Financial affairs: a theater of the absurd?

Lots of important things but also discussion of e-currencies, $10,000 rentals, foreigners hacking our severe weather warning system, 50-year recycling contracts, etc., etc.

The Financial Affairs committee met on February 28th.

But first, from Wikipedia:

The Theatre of the Absurd is a post–World War II designation for particular plays of absurdist fiction written by a number of primarily European playwrights in the late 1950s. It is also a term for the style of theatre the plays represent. The plays focus largely on ideas of existentialism and express what happens when human existence lacks meaning or purpose and communication breaks down. The structure of the plays is typically a round shape, with the finishing point the same as the starting point. Logical construction and argument give way to irrational and illogical speech and to the ultimate conclusion—silence.

So imagine a play. Like Samuel Beckett’s Waiting for Godot meets Franz Kafka’s The Trial. It consists of a single scene—a woman sitting before a committee of faceless and somewhat indifferent government functionaries in a drab, uninspiring conference room. It’s unclear both to the functionaries and to the audience why she is there. Possibly, it’s even unclear to the woman herself. That too is unclear. There is the faint sense that she is under duress but the source of her desperation and anxiety is never clearly articulated. The woman needs to know where the money is at—people want to know, she tells the committee—and this is a meeting of the Financial Affairs committee, and if you squint hard enough it almost makes sense. Almost.

The meeting has an agenda but it’s a thousand pages long and while a cursory glance suggests it is written in English, every time the woman tries to read it she realizes none of the words mean anything to her. So she simply listens, and each new agenda item seems vaguely, potentially related to the money she’s in search of on behalf of some shadowy group of people who are never named or described in the play.

But every time she asks her questions, the words come out in the wrong order. She makes frequent vague references to construction projects and expansions and where is the money at? and the committee chair with only a moderate amount of irritation tells her that’s not the agenda item currently under discussion. There are other people in the audience and on the committee who sit through all these interactions mutely. They never say a word or turn their heads.

The play goes on for hours, back-and-forth, back-and-forth, one agenda item after another, one non-topical question after the next. But neither the woman nor the committee members get any more flustered or irritated or upset than they were to begin with. There is no arc to this story, no build up or resolution of tension. She asks maximally confusing questions in an even and earnest tone and the committee chair expends a moderate amount of effort trying to answer them before moving on in frustration. Eventually you realize—the joke’s on you. You’re the one meant to be going insane and pulling your hair out. The play will go on as long as you continue to sit there. You’re not watching a nightmare, you’re in one.

I won’t say the Financial Affairs committee meeting this week was exactly this bad, but it had a bit of that feel.

I.

Jackson and Leo, the city’s finance interns, gave a short presentation on financial trends in the city’s budget over the last several years. As, John Ruggini, the city’s Finance Director explained, they take a 140-page audit report full of numbers and create a series of graphs that “makes it more understandable and tells a story.”

They provided a helpful summary of some of the financial metrics they considered and whether they were trending in a good or bad direction:

Most of these was accompanied by a graph and an explanation that was sometimes helpful.

• For instance, take the first one: “Capital expenditures: depreciation expense.” Trucks, roads, and buildings eventually wear out and require replacement. Overall, it can be useful to know how much the city is spending to replace or expand things (capital expenditures) compared to how quickly the things that are already there are wearing out (depreciation expense). A ratio less than 1.00 would indicate that the city’s assets are wearing out faster than they can be replaced.

  

  Ratio greater than 1.00 is good. Source

  Although now that I think about it, capital expenditure include two things—money for the replacement of things that already exist (e.g., repaving a road) and money to buy new things that didn’t exist before (solar panels on the top of a government building or a new bike path). You could imagine spending more money on new things while still failing to replace the old things and these ratios would presumably still look pretty good even as infrastructure failed. Nevertheless, this is probably directionally useful and the city appears to be building and expanding more quickly than it’s wearing out.

• Others were simpler. For instance, the top ten property owners comprise almost 16% of the city’s entire assessed land-value which is considered somewhat undesirable because if one leaves, they would take a large chunk of tax revenue with them. The table below shows that only two of the current top ten property owners were in the top ten in 2011.

  

They went through several of these indicators, some of them more helpful than others, but overall it painted a picture of a city in relatively good financial health if one with slightly increasing long-term debt levels.

