Why I voted Against Approving the Budget
Last Monday the City Council in a vote of 5:2 passed a budget with the largest deficit in the recent history of University City. I voted against approval of the budget because it is not a balanced budget - even though it was (mis) represented as being balanced. The final budget contained an extraordinary amount of last minute additions that were not discussed by the entire Council, and it was not presented in a clear manner. Not only were citizens unable to observe the process and content of the real and final budget, but also some members of Council faced the same problem. Simply put, there was a lot of activity to present the draft budget, but the real budget remained in flux until the last moment. The budget that was passed has a deficit of nearly $4M. We are spending 15% more than we are taking in, and are spending more than every deficit budget since 2000.
By our Charter, the City Manager is responsible for preparing the budget and submitting it to Council for approval. A DRAFT of the FY2014 Budget, including the Capital Improvement Plan for FY2014-FY2018 (a part of the Budget) was prepared and presented to Council and the public on February 25th of this year. In the draft budget, the General Fund’s operating budget submitted by all departments provided a surplus of $137,200 and this included $854,352 for the capital improvement program. Were this our final budget we might have actually had a budget with a surplus of $137,200 (the surplus you hear about), BUT that did not include a planned $1.4M set-aside toward a renovated or new police station, which was to come out of the Reserves. Even at this point, we were planning to spend more than we were taking in.
From February until May 13, the City Manager held 6 public meetings and 3 Study Sessions for Council that covered all the costs for all City departments, and focused on the so-called surplus budget. These meetings were followed by an additional meeting on May 13th, to allow Council to discuss which items we would like to see included in this budget.
As a result of this short meeting on May 13th, some members of the Council asked to include additional projects costing $125,000. In an email to Council acknowledging those specific additions requested by Councilmembers, the City Manager, Mr. Walker, proposed to add an additional $1.6M (million) to cover all of the unfunded items in the Capital Improvement Budget as well as well as the $125,000 requested by Councilmembers. Funding the unfunded projects in the Capital Investment Program was never discussed in any meetings with the entire Council. If it was important to include these projects, why were they not included in the draft budget or any other subsequent review?
Within days, Councilmember Crow and I met with the City Manager, the Director of Finance and the Director of Public Works and Parks to better understand both the advisability and immediate need for the projects, and how this impacted the City’s finances. During this meeting we discovered that the cash and investments in the Reserve Fund were not equal to $18M we understood we had, but rather roughly $8M in cash, $5M in investments, $5M in liabilities, and a non-liquid portion of our Reserves equal to $12M, which could not really be accessed. The approximate $18M was a snapshot taken on July 1, 2012, and might no longer be accurate, since we had been spending from Reserves all of FY2012 – for additional policemen, cameras, a new roof and family changing room for the Heman Park pool, amendments to the Parkview Garden Plan, the Mock Roundabout, etc. In other words, we probably only had liquid assets in our Reserves of around $8M or less. It took multiple meetings, phone call conversations and emails with the City Manager to determine that we were fast spending down our Reserves and might fall short of the mandated undesignated minimum balance (equivalent to 17% of the General Fund expenditures).
Thursday evening, May 23, 2013 I received my Agenda packet for the upcoming meeting on May 28th, and discovered that as a Council we would be voting to approve the FY2014 budget nearly 1 month before the deadline required to approve the budget – something which had not happened before. I asked the City Manager why we were voting so early, and he told me that the majority of Council was ready to vote… I only found out about the intended vote by reading the final packet.
On Tuesday morning, hours before the meeting, several members of Council (including me) asked for additional items to be added to the budget in the approximate amount of $1.36M. All requests (except for the request I made for additional Parking in the Loop) were readily granted without Council discussion. We went into the meeting planning to vote on a budget that seemed (to me) misrepresented, bloated and not fully discussed. I asked the Council to delay the vote for 2 weeks so that I could better understand the financial situation. Councilmembers Glickert, Price, and Crow extended me the professional courtesy of voting to allow me the time to get a handle on what we were proposing to approve.
