Sedona, AZ – Editorial by Tommy Acosta.

Might as well warn the reading public right now — this is going to be one heck of long editorial.

The mayor’s advisory committees are toast.

Though fried, the factors leading to their demise remain very much alive.

Let’s do a little review here:

The mayor forms his own committees without council blessing.

Council elements try to knock them down because they feel it sets dangerous precedent, are illegal, eat up staff time, duplicate effort and of course give the mayor way too much power.

The committees get a reprieve till March.

A committee member writes an email criticizing city budgetary practices.

The council calls a special meeting and rubs out the committees, calling them a shadow government and justifying their act by stating a committee member wanted to go public with a scathing email that was insulting to the interim-city manager.

Ok. Umm. Let’s take a look at the email written to the city manager by Rick Normand, a member of the mayor’s now defunct Economic Advisory Committee. Keep in mind, this is the same email labeled “scathing.”

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EMAIL #1 FROM RICK NORMAND

From: J Rick Normand
Subject: Council: Relative to Staff Burden, You’re Asking the Wrong Question!

Date: Monday, February 9, 2009, 8:12 PM

Dear Mayor and Council,

To begin with, I want to say that I write this e-mail to you of my own volition, that is, I am NOT speaking for the Mayor’s Economic Steering Committee, nor did I counsel with them over the contents herein. They have had no part in what is written below. Meanwhile, I am formally requesting that this e-mail be archived for purposes of making it a part of the public record and posterity.

Some of you continue to question whether there is a cost/benefit ratio favoring or disfavoring the time required by Staff to service the above-mentioned committee. Unequivocally, you’re asking the wrong question, which if ignored, irrespective of the answer to the question upon which you are focused, will lead this City to dire consequences. The question you should be asking is, “What is the cost to the City of having staff perform budget busywork that leads, not only to work product of no practical consequence but, to work product that leads the City to adopt financial policy that will place the City in a risk position of not being able to refinance its debts in the municipal bond market three through six years from now?”

Below is a chart that each of you should study. What this chart will tell you is that Arizona is the second worst State in the Union at mismanagement of its budget process. This tells us that the State does not incorporate modern financial modeling techniques which has resulted in the huge budget deficit we are now facing as a State. Please note the catastrophic variance between budget forecast and actual budget numbers for the State’s most current budget.

Yet, when Alison Zelms and those who assist her (by the way, this is NOT a criticism of Alison’s capabilities as I can assure you she is quite capable, hard working, and easy to work with as is all of Staff), spends  an inordinate amount of time in budget preparation (probably 80 to 100 hours), she follows a forecasting methodology which was taught to her that is deeply flawed and cannot, therefore, produce any reliable information for Council to rely upon. Why? Because she acquires her budget revenue forecast assumption input numbers and variables from 1.] off-base and unreliable information given to her from the state personnel who botched the State’s budget, 2.] the League of Arizona Cities & Towns who get their information from state provided sources and Chambers of Commerce who are upside-biased and over-zealous, 3.] comparisons to budget assumptions from other selected cities who are running deficits and, worse yet, 4.] from assumptions in prior City of Sedona budget forecasts and flawed forecast models which were derived from a misunderstanding of classical economic models, lack of access to modern forecasting methodology and technology (which would allow Alison to do her budget preparation in less than an hour), and an inability to foresee and understand the consequences of the current near-depression in which we find ourselves.

So, the correct question discussed by Council should have concerned what the direct and intangible costs to the City is/are of not being able to avail itself of sufficient talent to teach to Staff proper budgeting methodology and afford them knowledge of support budget preparation technology? You have that talent available to you right now in Sedona, yet you seemingly ascribe no value to it. At the moment, you’re worrying about time constraints on available Staff time instead of how much time they spend performing work that hasn’t any reliable output of discernable value.

The difference between asking the right question and the wrong question is in the consequences that will impact your legacies which will be bitterly remembered by your supporters three or four years from now. If you focus on the question of how much Staff time is spent with the much-debated Economic Steering Committee, the best result is that you relieve some workspace stress from Staff. However, if you don’t address the question I have posed, then the consequence will likely be that you will find that this City may not be able to return to the municipal bond market on viable terms to finance its next presently unrecognized debt issue requirement, beginning around 2012. And, what is this unrecognized financing issue? It will be a new financing issue which will come about when the community of bond underwriters recognizes that the City is financing the entirety of its current $75-76 million bond indebtness through the Waste Water Enterprise Fund Reserve Account, which equates to approximately $6-1/2 million dollars annually for interest and principal. The issue is, then, will there be sufficient reserves in the Waste Water Enterprise Fund Reserve Account to insure that this debt service can be made from 2012 through 2016? If not, the City will find itself insolvent at that point. This would be catastrophic, especially in light of the fact that there are some very serious deferred maintenance and misunderstood processing-capacity specifications issues existing relative to the City’s Waste Water Treatment Plant right now as I write this. I know because I’ve been there and seen the problems.