During the period for public comment, a woman whose name I couldn’t quite catch but I think may have been Bernita, said she felt like there were “a lot of numbers missing” and that the city had a “lot of stimulus monies come in from President Biden as well as President Trump.” She said that the last meeting she had attended was over thirty years ago but that with the completion of the Mayfair Collection, the Amazon Warehouse, and a number of other projects, “the residents are looking at my account and they’re wanting to know where are the monies for the proposals that were approved?”

Committee Chair Ald. James Moldenhauer, somewhat confused, says, “Okay, you have some very abstract observations on this, so I’m going to ask for a little input—I see the City Administrator is—”

City Administrator: “If I may, some of those questions really aren’t on the agenda. So maybe I can go out in the hall and we can talk about that.”

She asks where the numbers in the presentation came from and Mr. Ruggini says they’re all from the city’s audited financial statements and shows her where to find them on the city’s website. She seems pretty satisfied with this and the meeting continues.

II.

Section 12.24 of the Wauwatosa Municipal code requires owners or occupants of any buildings “fronting upon or adjoining any street” to “clear all accumulation of snow or ice within twenty-four hours after snow has ceased to fall” lest the city remove it themselves and send you the bill. Until the beginning of 2022, this was a somewhat involved process whereby a neighbor would lodge a complaint, someone from the city would drive out to the property to verify presence of snow on the sidewalk, take picture, post picture prominently on homeowner’s or occupant’s door, return to office, wait 24 hours, send a supervisor to check sidewalk again, return to office and say, “it’s still there,” and then send a snow removal team to remove it.

The new way, which I consider to be a true innovation, is to receive a complaint and if it’s been 24 hours since it stopped snowing (Public Works Director David Simpson calls these “snow events”), they’ll send someone out to shovel it immediately and bill the owner, no picture-posting or driving back-and-forth necessary. Mr. Simpson gave a brief rundown of this year’s delinquent snow-shovelers:

He also said that the current rate of $100 per property per “snow event” + $1 per linear foot up to 30 feet and $2 per linear foot thereafter seems a little excessive given the new efficiencies mentioned above, and proposed a reduction of the fee to $100 + $0.25 per linear foot. The difference in cost can be seen in the last two columns of the table above. Also, he added, if the proposal passes those who’ve already paid bills this year at the higher rate would be refunded the difference.

Ald. Joe Phillips asked whether the reduced fees would just encourage more people not to shovel their sidewalks, but Mr. Simpson said that the fee is still larger than the cost of hiring a commercial service and he thinks “it's high enough to motivate people to clear their walks.”

Ald. Moldenhauer said he thought that sixteen non-compliant property owners in a city of 50,000 was pretty good, most of them were commercial properties, and that he’d like to think that “those of us who have neighbors that have trouble—we help them all out, and I think most people do in our city.” However, he asked Mr. Simpson to monitor the non-compliance rate and “if we’re becoming a snow clearing business for folks, we don't want to be in that business.”

Bernita tries to ask a question but Ald. Moldenhauer tells her she’s missed the allotted time for public comment and is rebuffed.

The Financial Affairs committee unanimously recommended the fee reduction for approval by the Common Council.

III.

Finance Director John Ruggini asked the Financial Affairs committee to approve a new contract with Waste Management to handle the city’s waste and recyclable processing. Their current contract with Republic Services started in 2021 and runs through 2023 but they’ve been more or less completely useless. “They were closed, they weren't accepting material at all. And so they've become very unreliable. At this point we're on month four of a complete shutdown" mostly due to mechanical failures, he said. Furthermore, the facility is jointly owned by the City of Milwaukee and Waukesha County and the facility must take their recyclables (even if they can’t process it) while the city of Wauwatosa is considered a “third-party source” that can be turned away if they are over capacity or shutdown. “The City has been put in a position to haul to alternate locations where we are not able to partake in a revenue share or have protection from being turned away.”

Republic Services is willing to terminate their contract early, and Mr. Ruggini asked the committee to approve a three-year contract with Waste Management for $208,000. “Waste Management guarantees alternative hauling locations if they experience a shut down and will be upgrading their facility in the late spring and summer of 2023,” Mr. Ruggini’s memo to the Financial Affairs committee stated.

During the period for public comment, Bernita asked why the city can’t do a 50-year contract, to which Ald. Moldenhauer responded, “David, is it fair to say, no business is going to negotiate a 50-year agreement on something like this because they have no idea what the commodity prices are for recyclables or what the market's going to be?”

The Director of Public Works agreed.

Ald. Moldenhauer: “We're going to move on.”

IV.

