Berkeley's Bold Bet on Bitcoin

BY  | AUGUST 2018

Berkeley, Calif., has always had an independent streak. It was named after Irish philosopher George Berkeley, who advanced the theory of immaterialism or the belief that material things have no objective existence. Located across the bay from San Francisco, Berkeley has long attracted people and ideas outside of the mainstream. In the 1960s, it was the birthplace of the free speech movement and hippie counterculture. In the 1990s, an advocacy group tried to bring back the bartering system in protest of economic globalization. And in the 2000s, voters overwhelmingly approved the nation’s first-ever soda tax to counteract the damage done by high-sugar drinks.

But now this city known for its out-there policies is taking perhaps its biggest risk yet: Later this year, it plans on becoming the first municipality in the country to issue municipal bonds using the blockchain technology that underpins cryptocurrency. The project is the brainchild of Mayor Jesse Arreguín and Vice Mayor Ben Bartlett and is being billed as a way to make investing in municipal bonds more accessible than ever. That’s because, unlike the minimum $5,000 bond denomination common today, “cryptobonds” can be issued in denominations as low as $5 or $10. The bonds also have the potential to open up a whole new way for the city to raise money for housing. This is an acute issue since the Trump administration has slashed the budget for the U.S. Department of Housing and Urban Development, cut funding for Section 8 housing credits and targeted sanctuary cities such as Berkeley for federal funding cuts.

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The New Gold Rush for Green Bonds

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BY  | JULY 2018

Hanging on the wall just outside Bryan Kidney’s office in Lawrence, Kan., is the framed first page of a bond offering statement. Unlike most -- or really, any -- bond statements, this one required a color printer. It could even be described as cheeky: It’s for the sale of the city’s first green bond, and every reference to “green bond” or “green project” is printed in green ink.

Kidney, the city’s finance director who shepherded the $11.3 million sale last year, says the green ink originally started out as a joke. 

But then, he thought, why not? When the projects are fully implemented, Lawrence is projected to save 3,201 tons of carbon dioxide equivalents (CO2e) annually, which is equal to burning 3.5 million fewer pounds of coal. “I get really passionate about this stuff,” Kidney says. “I was just so excited that Lawrence stepped up to be a leader in sustainability.”

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Scott Wiener Thinks He Knows How to Fix California's Housing Crisis

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Other legislators aren't so sure.
BY  | JUNE 2018
California's go-for-broke legislator failed this year in his bid to spark a revolution in housing policy. He's ready to try again. (AP)

To California Sen. Scott Wiener, nothing epitomizes his state’s housing failures more than the seemingly endless fight over a five-story condo building at the corner of Valencia and Hill streets in San Francisco’s Mission District. The area is in the Eastern Neighborhoods Plan, which rezoned a third of San Francisco in 2008 to increase density near transit and to make housing more affordable. The lot was formerly home to a fast-food restaurant whose neighbors included several three-story apartment buildings and the historic Marsh theater.

Shortly after the Neighborhoods Plan took effect, a developer proposed a 16-unit building with two affordable housing units on the site of the restaurant. Although it adhered to the new zoning plan, the 1050 Valencia project was to be the tallest building for many blocks, and Mission District residents moved to stop it. In addition to complaining about the project’s height, they insisted the modern building would damage the historic character of the neighborhood. This was despite the fact that the stucco and wood-shingled restaurant there at the time was neither historic nor aesthetically appealing. In addition, the Marsh theater owner was concerned that construction noise and a proposed first-floor bar would disrupt theater business. It took years for the condos to be approved. The developer agreed to mitigate the noise impact and reduce the number of units from 16 to 12.

Not satisfied, the opponents turned to the Board of Permit Appeals, which sympathized with them and lopped off the top story of the building. That reduced the number of units from 12 to nine—and eliminated the two affordable units. “Welcome to housing policy in San Francisco,” wrote Wiener, who was then a member of the city’s board of supervisors. “A policy based not so much on our city’s dire housing needs but on who can turn out the most people at a public hearing.”

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How Cities Fell Out of Love With Sports Stadiums

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Major league teams used to get everything they wanted from sports-mad cities. Now they have to fight for it -- and increasingly, they’re losing.
BY  | MAY 2018
(AP)

St. Louis is used to getting stood up by football teams. The city has been home to four different franchises, and all of them have left town. But the last two departures -- and especially the loss of the Rams to Los Angeles in 2016 -- have been gut-wrenching experiences that seem to have broken much of the city’s storied enthusiasm for sports.