This City’s participation in the municipal bond market is no longer assured. The U.S. and global credit markets are being re-structured in their entirety for the first time since 1933 and debtors, including this City will have to now start competing for money. Nothing is any longer guaranteed. In fact, the rating agency and the insurer of your Chapel Sewer Bond Issue have both been discredited. When I mentioned this before Council on January 27, it was obvious some of you just weren’t paying attention.

The municipal bond market typically is backward looking, usually to the extent of three years. In other words, this City’s current budget work-product will be the start-point for analyzing the accuracy and efficacy of your budget in 2012. If your forecast assumptions are far off target this year, that will exponentially compound the variances next year and even more so the year after and make bond underwriters question the reliability of your assertions of debt repayment capacity in the next refinancing round. Not understanding this dilemma now will be a fatal mistake of unrecoverable consequences on your parts since this City lives off debt!

It’s clear to me that your priorities are singularly confused and need to be reassessed. In fact, setting new precedences are critical to our near-future quality of life here in Sedona.

J. Rick Normand” (end email)

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There you go readers. Make up you own mind. Was it scathing? Was it insulting to the city and interim city manager? Now let’s look at the response from the city; Mr. Normand’s consideration in asking how the city would feel if he went public with the email; and the city’s response to his request:

 

EMAIL #2 RESPONSE FROM ALISON ZELMS

From: Alison Zelms
Rick –

Every email pertaining to public matters that you, or any other member of the public sends or is sent to/by the City is a public document.

Thank you

Alison (end email)

>>> J Rick Normand 2/12/2009 8:44 PM
>>>
Alison,

Thank you for your clarifications enumerated below. Since you’ve archived to the public records both my original letter entitled “Council: Relative to Staff Burden, You’re Asking the Wrong Question!” and your clarification remarks relative thereto, would you have any objection, or would the City according to Mike Goimarac, to dissemination of both documents (conjoined) together to the public-at-large? Thank you so much.

J. Rick Normand (end email)

— On Thu, 2/12/09, Alison Zelms wrote:

Date: Thursday, February 12, 2009, 8:38 AM

Mayor Council and Committee Members:

First, I appreciate the time the committee members have put into and backgrounds they bring to their efforts.

However, let me clarify what staff spends time on (far in excess of 80 to 100 hours) when preparing the budget for the City Council. Let me make it very clear, it will never take less than one hour to complete the budget.

One tool will not change the expenditure side forecasting that cannot go overlooked and that is required for us to accurately project our needs for future years and what areas can or should be cut if those outweigh our revenues.  In addition we meet with multiple outside entities that provide services that the City might otherwise provide in-house to work through them requests and operations
among other things.

The overwhelming bulk of the time it takes us to present a budget is generally not in forecasting – although our revenue numbers have been accurate enough over the last ten years to add annually to our reserve, which is over $30 million for all funds.

The model that Professor Ancis presented is based on regression methodology and is a “what if’ scenario that may help to show the effects of changes to specific indicators on our local economy and therefore local revenue collection.

It may also be helpful in proving out our numbers or changing some of our numbers, and more specifically for help in decision making and contingency planning.  It was never intended to replace other budget preparation or projection needs.  We will still rely on the state’s budget forecast tempered by our own analysis of the economic situation.  Perhaps I wasn’t clear in my explanation to the committee about our use of State and League numbers.  We use those as a start for our current year base (for state shared revenue only) once finalized by the State and then we project out based on the revenue distribution formulas, current, and future economic expectations.  In order to start up the system, staff has been working with the committee through Professor Roberto Ancis and will need to provide reliable sources for a multitude of data points, and will also have to ensure that those are updated and remain valid in the future.

Meeting bi-weekly to discuss future business models, regression analysis, rehash the work of the Chamber of Commerce for marketing, and question our current debt – which is $71.8 million, not $76, does not help staff to present an annual budget to the Council.

