[MissoulaGov] On SIDs

[Jed Taylor]

As a follow-up, here's a scenario.  You and I live on a cul-de-sac, behind
which is undeveloped city property.  We're the only two landowners around.
My lot is 9,000 sf and yours is 1,000.  I propose that the city build the Ed
Childers Memorial Park.  Because we're clairvoyant, we know when it's all
said and done, this park will cost $10k.  The city says that as much as
they'd like nothing more than to build a park on this land in your honor,
there's no money in the budget to do so.  It will, however, agree to the
creation of SID to be comprised of mine and your property as long as the SID
pays all costs.
 
1)  You object to the creation of this SID.
        a.  Too bad.  The size of your lot means you only have a 10% say,
and you need 40% to block it.
        b.  You're one of two property owners, and your 50% is enough to
block it.
 
2)  The park has been built and now it's time to pay up.  I'm going to use
the park every day.  You're never going to set foot in it.
        a.  My share is $9,000 and yours is $1,000.
        b.  We both owe $5,000.
        c.  I owe the entire $10k and you don't owe a thing.
 
 

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From: missoulagov-bounces at cmslists.com
[mailto:missoulagov-bounces at cmslists.com] On Behalf Of Ed Childers
Sent: Sunday, February 15, 2009 16:15
To: Jed Taylor
Cc: MissoulaGov
Subject: Re: [MissoulaGov] On SIDs


Hi, Jed. You've been writing a lot, you deserve a response.
Here's some more to think about. Numbers refer to numbers below.
1. "tax" vs "fee." You need to explain how you would structure both the tax
and the fee (and are you using "tax" as a synonym for Special Improvement
District?) to make them equal. I don't know of a scenario in which they
would be equal, or why they'd need to be.
2. a) "get around state law?" b) "using the SID... to accomplish" etc.
Would you mind explaining how using SIDs gets around state law? And SIDs
have been used by cities and counties for, well, at least 50 years and
doubtless many more.
3. Jed, once again you need to explain how using SIDs, which are explicitly
allowed by state law, would be used "to accomplish things the state law
currently prevents."
4. It costs money to borrow money. I've never worked in a bank, but as I
understand it banks charge money when you borrow money from them. I'd be
glad to hear of a way to get around paying interest and fees to borrow
money, whether from taxpayers or from bankers.
5. "state law forces the city to use sids?" Nope. See above.
For what it's worth, I think the cost to individual property owners paying
for Pineview Park was: not much (in the neighborhood of a dime a day).






Ed Childers
Jed Taylor wrote: 

1.


What's the difference between a tax and a fee in this case?  If you live in
a taxing district, whether it's the City of Missoula or a SID, you're making
a payment to government solely on the basis of owning property.
 

2.


Perhaps the state law needs to be changed.  Under the current system, the
city prepares its budget by accounting for things like COLA payroll
increases, rising health care insurance, more expensive fuel, etc., and then
finds that it's hamstrung in collecting enough money to simply maintain
current operations, let alone undertake new projects like rebuilding a park.
So, in order to get around the state law, it begins using the SID mechanism
to accomplish what it can't do in an efficient and straightforward manner.
 

3.


To be sure, I see two advantages to using SIDs.  One, it allows subsets of
the city to have higher tax rates to accomplish things the state law
currently prevents (assuming other programs aren't cut), and as has been
pointed out, this subset can equal the city itself.  Two, since 40% of a SID
can block the SID, it requires more support than a simple majority, thus
implying only projects with substantial support are funded by the mechanism.
 

4.


OTOH, as demonstrated by the park rebuild financing and administrative
costs, a SID creates another layer of bureaucracy and expense.  Wouldn't
taxpayers get more bang for their buck under a system in which the budget is
set and then the taxes required to pay for it are collected, and that's it?
 

5.


One other thing.  It seems to me that there's nothing preventing the Council
from saying going forward that while state law forces the City to use SIDs
to raise additional revenue, only city-wide SIDs will be used.  Thus, the
park still gets rebuilt, but the entire city pays for what is an entire city
asset.  Perhaps that would permit the SID to piggyback on the standard
property tax system instead of having to create an additional one for the
SID.  Yes, I realize that in this example of the park rebuild, the city
would be taxing everyone $5 instead of 1,000 people $750, but if this
approach was used, and you didn't want to separately bill such a small
amount, a city-wide SID could cover a bundle of projects spread across the
city, thus combining financial efficiency with broadly based political
support.
 
 

  _____  

From: missoulagov-bounces at cmslists.com
[mailto:missoulagov-bounces at cmslists.com] On Behalf Of Jim McGrath
Sent: Sunday, February 15, 2009 10:21
To: Jed Taylor; missoulagov at cmslists.com
Subject: Re: [MissoulaGov] On SIDs



In order for the citizens of Missoula to raise their own taxes -assuming we
agree to that-state law would need to be changed. The city has extremely
limited taxing authority. Hence the shift to fees by municipalities across
the state.




