Greetings and welcome back to ZapCast, the official podcast of Local Government Nerdery. I'm Chad, that's Pat, and today we are going to talk a little bit about sales tax, where it's headed, uh, across the state of Texas. Um, spoiler alert, not so good. Um, Patrick has a, a podcast this morning that piqued his interest, and so we're gonna talk about that. I- I'm curious to see if it's going to sort of tailspin into a conversation like last week. But, um-

Well-

... either way, it's gonna be fun

... we're going straight to, we're going straight to business today, though. I mean, we're, we're staying away-

Yeah

... from all the sports conversations, you know. All of Chad's teams are out, so we're just gonna go straight to business today.

All of everyone's teams are out.

Yeah, that's true. My Texans lost last week.

Yeah, I was gonna say, you wanna go down that road? We can, but, uh, anyway-

I promised myself we were gonna, we were gonna make this very informative, very short.

Just jump right into it.

Jump right in.

Concise.

Yes.

Yes. So it's an important-

Well, and it's an important, it's an important conversation, right? So we need to be concise.

It is, which it's also very good that we're sitting here talking about how concise we're gonna be. Yeah?

concisely.

Okay. Okay, so let's just jump in real quick. Uh, first topic here, sales tax, uh, local sales tax across the state of Texas, like, what, what are the trends? What are we seeing? Um, we had a client reach out asking for a little bit of input on, um, on their January sales tax numbers, right? 'Cause we've been importing this week, getting all that information out there. And so we start kind of taking a look and noticing a couple things, uh, that are really highlighting some stuff that we've been talking about for almost a, a year now. But I think it's time to go ahead and, like, talk about some actual numbers. Um, so before we begin, Pat, I think it's important that I kind of explain, um, how our momentum analysis works. I think that's fair?

Yeah, let's get nerdy.

Okay. I have not rehearsed this, so you'll have to bear with me. But essentially, one of the, one of the f- easiest things that you can look at from a moment- momentum standpoint is your short-term average versus your long-term average, right? So, like, maybe you look at your 12-month moving average compared to your 36-month moving average, and in ideal times, those things are spreading farther apart. Your 12-month average is getting higher, uh, than your, uh, farther away from your, your 36-month average. When those things cross over, and that 12-month average dips below the 36-month average, that's when you're in a really bad spot. Um, but the hardest part about looking at that particular chart is seeing what the inflection point is at the top end, right? So, like, my, my short-term average is still above my long-term average, but I really wanna know when it starts to get closer, right? Like, when that inflection point is hit, and I'm, I'm starting to actually slow down. And so that's where this, uh, momentum analysis that we have in ZacText comes in. It is something that you can do, uh, on your own. It's really just sort of a, a... It's very similar to the MACD, uh, stock analysis, which I hope that's how it's said. I've never heard anyone say it. I've just read about it. But essentially, what this is doing is comparing the difference between your short-term average and your long-term average and, and trendi- or trendlining those two values, right? So, uh, we look at, at the difference between those two, the 12-month average and the 36-month average, and we create a shorter six-month moving average of that value, right? Then you can sort of look at that inflection point. Essentially, when that, when those lines cross, that's your inflection point for the 12 versus 36-month graph. Does that make any sense, Patrick?

No, yeah, that makes sense.

Okay. Well, I assume that we're gonna have a blog post about this, so maybe I'll be able to explain it a little bit better in writing than I can extemporaneously, um, via just talking about it. So, um, but either way, essentially, it, it's a type of analysis that doesn't look at the averages per se. It looks at the inflection points of those averages and how they're comparing with each other. So we pulled, uh, sales tax collections across the whole state of Texas over the past three or four years and ran this, this momentum analysis for every city. And, um, I sent Pat- Patrick, I sent you a couple of, uh, pictures f- a little bit earlier today, uh, and then when we jumped on this Zoom call, we kind of looked through them again. It's ug- it's kind of ugly.

It's really ugly. It's, it's so ugly that we have to blog post about it. We have to send an email out to the clients. Uh, and, and I mean, granted, like, we don't, we don't do that very often where we, we have to, like, raise the flag and tell people, like, "Hey, you got to start paying attention to this." I mean, I, I think the last time we probably did that was, like, COVID, where we told people not to reduce their budgets by 50% because it wouldn't be that bad. Um, but I think we're in a situation here where, um, as we get into mid-year adjustment cycle, right, and, and what these things are looking like. So just give people a visual of what they're going to see when the blog post eventually comes out. Um, the, the blog-

Yeah, so this is basically a map of Texas, and it has a lot of red dots on it.