The City is not servicing $6.5 million of debt from the reserve and our underwriter is fully aware of that.  The reserve is not considered in our coverage levels, that would not be allowed, nor is the entire 3-cent sales tax.

The debt the City has is not a new issue and we have more coverage and reserve today than we did with the same amount of debt ten years ago.

Our financial position is stronger than most Cities in the state.  That is not to say we don’t have challenges – just like every other City.

At least since I arrived at the City, and I believe before then, staff has pointed out that our expenditures were starting to outweigh revenues and that Council would have to either increase revenues or control expenditures – regardless of the current economic situation.

Alison Zelms
Interim City Manager
City of Sedona (end email)

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So now we have both emails to compare. What do you think? Whose right here? The city? Mr. Normand? What do you think Mr. Normand’s intentions may be? Is he acting on what he believes is the best interest of Sedona? What about the interim city manager’s response? Was Mr. Normand’s email reason enough to ice the committees? Now, let’s read the story I wrote for Sedona.biz.

 Council shuts down Mayor’s Advisory Committees

By Tommy Acosta

Sedona.biz

SEDONA, AZ – Feb 19, 2009 – Sedona Mayor Rob Adam’s advisory committees are no more.

By a 4-3 margin the Sedona City Council, at a special Feb.17 council meeting called by council members Nancy Scagnelli, Pud Colquitt and Dan Surber, voted to dissolve all of the mayor’s advisory committees.

Voting to suspend city rules governing the reconsideration of a previously voted item within a 60-day period, councilors Scagnelli, Surber, Sterling and Pud Colquitt put an end to the committees. The council had voted Jan. 27 to review their existence in mid-March of this year.

“There has been a change in the landscape,” said Councilor Scagnelli referring to an exchange of emails between City Manager Allison Zelms and Rick Normand, a financial specialist and member of the Mayor’s Economic Advisory Committee.

“It was a scathing email that questioned the city manager’s integrity,” she said. “Allison explained the misconceptions in an email to the writer.”

In his third email he asked if he could go public. 

The interim-city manager denied she was insulted by Mr. Normand’s email after being asked by Councilor Cliff Hamilton how she felt about it.

“Were you insulted,” he asked her.

“My email speaks for itself,” she replied. “I was not insulted.”

Councilor Scagnelli said she was taking action because of Mr. Normand’s last email.

“This person wanted to go public with it,” she said. “There was a lot of misinformation in the email that went out.”

Councilor Hamilton questioned the accuracy of the city’s response to Mr. Normand’s initial letter, where Mr. Normand stated the opinions expressed in his letter were his alone and where he complimented the interim-city manager for her work.

“The letter sent to the council is true,” he said. “Our response is not.”

Before council voted 4-3 to temporarily suspend its rules governing reconsidering already discussed items, Councilor Hamilton questioned the urgency behind the unprecedented action.

“There is no emergency here,” he said. “There is no pressing issue. Suspending rules should be reserved for emergencies. We have no staff reports. No information. No data. We arrived at the meeting unprepared and uninformed. We are wasting time.”

Councilwoman Scagnelli stressed the need for immediate action.

“We just need to take care of this tonight,” she said. “By allowing these committees to exist we have government by one person. We have a shadow government going on. It’s about the process. It’s confusing and inefficient. The writer of the email threatened to go public. We need to step forward and support our city manager and staff.”

In an email to Mr. Normand, the interim-city manager indicated their email exchange was indeed a matter of public record, where she wrote in a Feb. 13 email to him “Every email pertaining to public matters that you, or any other member of the public sends or is sent to/by the City is a public document.”

Mayor Adams took great exception to his committees being called a shadow government.

“A shadow government? Give me a break,” he replied. “All we are being is transparent. The goal and mission of these committees is to support the staff and council.”

A number of citizens during public testimony also rejected her calling the committees a shadow government.

“The committees were set up to advise the mayor,” Marlene Rayner said. “Somehow it’s gotten into them being a shadow government. The role of these committees was to simply bring suggestions the mayor who would them bring them to the full council for consideration.”

“I was neutral on the committees until I heard them being called a shadow government,” said Don Kirshner.

“There is no secret government here. These are advisors who are qualified experts.”

Paul Chevalier called for ending animosity between council members.

“Does anyone in this room have the moral right to shut down these committees,” he asked. “This is about politics. Do the right thing.”

In her motion to dissolve the committees Councilwoman Scagnelli did add that the council should meet for a retreat to come to consensus.