In 2022, the city installed an “advanced outdoor warning system” at Hart Park. The way I gathered this works, is that the city has some type of public address system that is connected to remote weather monitoring systems that will automatically sound an alarm or play a message if there’s severe weather in the area. City staff can also transmit their own messages using app-based software. All this requires a yearly subscription fee, and the city requested to enter a 5-year contract with Perry Weather at a cost of approximately $3,000 per year.

Bernita again: “Most of the apps are corrupt and connected to other countries that are looking in at what we’re trying to do in our different cities in Milwaukee County.” And also, “if you don’t have a cell phone to let the public know that there is something that’s going on—a weather alert—is there another way? [Like] TTY for people that are hard of hearing?”

Ald. Moldenhauer: “David, do you want to respond to any of that?”

Mr. Simpson: “This is simply an outdoor system. It’s just designed to get people’s attention. It has a flashing light and a loud vocal system.”

Ald. Moldenhauer, helpfully: “So, I think what I’m reading into her question is, let’s just pretend I’m the director of public works, and I have this smartphone. And I go and I have the ability to access that system. I would imagine there’s some sort of, what’s called MFA—multi-factor authentication—that would allow me, from a security perspective, to make sure that if I’m broadcasting, I’m the person who is to broadcast for that. Is that a fair way to [describe] access to the app?”

Mr. Simpson says, yeah, essentially. It’s been a while since he logged into it, but he’s pretty sure it has multi-factor authentication.

Ald. Fuerst also clarifies with Mr. Simpson, and I think for Bernita’s benefit, that the app is only for administration of the system. It doesn’t transmit warnings to people’s cell phones. The city uses a different system for that.

Ald. Moldenhauer: “The item that’s before us was absolutely stating that it’s for an outdoor weather system at Hart Park. So, I don’t know where we conceived that it was a city-wide alert, but that’s what we’re voting on.”

The committee unanimously recommended approval of the contract.

V.

MSP Real Estate Inc. presented a proposal to construct affordable apartments at Burleigh Triangle, part of Tax Incremental District (TID) district 7. In 2021, MSP completed construction of the River Parkway mixed-income apartments in Wauwatosa. The current proposal for Burleigh Triangle will include 39 age-restricted apartments for seniors and 41 non-age restricted units. Sixteen of those units will be offered at 30% of CMI (County Median Income) or about $450-500 per month, 32 at 50% of CMI ($900-1,200 per month), 8 at 60% of CMI ($1,200 per month), and 24 market rate units for $1,400-2,300 per month.

Proposed location in red.

Drawing of proposed development.

This will be a $23+ million investment with subsidies from the Wisconsin Housing and Economic Development Authority (WHEDA), ARPA funds through Milwaukee County, and because of the inclusion of affordable units and its location inside TID 7, MSP is requesting $2.3 million in develop incentives from the city. Construction is expected to start in April 2023 and finish by late-summer of 2024.

In addition to those subsidies for MSP, the city would also pay the cost of relocating sanitary and storm water infrastructure ($1.1 million), master developer site preparation costs ($115,000), and master developer incentives of $3,600 per residential unit for a total of $280,000¹. Additionally, the city has a policy that requires 25% of contractors and subcontractors to be from disadvantaged businesses and 25% of new hires to come from distressed zip codes in Milwaukee. There is a business that specializes in helping municipalities meet these diversity goals called PRISM Technical (similar contracts previously discussed here and interesting connection with former member of the city’s Equity and Inclusion commission here) to whom the city will pay $82,000. Finally, there will be construction monitoring costs of $16,000 and ongoing support for $20,000 to analyze the agreement with MSP and understand its impact on TID finances.

I’ve described Tax Incremental Financing before (see here) but essentially,

Designating an area as a Tax Incremental District (TID) is a way for the city to subsidize the development of newer, nicer, bigger buildings by pulling forward some of the future tax revenue they expect such a development will create and using it to entice developers to build the newer, nicer, bigger building in the first place.

Since it’s establishment in 2013, the value of the land and property in TID 7 has increased from $20.1 million to $183.7 million and currently represents just over 2% of the city’s total equalized value.

While Mr. Ruggini described TID 7 as one of the city’s best performing, he stressed that “it's really important before you consider providing TIF assistance to a project, that we understand where the TID stands financially.” Currently, the TID “produces about $2.5 million dollars annually in property tax increment” and “most of that increment goes to pay for existing debt used to build a lot of the public infrastructure especially along Burleigh.”

Bernita asks whether the apartments will rent for $500, $2,000, or $10,000 per month.

