Fort Wayne’s Looming Budget Crisis

Posted by Jeff Pruitt - 7/2/09 @ 6:01 pm

I suppose it’s never too early to talk about city budget issues but I think 2010 and 2011 will be much worse than anyone has predicted. As of last year the projected budget shortfall for 2010 was over $9 million and the city council rightfully made a down payment on that by cutting $2.5 million from this year’s budget.

With the economic recession in full force I would expect state revenues (income tax, sales tax, etc) to be down from the original estimates. This will certainly put pressure on the 2010 budget but the real crisis appears to be the 2011 budget.

Currently ~$100 million of the city budget is collected via property taxes. While we might not be affected as other communities we are certainly not immune to falling real estate values. The reason this will be felt more in the 2011 budget is because the trending analysis done by the county assessor uses data from the prior 2 years to adjust the current assessed value. Falling values in 2008 and 2009 will show up in 2010 assessments which are payable in 2011. Now one might think that even if property values fall, the rates will just go up and thus the city will still be collecting the same amount of money.

Well that might have been true a couple years ago but HEA 1001 now limits a homeowner’s property tax bill to no more than 1% of assessed value. So as home prices fall the number of people hitting the 1% cap will increase, and this will result in less revenue for ALL local government (not just city government).

At this point I cannot predict what the shortfall will be because we don’t have the necessary data on decreasing home prices, income and sales tax. However, last year the city controller was predicting a $7 million shortfall for the 2010 budget and that was before the economy fell off a cliff. I don’t think it is out of the realm of possibility that the updated budget shortfalls could be double the original estimates. That would have the city staring down the barrel of at least $7 million for next year and perhaps $16 million for 2011.

The administration and the city council will have serious work to do over the next two years on the budget and the sooner they get started the better. I’m sure the Hooverites in the administration will, once again, push to double the income tax but that should be a non-starter in this economy. I think we need to identify what essential services we want from local government and everything else needs to be cut to the bone…

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Change we can’t believe in, post one

Posted by Mike Sylvester - 7/3/09 @ 1:31 pm

This post is the first post of a series of posts that will document some of the failed promises of President Obama and some of his poorer decisions.

President Obama ran on a platform of change and hope. 

His first five months in office have been marred by numerous broken campaign promises and little of the change that he promised.

This article is well worth your time.  Most worthy of your attention is this paragraph:

This tension can be traced back to Mr. Obama’s claim during last year’s campaign that President George W. Bush engaged in an “extraordinary politicization of foreign policy.” Mr. Obama said he instead would ensure that hires are based on merit, rather than party or ideology. The American Academy of Diplomacy, an association of former diplomats, seized on the comments in lobbying him to lower the portion of ambassadors drawn from outside the foreign-service establishment to as little as 10% from the 30% average since President John F. Kennedy’s tenure. (Mr. Bush’s score was 33%.) 

First off Republican and Democrat Presidents have often appointed large campaign donors to various ambassadorships.  This policy is 100% wrong.  It should stop.  Instead Presidents should appoint those people who are the most qualified.

Appointing those people who donated large sums of money to your campaign is wrong.

President Obama specifically attacked President Bush on this topic; then once elected he continued the practice; in fact, he may well appoint even more of his large donors than President Bush did.

I would imagine that the only person reading this blog who would think that President Obama is right to appoint large donors to ambassadorships  would be Kevin Knuth…

I have a feeling this is going to be a long series of posts before President Obama’s first (and only) term is up.

Mike Sylvester

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They are so stupid in Washington DC that it baffles the mind

Posted by Mike Sylvester - 7/2/09 @ 6:37 pm

I think everyone reading this blog would agree that most of the drop in real estate prices has been due to the fact that our lending institutions (with government encouragement) lent Americans more money than they should have.

I hope that everyone reading this blog also remembers that the taxpayers now own Freddie Mac and Fannie Mae and that we are responsible for the debts of those two failing mortgage institutions.  In my opinion it will take billions upon billions of dollars to prop up these failing companies…

Up until yesterday these two mortgage giants could only refinance loans through President Obama’s “housing fix” program when the loan-to value-ratio was 105%.  What this meant in simple terms was that through these two government lenders you could refinance a maximum of $105,000 on a house that was worth $100,000.  In my opinion 105% is far too high; I would be more comfortable with 80%.

The idiots in Washington DC decided to increase the maximum ratio to 125%.  This means if your house is worth $100,000 you can refinance $125,000 on that house through Fannie and Freddie through this program.

