In a situation as touchy as taking on debt, why wouldn't the town council ask the voters for permission to proceed? There is certainly every indication based on recent votes that that would not be an automatic "okay".

That's probably why the three council members don't want to do it.

That's just not the right way to do things.

Just build the d#$n thing already. This has been dragging on and on for years. The design is fine. The scale, form and function is all fine. This is a major civil infrastructure project which will serve the community for many many decades. Take on the debt, rebid the project to a larger group of builders and get on with it.

I agree with Build it already.

This is a long term capital project that should have been funded by accumulated depreciation but no such funding occurred.

Don't deny future generations an appropriate Town Center just because this and prior councils did not fund depreciation of existing buildings.

Let the voters decide on a bond issue.

I agree we should build both the library and civic center largely as originally planned. Atherton will likely see lower costs when bidding is opened to more contractors.

Both the town and library budgets have excellent cash flow that could fund any debt needed to pay for construction. Atherton would be easily living within its means.

This is a long term investment. We should not be short-sighted with our capital infrastructure.

Everyone has an opinion, so let's let everyone vote their opinion on a ballot before the voters. People who think it's obvious this is the right thing to do can advocate their position to the voters before vote. People who think it's irresponsible can do the same. Then people vote.

That's how democracy works. Three council members, two of whom have personally agendas heavily invested in this (their own history with this project, and not wanting it to fail) should not be deciding whether 7200 residents should take on debt.

Perhaps surprisingly, I strongly agree with all of the comments to date. We have the library tax funds to build the library and we should build it. The Town has the long term revenue to build the Admin/Police building, but this will require some combination of using the non-mandatory reserves and borrowing in some way because the bids are just too high and we shouldn't reduce a 29K sq ft building by 13K sq ft and end up with something that is totally inadequate, but I believe that we should put this issue before the voters. This is the biggest project in our Town's history. We certainly need it, but the cost is going to require us to borrow some money, which we haven't done before. I think that is something that everyone should have an opportunity to weigh in on. I am confident that a majority of our residents want to finally fix this issue that has now been discussed by the Council for more than 20 years. The building that has been designed is not excessive. The Admin is equal in size to what we have now and the Police side is designed to meet code, which is stringent for this kind of a building. We are working hard to make this the most cost effective building that we can. No landscaping, etc. but it will last 50-75 years and it should be done right.

I totally agree with Rick about being willing to take on debt.

But I wonder how much in each of the last 20 years the Council budgeted to go into a depreciation fund to replace these dilapidated buildings?

And Lewis covets the Fire District's carefully saved and allocated reserves when what she should be doing is emulatiing the Fire Board' fiscal discipline.

Mr. DeGolia, I just want to clarify your position. You say, "I believe that we should put this issue before the voters". I agree with you. The article suggests that Bill Widmer advocated this, but Elizabeth Lewis and Cary Wiest supported your (presumably contrary) view. Maybe the article just wasn't written all that well. Thank you.

Thoughtful asked: "I just want to clarify your position. You say, "I believe that we should put this issue before the voters". I agree with you. The article suggests that Bill Widmer advocated this, but Elizabeth Lewis and Cary Wiest supported your (presumably contrary) view."
The article isn't clear about the particulars. Bill and I agreed on the value of a vote and the others agreed with me on what I see as the biggest issue (the need to build an understated but attractive facility that our residents will be proud of and will serve us for generations). I advocated putting the issue before the public, either for a bond (which isn't realistic to get a proposal together in time for the November ballot) or an advisory vote. Bill Widmer clearly supported me on the advisory vote because he is opposed to taking on any debt without that vote. I was supported by Lewis and Wiest to look at taking on some debt, rather than reducing the size of the Admin/Police building from 29,000 sq ft to 16,000 sq ft as suggested by the architects. The essence of my position is that if we are going to build something (and we've already sunk nearly $5m into the design, staging, etc), it should be something that future Atherton generations can be proud of and that will generate the returns that justify the cost and time (staff retention and hiring as well as functionality). I agree that we can cut some of the designed Admin/Police facility but not to the degree that we could pay for this without additional funds: either debt or private donations or a combination. I'd like to put this to the public as I believe there is a real recognition of this need, but I don't know that others agree with the advisory vote concept. Personally, I think that a $10-15m bond is fairest as everyone bears the cost and that is the shortfall from the private donations fundraising campaign, but we can't get that done in a timely fashion, so it probably won't happen. If we eliminate the lobby, make a few other changes, and move the admin function out of the area during construction, we should be able to reduce the cost by $4-5m which should get us within range of what Atherton can finance. Of course, I'd prefer to get private donations than to take on any debt, but we have to build this facility. That conclusion isn't an ego thing for me. I don't have any ego in this. I just want to do what is right for the Town, both the current generation of residents and future generations. This is the biggest project in our history. It warrants support from everyone and the best way to get that is by putting it before the residents in a vote. But even if there isn't support for a vote, we need to move forward.