Ald. Moldenhauer: “Uhh…I don’t think he said $10,000 a month.” Explains proposed rent levels as described above.

Bernita explains that she “wrote the proposals for Mayfair Collection and everything you completed” and “I haven’t received any monies yet” and suggests charging higher rents to raise more money. Five-hundred per month is too little, she thinks.

Ald. Moldenhauer: “Okay, well, first off, this is an affordable housing project. Not a market rate development. There's a clear delineation between that and what you're illustrating.” Explains that there are many other market-rate developments being constructed in the city.

Bernita: “So, it's affordable housing at $2,300 dollars?”"

Ald. Moldenhauer: “No, that's market rate. So, ma'am, there's three levels of affordable housing.” Explains some more.

Bernita mentions something about money “from the President because of the Covid, SARS, Ebola, and wisteria [Ed. Note: Pfiesteria? Not sure what she’s referring to here],” then talks about underground parking, then asks, “Are you able to use e-currency to pay for any of the properties to live in?”

Ald. Moldenhauer: “John, do you want to respond to that real quick about e-currency?”

Mr. Ruggini: “No, there’s none.”

Ald. Moldenhauer: “There is no e-currency. Is there anything else ma’am, because we’re going to move on?”

They move on.

VI.

Sometimes the city allocates money to projects but the projects get delayed or they take longer than anticipated. A “carryover approval,” according to Mr. Ruggini “is the final step of the 2022 budget” where unspent funds for particular projects are allocated to the next year’s budget. Total proposed carryover amounts were $1.96 million.

Ald. Moldenhauer: “And just so we’re clear, and this is from someone who’s been around for a while, this is sort of an annual type process where we have to do this due to projects running over, monies being carried over, so this is not out of the ordinary.”

Bernita again:

The expansion monies that you said you only have four funds, but we also have the Medical College and Froedtert Hospital expansion out there with the Foxconn, Toshiba, Tesla, in that area going up […] so we have a lot more monies that were given to Wauwatosa for the expansion. And I’ve already mentioned the Amazon and the Mayfair Collection but also the other side of the Mayfair Collection we have the old Roundy’s area, so that is also going to be included?

Mr. Ruggini, a bit confused perhaps: “…So, those—”

Bernita: “So, my question, is there room for more than only four?”

Ald. Moldenhauer: “Well, first off, we’re discussing carryover budget for items that were already approved, right, John? That we’re carrying funds over because projects either were delayed or [for] other reasons we have to carry those funds over. So, I’m struggling to—”

Bernita: “I’m saying that the monies to be carried over for the Medical College and Froedtert—”

Ald. Moldenhauer: “We’re not discussing the Medical College and Froedtert right now.”

Bernita: “But the monies were in the 2021 budget—”

Ald. Moldenhauer: “Ma’am. Okay, first off, your question is not germane to what we’re discussing here. Seriously, it is not.”

Bernita: “I just thought that it was.”

Ald. Moldenhauer: “No, it is not. I’m sorry, I don’t mean to be blunt.”

Bernita: “No, no, no I mean, you’re new.”

Ald. Moldenhauer: “No, I’m not new to this.”

Bernita: “To being the mayor, but you’re not new to being on the board, right?”

Ald. Moldenhauer: “No—I’m just saying, what you’re asking about is not germane to this item.”

Bernita: “So where are the monies for this expansion?”

Ald. Moldenhauer: “This isn’t an expansion. We’re talking about carry over funds of prior approved projects from 2022 to 2023.”

Bernita: “Correct.”

Ald. Moldenhauer: “They have nothing to do with what you’re abstractly referencing.”

Bernita: “I just wanted to know where the monies were. Because I have a lot of other people that are looking to find out where these monies are.”

Ald. Moldenhauer: “I would ask you to direct your question to the City Administrator or the Finance Director after the meeting. Alright, thank you very much.”

Bernita: “Thank you. Thank you.”

Epilogue

Overall, I found Bernita remarkably polite, even as she continually failed to find answers to her confusing if earnest questions. She never raised her voice or appeared frustrated.

But also, seriously, who are these people looking for their monies? And what is going to happen if Bernita can’t find it for them? These are the questions I would have liked answers to.

1. The Master Developer, Citadel Property Advisors (formerly HSA), is the developer responsible for the overall site preparation and infrastructure for (all?) the land in TID 7 so that other developers can come in and put buildings on them. According to Mr. Ruggini, the Master Developer spent approximately $2.1 million for infrastructure that the city agreed to pay back $3,600 at a time for each residential unit that was ultimately constructed.