tax and fee rules to avoid misunderstanding and conflict among your citizens. Succeeding through the rapidly changing social and technical flows of our world today requires active effort, not just to maintain, but do respond and change with the changes.

• Stay informed on proposed state and federal laws and budget proposals and how these might affect your agency. Work with the League of California Cities, CSAC, or the California Special Districts Association to make your concerns known to lawmakers. • Work closely with your agency legal counsel to determine if revisions to your ordinances


Whose Money Is It, Anyway? Policy Considerations for General Fund Transfers from Enterprise Funds

Michael G. Colantuono, Colantuono, Highsmith & Whatley, PC




California’s penchant for initiative legislation has produced a very complex set of Constitutional provisions and statutes governing public revenues. The most recent of these — 2010’s Proposition 26 — is the subject of litigation to clarify its meaning and, of course, we still get cases from time to time explaining 1978’s Proposition 13. Proposition 26 builds on 1996’s Proposition 218 and, together, the two have generated a spate of recent lawsuits over transfers to general funds from utility and other enterprise funds. This article describes policy considerations and summarizes the legal bases for general fund transfers. Here are the lawful means to transfer funds from a utility enterprise fund to a general fund: 1. Loans: A fund with excess cash can invest in government instruments, including a loan to the general fund. Such a loan should be documented and should pay a reasonable rate of interest. The rate might be a proxy for the interest the money would earn if it had remained in the enterprise fund – such as the currently very low, LAIF rate. 2. Returning Property to the General Fund: If the general fund loaned cash or other assets to an enterprise, obviously, the enterprise can return that property. That “return” can take the form of rent if the enterprise is making use of real property or another asset of the general fund. Thus, if a water utility occupies space below a city park for a reservoir or pumping station, and it can be shown the general fund owns the land, the water utility can pay the fair market value purchase price or rent for the use of that land — there is no duty to subsidize water rates with free real estate at the expense of the general fund. You do need evidence of which fund owns the asset, though, and records of assets held prior to Proposition 13’s adoption in 1978 may have had no need at the time to distinguish among the agency’s funds as to which owned the asset. 3. Cost Allocation: Of course, you CSMFO MAGAZINE NOVEMBER 2016

can and must allocate costs like general overhead and administration across all the funds that benefit from those cost centers. Utility and other enterprise funds are not immune. Several recent cases hold that fees subject to Propositions 218 (e.g., water, sewer and some trash fees) and Proposition 26 (most other fees) can recover the full cost of service, including overhead. 4. Other documented cost recovery: An enterprise fund can also repay the general (or any other fund) which bore costs for its benefits. Thus, a utility can pay to use street rights of way and for police and fire protection of utility assets. The Court of Appeal reached this conclusion in Proposition 218 cases involving Roseville and Fresno a decade ago and the rule under Proposition 26 is no different. However, you have to have record evidence, like a consultant’s cost-ofservice analysis, to justify the reimbursement and you cannot double-recover costs already allocated to the enterprise by the agency’s general costallocation program.

municipal power utilities to pay a “franchise fee” for use of City rights of way not shown to reflect cost of the road impacts of utility operations, an “operating transfer,” or a payment in lieu of taxes (a “PILOT”)? As to the water, sewer, and trash fees subject to Proposition 218, these became unlawful on July 1, 1997 as the Fresno and Roseville cases mentioned above concluded. Maintaining these fees requires voter approval as a tax or a costjustification. As to electric, gas and other services not subject to Proposition 218, I conclude these transfers can continue because Proposition 26, unlike Proposition 218, is not retroactive but rather grandfathers local legislation authorizing such transfers that existed when proposition 26 was

5. Voter-approved taxes: Voters can authorize fees which exceed the cost of service as taxes on utility or other enterprises. General taxes benefiting the general fund and generating discretionary revenue require simple majority voter approval under Propositions 62 and 218 and special taxes generating revenue restricted to specific purposes require twothirds voter approval under these measures and Proposition 13, as well. 6. Franchise fees, operating transfers, PILOTs, etc.: What about non-costjustified transfers to general funds, like the common practice of CSMFO.ORG

adopted in 2010. However, this conclusion is contested. Lawsuits involving a general fund transfers by municipal electric utilities are pending around California. I persuaded the Shasta Superior Court of the grandfathering theory in a case involving Redding that is pending in the California Supreme Court and likely to be decided in 2017: Citizens for Fair REU Rates v. City of Redding, California Supreme Court Case No. 224779 (fully briefed and awaiting argument as of July 21, 2015). Los Angeles prevailed in its suit because the challenge was filed too late. I was unsuccessful in persuading the Los Angeles Superior Court of the grandfathering theory at trial in a case involving Glendale, but will take another crack at it on a post-trial motion and, if necessary, on appeal. I am also defending a power-to-

water transfer for the Modesto Irrigation District in a case that is in its earliest dates, and a general fund transfer from Palo Alto’s electric utility in a case still at the pre-suit claim stage. While the Court of Appeal ruled that Proposition 26 is not retroactive as to local government in a case involving the Brookfield Township Community Services District in Mendocino County, the Los Angeles Superior Court ruled that grandfathering ends with the first electric rate-making after 2010. I think that court erred, but it will take a decision in the Redding case or another appeal to decide the issue. An agency that transfers revenue from a power or gas utility under pre-2010 legislation (charter provision, ordinance, or even a budget resolution) can maintain that practice only if Redding prevails in its case. Thus, those agencies should follow the case. They should

also take care to implement pre-2010 authority as it existed in 2010. Any amendments which increase the amount of the transfer require voter approval and amendments which reduce the transfer need to be carefully written to avoid a “ratcheting down� effect requiring voter approval to restore the transfer to previous levels. Plainly, the issue of transfers to general funds from enterprises funded by gas, electric and other fees exempt from Proposition 218 (and therefore subject to Proposition 26) is hotly contested. Hopefully there will be clarity and guidance next year for public agencies to assist you in reviewing your policies and procedures. As always, when considering policies on these subjects, local governments are well advised to consult legal counsel and to rely on capable rate-making consultants. The law is complex and changing, and getting it wrong can get you sued or cost you vital support for your general fund.




Do you have the Power (of Fiscal Policies)? Q & A with Bill Statler & Joan Michaels Aguilar

Joan Michaels Aguilar, Deputy City Manager-Admin Services, City of Dixon. Bill Statler, CSMFO Past President & Retired Director of Finance San Luis Obispo


A long time ago, past President Bill Statler (2001) from San Luis Obispo appointed a relatively new CSMFO member named Joan Michaels to a three-person Budget Awards Committee as Vice Chair. (That was me! I was in Burbank at the time, and felt pretty privileged to have been recommended.) Bill has been a vital part of CSMFO and continues assisting the organization by speaking at the annual Weekend Training and his popular Power of Fiscal Policies and Long Term Finance Planning seminars. I recently had a chance to catch up with him and ask him some key questions on policies. Joan: Since you have been teaching the Power of Fiscal Policies course, how have you seen a marked improvement in public agencies that have been considered fiscally distressed?

