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Barbara Malkove Budget Issues 02.24.12

Barbara Malkove Budget Issues 02.24.12

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Published by WKRGTV
This is the city finance director's letter to council members
This is the city finance director's letter to council members

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Categories:Types, Letters
Published by: WKRGTV on Feb 24, 2012
Copyright:Attribution Non-commercial

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02/24/2012

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CITYOFMOBILE
CHIEFASSISTANTCITYATTORNEYFLORENCEA.KESSLERASSISTANTCITYATTORNEYSE.ASHTONHILLIIIDAVIDJ.WIBLET.EDWARDSMELSER,SR.MELISSAMUTERTTHOMASDERRICKV.WILLIAMSLEEF.HOLLANDOFCOUNSELJOHNL.LAWLER
LEGALDEPARTMENT
February24,2012
LAWRENCEM.WETTERMARK
CITYATTORNEY
CouncilmemberReggieCopeland,Sr.,President,District5(copeland@cityofmobile.org)CouncilmemberFredrickD.Richardson,Jr.,Vice-President,District1(richardson@cityofmobile.org)CouncilmemberWilliamC.Carroll,Jr.,District2(carrollw@cityofmobile.org)CouncilmemberJermaineA.Burrell,District3(jermaine.burrell@cityofmobile.org)CouncilmemberJohnC.Williams,District4(john.williams@cityofmobile.org)CouncilmemberBessRich,District6(bess.rich@cityofmobile.org)CouncilmemberGinaGregory,District7(gregoryg@cityofmobile.org)RE:BudgetIssuesDearCoun~IMembeffi:MayorJonesaskedthatIgiveyoumyanalysisofthebudgetshortfallfacingtheCitynextyear.Healsoaskedmetoaddresssomeofthequestionsyouhaveraised.Asyouknow,Mobile,likecitiesthroughoutthestateandnation,isexperiencingaseriousrevenueshortfallduetotheeconomy.Austeritymeasureshavebeeninplaceforseveralyearsnow.Cityemployeeshavebornethebruntoftheausteritymeasures.Raiseshavenotbeengivenforfouryearsandtherehavebeennocostoflivingadjustments.Thecurrenthiringfreezehasresultedinfeweremployeesperformingagreaterlevelofservice.Thedemandforservicesbyourcitizenscontinuestoincrease.Citydepartmentshavebeenaskedoverthepasttwoyearstomakesignificantbudgetcuts.Overtimehasbeenslashedtoapointwhereitbecomesdifficulttodeliverbasicservices,particularlyinthepublicsafetyarea.
P.O.BOX1827·MOBILE,ALABAMA36631827TELEPHONE:(251)207416·FAX:(251)207322
 
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0
Asyouwillrecall,atemporarysalestaxwasenactedtobridgetheCitythroughtheeconomiccrisis.Unfortunately,theCouncilchosetoshortenthebridgebyoneyearfromthetimerecommendedbytheMayor.Thetemporarysalestaxwentawayasofthebeginningofthisfiscalyear,October1,2011.Forgreaterclarity,Ihaveattachedafinancialsummarydepictingwhathashappenedoverthepasttwoyearsand
what
willhappenfortheCity'sbudgetyearbeginningOctober1,2012.Ifyouwillrefertotheattachment,youwillseethatlastyear'sbudget,2010-2011,wasthelastyearduringwhichthetemporaryonecentsalestaxwascollected.Asyoucansee,weendedlastyearwithanetbalanceofover$27,000,000.ThereasonthisoccurredwasthattheMayorchosetobankallthathecouldofthetemporaryonecentsalestaxinordertobridgethroughthecurrentfiscalyear.Hadthe.Mayornotdonethis,thebudgetcrisisthatwillhappenthiscomingOctober1wouldhavepresenteditselfasofOctober1oflastyear.Ifyouwilllookatthemiddlecolumn,youwillseesummarydatafromthecurrentfiscalyearendingSeptember30,2012.Asyoucansee,totalrevenueisjustunder$190,000,000.Withthe$27,000.000carryover,ourtotalresourcesforthisyearamounttoapproximately$217,000,000.Afterdeductingforcurrentyearexpenses'andreserve,youwillseethattheamountofcarryoverthatwehavefornextyearisalittleunder$7,000,000.Thethirdcolumndepictswhatwillhappentonextyear'sbudgetifanadditionalsourceofrevenueisnotfound.Asyoucansee,withoutthe$27,000,000carryoverfromthebankedsalestax,wewillendupwithtotalresourcesofjustover$194,000,000.Unfortunately,thiswillbetotallyinsufficienttomeettheanticipatedexpensesandreserveprojectedfornextyear.Thefollowingaresomeofthequestionsthatyouhaveraised.
HOWDIDYOUPROJECTA$27,000,000DEFICITFORNEXTYEAR?
Columnthreeoftheattachmentshowshowthiswascomputed.
IFTHETEMPORARYSALESTAXWENTAWAYASOFOCTOBER1,2011,HOW.DIDWEGETABALANCEDBUDGETTHISYEAR?
Ifyouwillrefertotheattachment,youwillseethattheonlywaywewereabletobalancethebudgetthisyear.wasbybankingtheamountoftemporarysalestaxcollectedduringthepriorfiscalyear.
WHYDIDPROJECTEDEXPENSESINCREASEFORNEXTYEAR?
Theanswertothislies,inexpensesthatarebeyondthe''controloftheCity.lnIarqemeasure,theincreasecanbeexplainedbythreecategories:healthbenefits,pension
 