In 1987, St. Louis’ NFL team, the Cardinals, skipped town abruptly. Tired of the old Busch Memorial Stadium and increasingly indifferent fans, the team packed up after 27 years and headed for Arizona. The loss was a bitter one for St. Louis. But the city went after another NFL team with zeal. In the early 1990s, local officials had little trouble winning approval of a new downtown stadium funded entirely with taxpayer dollars. The city failed to win one of two NFL expansion teams awarded in 1993, but eventually it lured the Los Angeles Rams, who had their own problems with an ancient facility and a waning fan base. By 1995, the Rams were kicking off in downtown St. Louis.

It was a time when other cities were making similar choices. The Maryland Stadium Authority built a new publicly funded football stadium in 1998 as a prize for the NFL team it had stolen away from Cleveland two years earlier. Cleveland, in response, built a taxpayer-funded stadium and won back an NFL franchise in 1999.

The Public Startup Charting Bold New Waters

Water utilities are struggling to lower their operation costs and simultaneously meet stricter environmental rules. Blue Drop, the brainchild of DC Water’s former leader, wants to help.
BY  | MARCH 2018
Blue Drop hopes to turn wastewater into a revenue stream. (David Kidd)

Most startups fail. Within the first four years, anywhere from 50 to 90 percent of firms go belly up. Investing in them is risky. It’s easy for things to go wrong.

But Blue Drop LLC isn’t a typical startup. To begin with, there isn’t a hoodie or open-loft office to be found in its modest headquarters in downtown Washington, D.C. And the company’s lone investor, the public utility DC Water, hails from an extremely risk-averse sector.

There’s something else unique about Blue Drop: A healthy portion of its revenue plan relies on selling truckloads of what used to be human poop.

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Taxpayers Have Their Own Bill of Rights in Colorado. But Who Benefits?

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The unique anti-tax tool has defined spending in the state, and it may spread to more states.
BY  | OCTOBER 2017
Anti-tax advocate Douglas Bruce led the TABOR effort in 1992. "No one has had the impact on Colorado politics" that he has, according to one academic in the state. (AP Photo/Ed Andrieski)

The blue tag on the streetlight outside Robert Loevy’s Colorado Springs home in 2010 didn’t signal an upcoming utility project. It was a receipt to show he had paid the $100 to keep his light on for the year. The city was facing a decimating $40 million budget gap and, among many other cuts, it was turning off one-third of its streetlights. That is, unless residents could come up with the money themselves. “I could afford to pay it,” Loevy says today, “but I have to think that would have been a stretch for many lower-income people.”

Loevy, a retired Colorado College professor, says the lights-out incident -- which earned Colorado Springs international infamy that year -- is just one of the many instances in which Colorado’s Taxpayer Bill of Rights (TABOR) has only benefited those taxpayers who can afford to pay for services out of their own pocket. Loevy has been a vocal critic of the law. As he sees it, “TABOR has had its worst effects on poor people.”

TABOR was approved by Colorado voters 25 years ago next month. The constitutional amendment limits the state’s year-to-year revenue growth to a formula based on inflation plus the growth in population. If revenues exceed TABOR limits, the money has to be rebated to voters, unless they approve an increase in spending.

Halfway across town, the author of TABOR holds a more cynical view of Colorado Springs’ recession-era cuts, which also included shuttering pools, terminating bus service on evenings and weekends and eliminating 550 municipal jobs. The deeply conservative Colorado Springs has its own TABOR that puts even more limitations on the city’s property tax rate. To Douglas Bruce, an anti-tax advocate who spearheaded the bill of rights effort in 1992 at the state level, the cuts were nothing more than a “publicity stunt” designed to fuel resentment against TABOR. “It confirmed my belief,” Bruce says, “that the people running city government are sadistic bastards.”

The Next Big Technology to Transform Government

It's called blockchain. Some say it will have a bigger impact than the internet.
BY  | SEPTEMBER 2017
(Shutterstock)

Imagine this: Homeowners no longer need to buy title insurance. The chronology of ownership and claims for every piece of property in a jurisdiction are on an unhackable, constantly updated, always current ledger.

Or this: Governments, companies and individuals can transfer funds from their banks to another bank or party instantly -- without any administrative holding period or fee.

If these sound like future projects, they’re not. They’re both here-and-now developments using an underlying technology called blockchain. Cook County, Ill., is using it to build a land records ledger. Seven of Europe’s largest banks are buying into a blockchain that IBM is putting together for financial institutions. Beyond that, in the wake of questions about the security of voting systems during the 2016 presidential election, many believe blockchain technology will be the answer to securing future elections, allowing them to be audited in real time.