Other top policies that agencies should consider adopting included: • Balanced budget – and what this means • Elected official versus staff budget amendment authority • Capital improvement and debt management • Unfunded liabilities, such as pensions and retiree health care • User fee cost recovery • Interfund transactions (loans and transfers) • Closely monitoring and reporting on fiscal results throughout the year

Along with stating the policy, I think it is important for agencies to note where they are regarding the policy; Bill: Since we began this training and if not “on target,” their strategy program about five years ago, over for getting there. This 300 folks have attended. helps keep the policy So, there is definitely a lot now is the time “fresh” in the minds of of interest in the “power to develop and governing bodies and of fiscal policies.” One reinforcing the notion that of the questions I ask is adopt fiscal is important to not only if agencies have seen adopt policies – but to policies that recovery, even if modest, follow them. in their fiscal situation. The focus on fiscal Joan: Without naming overwhelming answer is sustainability, names, can you give us “yes.” So, most agencies a story of something that which in are moving out of fiscal occurred at an agency distress; and many have includes funding that could have been used this as an opportunity prevented with the right for capital to develop policies that will help them mitigate the improvements fiscal policies in place? impact of future economic Bill: I think all of the that were downturns (which there “fiscal challenge poster surely will be) and better deeply cut by children” (you know who navigate their way through they are) would have many agencies better managed their them when they happen. during the Great way through the Great Joan: What policies Recession if they had do you find most public Recession. clearly articulated policies agencies do not have, but in place – and followed would be easy to adopt? them – as the foundation for financial Bill: Many agencies have still not decision-making. adopted minimum reserve policies. Joan: What’s the most common error I wouldn’t say this is easy to do, you find in an agency’s fiscal policies necessarily, but it is one of the most and how can it be easily corrected? important policies to have in place – and follow – before the next economic Bill: Ensuring that policies are welldownturn. GFOA has recently developed known, don’t gather dust and are a great tool for evaluating minimum periodically reviewed by governing fund balance based on the “risks” bodies to ensure their credibility that reserves are intended to mitigate. and authenticity. For this reason, I


recommend that key “governance” fiscal policies be included in the Budget document (including how the agency stacks-up compared with them) and reviewed with the governing body as part of the budget process. Joan: In this era of deferred maintenance and tight fiscal resources, how do agencies develop policies such as an “Infrastructure Capital Funding Policy” or Equipment Replacement Policies? Bill: As noted above, as financial conditions improve, now is the time to develop and adopt fiscal policies that focus on fiscal sustainability, which in includes funding for capital improvements that were deeply cut by many agencies during the Great Recession. Stated simply, if you can’t get focused on these now when times are good, when will you be able to? Joan: Is Elected Official goal-setting an important first step toward adopted fiscal policies – why or why not? Bill: While I am a strong believer in the essential role that elected official goal-setting should play in the budget process, I think that formal fiscal policies can be set outside of this process. Timing is everything, and context matters. While the goalsetting and budget process is a likely candidate for “context,” there may be other opportunities that arise that are better, depending on local circumstances. Joan: How can finance professionals stress the need for adopted fiscal policies during fiscally stressed times and increases in CalPERS costs, when they work for smaller agencies that often don’t feel the need for the formality? Bill: Local agencies do not get into fiscal problems in the bad times, when most agencies follow the “first rule of holes” (when you find yourself in one, stop digging!); but in the good times, by making fiscal decisions that are not sustainable. Most agencies today are in recovery and are doing better financially. Now is the time to set policies that address long-term fiscal sustainability, such as addressing capital improvement needs, funding


fleet and equipment replacement and unfunded pension and OPEB liabilities. Regardless of agency size, I think most elected officials want guidance in making tough fiscal decisions. For example, city and county elected officials are used to making land use decisions in the context of General Plan and zoning policies. While they may decide to amend the policies as they review specific development proposals, current policies provide a powerful starting point.

Effective fiscal policies are not straightjackets: they are road maps. Having a clear idea of where you want to go will significantly enhance your chances of getting there. This is true for all agencies regardless of size. Lastly, one size does not fit all. Some agencies will be more comfortable with comprehensive, more complex policies; other with terser statements. I think we all can benefit from following Einstein’s advice: make everything as simple as possible, but no simpler. Look for opportunities to go to Bill’s sessions in 2017!


The Power of Fiscal Policies and Long Term Financial Planning – Could be Coming to Your Agency Joan Michaels Aguilar, Deputy City Manager-Admin Services, City of Dixon CSMFO’s mission includes providing quality continuing education and professional development. The Career Development Committee spearheads these efforts by seeking agencies throughout California to host the core courses it offers. Lorena Quijano, Assistant Director of Finance & Technology Services from the City of West Hollywood, shared her experience having heard Bill Statler speak at both Weekend Training and when West Hollywood hosted the Fiscal Policy/Long Term Financial Planning core course in September. Lorena shared these thoughts, “I have heard Bill at the Weekend Training and thought I had heard the most important aspects of his training until I attended his full day course. He emphasized the importance of conducting a benchmark city analysis to use when we compare our city to others and when we develop fiscal policies. By conducting this analysis and presenting it to Council, we not only build consensus on what key criteria is used to identify benchmark cities but we save staff time by identifying the benchmark cities that should be used for that year.”

Lorena, who serves as a member of the Career Development Committee, also noted, “Many times we might be tempted to use data from the surveys (e.g., CSMFO surveys) without taking into account if those responses are from “our” benchmark cities; if they are not, we should be cautioned that we might make incorrect decisions based on the data presented (I know I will be more careful when reviewing surveys taken by others!). Because financial conditions are dynamic, he suggested updating the benchmark cities and fiscal policies with the annual budget (or mid-year budget) process. We are currently updating our policies and I will definitely consider

these annual updates going forward.” Members may have seen an e-mail from Carrie Corder as the Committee is already seeking agencies willing to host courses in 2017. Hosting duties can include assisting with check-in, technology, and reimbursed refreshments/lunch. In turn, CSMFO will provide two registrations at no cost to for the hosting agency. Carrie can be reached at carriec@cvwdwater.com.


How Capitola Improved CouncilAdministration Relations With OpenGov By Mark Welch, Finance Director, City of Capitola SPONSORED ARTICLE




SPONSORED ARTICLE The ballots have been tallied. The yard signs have gone. The town halls are over.

Slash pension expenses! Cut travel costs!