Yeah, correct. It, it has a lot of red dots today because the momentum is turning negative, right?

Mm-hmm.

Uh, it, if you go back and look at two years ago, that momentum was very positive, right? As we were looking at, uh, you know, there's a lot more green on that map in 2022 than there is in 2024. And so, um, and, and granted, you know, we were, we were coming out of some pretty crazy inflationary times, but I think what we're, what we're looking at now is, is, is we're starting to see-

No, what's wild, we were in the inflationary times.

Yeah, that's correct. Yeah.

Right.

So yeah, I'm sorry. Good correction there, for sure. Um, the... I, I think what, what we're, what we're gonna see is cities are going into mid-year adjustments, right? We're, we're coming into March. We're coming into April. This is the time of year where people are starting to put together their projections for the fiscal year, their projections for the end of the fiscal year. Um, and everybody already knows that sales tax has been a bit soft. We've actually been talking about sales tax being soft now for, uh, I mean, not to put myself on the record, but probably over a year that we've started to see softness in especially the retail sector.Um, you know, there was, there was some, some good, you know, uh, credit card swipe data and some things that came out, uh, and some good articles that were coming out that were kinda forecasting, you know, consumer spending was dropping and consumer savings was dropping, so therefore spending would drop. And so we, we knew that we were gonna face this, uh, moving into the cycle. Um, but there were quite a few cities, uh... And, and rightfully so, I think what we saw then, there were quite a few cities that were still projecting pretty significant sales tax increases in the fiscal year that we're currently in, so FY24. Um, and I, I think we're, we're now faced with, uh, the reality that at the midyear, uh, some cities have started to see drops, and we saw drops through the holiday seasons, right? So we're seeing January sales tax numbers come out, uh, which obviously is November sales. We're, we're gonna see February, uh, here in, in two, three weeks, and we're gonna continue to see these numbers that are just flat or negative. Uh, and the momentum analysis is showing us that we're probably gonna continue to see those numbers as things soften, and continue to soften. So, um-

Yeah, so it's important to understand, like right now, Patrick, I'm showing you, this is a map of January allocations, and I've basically just got red dots if the year-over-year change for January was down, and a green dot if it was up. There's a lot of green on this map.

Yep.

Right? There's a lot of cities who are still experiencing year-over-year growth, um, from a mo- on a month-to-month basis. The momentum analysis, on the other hand, is showing us what, where, what is the actual direction that we're headed, though. Right? So that growth is-

We're, we're moving towards the inflection.

Yes. That growth is slowing.

We're moving towards the crossing of the lines.

Yeah.

Like the-

A lot of, a lot of cities are already below that line, where that growth is definitely slowing, if not already negative.

Yes. And, and-

So even if you are still experiencing nominal growth, that growth is probably slowing to a point where you need to start really paying attention to it.

And, and I don't, I don't remember in graduate school which professor it was of ours that really focused on the 12 over 36 line. Um, I- I- for some reason, like always in my mind I think, like, um, um, Ghostbusters when you look at those lines, because it's like you don't wanna cross the streams. Like, it's really bad if you cross the streams, and when they cross the streams you gotta really pay attention. We're, we're at that point. Like, the streams are crossing.

Yeah.

And, and even-

That's also like, uh, Crossbones Jones. But-

Pretty... Yeah, there you go. So-

I'll just leave it at that.

So, um, y- you know, it's just, it's... Look, we're not gonna, we're not gonna dig into this. We're gonna put more detail out there, and we're gonna show you, um, we're gonna provide you in the blog post a video that shows you the movement in the momentum analysis across the state. It's a really cool picture. Chad did some good work on this. Um, and, um, you know, really, really kinda put some time into this to show people what that looks like. We're not telling you the world's ending, we're not telling you the sky's falling. W- what we're telling you is when you get into midyear adjustments, uh, now's the time to start thinking about that so that you're not trying to triage a major issue as you get into a new budget cycle. Um, let's try to make the adjustments in April and not really have any major impact on city services and things like that, instead of waiting until budget adoption and figuring out that we have to make up for a previous year's issue plus the future year issue. Um, we're, we're giving you kind of a, a heads-up that it just doesn't look great. Maybe things change economically, maybe interest rates falling will have an impact on this before we get to October. It's entirely possible. I'm not a super Negative Nancy about the economy in Texas. I actually think Texas is pretty stable. Chad and I believe that we're not... I mean, for the most part I think your current prediction is, like, you, you believe that there's a 28% possibility, we do this every week, but you believe there's like a 28% possibility that we go into a recession, right? Um-

Over the next, over the next 12 months.

