Kevin Standlee (kevin_standlee) wrote,
Kevin Standlee

Small Town Politics

Last night I watched a rather contentious city council meeting of the City of Fernley over the internet. The subject was what to do about the bond debt on the water treatment plant. Although I'm not a legal resident of the city (or of Nevada), I do after all own a house there and pay the water/sewer bill, so I think I have a stake in this.

Based on the (biased) opinions of the people at the meeting, the story appears to be thus: A few years ago, when the boom was running hot, Fernley was a newly-incorporated city flush with ideas of Big Growth, and the Federal government ordered them to build a new water treatment plant because the local water tested too high with arsenic. So Fernley built a shiny new plant. A big one, anticipating large amounts of growth. The city used bond financing to pay the rather substantial bill. No Federal grants were applied; some assert that's because the plant's location violates local zoning rules, but the person complaining about that lives near the plant and clearly has her own NIMBY-esque ax to grind. The financing was a contentious issue. The statements from current city councilors imply that past councilors lost their jobs in subsequent elections because of this issue.

So now we have a great new $20M water plant, but none of the anticipated growth happened. The bonds have to be paid. It's expensive. Very expensive. The city really doesn't have the money to pay for it. Last year they adopted a short-term $18/month/residence bond fee, but that's not enough either. The city has drawn down its reserves and is running out of options. Last night's meeting discussed the four major options.

The first option appears to be to adopt a substantial new bond-repayment surcharge, which could be on the order of $45/month/residence, although there are lots of different sub-options such as charging based on the size of the water meter and charging businesses more than residences on a sliding scale. This also appears to be in the form of a property tax so that it would create a lien on the property and apply whether or not you actually had your water service turned on or not. This would thus apply to the vacant, mostly bank-owned properties in the city.

There were people rehashing the chain of bad decisions that put the city in such a big financial hole. One of them seemed convinced that if the five council members didn't take their small stipend, it would make a significant difference. (It would be like spitting in the ocean.) Others seemed to have the attitude that nobody working for the city had a "real job," so they should just cut, cut, cut. (Notwithstanding that the city has cut many things, including zeroing out road maintenance for this year if I read the budget correctly, which I may not have done.)

Option 2 is to sell the municipally-owned water/sewer service to a private operator. The consultant they engaged for this one said there were some interested buyers, but they mostly said, "Why not just fix the rate hole and operate it yourselves?" It seems pretty clear that if they sell the muni to a private operator, that operator will just go to the Nevada Public Utilities Commission and say, "See all of this debt? We need to raise rates to $X in order to pay it off," and the PUC will say yes, and the water rates will go up while the city loses control of its largest single asset. Nobody seemed to think this was a good idea.

Option 3 refinances the current debt, lowering the amounts due in the next few years while increasing payments later. This pretty much kicks the can down the road five years and hopes that growth will restart. This wasn't very popular, either.

Option 4 involves trying to bring in new customers from outside the current municipal system, which is to say outside the city limits, such as the town of Wadsworth next door or the business park at USA Parkway ten miles west of Fernley. This mainly seems to be in having the city sell or lease their existing water rights rather than building yet more expensive infrastructure, which is what got them in this spot in the first place. This might have some long-term viability, but won't fix the gaping financial hole.

The amount of ignorance displayed was annoying, particularly when it was primarily caused by people not paying attention or thinking that you could just wish away the debt. One person said the city should "declare chapter 11." The Mayor pointed out that Nevada law doesn't allow municipalities to declare bankruptcy. (California does.)

Another woman insisted that "We need an initiative to dis-incorporate!"

The Mayor, trying to be patient, said, "That's fine, but you'd still have the debt."

The woman said, her voice trembling with rage, "It's not my debt! I didn't vote for it!" Lots of other city residents seemed to think that they shouldn't be responsible for anything city expenses that they personally didn't vote for.

This sort of stuff went on for several hours. No firm decisions were made (although selling off the muni got no support at all). The council seems split 3-2 toward increasing fees and told the city staff to go put together a more details on the other three options.

Had I been at the meeting, I would have stood up and said, "I'm really sorry that the condom broke, but the kid is three years old now and the court has ordered you to pay child support until she's 27!" Complaining about bad decisions made in the past may make you feel better, but it's not going to fix the fact that there's a legitimate municipal debt that must be paid somehow. Either the city raises the money in some way or it defaults on the debt, the debtors take possession of the system, sell it to a private operator to pay off the debt, and the rates go up anyway.

TAANSTAFL. As Lisa said, "We're living in a desert! Pay the money already!"
Tags: fernley, lisa, politics

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