I do not believe candidates 2016’s local government election intentionally mislead citizens. These is behind us, but finance officers will public servants have decided to step feel its effects in the months and years up for their communities and their ahead. New and returning members representation is one alike will seek to of the hallmarks of a enact policy agendas During my time in democratic society. and fulfill campaign However, like most government, I’ve pledges. And because citizens, council every policy involves seen dedicated candidates and a financial investment, members may not have finance officers will find councilmembers and the most informed themselves responsible staff unite to make knowledge of local for figuring out how government operations the community a to implement the new and finance. Financial council’s policies. better place to live illiteracy breeds honest

Many will be and reasonable. Invest in repairing roads. Pay first responders well. Clean the parks. But then there are the inevitable others. Every year, councils propose pledges that do not reflect financial reality: Repeal a sales tax that funds bloated salaries!


mistakes during the campaign. In turn, this breeds conflict with the administration when it comes time to craft and implement policy. In the City of Capitola, California, we believe good relationships with our governing body lead to better policies and, ultimately, better services for

citizens. I want to share how, during the recent election, we took preemptive steps to educate and engage with candidates. I then will explain how we improved relationships with the existing governing body – elevating the quality of public debate and building trust with staff and citizens – and why this will help us engage new elected officials. Educating Candidates Before the Election It was important to us to empower candidates to make feasible promises to their constituents. Therefore, we held an orientation for council candidates after the filing deadline passed. Candidates had lacked an easy tool to learn about and explain financial issues to voters, so they often conducted their own analyses. These ‘self-explorations’ of financial data displayed in PDFs and often spreadsheets often didn’t end well. Because our financials were not presented clearly, candidates accidentally made incorrect claims about budgets, revenues, and finances.

SPONSORED ARTICLE Newly elected members would come in with an incomplete or incorrect ideas, and propose policies they would not support if they understood financial realities.

also reported back that they were able to learn a lot more on their own – leading to more informed campaign platforms and councilmembers.

Our elected officials – and citizens – deserved better. That’s why we decided to hold a candidate orientation. However, if we had relied solely on our financial system to prepare the necessary reports, time constraints would have prevented us from giving candidates the insights they needed.

When the new council is sworn in, OpenGov will help us engage every member. We’ve had great success with the existing council.

It would have taken almost two full workdays to build the reports that explain issues candidates tend to care about, such as overtime across the entire organization. I would have been forced to download multiple reports from our financial system, combine them, calculate the right subtotals, determine the correct classifications, and prepare the necessary charts and graphs. And this is for every question a candidate might conceivably ask. Fortunately, Capitola had purchased and implemented OpenGov, a cloudbased reporting and transparency tool. To generate the overtime report we needed in OpenGov, we simply filtered data by expense type, checked the overtime box, and selected all departments. OpenGov automatically generated charts as we went along. Instead of having to drill vertically into our Chart of Accounts, we could mix and match elements across departments and funds. It took just 15 minutes to build the all of the reports we needed. Candidates loved having this information available both during the orientation and for their own use afterwards. Because OpenGov is interactive, we could answer any followup questions in real-time. Candidates

Engaging Existing Councilmembers

Before OpenGov, although we generally enjoyed good relationships with our council, there were moments when trust broke down. For example, councilmembers would sometimes not trust the reports staff gave them. And because it often took over a day to

Based on this success, I think the new governing body will benefit greatly from OpenGov just as its members did during the election. Moving Toward Better Policy During my time in government, I’ve seen dedicated councilmembers and staff unite to make the community a better place to live and work. A functional council-administration relationship – grounded in trust and mutual respect – can really move the needle on critical policy issues. But, as we’ve seen, building and maintaining these relationships isn’t easy. It requires engagement both during and after the election. This engagement will always depend primarily on people, but OpenGov’s software is proving to be an indispensable ally. With OpenGov, our relationship with elected officials will benefit both sides – and Capitola’s citizens.

generate a report, councilmembers could not receive immediate answers to follow-up questions if we hadn’t already pulled the report – reducing the information available to a debate and eroding trust between the administration and the council. Since we implemented OpenGov, I’ve noticed a concrete improvement in our relationship with the city council. Because of OpenGov’s intuitive interface and visualizations, councilmembers use OpenGov to validate the numbers we give them, answer questions on issues such historical and projected future pension contributions, and inform their policy discussions. And they even use the tool to highlight successes to citizens.



CSMFO 2017 Board of Directors Election Regular government members of CSMFO should have received an electronic email/ ballot during the first week of November, requesting they vote for the incoming President-Elect and a Board member from the North and from the South. Voting is open until 11:59 p.m. on Wednesday, November 30. Please remember to vote!

Meet the Candidates!

President-Elect Brent Mason Finance Director, City of San Bernardino CSMFO has an extraordinary history as the premier organization to provide government finance officers the resources and training needed to effectively serve their agencies. It has been my privilege to be part of that history for 25+ years. It is an even greater honor to be considered to lead this organization and then be able to place my name among the former mentors that have led CSMFO for 60 years! The organization is at an important juncture. We continue to grow and provide more services to our members. Managing that growth consistent with our high expectations is a daunting task and may require doing things differently in future years. Exploring new and better ways to provide services, as well as envisioning “what else” CSMFO may need to become is a key focus of the Board and would be a primary focus of my term as President. Maintaining our focus on developing government finance professionals for the next 60 years will be another key focus if elected President. CSMFO is led through the volunteer efforts of individuals that have a deep appreciation and commitment to the government finance industry. Their motivation comes from their belief that it is worth the time we invest to make our profession better. I have a deep respect


for the effort each makes and will be a voice to share that passion and vision for government finance with upcoming professionals to prepare them to take the torch from us when eventually we leave our distinguished profession. I am honored to be considered for CSMFO President. Given the opportunity to lead our organization, I will work diligently to advance the existing momentum within CSMFO and tackle the challenges we face as a growing organization, always seeking to make the greatest positive impact on our respective agencies.

Margaret Moggia CFO, West Basin Municipal Water District

training opportunities, cross-promote with other organizations, and locate suitable partners that will help us meet the challenges today and into the future. CONNECT: Networking is so important for us finance professionals and we have the Chapter Meetings and Annual Conference that provide us these opportunities. I like us to foster these settings so each member can connect with others to learn and grow professionally. I value the personal and professional relationships that I have and continue to make through CSMFO and am energized by the dedicated individuals who serve the counties, cities and special districts throughout the State. Thank you for your consideration.

Joining CSMFO over 10 years ago, I immediately saw the benefits of this organization. My first engagement was through the Career Development Committee and has evolved to serving in a multitude of capacities as a member of the Communication Task Force, conference presenter, committee member, and serving on the Board. I love being engaged in this professional organization and foster CSMFO’s mission and guiding principles through the Strategic Plan and its three overarching goals of professional development, membership engagement, and organizational sustainability. As President-elect, I intend to focus on three areas: INFORM: Information comes at all directions. I like to see where we can improve on disseminating information and provide a voice for public agency finance professionals throughout the State and to our peers. EDUCATE: CSMFO does a tremendous job offering a variety of courses throughout the year through live training and webinars and at the Annual Conference. I like to continue to develop relationships to deploy more advanced


Board Member – North Jennifer Wakeman Financial Services Manager, City of Lafayette I hope to use my passion for leadership and municipal finance to build a stronger, future CSMFO. I think we often forget that the person next to us at the conference/training, could be our greatest resource for a challenge we are facing. I would like to maximize the leadership, experience, and engagement of our membership in a way that gets practical tips and information to other members when they need it. Some of the ideas around that theme that I have brainstormed with others and have begun to implement at the local level with my cochair include: roundtable meetings where various topics are discussed, “hackathon” type events where many experts contribute support and advice to help a member with a work plan/project, or to somehow identify subject matter experts who can be contacted directly when questions arise. I would also like to explore how to educate people on the rewarding opportunities that can be found in local government service, especially in the area of finance.