..(\0
fundcontributionsandfuelcosts.Iwillbehappytoansweranyquestionsyoumighthaveonmyprojectionsforthesethreecategoriesofbudgetexpense.
CAN'TYOUREDUCETHEAMOUNTOFNEXTYEAR'SDEFICITBYCREDITINGTHE2012·2013RESERVE?
Nextyearwearerequiredbylawtomaintainareservewhichwehaveprojectedtobeapproximately$3.8milliondollars.Wecannothelpbalancenextyear'sbudgetbyignoringstatelaw.
CAN'TYOUHELPREDUCETHEAMOUNTOFNEXTYEAR'SDEFICITBYCREDITINGTHERESERVEOFAPPROXIMATELY$4.3MILLIONDOLLARSFROM
LASTYEAR?Theansweristhatyoucandothisbutitwouldbefiscallyirresponsibleforseveralreasons.First,lastsummer,theCityofMobileactuallyhaditsbondratingincreasedtothehighestlevelthatithasbeenindecades.Thiswastheresultofgoodfiscalmanagementandofmaintaininganadequatereserve.Ifwewipeoutthisreservefromdayoneofthebudgetyear,wecanexpectthatthiswouldhaveadisastrouseffectonourbondrating.ThesignificanceofthisisthatitwouldcosttheCityhundredsofthousandsifnotmillionsofdollarsoverthelongterminborrowingcosts.
It
isalsoaterriblesignaltosendtothebusinesscommunityatlarge.AnotherreasonthiswouldnotbewiseisthatitwouldsignificantlyimpairtheCity'sabilitytorespondtoemergencyneedsandpublichealthandsafetyneedsduringthecourseofthefiscalyear.ItispoorfiscalpracticetospenddownavailablereservesaspartofthebudgetingprocessevenbeforetheyearbeginsbecausethisleavestheCitycompletelyvulnerabletounexpectedevents.OneexamplewouldbeahurricaneorothernaturaldisasterwhichnecessarilyrequiressignificantexpendituresbytheCity.Otherexampleswouldbeunanticipatedemergenciesinpublicsafetyandpublicworks.ToreducetheCity'sabilitytorespondtotheseneedswouldhaveseriousimplications.Toputthisquestioninfurtherperspective,evenifthisweredone,theamountofthedeficitwouldstillbewellover$20,000,000.Itwouldnotalleviatetheneedtomakethetypeofdrasticcutsinpersonnelandservicesthatweanticipatefornextyear.BecauseofthefinancialsituationfacingtheCityasofOctober1ofthisyear,IhaveadvisedtheMayorthatitwouldbeprudentandnecessarytobeginmakingsomeofthecutsinpersonnelandservicesduringthecurrentfiscalyear.
I
Therearenoeasy.answers.Absentaneworrenewedrevenuesource,theremustbesignificantreductionsinpersonnelandbasicservices.Becausesomuchofourbudgetisallocatedtopublicsafetyandpublicworks,itwillnotbepossibletoclosethegapwithoutsignificantlyaffectingpersonnelandser,_vicesinthosecriticalareas..'
.
.,.'
.
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