Utility consulting is sexy...no, really

This article taken from The Birmingham News.

Just Winging It Doesn't Work

Wednesday, May 14, 2008
THE ISSUE: One reason Jefferson County got into so much mess with its sewer financing is the lack of a policy to manage its debt.

Jefferson County did a lot of things wrong in financing its $3 billion-plus sewer program. Nothing more so than not putting in place a policy to manage its debt.

The county amassed more than $3.24 billion in sewer debt without many of the accountability practices that other municipalities use successfully to stay out of financial trouble. Without those guidelines in place, the county debt got out of control.
The most glaring omissions are policies limiting the use of variable-rate debt whose interest rates can increase, requirements that financial work be competitively bid, and a debt ceiling on how much the county could borrow.

Instead, as News business staff writer Russell Hubbard reported Sunday, Jefferson County officials kind of winged it, with no meaningful policy on what and how much they borrowed or how those financiers were chosen.

For most of the sewer work, the county also didn't employ a professional program manager to oversee the projects. That left the massive, court-ordered sewer overhaul in the hands of county commissioners and department heads who lacked the management background and skills for such an undertaking.

The result: The county took on more work than was required by the court consent decree or that it could afford, paid too much for the work and created a breeding ground for corruption that led to bribery convictions of county officials and contractors.

Likewise, in the absence of an adequate debt management policy, the county borrowed too much, put too much of its debt in risky schemes and paid far too much to lawyers and bond underwriters who didn't have to bid for the work.

Now, those poor decisions plus turmoil in the municipal bond market have brought the county sewer program to the brink of bankruptcy. Interest payments on the debt have more than doubled in the past three months.

This might sound somewhat akin to closing the barn door after the livestock have fled, but adopting a debt management policy ought to be among the reforms county officials need to embrace to help get and keep the county's financial ship in order.

Another needed reform is hiring a professional county manager to run the day-to-day activities of the county, freeing county commissioners to concentrate on policy-making. Shelby County has 15 years of experience with a county manager, and it has worked well there.

Unfortunately, a majority of Jefferson County commissioners are resistant to hiring a county manager. They like the power their dual roles of making policies and carrying out those policies give them.

Bills in the Legislature this year and last year to create the position of county manager went nowhere. It would certainly help the bills' chances next time around if county commissioners admit they need help.

Of course, there's nothing stopping county officials from adopting a debt management policy now. It doesn't require reinventing the wheel. Cities like Portland, Ore., have model policies Jefferson County could copy. Plus, the Government Finance Officers Association has information on its Web site to guide local governments in developing a policy.

We've seen how winging it worked. It's past time to try another approach.