Over the next 12 months. Uh, so... And we're not, we're not, like, thinking that there's just gonna be this world-ending event, but what we're saying is is that revenues are slowing down and you need to be prepared for that, especially if you were predicting that they weren't gonna slow down at the speed they are. So.

Okay.

Yep. Onward. We told you this was gonna be, like, really quick. And, uh, we're gonna, we're gonna move on to the second one. So I listen, and I actually listen to this with my kids on most occasions. Um, my, my kids are almost 12, almost 9. Um, and, uh, usually on the way to school, uh, my eldest specifically really likes to listen to the, the Wall Street Journal, The Journal podcast, uh, that comes on every day. Uh, it usually gets released at like 3:00 or 4:00 in the afternoon, and then that next morning we listen to it. But there was a podcast, the title of that podcast, Chad, I sent it to you, right? Is, um... Yeah, 'cause you listened to it, of course. Sorry. Uh, the computer glitch that caused nearly 1,000 convictions. Um, this is a podcast specifically about the postal service in, uh, in Great Britain, uh, in England. And the postal service in England runs quite a bit different than it does in the United States. They're almost like little mini franchises of the postal service. So people have, um, little, uh, post offices, or they call them posts. Uh, and, you know, they could have cafes or shops or other things that are in there, uh, that also generate business. But they have, like, the franchise to be the post office for that small community or that area. Um, and, you know, they-

It's kind of an interesting idea.

It, it's actually a fascinating idea-

Yeah

... because our postal service in the United States is incredibly inefficient. Um, and, you know, this seems to be, not only that, it's just, it's like a, it's like a city-making type of deal. Like, you're creating, um, you're using a government service to create it. Uh, it'd be cool, like, if the UPS Store, which does a lot of things in the private side. I use the UPS Store all the time. Probably a lot of people do too, 'cause that's where you return most of your Amazon stuff. But, but the UPS Store, it'd be cool if they had a coffee shop. Like, that would make sense. I feel like I'm at the UPS Store three times a week. I don't know about you. But-

It'd be tough, because they tend to go for very small spaces.

They do, yeah. They'd have to open up some retail space there, you know, at the very expensive $36 a foot that rents go for these days probably. But-So anyways, this, this episode of the podcast, and we'll, we'll link to the journal podcast on, uh, the show notes. But, uh, this episode specifically talks about these individuals. And back in the early... late '90s, early 2000s, uh, the postal service there in England changed over to a very complex, uh, software system that all these small post offices had to transition to to manage all of their sales and, uh, basically their reporting requirements. Uh, so their register systems, all that type of stuff was, was used. It was a, um, it was a, it was an out-of... It was a big contract. It was like a billion-and-a-half dollar contract, I believe. Um, you know, sizable, very complex system, and it was rolled out to all the postal offices that are out there. Unfortunately, there were quite a few bugs in the system, and there were, uh, just a multitude of things that went wrong in the process, in the checks and balance process. Uh, and Chad, before we started this, you were curious, like, which direction I was gonna take this, and I'm kinda gonna give you a little bit of, uh, an idea here. But, um, what occurred is, is they rolled the system out, and these small, little... You know, basically we call them postmasters, but these small, little postmasters started losing money, as in, as in money was missing, right? So they would do their weekly reconciliations, and then little by little they'd be missing $1,000 or $2,000, and it just started adding up. Well, instead of the postal service going in and trying to find something that was wrong, um, they prosecuted and convicted over 1,000 of these individuals. And the reason this is coming up now, because, you know, obviously this lasted from '99 to 2015, but the reason it's coming up eight or nine years later is because there is a, a new TV show in England that has just taken off. Um, and it's, uh... it basically is talking about this fiasco that happened at the, the postal service. And it's, uh, Mr. Bates versus, uh... I think it's Mr. Bates Versus the Postal Service or something like that. Um, which I find that funny, 'cause I was a big Downton Abbey fan, and what the... Mr. Bates was on, uh, Downton Abbey as well. Seems like a very common English name.

Mr. Bates versus the Post Office.

Hey, yeah, I was, I was close. So, um, it's become the most popular television show in England, but it's created this, this uproar because people did not realize that 1,000 people or so had been convicted of these crimes-

Mm.

... um, and the state has done nothing to rectify it, and later found, obviously, that, you know, there was an issue with the software. It was not found by the postal service themselves or the inspector general of the postal service. It was found by two people, uh, one who had pled guilty to a lower crime in order to kind of cleanse themselves, uh, and in a Wonderful Life moment owed the postal service $36,000 and couldn't come up with all of the, the money.