Blockchain has been on a stealth course in government circles in recent months. At the 2016 conference of the National Association of State Chief Information Officers, nobody had blockchain on their priority list. This year, a NASCIO survey found that a majority of CIOs had begun investigating blockchain through informal discussions. In May, the group released a report calling it the “next big transformational technology” in government. “This is a very big deal. It’s so much more dramatic than [when the internet was launched],” says Eric Sweden, NASCIO’s program director for enterprise architecture and governance. “It’s going to have a huge impact on how we do business, accounting, auditing -- anything that has a data lineage to it.”

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Legal or Not, States Forge Ahead With 401(k)-for-Everyone Plans

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Congress jeopardized the future of state plans to help private employees save for retirement. States don't seem to care.
BY  | AUGUST 2017
Fifty-seven million American workers don't have access to a retirement plan through their jobs. (David Kidd)

Matt Birong spent years cooking in upscale restaurants in Boston and New York City. In an industry notorious for low wages and zero benefits, he did something very unusual: He opened a retirement savings account for himself. Birong admits that if his parents hadn’t insisted he do so, he likely would have skipped the process. Even then, the notion of setting up an investment plan on his own would have been overwhelming if he didn’t have a trusted friend in the financial services industry to walk him through it.

Now, as owner and head chef of 3 Squares Café south of Burlington, Vt., Birong wishes he could do the same thing for his employees. He already offers other unusual perks for the industry to attract quality and loyal workers, such as paid time off after one year of service. But setting up a retirement savings program for his roughly 15 employees? “I’ve got my head under a sink making sure the water’s not leaking on the tenants downstairs,” he says. “I just don’t have the time; it’s not that I don’t want to.”

Birong’s situation is similar to that of many small-business owners across the country and is a big reason why half of private-sector workers don’t have an employer-sponsored retirement plan. Of those 57 million people, only a small percentage have saved on their own and those savings are generally paltry. According to the National Institute on Retirement Security, the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households.

Some states want to change that. This July, Oregon became the first to offer a retirement plan to full- and part-time private-sector workers who don’t have access to one through their employer. Eight other states -- California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, Vermont and Washington -- are implementing similar plans that should reach full rollout within the next five years. In general, the programs will run independently from the state and will be paid for through retirement account fees. When the nine state plans are up and running, they will serve roughly one-quarter of private-sector workers across the country. In California alone, the plans will cover nearly 7 million people.

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Nation's Least-Funded Schools Get What They Pay For

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Education funding has yet to bounce back from the recession in many states. But nowhere is the situation more dire than in Oklahoma.
BY  | JUNE 2017
school hallway and lockers
Shutterstock.com

In his 17 years as a school official in Oklahoma, Robert Romines has dealt with more than his share of painful situations. In 2013, as superintendent in the town of Moore, he had to shepherd his system through the aftermath of a tornado that caused $2 billion in total damage, destroying entire neighborhoods and taking down two elementary schools. Today, he is up against a subtler but deeply corrosive attack on his schools: death by a thousand spending cuts.

No state has suffered more than Oklahoma when it comes to education funding over the past decade. As it has struggled to balance its budget in the face of declining oil revenue, spending on schools has declined further than anywhere else. Oklahoma now spends $1 billion less on K-12 education than it did a decade ago. One in five of its school districts has opted for a four-day school week; the base minimum salary for educators hasn’t been raised in nearly a decade; and emergency credentials are being awarded at a record pace to help fill teacher vacancies. Arts programs are going away. Some schools are consolidating their sports programs with other schools to save money. Funding was cut in this year’s education budget for the statewide science fair, in which students compete for awards and scholarships.

In Moore, Romines has tried to hold off as long as possible from making budget cuts that directly impact students. But in the last few years, he has had no choice.

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The City Managers on a Constant Quest for New Places to Fix

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BY  | MAY 2017

 

In the early 2000s, Mark Scott had been working for the city of Beverly Hills for 20 years -- 14 of them as city manager. Thanks to the opulence of the town, it was the kind of place where a budding manager could learn the business minus the typical “city” problems. But eventually the absence of serious issues started to get to Scott. During his tenure, he had watched neighboring Los Angeles endure dramatic civil and social unrest. Meanwhile, in Beverly Hills, luxury merchants and developers were bending over backward to do business. In 2003, the town’s Rodeo Drive Committee announced that the glassware company Baccarat was displaying $1 million worth of crystal chandeliers along the famous road’s median. It all triggered something in Scott, and he decided he needed a change. Or, really, a challenge.

He couldn’t have picked a more opposite place for his next chapter. Scott landed in Spartanburg, S.C., a former mill town divided almost evenly between white and black residents. About one-quarter of the town lived in poverty.