Since then, I’ve largely taken the summer off from Trenton politics because I was too depressed about the election including the city council contest in which most of my choices lost.  But still there’s hope.

Now here we are, a month into our new government, with a well documented litany of bad and possibly nefarious decisions and revelations coming out of city hall.  The regional and national press is covering Trenton’s train wreck.  Citizens are openly discussing recall elections and State takeovers.  Our murder rate has spiked and absolutely NO progress has been made on actual revitalization.

 Mr. Mack is wrong when he says the election is over. He wasn’t the first choice of a large majority of Trentonians in the first place and even if was, he’d have to win them over daily in order to get the city moving.  Great politicians keep campaigning.

Reinvent Trenton and subsequently the Fix Trenton’s Budget group were set up calmly discuss revitalization policy and budget process.  This is hard to do in the best of times but in an environment devoid of trust, I’d say it’s impossible to initiate brave new policies.

For Trenton to take new approaches like the ones I’ve outlined over the years, we’ll need to take leaps of faith in our leadership.  Our leader will need to bring along not just people like me, but all of the citizens in Trenton.  Tony Mack himself once told me, “Dan, I like your ideas, but how will they play in the Wilbur section?”.  I thought it was an excellent question and I gave him what I believe was the good answer, “Rising water raises all ships”.  No matter who we are, we’re better off with more wealth in Trenton.

To get his administration back on the right leadership footing and to earn the ability to lead us in the policy leaps of faith, Mr. Mack needs to do a few things. 

• Institutionalize transparency,  especially into his own finances

Anyone in Mr. Mack’s financial situation would be desperate.  However, not everyone is mayor of a small but high profile city.   His situation damages his leadership ability but more importantly gives rise to suspicion that he will abuse his power in order to resolve his debt issues.  To abate these concerns, Mack needs to put his finances under official third party scrutiny until he’s resolved his problems.  This is uncomfortable I’m sure, but how else will we be able to establish trust?

• Develop a revitalization plan that passes the test of economic soundness

None of the candidates offered real revitalization plans and to be fair, it would be hard to do so without the resources of a city administration.  So now, Mr. Mack needs to get down to work on this.  So what is  “this”?  The budget is only part of the problem. When we talk about cuts, we’re really talking about surviving.  We have to talk about not just surviving but thriving.  I’ve said many times,  that this is harder than rocket science and therefore we need a serious effort.  We need a solid team led by a serious person.  While Mr. Guhl may have been a serious person, the idea that the solutions to our city’ core problem would be resolved by a volunteer who could easily resign, is ill-conceived.  I’m not saying volunteers shouldn’t be welcome to work on this (I’ve repeatedly volunteered to help and to no avail) however leadership should come from a cabinet level city employee (or at least a paid consultant).

• Slow down and begin operating from a core set of management principles

One of the observations I’ve made about Tony Mack over the years is that he seems to manage in the minutia.  I remember him offering marketing tips to the Marriott when his central complaint was about the ownership structure.  People like this are often shooting from the hip.  Great chief executives don’t do this.  Rather, they operate from a well communicated set of core principles (e.g. integrity in government, create a positive business environment, be fair).  Then they focus on developing and managing their subordinates and fostering communication.  I wrote an article,  “Trenton as a Turnaround Opportunity” a couple of years ago that Mr. Mack will find worth reading and perhaps discussing with his advisors.

Running a water company for Ewing, Hopewell and other towns isn’t core to the business of running Trenton. It’s safe to say that we have more pressing concerns than whether or not our neighbors to the north have good water pressure. Continuing to run TWW would stretch our already thin and getting thinner, management resources.

Those that argue against the sale need to consider the big picture.

After all, it’s not as if owning the water works is somehow a birthright to all Trentonians. In peril of not having studied the history of TWW, I’ll guess that sometime long ago, Trenton was the stable big brother to Ewing, Lawrence and the others. With an attitude of taking care of our young neighbors and empire building, it probably seemed a good idea to run their water systems.

However, running Ewing’s water system isn’t core to Trenton’s management and never was.

Some opponents have complained that by selling TWW, Trenton will miss out on a revenue stream that it needs. While we will forego a portion of the revenue (we maintain a wholesale capability) we also forego future expenses and capital improvement costs.

Hopefully the administration or its professional advisors have done an analysis that compared the NPV (Net Present Value) of selling TWW vs. keeping it.  The NPV of selling it is $80M (i.e. the sales price)

The NPV for keeping it includes an analysis of future cash flows as follows:

• Revenues for the suburban water, expenses associated with the revenue and estimated capital upgrades and repair costs.
• All of these would be added together over time and discounted to present value.
• That present value is hopefully less than $80M.
• Extra credit if the admin did some scenario analysis (particularly a Monte Carlo analysis) to test an expected value for the NPV given a variety of scenarios (i.e. what if a major repair is needed).

My hope is that Council was briefed by the professional help on this analysis and all seven were comfortable with it.

Did we get a good deal?  We got as good a deal as those in power could negotiate.   It was in their interest to maximize the sales price. The $80M sales price factors in future revenue and costs. By selling the asset we’re getting the financial benefit up front so we can re-invest it in a way more closely aligned with the city’s strategic objectives (like lowering our debt burden).

At a broad brush, the city of Trenton should not be in the water business outside its borders. We’re stretched thin at managing things in general and there is a real risk that things could go wrong (pipe breaks, contamination, corruption). Reasonable people support the sale, including me.

My concern is over what we do with the funds.

We have a few options of what to do with the $80M in sales proceeds from TWW.

• We could pay down $35.7M of water utility debt and spend the rest plugging budget gaps for the next two years. This is the administration’s current proposal.
• We could use all $80M to pay down debt principal.
• We could pay down $60M in debt principal and use $20M to plug the hole in the 2009 budget.

In principal, we should use the proceeds of the sale to pay down long term debt. The value in TWW has been built up over many years by many Trentonians. We should want their efforts to be repaid to generations to come, not to just those of us living in Trenton today.

Furthermore, reducing the city’s overall debt level increases our flexibility to fund future capital projects.

The argument against using the proceeds to fill budget gaps is similar in logic to how businesses and homes manage their budgets. We don’t sell our car or home to pay for groceries. Rather, we invest the proceeds in other long term assets (new home, college education). By paying down an additional $44M in principal we reduce debt expenses in future budgets by $2M – $3M per year.

By using the proceeds to plug holes in the 2009 and 2010 budgets, we are using a precious long term asset to cover up our spending problems for just two years. The 2011 budget and beyond will have even bigger shortfalls ranging up to $30M.

To avoid any perceived impropriety, the Palmer administration should not use the TWW sale to fix current budget issues at the expense of future budgets and future administrations.

Instead the administration should propose the following:

• Pay down $60M in long term debt
• Use $20M to plug the 2009 problems (its too late to fix this year any other way)
• Get busy fixing our structural issues in advance of 2010

The long term fixes to our budget’s structural problems will come in six areas

• Reduction of long term debt ($60M from TWW sale)
• Non-resident wage tax
• Property re-assessment & rate increase
• Implementation of a land tax (or fines on vacant property)
• Accelerated sale of city owned property (at nominal prices)
• Realignment of the budget towards revitalization

Fixing our structural budget issues is hard work. Using proceeds from the TWW sale to fix the budget is an easy shortcut. The question is whether the Palmer administration, along with city council, will undertake the hard job of restructuring our budget or simply leave it to the next mayor.

Mayor Palmer will leave a positive legacy in Trenton if he can work through these thorny issues by the time he leaves office. I, for one, am ready to help.