It was £36,000.

The small... Yeah, sorry, £36,000, which, um-

I think they said it was over $70,000 at the time.

Yeah, so over, over $70,000 at the time, and couldn't come up with all of that money. And so if they couldn't come up with that money, they were gonna have to go to prison. The small town where she ran that post office actually started dropping off money to the postal service and was able to collect enough money to... so that she wouldn't have to go to jail. So, you know, it's like A Wonderful Life, you know, when he loses all the money because he accidentally gives the cash and... If you watch that movie, it's a good movie. So anyways, getting to the end of, of my comment here, this goes on for 16 years where they just continually go after people for stealing. Um, and then eventually this one lady who, who was convicted and Mr. Bates, who, um, I don't believe was convicted, but he basically fought back, right? So-

No, he was not convicted.

Yeah. But he, he figured out that this was happening to hundreds and hundreds of people, and so he started to fight back and he started to look into the software program, and that's when they figured out, right, that there was an error in the software program. Um, so that's the background behind it. Now, you want me to start with my thoughts, or you wanna go first?

I would like you to start with your thoughts.

Okay. So my thoughts are very specific to when you build a complex system that does not allow a normal, caring person to look out for the best interest of a human, you are asking for trouble. So what I mean by that, and in any city service, I, I say this, but when you build a system where there is not a person who can oversee the operations of that system in a knowledgeable way, this was such a complex software program that there was not a single individual who had an understanding of how it operated or how it worked, right? And because of that, there was no check or balance. There was nobody logically in this large governmental organization, managers, executives, investigators at the OAG, uh, Internal Office of Investigation, basically. Nobody stopped to think, "Wow, maybe this nice little lady from this small town who's run this post for a long time didn't steal. Maybe we should look at the software itself and see if there's something going on." And the reason was-

Well, also, yeah, also even if maybe she was, if sh- she was continuing to steal after we identified that she was stealing, that seems unlikely.

E- exactly. And but the software itself was so complex, was so difficult for a single person to analyze and understand what was happening, or when you pushed button A, what happened with B and C. You know, for city managers out there, when you make a journal entry in InCodeNot everybody understands how that journal entry impacts the other things that happen, the other funds or the payables or anything like that. But there are people who do understand that, right? You c- at least can pick up the phone and call somebody. This was a situation where it was so complex, there was nobody who understood it.

Yeah.

And the vendor just kept telling them... The, the vendor got, got paid, by the way, a billion and a half dollars to roll this out. The vendor just kept telling them, "No, it's on you, and it's not happening to other people." It was hidden in the customer support. The customer support was not coming through the Postal Service itself. It was coming through the vendor, and the vendor just kept telling all these people, "No, you're a criminal, and nobody else is really a criminal. It's just you all by yourself." And then they find out years later, right, bam, there's 1,000 people they've convicted for this same crime that, you know, lost livelihoods just because of one complex system.

Yeah.

That's my thought.

Okay. So I would say there's a couple things going on here. Um, one of them has to do with, with incentive alignment, right? The, the, the w- I guess you could say, like, the watchdogs. Maybe it's just customer service, whatever. Um, that was the vendor who has an incentive to hide the fact that their software is screwing up. Uh, right, 'cause the entire post office is running on it now.

Like a door plug on a Boeing 737?

Yeah.

Yeah. Okay.

Um, and there's no one with any level of accountability in the Postal Service who's tasked with making sure that what the vendor is saying is actually accurate. I think there's another element which in some ways was unique to England or Great Britain in this particular scenario, but it is, I think, human nature, uh, as well, which is why it's codified in our legal system. The concept of innocent until proven guilty is extremely important. Um, and in the podcast, they mentioned that around the same time, a new law had passed which said that basically if evidence comes from a computer, it's deemed to be correct and true. Like, you don't have to... Do you remember that part of the, of the-

Yes

... the episode?

Yeah, I do.

The, the burden of proof then switches from the accuser to the accused, right? So-

Which is super un-Amer- super un-American.

Yes.

Right? But yeah.

But I think, uh, I think that one little element is kind of indicative of why this whole problem was never identified and rectified until so much later, is that there was already the presumption of guilt, um, rather than of, of innocence. And, uh, there's probably a lesson in there for how, um, how we handle, you know, conflict and issues with personnel and things like that.

Wow. I was, I was gonna say, your breakdown of that, so good.

Well, thank you.