Concerned about the real numbers, I asked Mr. Walker to remove the last minute additions that I made to the budget, and set up a meeting with him, the Director of Finance and Councilmember Crow, to once again dig into the details of the Reserve Fund and the funding of the additions to the budget. For the remainder of the next week, I met and consulted with the City Manager and Finance Director to pick apart the numbers over the period from FY2000 through FY2014 budgets. They were exceedingly patient and very responsive to all my requests for information and explanations. I am indebted to and credit both of them with helping me develop a deeper understanding of the budget and our financial positions. I was now ready to vote on the budget.
Once again, however, I was blind-sided when I received the next Agenda packet for the meeting on June 10, 2013. The City Manager had made another last minute addition to the budget - $15,000 to paint the Sutter-Meyer House. I only found out about it by reading the packet. We have a lease with the Sutter-Meyer Society in which the City charges the not-for-profit private entity only $1/year to rent the house and property, because they were to raise the money to renovate the historic home and bring it up to code. They are supposed to pay for painting the house!
The Charter specifies that the City Manager has the powers and is required to “Enforce all laws and ordinances and see that all contracts and franchises are faithfully performed.” We are bound by the contract with the Sutter-Meyer Society, which states that the City will not be a partner or engage in joint ventures with the Society; the City can ONLY finance the work if they will immediately bill the Society to recover the cost of the work plus a 5% overhead charge. We have several city-owned and operated buildings that are out of code and require renovation. That work was not included in our budget.
An earlier legal opinion on using public money for a private entity (street sweeping in private subdivisions - the residents of which are tax-paying citizens) had eliminated that possibility. But in the case of the painting of the historic house for the Sutter-Meyer Society, we are planning to use public money to finance the work that should have been financed by the Sutter-Meyer Society (which is a 501c3 and does not pay taxes). I asked that this item be removed until the Council could re-evaluate the contract and provide another policy. The majority of the Council (5:2), however, voted to keep this item in the budget.
To summarize, we started with a purported $137,200 surplus, and at the same time, planned, additional spending of $1.4M… (No surplus!) Later, Councilmembers added $1.2M in spending. Finally, the City Manager added another $1.6M to the budget - a deficit budget that was upon passage still touted to be surplus by the Mayor. Regardless of whether the draft budget started as an apparent surplus when produced in February, just the additions by the City Manager, alone, brought it to an astounding deficit. It is intellectually dishonest to present this budget as a surplus budget to the public and media when we are spending nearly $4M more than we are bringing in.
The budget did pass and as a result we will fix more streets and sidewalks… trim more trees. It is interesting to note, however, the spending from the Reserve fund has steadily increased over the last couple of years:
• FY2010 (passed June 2009) - $169,000
• FY2011 (passed June 2010) - $550,000
• FY2012 (passed June 2011) - $539,000
• FY2013 (passed June 2012) - $1,509,000 (estimated)
• FY2014 (passed June 2013) - $3,800,000 (estimated)
We were told that we were spending for these projects out of Reserves so as not to increase our taxes. Several Councilmembers and citizens have suggested that we must spend down our Reserves in order to convince the electorate to vote for a bond issue. That makes no sense at all. First, if we have a good capital project that requires funding via a bond issue or tax, the voters will usually support it (i.e. the Library, renovating City Hall, building Centennial Commons, etc.). But, if we are living well above our means and emptying our Reserves for non-capital items, when the time comes that we really do need a bond issue or tax increase, those very same people who are demanding that we empty our coffers to convince you to vote for a bond issue will tell us that we were spendthrifts and careless... so why should THEY vote to give us the additional money? Even if the citizens agree that we should have the bonds, the financial institutions will rate us according to our financial holdings, health, and behavior. Sound fiscal behavior is rewarded – not punished.
Many of the projects contained in the budget are worthwhile and I support them. Councilmembers are stewards of this city. Fixing our streets and sidewalks is imperative, but even if you could fix them all today, in a few of years they would need repairs. Asphalt does not last long in this climate. Much of what we are spending our Reserves on could be considered maintenance. Infrastructure improvements and maintenance should be regularly budgeted for with a continued source of revenue. It is also troubling that we are paying for normal operating expenses out of our Reserve funds. That is like buying food and gas out of savings rather than budgeting out of your current income.
A wise use of our Reserves will keep this city financially healthy and flexible. I look forward to a truly balanced budget for FY2015. If it is, I will cast my vote to approve it.