Brad Wilkie Management Services Director, City of Lompoc I’ve been in various accounting and finance positions for over 30 years with the last 17 years devoted to municipal government. My Dad was active in community organizations giving back to the community - when I was a kid. I feel it is time I take the experience I’ve gained in government and finance positions and do what my Dad did - give back to the community - the CSMFO community.

Since I was asked to be the Chair for the Central Coast Chapter in 2013, I’ve become active in CSMFO. In participating in chapter meetings, annual conferences, conference planning events, and other CSMFO activities, I’ve become amazed at the commitment of the volunteers and professionals that make CSMFO a leader in governmental finance across the country. The health of CSMFO is measured in the values of its members and the opportunities CSMFO provides - trainings, conferences, programs, resources. The future of CSMFO is in the hands of those we introduce to the governmental finance profession. It is our responsibility to promote CSMFO to the next generation and encourage their active participation in the organization for the benefit of the members. I see a great future for CSMFO!

Board Member – South Scott Catlett Finance Director, City of Yorba Linda Over the 10 years that I have been a member of CSMFO, its conference, educational programs, and awards programs have grown significantly and provided more value to members. As a Board Member, I want to continue to work with the CSMFO leadership to make the services and educational offerings available to our members even more outstanding in the years ahead. That’s why I’m running for the CSMFO Board. This organization has given me a lot, both through training and connecting me with other finance officers, many who are now my friends. The networking and mentorship opportunities that are available in this organization are one of its greatest benefits. One area that I hope to focus on as a Board Member is assisting members, particularly those whose goal it is to be a Finance Director one day, to achieve their career goals. Succession planning

and preparing the next generation for leadership in government finance are critical issues facing many of our agencies today. Thank you for your time.

Steve Heide Finance Manager, Chino Valley Independent Fire District Fellow CSMFO members, we must be highly judicious in deciding which professional organizations to join, where to seek continuing education and professional development, and when and how we network with our peers. CSMFO is at the very top of my list of highly valued professional memberships. Having volunteered in a number of different roles with CSMFO over the past decade, I believe I have a well-rounded perspective on CSMFO’s mission and the needs of our members. In my work with the Membership Committee, our emphasis has been on adding value for you, our members. As Chair of the Inland Empire Chapter, I regularly engage with members at a grass roots level. If elected to your Board of Directors, I intend to maintain a member focused approach in service to municipal finance officers in California. I strongly believe in CSMFO and it is my pleasure to serve the membership. Fellow CSMFO members, respectfully, I thank you in advance for your consideration of my candidacy for a southern Board member position. Should you require any clarification regarding this candidate statement, my qualifications, background or experience, or passion for CSMFO, please don’t hesitate to contact me at: sheide@chofire.org. In service, Steve Heide, CPA


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Membership Has Its Privileges Steve Heide, CSMFO Membership Committee Chair A $110 doesn’t tend to go a long way these days…right? In most cases, sadly not. Maybe a few weeks of the daily routine of a quick stop off for a cup of coffee or a hot tea on the way to the office. Perhaps a no-frills dinner with the family at that new burger joint in town, if you mind the beverage tab. Possibly a day at the local amusement park for one (minus food, drinks and souvenirs, of course).

November signals the official kick-off of our 2017 CSMFO membership renewal campaign. Member dues will remain unchanged from 2016, so for the low, low price of only $110, new and renewing municipal members can access the powerful benefits of CSMFO for 2017. If you’ve not yet renewed your CSMFO membership, please take a few moments and visit the CSMFO website to renew your membership today. Renewing members understand the value proposition of membership in CSMFO. When asked about his views of membership in CSMFO, Marcus Pimentel, Finance Director for the City of Santa Cruz and a CSMFO Board member, stated, “I’m so impressed with the cost-benefit of membership in CSMFO, including the discounted professional training that I and my city’s finance team have access to, and the fact that CSMFO membership offers a supportive community of local government finance folks who are literally an email or a listserv request away.” Among a whole host of benefits, membership in CSMFO entitles members to deeply discounted registration for the 2017 CSMFO Annual Conference in Sacramento. Municipal members save $140 over the non-member conference rate. Additionally, exclusive member benefits include: the membersonly listserv, access to the CSMFO budget and financial reporting awards program, discounts on the everpopular CSMFO job board, the annual membership directory, and much more.

Membership Benefits And did you know that CSMFO membership is open to municipal staff at all organizational levels of cities, special districts and counties? Students, commercial associates and others can join too. So if you’re not yet a member but would like to be, registration is simple and, as you know by now, highly affordable too. CSMFO also offers additional membership discounts to the fourth and successive staff members from the same agency. Visit our website today to unlock the powerful benefits of membership in CSMFO. Member Fee Schedule MUNICIPAL


Open to all public employees and elected or appointed officials presently having responsibility for, oversight of, or engaged in, the function of government finance in any city, special district or county in the State of California.



Open to persons or corporations not currently employed by a government agency whose livelihood is derived principally from commercial or professional activities directly related to government finance.



Open to government employees in the financial field who do not presently qualify for Municipal or Commercial membership but who are interested in the principles and practices of government finance. This may include finance professionals from state agencies, school districts, universities and representatives from other finance professional organizations such as GFOA. Retired: Open to former municipal members who have retired from public service. Student / Professor: Open to persons presently enrolled in or teaching finance, accounting or public administration studies. Honorary: Past presidents who are retired may be granted honorary status. Complimentary: Open to those persons as determined by the board of directors. Temporary: A six month temporary membership may be extended to any municipal member due to the loss of employment at a public agency at the discretion of the board of directors.


Piper Jaffray is committed to California municipal finance

For more information, contact the following representatives from our California public finance team: Mark Adler Managing Director 301 297-6010 mark.j.adler@pjc.com

Katie Koster Managing Director 949 494-6110 katherine.a.koster@pjc.com

Dennis McGuire Managing Director 916 361-6520 dennis.j.mcguire@pjc.com

Russell Reyes Managing Director 310 297-6014 russell.c.reyes@pjc.com

Victor Ume-Ukeje Managing Director 415 616-1662 victor.e.ume-ukeje@pjc.com

California municipal finance banking offices are located in Los Angeles, Orange County, Sacramento and San Francisco

CSMFO MAGAZINE NOVEMBER 2016 Since 1895. Member SIPC and NYSE. Š 2016 Piper Jaffray & Co. 1/16 CM-16-0064


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Meeting Your Continuing Disclosure Obligations: Developing the Right Policies

Mark B. Campbell, Executive Director, California Debt and Investment Advisory Commission