Please read this article about it.

I especially like this quote “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly,”Treasury Secretary Timothy Geithner said in a statement.”

Where does President Obama find these idiots?

The real estate market crashed because the banks loaned too much money to Americans.  This easy money drove up home prices.  When the real estate market crashed this then caused many Americans to default on their home mortgages; which in turn caused many financial instruments (Those consisting of these bad mortgage loans) to plummet in price.  This in turn caused many financial institutions to fail.  This in turn caused the Federal Government to pour billions of dollars of tax payer money into these financial institutions.

The idiocy must stop.

I am scared for the future of this country…

Mike Sylvester

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Framing the Renaissance Square Debate

Posted by Jeff Pruitt - 7/2/09 @ 9:28 am

Your brother is spending $1200/month to rent a house and you’re trying to convince him that he’s paying too much. You talk to your buddy Cliff and he says he’s got a house he’ll rent your brother that’s just as good and he says he’ll rent it for $1000/month.

You know for a fact that Cliff hasn’t had any tenants for a few years and he’d like nothing else than to finally get that place rented so it’s not a drain on his pocket every month. You figure Cliff would probably take $800/month but after all he’s your buddy and it’s not your money so why not pay the $1000/month? Besides you’re still helping your brother save $200/month. It’s a win-win right?

So did you save your brother $200/month or cost him $200/month?

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Health Care Debate

Posted by Jeff Pruitt - 7/2/09 @ 9:13 am

Both sides of this argument have not presented a very compelling case. At the end of the day nobody has addressed the fundamental issue - namely that Americans are fat, lazy and gorge themselves with low quality foods. Until somebody figures out how to address that issue we aren’t going to make any progress.

How will “finding efficiencies” pay for more coverage? Does anybody really believe that? We will still spend the same amount of money regardless and that’s the real problem - the current growth in health care costs are unsustainable.

And what about the “private insurance for all” nonsense? What are we to do about the fact that some people are completely uninsurable? For example the cost of their care (perhaps even in one year) vastly outweighs the wages they will likely earn over their lifetime. They want to force a private insurer to cover this person? It guarantees that they will lose money. So why would they agree to it; because they can overcharge everyone else of course.

That’s not insurance by any stretch of the imagination. That’s socialization - pure and simple. In fact we’ve already got a socialized system. People with health insurance are paying for those that don’t. Private coverage for all is just a way to socialize the risk and privatize the profits - something government has always done remarkably well…

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Indiana State Budget

Posted by Mike Sylvester - 6/30/09 @ 6:13 pm

I spent most of June on vacation and so I have not been posting in June.  My family just got back from a 19 day trip to Europe late last night…

Both the Democrats and Republicans in the Indiana legislature have completely failed in their primary duty this year; to pass a two year state budget.  It was so bad that legislators were called into a special session since they completely failed to pass a budget during the regular session.

This disaster is the fault of both Republicans and Democrats; however, I stand with Mitch Daniels and the Republicans and support their budget rather than the budget proposed by Democrats. 

I have read everything I could find on this year’s budget standoff and it looks to me like there were three major differences between the two parties:

1.  Mitch Daniels and the Republicans wanted to keep a rainy day fund in place with a minimum of one billion dollars while the Democrats wanted to spend more of the rainy day fund.  One billion dollars is really a pitiful rainy day fund since it amounts to less than one months of Indiana’s operating expenses and I certainly stand with the Republicans on this one.

2.  School funding.  The Democrats want to spend more money on education.  I have two kids in the public school system and I think we need a strong education system; however, we cannot afford to increase education spending at this time.  The Republicans and MItch Daniels have supported little to no increases in K-12 school funding.

3.  The Democrats support the archaic school funding formula that has been used for a long time in Indiana.  This formula benefits schools that are in urban areas and schools that are actually shrinking.  The current school funding formula is absurd and should be abolished.  The Republicans want to change the formula so that school funding is more evenly distributed.  I would like to see the Republicans go even further; I think the state should give a set amount per student; period.  Right now NACS gets the lowest amount per pupil in the state.  I think that the state should pay a flat amount per student per year.  

It is truly pathetic that our state could not get a budget passed without a special session.