Rick - Well stated - go for an immediate advisory vote on the debt to build it RIGHT.

If that vote is affirmative then the details can be worked out later.

And if it's negative?

Rick DeGolia: "But even if there isn't support for a vote"…

How can this ever be? You hold that decision in your own hands. Lempres and Widmer have already said they want a vote.

I don't think that the Council wants to be forced to a citizen's vote on this issue by a petition or a referendum.

I would vote no. Downsize the building. Stop the madness. Follow a budget. A number of residents will vote no. It isn't a good idea to take on debt. If you cannot afford it don't buy it.

A revenue bond would force incredible discipline on the Town's future spending since interests payments would have priority - not a bad idea.

Borrow money we don't have to build a much bigger building than we need imposes fiscal discipline? Not in my view.

I'm with "Vote NO". Downsize the building. The problem as I see it is the people who designed the building are the ones now faced with either throwing out their design or forcing this project through. We need some people who can look at things with fresh and objective eyes making the decisions on this.

Also, good catch from "Vote". Mr. DeGolia is pretending he can't really control whether this ultimately goes to the voters, but this is not true. He would be the deciding vote.

My prediction is voters say "no" to this, as the two recent elections have foreshadowed. That's why Lewis and Wiest (and Mr. DeGolia, though he is at least trying to appear like he has an open mind) don't want the vote.

When did Lempres say he wanted a vote? In the article, Lempres is against borrowing, but he doesn't ask for a vote.

Here's an answer: we know Widmer wants a vote. We know (from his post here, "I believe that we should put this issue before the voters") that DeGolia wants a vote. It would be reasonable to assume if Lempres is against borrowing money, he would rather see a resident vote taken than to just outright approve borrowing the money, since at least that way, there is a decent chance no borrowing will take place.

Seems the people who want this town center built no matter what the consequences or costs are trying to weave a tangled web to avoid asking the residents if they want to shoulder the cost of it.

Peter Carpenter, okay, I'll play that game. What plan of spending decreases will accompany the council's request for debt to prove to residents that there's going to be fiscal discipline versus this just being the first step on a slippery slope? What plan of spending decreases with no new taxes, as the voters have already rejected the parcel tax? Where are the cuts going to be made? Or are we just supposed to wing it and believe everything is going to work itself out? If we don't have the money today for this center, we won't have it tomorrow without decreases to how we're spending money. Since the council majority won't consider outsourcing the police department or even question the huge comp packages, where are the cuts coming from, since that's where we spend most of our money?

What a revenue bond would do is to force the Council to pay each year's interest BEFORE any other town obligations. Then they would have to adjust the rest of their spending to stay within their current revenues.

Financial tough love.

@Vote

Ok, it's an assumption that Lempres is in favor of a vote. Thanks for clarifying.

Peter Carpenter, forcing fiscal discipline is one way to predict what would happen. Another is the council wouldn't get fiscally disciplined, and exercise the same unilateral right they believe they have now to issue even more debt. That's why I'm asking for what the plan is now. There's no reason why what you say would be forced to happen can't be stated right now. I guess the answer to my question is we're supposed to wing it and hope. Nope.