When we look at the major Security and Exchange Commission’s (SEC) enforcement steps concerning continuing disclosure and secondary market disclosure, much of the SEC’s perception of the problem leading to the disclosure failures centered on the lack of written continuing disclosure policies and procedures. Much of the SEC’s attempted solution to that problem was for the issuer to implement written continuing disclosure policies and procedures. As discussed below, what is meant by this is not some general policy that discusses the value of continuing disclosures but concrete procedures that fit an issuer’s organization such that it can know that it will timely file continuing disclosure reports. In the Security and Exchange Commission’s (SEC) 2013 action against West Clark Community Schools, the SEC found that the issuer had falsely stated in a 2007 Official Statement that it had complied with annual financial disclosure filings from CSMFO MAGAZINE NOVEMBER 2016

earlier transactions. However, West Clark had not submitted any of the required annual reports or notices for a 2005 bond offering and did not conduct adequate due diligence to detect the false statement in the course of the 2007 offering. The SEC made clear what it believed to be at the heart of the problem when it required, as a part of the settlement order, West Clark to adopt written policies for its continuing disclosure obligations and the designation of an individual responsible for ensuring compliance with those obligations. The school district also has implemented annual training for personnel involved in the bond offering and disclosure process. The SEC also took action against the City of Harrisburg, Pennsylvania and the Kings Canyon Joint Unified School District in California for their failure to meet their continuing disclosure obligations. The SEC settled with the City of Harrisburg in 2013, finding that City officials had made misleading statements and omissions

about the City’s budget problems in public statements and had not filed its annual financial reports. With respect to Kings Canyon, the SEC found that the district had represented to investors in a 2010 bond offering that it was in compliance with all of its prior disclosure obligations. In fact, the district had failed to provide investors certain information during a two-year period from 2008 to 2010. The SEC identified the importance of continuing disclosure policies in both actions. In the Harrisburg action, the SEC took the extraordinary measure of issuing a special investigation report that emphasized the importance of issuers maintaining continuing disclosure policies and procedures. Also, in both of the settlement orders with the SEC, the issuers committed to developing policies and procedures and providing staff specific training. There is reason to argue that the West Clark action precipitated the SEC’s Municipal Continuing Disclosure


Cooperative (MCDC) Initiative, but the MCDC Initiative followed repeated statements by the SEC recognizing problems in municipal disclosures, particularly in failures by issuers to meet their continuing disclosure obligations. It is no accident that, aside from remediating past compliance failures, the one major undertaking to which issuers must agree in any MCDC settlement order is to implement disclosure policies and procedures. These actions by the SEC should lead issuers to one simple conclusion: Issuers must develop sound continuing disclosure policies that incorporate concrete procedures to ensure effective compliance with continuing disclosure obligations.

Developing Procedures—A PostIssuance Compliance System Rule 15c2-12 of the Securities Exchange Act of 1934 indirectly regulates municipal securities offerings by directly regulating underwriters who bid for, purchase, or sell municipal securities. The Rule requires underwriters to reasonably ascertain that the issuer, in a written agreement, has committed to provide the Municipal Securities Rulemaking Board with certain continuing disclosures. These include financial reports and notice of specific material events, such as a defaults, draws on reserve funds, or a change in credit rating.

Concrete procedures need to take The Government Finance Officers into consideration the challenges Association (GFOA) got out in front of that issuers face in timely filing the MCDC Initiative continuing disclosure with its publication, reports. These include Issuers must Understanding Your staff turnover, the Continuing Disclosure develop sound disaggregation of key Responsibilities. In information throughout continuing this best practice organization, and disclosure policies the guide, GFOA a lack of understanding makes reference to by local issuers’ of their that incorporate the administration obligations. concrete procedures disclosure of the continuing Good procedures will disclosure policies to ensure effective accurately evaluate and procedures in these challenges and compliance its final comments: assist the issuer in “Upon implementation with continuing developing a strategy to of a formal set counter them. disclosure of continuing Common sources of disclosure policies obligations. information subject to and procedures, continuing disclosure issuers should also reporting often reside in different take steps to ensure standards are units or divisions within the agency. being diligently followed. Continuing Information concerning the issuance of disclosure policies and practices debt, includes: should be periodically reviewed to ensure consistency with market and • Finance Department—debt regulatory expectations“. issuance, investment of proceeds, expenditure of proceeds; This article defers to the excellent resources available to issuers in • Public Works Department— developing disclosure policies and expenditure of proceeds, facilities procedures and focuses instead on use, private-use restrictions; some of the considerations issuers • Facilities Planning—cash flow should give to ensuring that the including receipt of proceeds procedures incorporated into policies of bond sale and investments, achieve the goals of those policies compliance with tax certifications; with respect to their continuing disclosures.

• Executive Office—establishing and maintaining disclosure policies, administering contracts and facility use agreements, coordinating filings on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (EMMA) site; and, • Legal Office—developing continuing disclosure agreements. How the information comes together and is managed in a way that produces consistent and accurate disclosures will differ between agencies. Some are better at it than others. Let’s call it a post-issuance compliance system. Elements of a post-issuance compliance system may include: • Checklists of reportable items; • Warehouse of source documents; • Database of material event notices, including baseline data, tracking services, required disclosure actions; • List of responsible individuals; • Calendar of disclosure filings; and, • Database of compliance, i.e. a recording of the date, content, and action taken for each disclosure made. Atop this set of structural elements, issuers should create procedures for tracking and reporting material events, and identifying and reporting on other required disclosures such as financial reports. And, of course, procedures to manage the process, including review and approval of disclosures and reviews to determine that disclosures were made as required. Some of these procedures may include: • Procedures for submitting materials to EMMA; • Compliance review procedures to verify submissions to EMMA; • Routing and approval procedures for reports and material event notices; and, • Procedures to maintain calendars, lists of responsible individuals, reportable items, and other source materials.


Some of the items that an issuer commits to disclose after the sale of the debt include information that is available at a specified time. Other disclosable events may occur unexpectedly and irregularly. Issuers must develop practices that enable it to both recognize when a disclosable event has occurred and what actions to take when it does.

• They APPOINT a quarterback who is responsible for making sure the issuer timely files all reports. • They KNOW the Who, What, When, Where of their disclosure requirements. • They COMMUNICATE across roles and responsibilities for timely and complete disclosure.

• They regularly TRAIN staff on the Disclosable events that an agency may agency’s disclosure policies. be able to anticipate include annual financial reports, What do issuers risk if annual audit findings, ...good policies they do not make timely financial projections, and administrative and complete disclosures and revenue after they issue debt? practices can help MCDC should tell you all collections. Disclosable events that avoid problems you need to know. Issuers risk having to respond to the agency may not from occurring in a costly investigation by be able to anticipate the SEC. Their reputation include the material the first place. and, by effect, their event notices required ratings and market under Rule 15c2-12, public statements access may suffer. As in the cases by officials, litigation, or audits. cited above, the issuer may, upon Issuers may create calendars that settling with the SEC, be required to provide reminders to disclose develop new policies and be subject information that conforms to a regular to oversight. Finally, the agency or its schedule—annual financial reports, for officials may be fined. example. The problem is developing In contrast, how do disclosure policies a process that catches everything and an effective administrative system else. There are two ways issuers to carry out the policies benefit generally address this challenge. issuers? First, the issuer not only meets The first is to centralize responsibility its legal obligations, but in providing for monitoring disclosable events good disclosure it may result in a within one organizational unit—the lower cost of funds. Second, good finance department, for example. policies and administrative practices Alternatively, the issuer may distribute can help avoid problems from responsibility to those units or occurring in the first place. And, individuals most able to detect and finally, they can provide a defense respond to reportable events. Each against SEC action or they may soften offers benefits and risks. the SEC’s response to infractions Practicing Good Secondary Market as the SEC considers their cause of Disclosure action or the remedy. Developing procedures to ensure secondary disclosures are made in a timely and complete fashion is challenging. Agencies differ in size, capacity, and resources. These traits favor no particular agency over another. What’s the secret sauce, then? Issuers that have developed and maintain effective procedures for meeting their continuing disclosure obligations demonstrate four characteristics.