“There is no warm and fuzzy way to get this done,” she said. “My point is to dissolve them and then come to a consensus.”

A number of citizens agreed the committees had to go.

“The mayor has exceeded the power of his office,’ said Mark Dinunzio. “The committees that have been formed should be disbanded.”

“The committees are not informal when they are talking about making laws and codes,” Ron Volkman said. “What concerns us is duplication of effort.”

Councilman Marc Sterling questioned the importance of citizens attending the meeting.

“I see a lot of the same faces,” Councilman Sterling said. “I don’t always agree the people in this room represent Sedona. It is not by mob rule in this case.”

Mr. Normand, after the meeting, said the real reasons his committee and the others were dissolved were not the reasons given by those who wanted them gone.

“It isn’t about staff,” he said. “It isn’t about setting precedent. It isn’t about the mayor having too much power. It is about shutting my findings down.”

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 Whew!!! That was a read. Now let’s read some “Reader’s Comments” to my story.

 

Readers’ comments in Sedona.biz

#1 “Scathing email”? I read the emails. They didn’t seem scathing to me. Sometimes the way council members phrase their remarks misrepresents the issue. Their phrasing colors and perhaps incites. I was particularly interested in Councilor Scagnelli’s summary they needed to “dissolve [the committees] and then come to a consensus.” That sounds like, “I want to win this one, even though we have to change city rules to do so, and then we’ll consider being less contentious.”  I’m with Councilor Hamilton on this one. What was the “emergency”?

#2 With all the problems facing the City and the need for more cooperation and non-paid expertise, it is amazing to have this situation arise.
Certain Council members continue to put ego before service to the community and power plays before common sense.
These Sedona headlines are posted on CNN and illustrate the small town petty politics that have long plagued our city. Hopefully this will be remembered when the seats of these particular members come up for reelection. To those three who sabotaged the greater good for their own self importance, “shame on you.”

#3 I think it is obvious there is animosity on the Council and they need a retreat or a referee to get rid of that. Secondly they definitely do need “outside expertise” as they have shown they do not have the necessary expertise to effectively run our City, both in the area of finance and of technical issues, and perhaps other areas as well. None of them seems to have either of those areas of expertise, hence the matter of a mistake on bond financing, which they want to sweep under the rug, and with the upcoming discussion with an ADOT consultant on lights. None of them understand any of the technical aspects, such as energy cost, efficiency of various lighting systems, and the future of street lighting in the US yet they will decide along their lines of animosity, with a 4-3 vote on everything.
Heaven help us if they think they don’t need help.
Bill Eich

#4 “I was glad to hear that Councilman Sterling was concerned about mob rule, but I fear he does not recognize who the real mob is.
#5 “I believe a simple solution would be for the Council to call another meeting where the members who voted to disband the committees publicly compare notes and solutions with what the committees have discovered to date. If the committees prove to be further along and more involved in solutions to the city’s problems, then perhaps the original dissenting council members should disband. At least then the city residents would know who they voted for. “If you’re not part of the solution, you’re part of the problem.”
Thom Stanley
editor Sedona Excentric

#7 “Yes, there is a shadow government–CFAR and the Uptown merchants, who apparently own this council.
The public who attend council meetings may not represent the community at large, but neither do these council members. Typically, four people run for three spots on the council. If the winners think they’ve been given a mandate to do as they please, they’re mistaken. The silent majority can’t afford to run for council or attend meetings that drag on for hours and hours. And at least some of us are getting tired of the petty, divisive, wasteful actions of these council members!

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The Prediction

Now let’s get to predicting what is going to happen next. Like I said, the committees may be history but chaos is the future. These financial pros who looked at the city’s budget and bookkeeping are obviously concerned and they are not going to be put off that easily. They might not be an official “unofficial” committee anymore but their interest and passion for what they perceive as truth has not subsided or been quelled.

It boils down to who is right and who is wrong; who is telling the truth and who is not. If there is something amiss and if the private citizens asking questions keep at it, the city will entrench. We may see media in Sedona threatened with legal action if they print things the city might not want to hear. We may see a galvanized and cohesive group of citizens getting legal about the whole thing, which revolves around issues raised by Mr. Normand in his email. The whole thing could just be smoke and in the end we may find the city has been responsible and solid all along in handling its finances; and all the questions raised by these concerned citizen, to be without substance or merit.

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This exclusive Sedona Times/SedonaEye.com editorial by Tommy Acosta.