" guess the answer to my question is we're supposed to wing it and hope."

Nope. The Council starts a year with known revenues, they must pay the amount due on their revenue bonds first, then they pay their pension costs, then they fund depreciation of their existing capital assets - what they have left is their operating budget for the year and they have to adjust their remaining desires to fit the remaining budget.

"and they have to adjust their remaining desires to fit the remaining budget."

Nope, they can choose to take on more debt, just like our federal government does every year (in fact, multiple times per year).

You're ignoring this issue/point.

Where's the plan? Is there a plan?

Wealthiest city in the country, yet needs to take on debt to build a civic center. why not vote on i? because the wealthy citizens of Atherton will vote NO to spending one extra dime on the help.

"Where's the plan? Is there a plan?"

There is no Strategic Plan on the Town's web site.

From the Town web site:

The Audit / Finance Committee has the following powers and duties:

Act in an advisory capacity and make recommendations to the City Council upon request in all matters pertaining to town finances
Consult with the city manager on matters pertaining to the budget, capital spending plan, and the long range financial plan for the town
Act in an advisory capacity and make recommendations to the City Council upon request in all matters pertaining to the town’s annual audit
Provide oversight of the annual audit and present and explain the audit to the City Council with recommendations as to acceptance
Advise City Council regarding appointment of outside auditors for annual audit
Review proposed audit scope with outside auditors prior to commencement of annual audit

The Town Manager states:
" In May 2018, the bid climate proved spectacularly higher than anticipated and the number of pre-qualified bidders that opted to bid on the project dwindled to 2, with the remaining 5 dropping out because they were just simply too busy. The lower bid of the two submitted was nearly 40% higher than the base estimates for the project."

And since then almost 1500 structures in Northern California have been destroyed by fire and, as a result, construction costs will surge even higher for at least the next two years.

Web Link

"A survey from the Associated General Contractors of America showed that 75% of West Coast firms were struggling to fill construction positions, up from 71% in 2016. The shortage comes as California added nearly 50,000 construction jobs in the period of July 2016 to July 2017, with 34,000 projects in the Southern California region. That was two months before the fires began."

And that was before 2018s even more devastating fires.

I predict that ANY plan put out to bid by the Town will result in bids in excess of $50 million - IF anybody even responds to the RFP.

One sales pitch that was missing from the Town Manager's e-mail was

HOW MUCH UNFUNDED PENSION LIABILITIES DOES ATHERTON HAVE?

In other words, how much debt are we already in, in relation to the enormous amount of new debt that Lewis and Wiest want us to take on?

Why is Rodericks ducking this issue?

Rick DeGolia, you should know. Please enlighten us.

This story talks about the matter being brought back for more council discussion on Friday, Aug. 10. That meeting has been postponed a week, and is now scheduled for Friday, Aug. 17 at 8 a.m.

That's great, Barbara. As the investigative reporter on the issue, can you find out how much debt Atherton residents are already shouldering in the form of Atherton's unfunded pension liabilities? This seems only relevant to a question of whether we should be taking on more debt, especially when the country Grand Jury just issued a warning about "crushing" (the Almanac's story, not my adjective) debt coming our way.

I cannot find either the Audit or the CAFR on the Town's web site - may be my inability to navigate the site.

A quick search on Google gives the investigative journalism information you struggle to find. Check it out:

Web Link

Web Link

The CalPERS reports were from June 30 2016. The 2017 information is not yet posted online.

This reports show how much the Town paid towards their unfunded liability but the reports (carefully?) omit any reference to the total amount of the Town's unfunded liability.

Here are some relevant quotations from the Almanac's recent article on why the grand jury has issued a dire warning to San Mateo County cities:

"And, according to the findings of a new civil grand jury report, San Mateo County's cities are not doing enough to incapacitate that pest before it becomes capable of wreaking Godzilla-like levels of havoc on city finances...