R- I mean, just, just thinking about it from that perspective, right, like looking through it, the, the legal system differences, I, that, I find that fascinating, right? Like, are, are Americans just because of the way our legal system's set up, are we just naturally more skeptical?

Um, no. We are not... I don't think anyone is naturally more skeptical.

Okay.

One of the things that they, uh, they talked about was that it's because so many of these people had pled to lower c- lower crimes. Once this information became known to the public, there was still a lot of skepticism because, well, these people all pled guilty, right? Like, they must have done something.

Yeah.

Um, and that happens with, like, 90% of all criminal cases in this country too, right? You have-

Yeah

... uh, charges come at a certain level, and then we plead them down. Uh, and then, you know, do you take a conviction or you take, you know, what- whatever you're gonna do, maybe it's probation, whatever. But you're a- you're a- admitting to the fault on some lower thing because the, like, we, we don't have enough room in our court system to actually send all of these cases to jury trials.

Right.

Right? So you're faced with, like, 15 years in jail, or I'll go ahead and plead guilty this, to this lesser charge, and maybe I take, like, six months and two years of probation, right?

Which the female in the story, in the podcast, that's what happened.

That's what happened.

Right.

That's-

Yeah.

So, um, season four, I believe, of Serial, the Serial podcast.

Okay.

So first season, Adnan Syed, uh-

Yeah

... Sarah Koenig goes through that entire series and, like, investigates the whole crime, right? Like that, there's a lot of developments that have happened in that case since. Um, I think he's now out. I'm not sure if he's gonna be re-prosecuted. They had a couple more seasons that I wasn't quite as interested in, but the last one that they did, they basically did a, like a deep, uh, embedding into the Cleveland court system. And this, this whole thing kinda came up that so many of these cases don't actually get tried. They just get pled down. Um, in many cases, they get overcharged, and then-

Yeah

... and then pled down. But the, like, the number of people who get charged with crimes, if they all went to a jury trial, it would clog up the system e- entirely. So, like, we accept that this is how things are done. But it's not necessarily a f- like a f- an even playing ground or a playing field because, you know, if I'm just a person who's been accused of stealing from the post office, what resources do I have? Like, she had already tried to sell her whole house just to pay off this thing, this, this, this, uh, this fine, versus the resources of the state-

Yeah

... at your disposal, right? So it, it is not a level playing field, which is one of the most important reasons why we, where we have this presumption of, of innocence.

So you need, do you need a devil's advocate in your organization to ask these hard questions? Like, should somebody be-

Well, I mean, to a certain degree, that's what-

Like an ombudsman

... unions are for, right?

Right.

That's what, like, your, your police and firefighters oftentimes-

Whoa, Chad's taking a pro, taking a pro-union stance. Everybody-

No, I'm taking-

... nobody stop

... I, I am 100% not taking a pro-union stance when it comes to public employees.

You've always been a big fan of Chapter 143 in Texas, Chad.

I, I see a major difference, and not to, not that this is relevant, but there's a major difference in, in unionization of public employees versus private employees-

Mm-hmm

... particularly if it gives them the ability to s- not do their job. But what... That's, that's sort of a topic for a different question.

That's for another podcast.

But I mean, it's certainly true that that acts as, teachers as well, you know, that acts as a, uh, as a, an, uh, an advocate for the employee. It can obviously go too far, right, where we can't fire bad teachers, we can't fire bad cops, um, because of all of these rules and all this, this bureaucracy. But, um, but certainly in the case, in this particular case, because all of these people had pled down, once this information became public, there was still a lot of skepticism about, uh, why would I believe these people? They, obviously they did something because they pled to all these crimes. So no, to get back to your original question, I don't think-

And, and Mr-

... that-

Mr. Bates fought it, right?

Right.

So people kind of trusted him a little bit more. And the, the female in this, in this example, um, I'm sorry, I cannot remember-

Jo

... her name.

I don't remember-

Jo?

... her last name, but her name was Jo.

Yeah. She was from a small town, and even though she pled to the lower charge, she just had, like, this huge community support that believed her because she ran this, like, little cafe, and it was, like, the community coffee spot, right? So, or cold cuts and coffees or something like that. So, sorry.

But to get back to the question that you asked, I, I don't think that it is inherent even, even with our legal framework, I don't think it is a just, like, a natural tendency o- of human nature to abide by the innocent until proven guilt- guilty sort of maxim.

Well, I would encourage people to go look at stats from the Innocence Project, and maybe that will make you naturally skeptical.

Yeah.