  _____  


From: missoulagov-bounces at cmslists.com
[mailto:missoulagov-bounces at cmslists.com] On Behalf Of Jed Taylor
Sent: Sunday, February 15, 2009 1:57 AM
To: missoulagov at cmslists.com
Subject: [MissoulaGov] On SIDs



Reading the discussion on SIDs has been interesting.  Here are some thoughts
I have on them.



SIDs seem to really go to the question of what is the City of Missoula.  If
the city is a single entity in which its residents share the expense of its
maintenance and improvement regardless of any individual neighborhood's
relative ability to contribute to the pot, and maintenance and improvement
is provided on the basis of need regardless of that same relative ability,
then SIDs in general seem to be about the last way projects should be paid
for.  People get the city they're willing to pay for, and it's up to those
who feel more money is needed to convince a majority that taxes need to be
raised, not necessarily so their own street is nicer, but so the city in
general is.



OTOH, if Missoula is really a confederation of neighborhoods where basic
services such as the police are paid for based on a city-wide basis, but
more localized projects such as rebuilding a park or putting in street
lights are undertaken only when enough residents of a neighborhood can force
everyone in that neighborhood to participate in a SID, then SIDs seem a
perfectly rational way of financing things.  It's not the model I prefer,
because it seems that this would tend to Balkanize the city, but it would
have the benefit of keeping the fundamental tax rate lower than the
alternative and letting specific areas decide what they want and what they
can live without (although living without is often not much of a choice, but
rather a necessity).



In either case, I do think it would be a good thing strategically for the
council to state which model they think is appropriate so Missoula residents
know where its government is coming from and so individual project decisions
don't seem ad hoc.



There's never going to be a perfect time or method to transition from SIDs
to city-wide funding.  Anyone who's already participated in a SID has
already decided how they're going to pay for it, even if they haven't cut
the check yet.  Should the council decide to stop using 'mandatory' SIDs (as
opposed to using the mechanism to help a group voluntarily donate something
like a park rebuild to the city), I would suggest that the council should
adopt a 'that-was-then, this-is-now' approach, declare a new strategic
vision, and say something along the lines of, "Starting in 2010, we 're one
city and everyone in the city is going to help each other pay for what's
needed.  Therefore, we're no longer going to use mandatory SIDs as a way of
paying for projects."



Concerning sidewalks, it seems that the city could make them the
responsibility of each property owner to maintain his to a minimum standard,
much as it does requiring a property owner to keep his sidewalk clear of
snow and ice.  If a property owner wants to tear his up once a year and lay
a new one down, let him.  If his sidewalk falls below minimum standards,
order it repaired or have the city do it and bill him.  And if he doesn't
have a sidewalk, then the city pays for putting one in and he enjoys the
increase in property value while also acquiring the responsibility to
maintain it.



Regarding letting a property owner defer his SID payment until the sale of
his property, is the city charging interest on what amounts to a loan?  What
happens if there isn't enough money from the proceeds of the sale to pay
what he owes?



The cost of financing of the recent park rebuild SID seems to point to
marked benefits that could be made available to city residents if the city
created something along the lines of a municipal credit union to help them
finance local governmentally imposed financial obligations.  From what I
heard from the committee meeting during which the financing of this park
rebuild was discussed, only ~$250k of the cost is going to outside
contractors, who obviously won't want to wait to get paid.  Another ~$250k
is actually budgeted items being provided by the city, such as the use of a
dump truck, that are being billed to the SID as if the SID is renting them
from the city (and that's as it should be given the financial design of this
project).  Surely, the city doesn't need to paid right away for these items
- it's paying for the dump truck regardless.  Therefore, this project is
incurring ~$65k of legal and underwriting fees to produce ~$250k of revenue
that's needed decently soon.  Maybe this is indeed the absolutely only way
to finance this project, and maybe the SID members find this ratio of fees
to revenue acceptable in order to get the park rebuilt, but these kind of
numbers suggest that there's a very strong need to put in place a program
for the future that makes it possible to cover the cash flow before SID
income is available without spending money on lawyers and underwriters.



BTW - am I correct in assuming that the members of this SID are, in effect,
donating this park rebuild to the city?



Finally, because parks are really something for everyone, both within and
without the city, to enjoy, and because there's quite a business function
aspect to running the park system, it seems to me that a separate Missoula
Park District would be something well worth consideration.  This District
could be, by design, larger than the city itself, and since it would be a
separate taxing district, people could more readily determine how much
they're will to pay for their Park District and whether they're getting what
they're paying for.










  _____  


"Be the change you want to see in the world." - Mahatma Gandhi 



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