In the past, CalPERS has assumed that its investments yield a 7.5 percent return on investment, a number some experts say is overly optimistic.

In the past three years, the agency's net return on investment has been only 4.6 percent. Over the past 20 years, that average annual return has been 6.6 percent.

To increase the accuracy of its projections, the CalPERS board in December 2016 voted to reduce its assumed rate of return from 7.5 percent to 7 percent in phases by the 2024-25 fiscal year. It may sound like a small change, but it's expected to double pension costs for many cities around the state...

The reports cites options cities can pursue to reduce pension obligations: increase contributions to CalPERS beyond the minimum required payments, develop a pension reserve, negotiate to share pension costs with employees, shorten the "amortization" periods over which unfunded liability is paid back, make sure salary increases don't surpass what CalPERS has assumed they will be, reduce operating costs, or find new revenue sources."

****************************************************************************************

In essence, Atherton's financial model is based on an assumption that CalPERS can get 7 to 7.5% annualized returns on investments. This assumption has not panned out historically. Stock market experts will make persuasive cases that it cannot pan out in the future. Just reducing the 7.5% return assumption 0.5% to the still totally unrealistic 7% DOUBLES the city's cost!

That statement alone is staggering. Again, just being off by 0.5% DOUBLES THE COST.

And, we're off by way more than 0.5%. I believe the supportable long-term investment rate of return is around 3.5% to 4%. Financially astute residents who are invested in the stock market know that at the high point of a market cycle (i.e., now), future rates of return don't look good. At the bottom of a recession, they do, but not now.

In the face of what its own county has warned WILL BE "Godzilla-like levels of havoc" on its finances, Atherton's town council thus far has:

1. Made amateurish attempts to find new revenue sources, like trying to charge for alarms (never mind that was a major rationale for over-paying for the police department in the first place), and upping the cost of renting the park.

2. Made no attempts to "increase contributions to CalPERS beyond the minimum required payments, develop a pension reserve, negotiate to share pension costs with employees, shorten the 'amortization' periods over which unfunded liability is paid back, make sure salary increases don't surpass what CalPERS has assumed they will be, reduce operating costs."

3. (At least as to two or three of its members) wants to double down on the liabilities by building a town center many Atherton residents believe is much too extravagant in a time that construction costs are at an historical high level (Peter Carpenter's point).

4. Oh, by the way, they also want to build new free housing facilities for police officers while they're at it.

All of this adds up to a high concern in my mind that this town council is completely out of touch with financial conservatism, fiscal responsibility, and even financial reality. It's a tax and spend mentality. No attempts are being made to cut costs. If they can't tax their way into spending money most residents think is for a building that is more than we need and can afford (failed parcel tax), they'll encumber residents with debt, even when the grand jury is warning we're going to be in a major fiscal crisis over the horrible fiscal decisions this council has already made with the pension and comp plans for the police department.

Does it concern other residents? It certainly should. We shall see. My prediction is the vote for this town center debt will fail (and if it's not proposed for a vote, a referendum will force the council to stop this madness).

More significantly, I am deeply concerned that new blood is not running for town council this year. The existing members running have shown poor judgment by supporting these fiscally irresponsible initiatives, or being afraid to question "the boss" (Elizabeth Lewis). "The boss" has created an environment in which anyone who questions her or her initiatives gets excoriated, humiliated and harassed. Yes, it will take strong-minded people to stand up to "the boss". The current three members running for re-election either agree with her or are afraid to take a different view.

Peter

Carefully not looked for, perhaps?

The town recorded a net pension liability of $13,981,508.

Web Link

Thanks.

I looked carefully but got zero results for the search terms "audit" and "CAFR" on the Town's web site. Neither term sppears on any of the sites menus.

Fishwrap - Since you apparently knew the answer why did you first misdirect us to the the Finance Committee staff reports that did not contain the answer?

Are you a member of a Town committee or a Town employee?