Right? Um-

It's... This is also not quite relevant, but I do think that it's... Actually, it's kind of relevant because when you talk about, like, policing and, and criminal investigations, there's an overlap here, but with local governments. But I think that it's really important, and I also think that too many times the lines between the, like, the DA and the police get blurred to where they're almost on the same side. Whereas, like, I think the police are doing the job that they th- are doing fine. I think it's more on the DA side, where they need to be more skeptical of the cases that are being brought to them as well. Not that they should-

Should they be elected, should they be elected positions like they are? 'Cause that seems to always play a role.

Yeah, because-

When you listen to Serial-

Mm-hmm

... all that type of stuff, it's always like the DA takes a hard line position on a case because-

Because-

... the political ramifications.

Yes. Yeah.

Right? And so really the DA becomes, like, almost, almost s- starts prosecuting, uh, cases based on, like, a populist movement-

Mm-hmm

... rather than, you know, what they see-

The facts of the case.

You know, granted, they're gonna say they have, like, you know, the canons of law and things like that that they have to follow and that they have ethics too.

Yeah.

And I get that.

And no doctor has ever done anything unethical either, even though they have the Hippocratic Oath.

Yeah, correct. And, and I mean, you know, city managers, you know, should, should be unswayed by politics, right? That's why we have contracts with severances. Um, and, uh, you know, there was a post on LinkedIn the other day talking about severance lengths. And, and yeah, I think it's extremely important for city managers not to take jobs that have short severance lengths because it puts you in a position to make decisions that aren't necessarily best for the organization, but are what, you know, the political winds say you should do, right-

Mm-hmm

... at the time. Um, so-

But I mean, the same is true in the corporate world, where quarterly earnings drive, you know, management decisions versus long-term fiscal sustainability.

Yeah.

We, we have the same incentive mismatches in local governments too, um, particularly when we don't fully account for things, uh, in our books. But I mean, I think one of the biggest challenges that any organization faces is making sure that all of the incentives are a- as aligned as possible. And whenever you have mismatched incentives or alignment, uh, misalignment of incentives, like, it's inevitably going to cause some problems.

Yeah, and I think that gets back to my takeaway, right? Like, somebody really honestly thought from an incentive standpoint that they were just gonna streamline this to a, streamline this process, these post offices, to, to make it better to manage, right? To make it more efficient. Like, I think there was a good reason behind it, but when you build a sy- a, a system that is so complex, it's very difficult to... Even if you had an ombudsman, even if you had a, you know, somebody that was there looking as a devil's advocate on this issue, it would be very difficult for them to do 'cause they would never be able to understand the in- the kind of the, the detail-oriented internals of how the software was operating.

So do you want me to go in real quick to my, one of my biggest sort of pie in the sky utopian opinions?

Yeah, let's go.

Okay. So this particular software was a top-down mandate, right?

Yes.

On all of these sort of franchised post offices.

Yes.

Okay. There's a lot of risk in making such a decision because if something goes wrong, everyone is affected.

Yeah.

Which is obviously what happened in this case.

Yeah.

However, there is a challenge with letting every single franchisee have their own, you know, point of sale system or accounting system, right? Like, you wanna have some kind of interoperability. In my opinion, the, the future of software like this is just standards.Like, like, um, protocols for communication between softwares, right? So, um-

You can use whatever software you want, but it-

It talks to-

... must meet these communication protocols.

Yes. It'll pass data in this way and receive data in that way, and I, and I don't care what you do, how you handle it, but as long as you can adopt this protocol, then we can all work together and talk to each other. The 311 system, right? Like, the service request system.

Uh-huh.

We have hundreds of apps now to handle service requests, and, you know, ideally those things should feed into our work order systems or, you know, whatever, whatever else they need to feed into. But now we also have these apps who can put data into them. This really took off because a handful of cities came up with this open 311 specification, and it essentially says as long as you have a server somewhere that can receive a 311 request in this format-

Mm-hmm

... um, and also that can, you know, show a list of them in this format or whatever the, you know, whatever, all the different specifications of it, then it doesn't matter what software you use because they can all talk to each other in the same way, and you could build an app for San Francisco that would work in Chicago or New York or, you know, Dimebox because everyone's-

Yeah

... using this just basic specification. It's the entire reason that the internet works, that email works.

Correct. Yeah.

Right? You can use Gmail or Outlook, although don't use Outlook 'cause it's terrible. But you can- ... uh, you can use all these different clients and it's, it doesn't matter what you're using or what I'm using, we can talk to each other because email is just a protocol.

It's the whole reason why Apple's going away from their messenger system officially.

