Heal Thyself

by Daryl Slusher

You really have to give the folks down at City Hall credit. They live in their own little world, and they're not going to let anything blast them out of it. No unwanted message or analysis can pierce their cocoon. Consider two of the latest developments -- a consultant proposal to nearly double the size of the Austin Convention Center by the end of the decade, and an audit of city government spending being conducted by none other than top level city management.

Auditor/Auditee

Let's start with management's comprehensive audit of itself. As reported in "Council Watch" two weeks ago, City Manager Jesus Garza is leading a five-year review of nearly every portion of the city budget. The manager will head a nine-member steering committee, seven of whom will be top-level city management staff, and two of whom will be city "middle managers." A small team of graduate students from the LBJ School of Public Affairs will provide research "support."

The idea began with Councilmember Brigid Shea as a comprehensive audit of the city budget. Shea wanted the State Comptrollers to do the audit, but legal problems prevented that. The LBJ students were suggested as a way to bring in the comptroller, but that fell through, and the idea for the management audit committee emerged. All in all, it was a tortured little path that shows how city management can mangle anything that has the potential of cutting the budget or identifying waste.

The Garza-led committee plans to spend five years poring over every aspect of the city budget. They'll study whether the cost of local government is too high, whether city bureaucracy is top-heavy, see if services are being provided as efficiently as possible, and look for cost savings. They'll continue the manager's alleged processes of "flattening" the organization and "delayering," defined as "removing management layers."

Few would argue that such an effort is necessary and long overdue. The big question, however, is whether city management is the appropriate group to take on this massive task. The cliché of the fox guarding the hen house comes to mind, but it doesn't quite work. This is more like asking the fox to give a count of how many hens he has eaten from the coop, and how many he plans to take in the future.

Maybe I'm wrong. I hope I am. Perhaps this project will truly identify fat and waste, eliminate excess management layers, and streamline "customer service." The endeavor would be a lot more confidence-inspiring, however, if the audit committee were just a bit more broad-based. For example, it might have been wise to include a few everyday taxpayers, since it is they who foot the overwhelming majority of the bills for city government. It might have been a good idea to include some business people who could bring their expertise into play. And there are certainly some folks around somewhere who have participated in government cost savings programs on other fronts.

Still another key group that could certainly offer valuable suggestions on efficiency and cost savings would be front-line city employees who carry out basic city services. Bill Spelman, the professor overseeing the LBJ students, suggested that front-line employees be given a larger role, but his advice was ignored. Garza explained it like this to Chronicle reporter Alex de Marban: "Bottom line workers will be interviewed," he said, but "They won't be doing the work. We're not going to pull people from the field."

Well, call me crazy, but that sounds to me like the front-line employees are performing services so essential that they can't be spared for duty on a committee, while management employees have so much more time on their hands that they can. And it's rather difficult to believe that this management committee is really going to "flatten" and "delayer" themselves.

The really scary thing about the comprehensive audit, however, is its five-year length. I'm worried that every time during the next five years that anyone -- be it a citizen, a councilmember, a city employee -- identifies any alleged wasteful spending, the city manager will say, "That comes up in year three (or four, or five) of the city audit, and we will look at it very carefully then." Remember, you heard it here first.

The Debt Burden

Just in case the audit is a serious endeavor, here are a few matters for the committee to ponder. Official projections hold that Austin will double in size over the next 25 years to become a city of one million. That is entirely possible, seeing as how the city doubled in size during the previous 25 years. As the population doubled, though, the total city budget increased tenfold -- from $122.5 million in 1970 to $1.2 billion today. That's a rate of increase faster than both the rates of inflation and population growth combined. If that happens again during the next 25 years, Austin is in big trouble, and will probably never make it to a million in population. More likely, people will move away in droves due to the high cost of living, while those remaining here will live at a reduced standard.