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Greg Clumpner/Director, Utility Rate Practice Group, NBS




In the vast majority of cases, important water rate policy issues are never really discussed until the Proposition 218 hearing, which is undoubtedly the worst time to have that discussion. If the rate adoption process is going to blow up, that’s when it will happen. Discussing and adopting well-vetted and well-understood rate-related policies beforehand can reduce the heated battles and tone down the rate-payer venom by settling some key questions, such as: (1) Are we willing to minimize rate increases at the expense of adequately funding capital replacement costs? (2) How do we make trade-offs between revenue stability vs. water conservation? or (3) Are we accumulating sufficient reserves to position ourselves to issue new debt? This paper discusses practical measures to consider prior to the heated debates about rate increases. WHY ARE POLICIES IMPORTANT? It is difficult to objectively examine and evaluate important policies in the midst of a heated Prop 218 hearing,


when the over-riding concern is the size of the rate increase. At that point, most of the audience, as well as elected officials, cannot focus on anything else. But broader, and maybe more important, issues get lost in the face of strong public opposition to rate increases. Is anyone asking what the guiding policies are that contributed to the increases? Carefully constructed policies that establish a rationale and a consistent approach to the financial health of the agency, be it a city, special district, or county, should be key factors in rate design, level of rate increases, and longer-term financial goals – but they rarely are. Identifying potentially contentious rate concerns well ahead of the rate study is just common sense. What are some key policies to consider? How about these as policy statements: • Our agency will establish predictable and cost-based rates to the extent practical.

• Rates will reflect a balance between debt funding vs. pay-asyou-go in a manner that minimizes rate increases. • Rates will meet the “fair and equitable” requirements of Prop 218 – based on advice of our attorney. • Rates will not differentiate costs by area or within a customer class. • Rates will collect fixed costs from fixed charges and variable costs from volumetric rates – to the extent practical and without unduly impacting low income customers. • Rates will fully fund costs related to compliance with regulatory mandates. • Rates will fund at least a minimum level of system maintenance – as defined by our engineering staff.

• Rates will be set to promote efficient and wise use of a limited resource (i.e., water). CSMFO.ORG

WHAT’S THE STRATEGY FOR USING POLICIES AS PART OF THE RATE SETTING PROCESS? Raising rates on customers will always meet some level of rate-payer hostilities. So resolving or at least openly discussing specific criteria for raising rates in a rational and calm setting prior to rate adoption can minimize the surprise, anger, and pressure from customers. For example: • Do our rates allow for timely replacement of system assets, or do they by default follow a “wait until it breaks to fix it” mentality? • Should we minimize rate increases for capital improvements by issuing more debt? • Should our rates reflect actual costs of service that vary significantly within the service area due to elevation differences and related pumping costs? • Should older sections of the service area, which require higher levels of maintenance and repair, be considered in rates or not? • Should the costs of expensive storage facilities be solely allocated to customers with high summertime peaking requirements? There are pros and cons to each of these policy questions. Costs, and often the winners and losers in terms of rate impacts, can be evaluated and contribute to a rational decision by elected officials… if that discussion takes place before voting on rate increases. Building a defensible basis for rate increases is always more effective earlier in the process. A proactive, forward-thinking process should incorporate a review and discussion of key rate-related policies first, followed by a financial analysis and development of rate design alternatives. Why is it an extremely rare case to see that process included in a rate-study RFP (Request for Proposals)? One answer might be wishful thinking – we hope it’s an easy rate adoption process, even though we’re not even sure yet how big the rate increases are going to be. Another might just be poor planning – we didn’t think that far ahead, and there’s always time to discuss those problems during the study, right?

Bottom line is we should try to be proactive and thoughtful so that we can minimize controversies at the most critical point in the process (that would be the night that elected officials vote to adopt or reject rate increases). General Concepts Here are some general concepts to consider as you are planning your next water rate study: • Ask yourself what the key objectives of the study are and whether you have established policies related to the rate issues that will likely come up during the study. • Lay out a timeline and process that allows for a discussion (and ideally a confirmation and/ or adoption) of the rate-related policies. • Include a discussion of the pros and cons of each policy so that decision makers can develop an informed opinion when considering adopting each policy. • Formalize the policies by adopting them after discussion at a public meeting (this allows you to tell rate payers that they were openly discussed and adopted with the intent that they would guide the rate-setting process). • During development and discussions of rate alternatives, provide references to specific policies as justification for things like rate design alternatives, level of capital expenditures, new debt issuances, etc. “Providing Advanced Warning” The last thing you want happening during the rate adoption process is for the elected officials to say something like “Why is this the first time I’m seeing these rate increases?” The best approach is to thoroughly vet the alternatives and the levels of rate increases with decision-makers in one or more study sessions or hearings so that they are on-board prior to the final public hearing. This is typically the role of a City Manager or General Manager – you are the liaison with your elected officials.

WHAT POLICIES SHOULD I CONSIDER ADOPTING? A number of policy topics are noted above. Basically, these policies should demonstrate that you understand what it takes to create and maintain a well-run and professionally managed utility. They are the fundamental guidelines that should be used during the rate-setting process, and should be available to rate payers so that they understand the rationale for the financial decisions your agency will be making. Keep in mind that we are in a period when more water agencies are seeing larger rate increases than ever before: • Free grant money to build infrastructure is no longer available as it was 50 years ago. • System assets are, unfortunately, approaching the peak of the replacement cycle as assets are aging out; not replacing worn out pipes and tanks not only risks system failures, but can create huge financial liabilities as well as public perception nightmares. • Generally poor economic conditions, which are likely to continue for the foreseeable future, create an even more difficult environment for passing rate increases. • Rate-related policies can play a significant role in minimizing resistance to higher rates. When your agency creates water rate policies, ensure that there is “full disclosure” of both the positive and negative aspects of rate-related policies.