I haven't seen that.

You know this? Yeah. They're moving to the different protocol because it doesn't, it's not interoperable.

Well, that was part of the s- charm of it is the lock-in, but-

Yeah

... whatever.

It was part of the charm is making fun of people who had green messages-

Yes

... on their screen. Yeah.

Man, it, it took us, like, f- six years to shame Doug into getting an iPhone so he wouldn't have his green bubble.

Welcome to the dark side, Doug. So-

So, but anyway-

But yeah, no, I-

... that's my thought is that you can-

No, I, I think, I think that's brilliant

... avoid a lot of these problems.

And, and we could do, we could go into this forever, but I will make this comment. One area that that is a glaring issue in city government is in their ERP financial management systems. None of those vendors, whether you... It, it doesn't matter who the vendor is, right? None of those vendors allow you the ability to be interoperable with other software vendors so that that data can be used for decision-making purposes.

Mm-hmm.

Like, you are going to pay some type of special interface cost or whatever else it may be. So that's... So you have these open data companies, right? That are, you know, providing these, uh, financial dashboards and things like that for cities on websites. There's a couple of them out there. Um, you know, OpenGov and ClearGov are the two that, like, come to mind, and they just basically have to hack-

Socrata.

Socrata, yeah. They basically... It... Well, but Socrata is owned by one of the big-

Socrata is owned by Tyler now

... by Tyler now.

Yeah.

Yeah. So, uh, and, and look, I, I mean-

I don't know if that's helped them improve operability between Tyler products. I assume it has, but I don't know for sure.

I, I would imagine, especially with like, like I've heard from some m- city managers that, you know, some of the products in Tyler's new suites are a little bit more interoperable and better, specifically Munis. Um, but the, the reality of it is, though, is that, like, we should have an expectation, like that 311 protocol that was written by all those cities that came together to have that conversation, why don't we have that with every softwa- software vendor?

Mm-hmm. Like, why do you-

I don't even-

... have to use one massive ERP system that does planning and HR and water billing? Like, it's insane how, first of all, how expensive these products are, but the risk that you take if it doesn't work out. Like, you're overhauling your entire operations, and just because-

Yeah

... this is a really good, you know, financial software doesn't mean that it's really good at permitting, and especially-

Well, and, and-

... for smaller cities, you, you, you don't-

Correct

... you don't have the way to talk to each other. Like, you do need a way for your permitting information to talk to finance because you're taking payments and, you know, and the, the, it has to hit the GL properly, right? But-

I, I understand it from the big ERP software provider, right? Like, I understand that they don't wanna have to compete with all these small, smaller software operators, which by the way, that's, that's where, well, we were that at one point. I think we're probably still a little bit that, but we've, you know, 230, 40 cities, we're probably not that anymore. But the reality is is that, um, the software vendor themselves wants to lock people out because they wanna be able to sell that.

Mm-hmm.

And so, well, talk permitting for example. I, I know a city that pays $120,000 a year in annual maintenance on their ERP system, and their interface cost, right? Is 20-plus thousand dollars just for the third-party permitting process that they use, right? That's wild.

Yeah.

That's crazy. It's, it's more expensive-

You're paying, paying for two different softwares and you're paying an interface fee

... and you're paying an interface fee. In some cases, that's more expensive than the actual software fee for the permitting software, right? Um, I just don't understand as, as cities why we haven't stood up and-

Why, why do we accept that?

Why... Yeah.

It's insane.

Why do we accept that? It is. It's crazy.

But y- you look at all these software vendors that are almost exclusively, uh, marketing at cities.

Mm-hmm.

This is their market. Like-

Yeah

... we have the leverage, not them, so I, I just really don't understand why we, we let that happen.

Oh, it could change overnight by just your mid-size... I mean, say, say that you're, you know, top 25 cities in Texas, which all those city managers, by the way, get together, right? Let's say they all sat down in a room, and while having drinks, 'cause, you know, that's what we do, um, they all decided, "We're not gonna do a software RFP that does not require some type of interoperability standard," right? Like-

Well, the problem is that we have-

... we're all gonna make that commitment.

I think we have to, we have to probably form some kind of, like, uh... Oh, God. What's the term?

Like, some type of, like, API standard or?

Yeah. There's a, there's a official term for it. Um-Hold on.

I'm talking to those, those city managers right now out loud on a podcast. We will happily sit on that committee. We will donate our time to do it. Um-

A consortium.

Yes. Yeah, there you go.

Okay. So we can, yeah, put together some kind of consortium to actually, like, identify what these might look like, and you would definitely need probably some, some technical people.