The city's bond debt contributes a big part to the budget increases. Austin regularly ranks near the top in the nation for per capita bond debt. That ranking is often defended on the grounds that Austin, unlike many cities, operates its own electric and water utilities. Well, Austin ranks high even in non-utility bonds, but here let's examine the claim that our overall ranking comes from having both an electric and water/wastewater utility.

The only other major city in Texas that has both is San Antonio, which also has a natural gas utility. As shown in the charts below, San Antonio's total utility debt, including the gas utility, is not much higher than Austin's, though the city is almost twice the size. Based on 1995 population estimates, in fact, Austin's per capita utility debt is 52% higher than San Antonio's. Total Utility Debt

San Antonio Austin

Population 980,000 526,000

Utility Debt $3.3 billion $2.7 billion

Per Capita Debt $3,367 $5,133 The most glaring discrepancy is between the water/wastewater utilities of the two cities. Austin's water/wastewater utility debt is actually higher than San Antonio's -- not just on a per capita basis, but on a straight dollar basis. And on a per-customer basis, our debt more than two and a half times that of our southern neighbor. Water/Wastewater Debt

San Antonio Austin

WWW Customers 268,000 143,000

Water/WW Debt $686 million $980 million

Per Customer Debt $2,559 $6,853 Just a little tiny piece of that water/wastewater debt helps make the Circle C subdivision possible. I'm speaking of that sovereign state out over the Barton Springs/Edwards Aquifer Recharge Zone run by Gary Bradley and Freeport-McMoRan -- the development at the end of the state-funded MoPac Expressway, the development for which federal taxpayers ate $90 million in loans. As I've mentioned before, previous city councils agreed to fund $35 million in Circle C water and wastewater bonds. The debt service payment this fiscal year, paid by Austinites, is $3.04 million. Maybe that doesn't seem like a large enough figure to get upset about, but when you consider that public funding for the Community Action Network, Austin's primary social service system, is only $9.8 million this year -- you start to question the city's priorities. Expand It and They Will Come Meanwhile, a $75,000 consultant study on the Austin Convention Center is in, and the consultants are calling for the city to nearly double the size of the center by the end of the decade. The estimated price tag is $70 million, one million more than the amount of bonds voters approved for the current center in 1989.

The expansion rationale is based on projections of 2-6% annual growth in convention center demand. These increases, consultants say, will leave the city short on space by the end of the decade. Also, argue expansion backers, a larger convention center would help spark the coming of a new downtown hotel.

Now, maybe it's just me, but something doesn't seem quite right here, and the consultant report raises more questions than it answers. First of all, the projected demand pattern isn't consistent with the current pattern. An Austin American-Statesman analysis found that the center was booked less during the 1995 fiscal year than in 1994 (an average of 53% occupancy in 1995, down from 62% in 1994). Doesn't it seem logical that this decline in bookings should get some attention before the city considers expansion?

As to the hotel, I'll bet there's one thought which hasn't occurred to most taxpayers, and that is, "Dang, Austin sure could use another downtown hotel." Even if it would be a good thing, it sure looks like the consultants have the schedule backwards. I mean, why should the city incur more debt in hopes of creating business for a new hotel? In the free enterprise system, aren't private businesses supposed to take risks in hopes of generating future profits? In this plan, the city takes the risk -- with taxpayer funds -- and the hotels profit if the city's venture is successful. If the expansion is not successful, it's no problem for the hotels, just for the taxpayers.

Expansion advocates argue that more guests in hotels generate more bed tax for the city, and more revenue for at least some local businesses. These arguments may be true, but they are based on assumptions that the expanded center will be successful in attracting enough additional business to make the $70 million investment worthwhile, as well as assumptions that subsidizing the convention industry is the best use for the bed tax. (State law permits the bed tax to be used for promotion of tourism and conventions, with a small portion going to the arts.)

Ultimately, it comes down to the priorities thing. Don't forget that this is the same city council, and the same city management, that thought a private baseball stadium was a public "emergency." It's beginning to look like the message from the baseball election hasn't gotten through.