Districts In The News

Revving Up Your Revenue – Emerging Trends

| Tags: | John Bliss, P.E. SCI Consulting Group

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The more things change, the more they stay the same. Chronically insufficient revenue continues to be the primary challenge facing special districts in California – but there is hope! Recent surveys, along with a high number of successful ballot measures in November, confirm a resurgence of support for increased funding to local agencies.

Although the fundamental funding mechanisms available to special districts have not changed, there have been significant and profound changes in the best approaches to communication with constituents and customers. In fact, over the last 24 months, political communication and discourse have gone through a radical change throughout the United States and especially here in California. Special districts, take note! Below are three major themes associated with this new approach to communication.

1. Straightforward messaging, but with lots of supporting detail and analysis

Rigorous engineering and financial analysis give much-needed heft and credibility to an effort to increase local revenues. Before engaging your public, perform extensive financial and engineering research and studies, and make decisions based on your conclusions. Make these supporting studies readily available to your constituents, and incorporate to them in your messaging and long term planning.

For example, regarding a recent flood control measure for a small district in the Delta, our primary message was “Upgrade Local Flood Protection from the HMP Standard to the PL84-99 Standard” instead of our more typical “Upgrade Local Flood Protection for Protect Life and Property.” Here, this tightknit community appreciated the more fact-based and quantifiable messaging to typical, vague “consultant-speak” messaging and the measure was overwhelmingly approved.

2. Authenticity is the new buzz word…and it should be!

If “transparency” was the over-used buzz word for the last five years, and it is still critically important, “authenticity” will dominate your constituent communications over the next five years. For special district outreach, authentic communication simply means your communication should be professional but not slick, honest but not rehearsed, passionate but not theatrical. Your constituency does not demand perfection from local government – but it now does demand absolute credibility and full truthfulness. If your district has made ill-advised decisions in the past, or has weathered a scandal, do not sugar-coat it, but instead own it and discuss it.

I recently had lunch with the police chief of a large urban city in California. Unfortunately, his department had participated in the ugliness of racial profiling during the drug wars in the 1980’s and 90’s. He told me that when he speaks at meetings of communities of color today, he readily admits to their involvement in these activities. After he witnesses jaws dropping at his honesty, he can then engage in meaningful and credible dialogue. This is more evidence that credibility, not perfection, is king.

3. Direct public engagement is a must

Authenticity also means direct, uninhibited communication with the public, often in the form of face-to-face community meetings. Again, community meetings need not be perfectly choreographed and should not be slick. Rather than having your general manager and a board member as your primary speakers at your meeting, consider having your district engineer and your maintenance supervisor lead the presentation, and include specific technical detail about your plans. Perhaps they are not as smooth at public speaking, but their knowledge and understanding will come through and be greatly appreciated.

Next, we will discuss some current perspectives on our traditional funding mechanisms.

Community outreach and public opinion polling for water and wastewater agencies

Long gone are the days when water and wastewater agencies could plan to raise rates, send out notices, endure some negative press and a heated public hearing, and move forward. (Remember, water and wastewater agencies, along with solid waste collection agencies, are exempt from the Proposition 218 balloting – they need only conduct a noticed public hearing). Instead, water and wastewater agencies should, and often now are, investing significant resources in outreach, including public opinion polling, focus groups etc., to better understand and respond to the needs of their customers.

The portfolio approach to funding is a must!

The portfolio approach to funding for special districts continues to be the optimal tactic. Special districts are encouraged to consider the five principle elements of a typical funding portfolio. Special districts in areas with even minimal new development should consider two funding mechanisms – a one-time impact fee, and an annual, recurring development-specific maintenance tax or assessment. All special districts should consider fees for full cost recovery of specific tasks, grants, and a community-wide tax or assessment.

Impact fees 

Local government agencies should consider implementing “impact fees” on new development to offset incremental effects on its local facilities resulting from the new development. This typically involves the creation of a supporting study to set the rate, but no balloting is required. Unfortunately, most special districts are not empowered with the authority to directly impose impact fees, so must coordinate with local cities and/or county to administer them.

CFDs and landscaping and lighting districts 

Similarly, special districts in areas with new development should consider implementing an annual special tax (typically a Community Facilities District, also known as a “CFD” or “Mello Roos”) or a benefit assessment (typically a Landscaping and Lighting Benefit Assessment District) on all new development to pay for additional maintenance of district facilities associated with new development. This requires the creation of a supporting study. A landowner balloting is required, but the developed land is typically owed by the developer who is well-incentivized to support the new tax or assessment. The creation of this type of funding is often a condition of development approval.

Fees and charges

All agencies can impose fees for full cost recovery for many of their direct costs, legally referred to as regulatory fees. These fees do not require a balloting, but must be well supported, typically with a cost-of-service study. The fee rates must not exceed the costs of the service. Common examples are inspection fees, plan review fees, and swimming pool use fees, etc.

Note that water and wastewater agencies often generate their primary revenue from property-related fees, typically referred to as water-rates and sewer rates. Although these rate increases do not require a balloting, they do expend political capital, and now require sophisticated outreach as discussed above.

4. Grants

Federal, State, and other grants should be evaluated as a portion of a district’s funding portfolio. However, grants are time consuming and competitive to win, and often come with limitations on use. Also, it is very difficult to develop long term financial plans based upon grant funding.
5. Community wide special tax / benefit assessments 

The most commonly known funding mechanism is the community-wide, balloted special tax or benefit assessment. These mechanisms can generate the most significant amount of revenue, but require community wide balloting approval. They require 66.6+ percent voter support for a special tax and 50+ percent weighted property owner support for a benefit assessment. Most importantly, they also often require public opinion polling, considerable community outreach, and come with the possibility of failure. In other words, the first four portfolio approaches should be fully utilized before embarking on a community wide balloting.


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