Correct.

Um, technical not just in terms of programming, but in terms of, like, subject matter experts.

What's the IT director conference in Texas?

I don't remember.

I'm gonna have to give old Troy a call and ask him that question.

Yeah.

He'll know. But, yeah-

You know, I think you have to-

Maybe, maybe that's what we should do, is we should go sponsor the IT thing so that we can get, like, two minutes on the stage, and we can just make this big pitch, and just say, "Hey, everybody in the room."

Yeah.

"This is where..." But, I mean, the, the reality is if you, if you change that for the top 25 cities in Texas, right? A lot of those cities are our clients. But if you change that, and you said that out loud, that's gonna be a market mover. That's gonna be a huge market mover.

Yeah, even just saying, "We are starting a consortium to look at, uh, developing interoperability standards for-"

Correct.

Yeah, various software packages.

'Cause we, we have this dr- you know, I, I, I w- I want to put my, uh, full disclosure hat on for a second 'cause there, there is a, there is a personal Scrooge McDuck reason why I want this to happen, right? There is so much more we can do from a management perspective, decision-making platform perspective, if we had access to some of those ERPs.

Yeah. When you say we-

Right?

... you mean the city management field.

The city management field.

Yes. I just wanna make sure you're not-

Right

... talking just about us.

No, no, no-

Yeah, yeah

... not just about Zach, just from a city management field. Like, the, we are so disconnected that it is madness how disconnected we are in city government. And, um, there could be hundreds, a-and I'll give my grand plan idea of just, you know, but there are hundreds of software ve- Don't give it? You don't want me to give it?

Not until we patent it.

Okay, yeah. But, I mean, the, the reality is, is that no city employee should be disconnected from that information, right? If they're dealing with an issue, they should be able to have all the tidbits of information in front of them, and you can't do that when you have disjointed software programs that don't talk to one another-

Yeah

... or have the ability to talk to something centralized. Um-

Yeah, I think, honestly, I think all you'd really need to do is, or at least you could, you could go a long way, and we probably, yeah-

But you don't need SAP and Oracle-

No

... to build that.

No, I'm saying you could prob-

Like, we're not in that, we're not in that world anymore.

You wouldn't even want them to build it. But-

Yeah

... I think you could probably go a long way if you just had a specification for journal entries, right? If I can write to the ledger from a different program, and I know that it's gonna be logged, but I also know that it's gonna be provided in the correct format-

Mm-hmm

... for my software to read it properly, and kick back errors if, like, you put a wrong account code or something like that.

So to put this into, like, actual operations terms here, if I could take my P-card software and automatically write in my P-card journal entries from that P-card software-

Yeah

... how much easier would that be for you?

Yeah. Or my park reservation software.

Yeah.

If it could write, if it could be totally separate from my, my accounting, but-

But drop that revenue right now

... because of this specification, yes.

Yeah.

Just drop it in. Each, you know, each transaction just goes right into the GL.

Wow.

Then everyone could use the software that worked best for them, and you could switch on a dime if you needed to.

Okay. We, we promised to be short and concise. I feel like that was a really cool topic that we just ended on. The first topic is by far more important. I'm gonna say that out loud. Uh, that last one we probably need to, like, um, we need to reach out to some software vendors and see if they'll come on and have a conversation. I think that would be really cool.

Okay.

So I m- I may, I may do that.

Just wanna put them on the hot seat or what?

No, I wanna tell 'em e- I wanna tell 'em exactly what we wanna talk about, but I think we could, we could dedicate a couple podcasts to bringing on some software vendors and having those conversations, and reaching out to them and talking about that. If they don't wanna come on, they don't wanna come on. We're not gonna call 'em out for not coming on maybe. I don't know. Would we? Like, "We reached out to so and so, told 'em why, and they didn't wanna come on," like a bad reporter.

Well, I mean, what do you think they're gonna say?

"We reached out to Patrick Alder, city manager, and he had no comment." I always hated that. Oh, I always hated that. And it, it was like they reached out to me, and they left me a voicemail, and I didn't respond to them in 10 minutes, you know? It's like, ugh. So anyways, that was fun, dude. That was a good, quick, uh-

Mm-hmm

... informative. Uh, you've gotta get to blogging 'cause we gotta put this thing on a blog post and get it out there for people.

Yeah, I'll have to do that tomorrow.

Yeah.

Post it in conjunction with the episode, so.

So all right, brother, enjoy the rest of the afternoon.

You too.

All right, see y'all later.

Adios.