Building Sustainability in Public Finance

Kenneth H. Pun, CPA, CGMA, The Pun Group, LLP, a Certified Public Accounting Firm



Four years after the recession, four During an economic downturn, a municipal governments (Jefferson series of actions - including but County, and the cities of Stockton, San not limited to, housing and stock Bernardino, and Detroit) have filed for market weakness, unemployment Chapter 9 bankruptcy. All were forced rate increases, and declines in Gross to seek protections from creditors Domestic Product (GDP) -- create due to their financial insolvency, a triggering effect on government while developing and negotiating revenues. In combination, they plans for adjusting weaken the local economy debt or obligations. and the tax base on which Goals The consequences, as the public sector relies to serve as the we’ve witnessed, can be fund programs and services. severe. These financial struggles


Since the Great not simply a result of framework for were Depression in 1929, revenue shortfalls caused the U.S. has entered by the crushing recession good fiscal a recession roughly or Sacramento’s raid on policy. every four to six years. redevelopment funds. In These downturns don’t each case, costs to operate necessarily follow a fixed schedule, government escalated dramatically. but the frequency of occurrence Among the drivers: pension and suggests a certain predictability – if healthcare costs for retirees, lucrative not inevitability – about them.. In labor agreements, and big spending fact, since the Great Recession hit on public works infrastructure. It in late-2007, and the extended bull was a perfect storm - a deteriorating market investors have since enjoyed, economic environment coupled with one could argue that another cooling gross financial mismanagement and period is not far off in the future. negligence by stakeholders that ultimately manifested itself in the form of too much debt.

The Importance of Developing Fiscal Policy Government depends on its fiduciary to ensure that operations are sustainable and a good control environment is established. With those requirements comes a welldefined series of objectives, including the need to develop standards, processes, and structure; to promote high integrity; and to retain competent employees for its mission. Goals serve as the architectural framework for good fiscal policy. Once in place, they effectively represent the form used by government to accomplish its mission. They serve as guideposts for developing the specific administrative and council policies that enable government to effectively function I’ve had the privilege of multiple speaking engagements at workshops and panel discussions with Michael Busch, CEO of municipal advisory and management consulting firm Urban Futures, Inc. We spend a lot


of time talking about the hallmarks of good fiscal policy. The following are some of the best practices that we encourage cities and public agencies to adopt in order to put them on a sure-footed path to sustainability. Operational Efficiencies To implement internal operating efficiencies wherever possible. To utilize private contractors when the same or higher level of service can be obtained at lower total cost. To staff each department according to adopted service levels, and to utilize consultants and temporary help instead of hiring staff for special projects or peak workload periods. To develop agreements with the other public agencies, including the school district to combine certain operations and provide program assistance where appropriate. To enter into joint operating arrangements with other agencies so as to provide services more cost effectively. Voter Approved Revenues


Fiscal Management

To provide sufficient routine maintenance each year to avoid a deferred maintenance backlog.

To maximize revenues by utilizing grants from other agencies to the fullest extent possible.

Employee Development

To charge fees for services that reflect the true cost of providing such services and to review fee schedules on a regular basis.

To attract and retain competent employees by providing a professional work environment, safe working conditions, adequate training opportunities, and competitive salaries as finances may allow. Economic Development To aggressively pursue new developments and businesses that add to the City’s economic base, particularly those that generate sales tax and property tax revenue. To promote a mix of businesses that contributes to a balanced community. To develop programs to enhance and retain existing business. New Services

To add new services only when To utilize revenues derived from voter a need has been identified and approved measures such as a Utility a funding source Users Tax (UUT) and developed. a potential Sales To provide Tax increase to fund To allocate CDBG programs and services sufficient routine funds and other important to the discretionary grants maintenance community. to programs with the each year to greatest benefit to the To establish appropriate rates avoid a deferred community. and assessments to maintenance best manage and Construction of operate enterprise backlog. New Facilities operations and capital To plan for new maintenance needs. facilities only if construction and maintenance costs will not Reserves adversely impact the operating budget. To set a goal equal to 25% of the General Fund operating expenses in a reserve account by annually committing the funds necessary to achieve this objective.

To fully account for the cost of enterprise operations to avoid any subsidy by the General Fund, and to charge Enterprise Funds their fair share of the cost of City support services. To maintain accurate accounting records to keep the city manager and council informed of the City’s financial condition at all times. To prepare and maintain a rolling 5-year financial forecast for all major funds including: General Fund, Enterprise Funds and Recreation. Take away A comprehensive fiscal policy serves as the blueprint to build financial stability – and sustainability. Once adopted and utilized, it becomes an essential strategic planning tool to ensure the City is financially able to meet its immediate and long-term needs. There’s one other major benefit to establishing the plan – one you won’t find on a balance sheet: stronger relationships between the stakeholders involved. As anyone who works in public finance can attest, that equity can be invaluable when it comes to good governance.




2017 Host Committee Running Diary Drew Corbett, CSMFO President-Elect As President-Elect and Host Committee Chair Drew Corbett works on preparations for the 2017 Annual Conference in Sacramento, he thought it would be fun to give the membership a glimpse into the process of putting the conference together. Each month, Drew will provide a running commentary on some of the work that goes into conference preparations. September 20, 2016: Well, David and Melissa finished the conference promotional video, which included the “Why I Love CSMFO” contest, late today. I definitely came away impressed with how it came out, despite my best efforts otherwise. A couple of folks that saw it right after its release described it the same way…professional. And those were my sentiments exactly. It was a great representation of our organization and a fun change of pace to how we have traditionally announced the opening of registration. September 28-30, 2016: I spent these three days in Sacramento on CSMFO business. I arrived on Wednesday morning to re-shoot my 60th anniversary video because there were issues with the audio on the first version. Having to shoot the video again, however, allowed for President John Adams and me to do a joint interview, which turned out to be a lot of fun. I can’t wait to see the final product, which will be shown to the membership at the opening general session of the conference. On Wednesday afternoon, we had our Board of Directors meeting at the Hyatt Regency Sacramento, which is the conference host hotel. We had a long agenda for this meeting, including the request for the Board’s approval of the conference budget. As I mentioned in my last diary, the budget called for a deficit of approximately $25,000, which is primarily the result of some special expenses related to our 60th anniversary. The Board approved the budget and was very supportive of making sure the Host Committee has what it needs to put on a great conference in 2017.

DREW CORBETT Thursday morning we got going early for our day-and-a-half strategic planning session. CSMFO does a three-year strategic plan, and this year’s session was to set our strategic direction for the next three years. To facilitate our session, we brought in CSMFO-favorite Neil Kupchin. Neil did a great job pushing us through an aggressive agenda that resulted in a re-written mission statement and organizational vision, as well as a comprehensive three-year strategic plan for the organization. Next steps are to identify which priority goals will be assigned to which standing committees. We’ll feature the highlights of the strategic plan in an upcoming edition of the CSMFO Magazine. In between our Thursday and Friday strategic planning sessions, we did a little team building. Melissa arranged for us to go to Escape Sacramento for the event. When we got there, we split up into teams and went about our task of trying to solve the problems and puzzles presented to us that would allow us to “escape” from the room in which we were locked. To add to the competitive element, we were able to divide the attendees up into teams representing CSMFO presidents/past presidents, Board members, committee officers/League committee representatives, and chapter chairs. With the staff at Escape Sacramento indicating there was only an 18% success rate at the game, the 4 CSMFO teams set out to see which amongst us could work together the best to escape. As you may have figured given the composition of our membership,