Mike Sylvester

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Mayoral Announcement on Renaissance Square

Posted by Jeff Pruitt - 6/23/09 @ 3:50 pm

You can read the full press release here if you desire, but let’s take a look at a couple of quotes from the release:

“We explored all the options,” observed Henry. “Our space needs demand action. 200 East Berry Street represents a unique and inclusive solution, a one-of-a-kind opportunity that will allow us to bring together all city departments and make the best use of our resources. The time is right. The price is right. And the long-term benefits for both the city and county are outstanding.”

The price is right? Hmmm…

The economics of the opportunity make it a highly desirable deal with all financial projections supporting it. The building will be purchased for $7.3 million from Renaissance Square, LLC. Renovations and furnishings will add approximately $7.2 million to the budget for a total cost of $14.5 million. The purchase funds will come from County Economic Development Income Tax dollars.

By any chance did we offer less than $7.3 million? Was this the same crack-staff that negotiated the Harrison Square deal? And using CEDIT dollars for this? Is that really the best course of action here?

The administration is using a potential $500k/year in cost savings to justify the purchase but even if you believe those numbers would it not be even better to pay less than $7.3 million? It’s not like the building has been a real hot commodity…

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Quick Thought

Posted by Jeff Pruitt - 6/23/09 @ 3:32 pm

Maybe the Harrison Square “catalyst” will ultimately be found in driving the size of local government so large that it can occupy all the vacant downtown office space…

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The Renaissance Square Fix is in Bubba - Again…

Posted by Jeff Pruitt - 6/19/09 @ 12:16 am

It looks like the mayor is hell bent on wasting millions of taxpayer dollars on Renaissance Square. From a local paper’s editorial:

City Controller Pat Roller said the administration will be introducing a proposal to Fort Wayne City Council on Tuesday. In addition to the city departments now in the City-County Building, city police would also move into Renaissance Square.

Roller said, “It’s the economics of the deal” that make moving the city to the building a better option now. She said under the previous plan the city would have had to reimburse the county for space at the City-County Building as well as make payments for the purchase of Renaissance Square.

“This way we just have to pay debt service, and then we own the building after 20 years,” Roller said. She also said the purchase price has gone down. The average of two appraisals on the building is $7.3 million.

So let me make sure I get this straight. Instead of renegotiating our lease with the County we’re going to buy and renovate a different building. We’re also going to pull the police station out of the Renaissance Pointe neighborhood which will most certainly hasten it’s demise. We’re also not going to use any of our $20 million surplus to buy the building - instead we’re going to finance it over 20 years and pay an enormous amount of interest. And to top it all off we are going to grossly overpay for said building.

Any appraiser that says that building is worth $7.3 million is either incompetent or on the take if you ask me. The county’s appraisal came in just over $1 million and the deputy mayor himself said that the $7 million figure was a non-starter. So what’s changed? That building has been empty for years with no private tenants. In this market it is essentially worthless - by that I mean it is worth whatever the scrap value is or perhaps 2x that.

In fact, the county assessor has assessed the value at $1.1 million for the last 6 years. But now we’re to believe it’s worth $7 million? Personally I don’t think the city should move from the current city-county building, and I definitely don’t think the police should move from their current headquarters. But even if they did want to consolidate they shouldn’t pay more than a couple million for a building and they should pay cash. Now is not the time for the city to be taking on unnecessary burdens of debt.

And what’s the rush anyway? Do they think somebody else is going to buy the building? Why not wait until they see the city’s finances over the next couple of years before taking on any major projects like this? The best thing for citizens to do at this point is to contact your local council member (citycouncil@cityoffortwayne.org) and let them know that you don’t support the city spending tens of millions of dollars when our current financial situation is so uncertain.

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Woodlan Junior-Senior High Moves to Fort Wayne?

Posted by John B. Kalb - 6/17/09 @ 3:12 pm

Tonights News-Sentinel has an article about Fort Wayne being a finalist in the All-America City competition this week in Florida.  One paragraph states that Sheena Tracy and Cheyenne Hale will be presenting Fort Wayne’s “engagement of youth” activities by talking about a program, “Thinking Errors” which the article says is at Woodlan Junior-Senior High School.   When I last looked, this high school is in the East Allen County School system and is not located in Fort Wayne.

I guess that our schools in Fort Wayne, including FWCS plus our non-public schools, are not involved in any youth engagement activities.    ( This is one of the three areas that a city has to be active in to qualify for the award).

So what does this say about Fort Wayne?   Doesn’t our city government know that we do not have unigov in Allen County?   There are youth engaging activities in our city- but they do not involve any governmental funtions and I guess therefore out mayor has no pride in them.  That’s the “not-invented-here” syndrome in action!

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