Bond Watch #1, January, 2010

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The Citizen’s General Obligation Bond Oversight Committee was busy at the end of 2009 with meetings in October and December. But one issue dominated both meetings – the 2008 Recreation and Park Bonds ($185 million).

In March 2008 the City Services Auditor division (CSA) of the Controller’s office released an audit of Rec and Park’s preparation for managing the 2008 bonds. The need for this audit stemmed from earlier problems with bond funds. In 2000 the voters gave Rec & Park $110 million for park maintenance and upgrades. The 80 projects suffered from delays and overruns from the very beginning. In my May BondWatch article I gushed about the process and changes the department has gone through to ensure the problems from the 2000 bond did not plague the 2008 bond. I even prophesized that the 2008 bonds will be run more efficiently and effectively. Well, it looks like I’m being proven wrong.

CSA’s March 2008 audit, and the update to the audit reviewed by GOBOC at our October meeting, listed all the same problems from 2000 without much change in 2009. Given the memo, there were a number of things I am was worried about:

• The department is not fully staffed and natural personell changes and new employee training may cause further delays;
• Six out of seven of the 2008 bond projects have revised completion dates from the baseline schedule from 5 to 15 months late) and the project delays will inevitably lead to increased project costs;
• Rec & Park’s project management system, IMPACT, which we were told was going to improve the entire process, seems to be causing as many problems as it solves.  

The GOBOC talked to both the CSA division and Rec & Park at our October and December meetings. As usual things are more complicated than they seem. Rec & Park, represented most of the time by new General Manager Phil Ginsburg, discussed the department’s response to the audit which included some claims we have heard before and a few new ones:

• The public review process was lengthier than we anticipated;
• Any staff openings are not affecting projects:
• Many projects are not delayed or just slightly delayed when compared to the revised schedules previously reviewed by GOBOC:
• The construction bid environment is so favorable that costs will come in below estimates regardless of any schedule changes;
• The IMPACT system is getting better and better.

As a group, we were not completely convinced by Rec & Park’s claims. For example, they cannot rely on the favorable construction bid environment when the schedules are slipping and the environment is changing quickly. However I do believe that Phil Ginsburg, who’s been on the job only since July of 2009, is taking a more active oversight role of the capital improvements group in the Rec & Park department and I’m hoping that we will see the improvements in all the projects in the near future.

The GOBOC has the authority to stop new bond sales for projects that we feel are not being executed correctly. The committee has never exercised that authority; I don’t even believe they have ever discussed it – that is until the December 2009 meeting. Although we did not decide to stop a new bond sale scheduled for early in 2010 (just over 20% of bonds have been issued), we will be watching the projects closely and will take action if needed.