United States Public Administration: to analyze, synthesize, think critically, solve problems and make decisions

Question #3. Competency: to analyze, synthesize, think critically, solve problems and make decisions

You are the Chief Financial Management Officer of a California county (Riverside county). The CAO has tasked you with proposing a funding plan for a proposed Water Management Policy that will require an initial outlay of $20 million dollars and subsequent annual outlays of $5 million for the foreseeable future. How will you approach this task? What information do you need to know? What possible alternatives are there? What are their pros and cons?

Make a recommendation supported by evidence and reasoning.

How will you approach this task?

Developing a comprehensive strategic financial and operational plan that addresses the Water Management Policy and details the policy goals.

1. Stakeholder Analysis

2. Information (E.E.F.F.) -

a. Fiscal Analysis - To analyze health

3. Alternatives

a. Pros

b. Cons

4. Recommendation & reasoning

Stakeholder Analysis

What information do you need to know?

The Current Water Management Uses of the County!

(E.E.F.F)

1. Evaluate Community Water Conditions

a. Current water management uses

b. Historical data

-Is there already a current user fee in place and if so what is the typical revenue on that?

2. Establish goals to guide government decision making

a. Community needs

b. Challenges

c. Priorities

d. Opportunities

3. Fiscal analysis of the county

a. Asses current water management system

b. Asses fiscal health (what conditions are we at w/ money) (what money do we have coming in and out)

c. Financial policies

d. Cost benefit analysis

4. Funding

a. Accessing needs

b. Identify potential funding sources ( Federal & State Grants)

3 Alternatives: Pros and Cons

Alternative #1: Secure one time funding for the initial $20million cost from a traditional revenue bond and create a user fee to fund the $5million annual cost,

· Utilizing bond financing for the $20 million is a type of long-term borrowing that will help us raise money for this purpose.

· However, this option would require the bond to be voted on by the public and added to the ballot by the legislature or through a petition from Riverside residents.

· To cover the $5 million annual cost we would raise water usage fees to pay off the bond as well as provide funding for the $5million annual cost.

· Water users would pay a fee per month, based on usage.

PROS

· The revenue bond is a long-term debt that will be paid back over several years.

· Creating a user fee will create a funding source.

· This alternative will not have a great impact on our current budget.

CONS

· Must be voted in, therefore not guaranteed type of funding.

· Requires buy-in from all stakeholders. Everyone needs to be onboard, and this is not easily achieved.

· HP: For example: In CA 2018 Prop 3 is a good example of a water bond gone wrong - it was the first rejected water bond since 1990. Although supporters argued that the bond would fix crumbling infrastructure, bring clean drinking water to disadvantaged communities and kick-start badly needed environmental restoration projects, the measure did not pass. The reason being the Environmental groups like The Sierra Club spent millions to campaign against the measure. (goes to show how important stakeholders are) Video https://www.youtube.com/watch?v=HF3Rprl6_EE

· HP- The challenges faced in this alternative, will create a lengthy process, which may result in push back from stakeholders internal and external.

Alternative #2: Secure funding for the initial $20 million cost through federal and state grants. The annual $5million cost will be secured by making budget cuts throughout the organization.

· Based on our research there are grants offered through federal and state.

· For example the Environmental Protection Agency (EPA) offers Drinking Water Grants to promote public health and the protection of the environment.

· Through our fiscal analysis of Riverside County we can identify which departments may have a surplus within their budget. This surplus will determine the budget cuts and will then be used to fund the $5 million.

PROS

· Assuming that we are being awarded the grant. This will minimize our expenditures.

· Low impact on our current budget.

· No debt

· This option will not financially impact Riverside residents and users.

CONS

· Grant does not guarantee that we will get awarded.

· There will be pushback from various departments that may be impacted.

· There is not enough surplus to cover the $5 million.

· Grant: restricted funds, competitive proposal process

Alternative #3: Finance $10 million debt through a bond and the remaining $10 million through the use of the reserves. Create a user fee to fund the $5 million annual cost.

· Utilizing bond financing for the $10 million is a type of long-term borrowing that will help us raise money for this purpose.

· In addition, the remaining $10 million will be funded through Riverside County reserves.

· The annual costs of $5 million will be funded by a new user fee.

PROS

· Not a significant impact.

· Lower debt because we are only financing $10 million.

· Do not have to make any service cuts.

· This is a long-term debt which will be paid back over several years.

· Creating a user fee will create a funding source.

· This hybrid financing model will allow the county to keep most of its reserves and only finance a portion of the project.

CONS

· Utilizing county reserves can be risky, if forecasts show potential for budget shortfall or future recession.

· The user fee & bond must be voted in, therefore not guaranteed.

· HP- The challenges faced in this alternative, will create a lengthy process, which may result in push back from stakeholders internal and external.

Recommendation / Conclusion

“I would recommend Alternative 1 to the Riverside County board of supervisors because: It secures one time funding for the initial $20million cost from a traditional revenue bond and creates a user fee to fund the $5 million annual cost.

· First, this is a traditional revenue bond; it would be one legislative process and so resources can be focused on lobbying on this plan alone. Therefore, increasing the likelihood of its passage and decreasing the use of resources. Secondly, the user fee creates a funding source which will allow the county to maintain its reserves, not requiring budget cuts. Third, since the bond and the annual cost will be paid through an increase in user fees it simplifies the cost on the user end, therefore there is only one fee that the users would need to pay. Spread across all users the fee would be minimal and not prohibitive, ensuring equity and access. Finally, based on the aforementioned this alternative will have a minimal impact on Riverside’s current county budget.