CSMFO managed a 50% success rate, with the Board team and the chapter chair team (which included our Executive Director Melissa Dixon) both successful in their effort to escape. My team, the team comprised of our organization’s presidents, did not escape, but we did have a great time working through the escape room as a team trying to do so. Everyone had a lot of fun, and it was a great exercise in communicating as a team to solve problems. After the event, we had a group dinner at Cafeteria 15L, which is the location of our second Thursday night event (more details on that in a future entry). We wrapped up strategic planning around noon on Friday, and as we bid farewell to the Board members, committee officers, and chapter chairs who were able to attend the session, we welcomed in the Host Committee for an in-person meeting, which included a tasting of meal options for conference lunches. We spent the afternoon on Friday continuing to put together the details of the conference, and things are really coming together. We’ve started to finalize a number of things related to the President’s Dinner and have made a ton of progress on the Thursday night event. We also spent time discussing conference session programming, the opening of registration, and the use of technology at the conference. On this last issue, we continue to search for ways to improve upon the use of the mobile application to make the conference easier to navigate for attendees. One of the improvements we are working on for 2017 is to allow for attendees to rate sessions using the mobile application during the conference, as opposed to having the sessions rated during the post-conference survey. October 3, 2016: Conference registration opened as expected! Melissa texted me at the end of the day that we already had 50 people registered for the conference on day one. October 7, 2016: Another series of texts with Melissa indicated that we had nearly 150 total conference registrations in the first week of registration opening. This is great news and an outstanding start to the early registration period.


October 12, 2016: Drafted the agenda for the October Host Committee meeting, which will be a conference call, and distributed it to Melissa, Janet, Teri, and Marisa for review and comment. Those four are crucial to helping me get the agenda set with all of the items that the committee needs to discuss, ensuring that nothing gets missed. We’ll finalize the agenda by the end of the week and get it distributed to the Host Committee a few days in advance of the meeting. October 18, 2016: We didn’t have an overwhelming number of submissions to the “Why I Love CSMFO” video contest, but that’s okay. The small number we received were very compelling and underscored why our organization is so great. Congratulations to Matt Michaelis, Finance Director from the City of Gridley, who was our winner. I look forward to having Matt join us at the President’s Dinner. October 19, 2016: Held our October Host Committee meeting today and, as usual, it was a productive discussion. We covered the usual topics and de-briefed on conference registrations so far, which have exceeded 200 after only two weeks of registration being open. We’re off to a great start! Because we are so far along in the planning process, and more importantly, because the committee members have been so great about getting a lot of work done offline in between meetings, we actually only needed about an hour to cover the entire agenda. And with the details on the Thursday night event coming together nicely, I will dedicate a portion of my next diary submission to providing some information about that event. We’re less than 4 months away!



CAREERS JOB OPPORTUNITIES Management Aide - Finance, City of Rancho Cucamonga Salary Range: $22.73 - $29.16 per hour Application Deadline: OUF

Supervisor of Accounting Services, Oakdale Salary Range: $5,126.73 - $5,909.99 Application Deadline: Friday, December 2, 2016 at 5:00 PM

Deputy City Manager/Internal Services Director, Avery Associates Salary Range: Open, DOQ Application Deadline: 28-Nov-16

City Controller (CFO), City of Compton Salary Range: $126,960-$148,876, SALARY IS UNDER REVIEW Application Deadline: 12.23/2016

Director or Finance, Rosemead Salary Range: $9,631 - $13,291 Application Deadline: 5-Dec-16

Buyer, City of Torrance Salary Range: $5,096.00 - $6,829.33 Monthly Application Deadline: Thursday, November 10, 2016 at 5:30 p.m.

Audit Manager, Southern California Regional Rail Authority Salary Range: $91,866.00 - $143,541.00 Application Deadline: Deputy Finance Director, Belmont Salary Range: $114,243 - $145,799 effective January 2017 Application Deadline: 6-Jan-17 Senior Accountant, Rancho Cucamonga Salary Range: $5,261 - $7,059 per month Application Deadline: Open until filled. First review is November 23, 2016 Vice President, Finance/Chief Financial Officer, Sacramento Regional Transit District Salary Range: $139,356 - $186,744 annually Application Deadline: Wednesday, December 14, 2016 Deputy Administrative Services Director, Monrovia Salary Range: $112,142 - $150,282 Application Deadline: 28-Nov-16 Director of Treasury Services, San Francisco (City and County) Salary Range: The normal annual salary range is $113,672 -$145,106. A sp Application Deadline: 11/28/2016 17:00 Assistant Director of Finance, Azusa Salary Range: $6,677.73 - $8,144.32 Monthly Application Deadline: 12/1/2016 17:30 Financial Analyst or Senior Financial Analyst, Santa Clarita Salary Range: $5,951 - $7,234/month or $6,733 - $8,185/month Application Deadline: November 21, 2016 at 12:00pm (noon) Director or Finance, Bob Murray & Associates Salary Range: Up to $178,139 annually, DOQ Application Deadline: 27-Nov-16

Senior Accountant (2 Positions), City of Monterey Salary Range: $87,696.00 - $106,488.00 Annually Application Deadline: 11/28/16 at 11:59 p.m. Accounting Technician, Portola Salary Range: Annual $38,040-$49,376, plus generous benefits Application Deadline: 2-Dec-16 Administrative Services Director, City of Dinuba Salary Range: $8,556 - $10,400 Application Deadline: 19-Dec-16 Chief Auditor, Sacramento Regional Transit District Salary Range: $119,268 - $166,980 annually (Plus Excellent Benefits) Application Deadline: 30-Nov-16 Accountant, Ventura Regional Sanitation District Salary Range: $73,590.40 - $89,793.60 Annually Application Deadline: 30-Nov-16 Payroll Technician, Belmont Salary Range: $60,178 - $82,148 annually Application Deadline: Open Until Filled Finance Director, City of Huntington Park Salary Range: $126,732 to $155,592, DOQ Application Deadline: Monday, November 28, 2016

CONTROLLER, LAGUNA WOODS VILLAGE, Roberts Consulting Group Inc Salary Range: Open DOQ Application Deadline: Immediately - Open Until Filled County Administrative Officer, County of Calaveras Salary Range: $179,192 Application Deadline: Wednesday, November 30, 2016 Director of Financial Services, Prothman Company Salary Range: $117,645 - $143,339 Application Deadline: First review: November 20, 2016 (open until filled) Director, Revenue and Tax, County of Santa Clara Salary Range: $148,971.68 - $191,164.22 Annually DOE Application Deadline: Continuous Supervising Customer Service Representative, Lodi Salary Range: $3603 - $4379 per month Application Deadline: 11/20/2016 Deputy Controller, Central Coast Water Authority Salary Range: $88,262 to $107,680 annually D.O.Q. Application Deadline: 18-Nov-16

Payroll Specialist, San Diego Association of Governments Salary Range: $30,641 to $59,637 Application Deadline: 18-Nov-16 Chief Fiscal Officer, El Dorado County Salary Range: 47.36 - 57.57 Application Deadline: 11/24/2016 Senior Accountant, Lomita Salary Range: $6,046 - $7,488 Application Deadline: 8-Dec-16





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