Three Options To Balance The City Budget
Posted by Jeff Pruitt - 11/12/08 @ 10:32 am - Filed Under City Council, Featured
At the last city council budget meeting councilwoman Karen Goldner presented a chart that showed we didn’t need to make significant cuts in the near term if we committed to limiting the growth of our expenditures to between 1%-2%. This alternate approach inspired me to take a look at a few different scenarios for solving our budget problem and I came up with 3 options - all of which I think are achievable and acceptable to the taxpayers.
First, controller Pat Roller’s assumptions are a non-starter. She is assuming 4% growth in expenditures but only 3.2% growth (after 2010) on the revenue side. Obviously that’s unsustainable and no amount manipulation is going to make those numbers work. So the idea that all 3 of my ideas are based upon is that we must limit future expenditures to 3% growth over the long haul. If the revenue base grows (without an income tax!) then fantastic - that will put us in an even stronger position. Here are my options:
Assume 3.2% annual revenue increase starting in 2011 (Roller’s estimate)
1-2-3 Plan
Keep 2.4 million in cuts for 2009
1% increase in 2010
2% increase in 2011
3% annual increase from there out
Flat to 3% Plan
Keep 2.4 million in cuts for 2009
Flat budget in 2010
3% annual increase from there out
One Time Bonus Plan
Keep 2.4 million in cuts for 2009
Flat budget in 2010
1.5% increase in 2011
5% increase in 2012
3% annual increase from there out
Alternate Budget Projections
All of these have us back in the black by 2015-2017 and our cash reserves never drop below $18 million (2x what we need for a good credit rating). What I’ve presented is obviously not an all-inclusive list as there are a lot of different ways to balance our budget.
What I wanted to show is thanks to this years cuts we are in fairly decent shape moving forward. Another 1-2 years of belt tightening and we’ll back to the strong financial position we were in before the previous council cut the levy and the the state legislature passed HEA1001.
And we can do it without a casino and without an increase in the income tax.
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11 Responses to “Three Options To Balance The City Budget”
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Okay I am not quite following on one idea….
If we are cutting 2.4 million than are we trying to build back up to it in five years? Is that the idea, why dont we just make permenant cuts that we can manage, like a third of the Civilian Police Department jobs. or 10% from Parks&Rec. My thought is that we really should not have a need for a constant 3% increase or even 2%. 1% I can agree with for inflation and cost of living but iit seems like they are only looking for a patch rather than a remedy to the issues at hand.
But then again they have trouble with the idea of making government less bloated in the first place so I sort of understand why they are scrambling. But seriously I would love to actually see the numbers scratched out rather then just the analysis of how to keep it to a minimum in either direction.
And doesnt it seem a little ridiculous in the first place to be running off of a 130 MILLION DOLLAR Budget let alone jumping it up another 20 MILLION in less then 5 years time? I never realized we allowed that much spending! That is like for every resident (@ 250 thousand) we are currently spending $520 per resident. That is every man woman and child, doesnt that seem a little high, that amount is greater then 1 weeks pay with full time at minimum wage after taxes.
Let see… The Northeast Annexation (vast area of St. Joe Township) was going to provide the city with “new money” and the people out there was “paying their fairshare!” This was a rolled in annexation starting in about 1993.
Then we had the Northwest Annexation (many called it Pine Valley but was a larger area) was going to provide the city with “new money” and the people out there would be “paying their fairshare!”
Then we had the Southwest Annexation (called the Aboite Annexation) was going to provide the city with “new money” and the people out there would be “paying thier fairshare!”
What did we get out of the larger city? Higher costs of bigger government that has delivered little to either the “old” city or the new annexed areas.
While I think Jeff offers some ideas for thought and debate that is all they do. The city and the other elected heads are far worse then Jeff because he at least looked toward the future.
I dare ask all of you the following. What City Council member, or even the Mayor would you ask to how to invest and spend your $180 million lottery winnings? How many would hire Pat Roller to keep their books on their lottery winnings?
My guess if I went to Jeff is the would tell me to seek out professional people. That he may give me some ideas of what he knows of possible pitfalls from his own self education. I would take Jeff’s advise under consideration unless he told me to invest in AIG or GM stock.
All,
I’ve been to every single budget meeting and there is absolutely no desire from this council to make drastic cuts in our city government. My analysis starts from that basic observation.
Inflation for normal consumer goods (CPI) is 2.5% right now. And many of the items government buys (i.e. building materials) have had inflation rates higher than the CPI.
So no matter where you end up cutting to (even if you cut the budget in half), once you are done with the cuts you are going to start having to pay more year after year for the same goods and services - that’s inflation.
Do you honestly believe this inflation will be less than 3% with the way our federal government is printing money? I think it will be extremely challenging to maintain that 3% number.
Don’t shoot the messenger!
Whether or not we should spend $130 Million in the first place is an entirely different debate but what I’m trying to do is lay out a few different options for how we get back into the black without raising income taxes.
And imagine how pissed you’ll be once you learn that the $130 million is only the part of the budget that’s supported by property taxes. The full city budget (not including city utilities) is over $180 million!
Jeff,
Here is two things that concern me and not sure how they work into your process….
1- There is little doubt COIT and CEDIT dollars will be flat or down over the next couple of years. I am sure someone at IPFW could give some general ideas on the amount. Look just at the GM plant in the reduced overtime and shutdown weeks they have had.
2- Gas tax dollars returned from the state is going to decline as fewer gallons of gas have been sold.
3- House price retraction is real. Homes are selling for less. Hence, their new tax value will be thousands of dollars less.
So there may be a hidden nightmare that plays out in one, two, or three years.
I would like to see your thoughts but I think we pull the belt buckle tight now and know that we may be doing it for a couple more years. Pretending, that everything will be OK in a year or two I think would be wrong.
It’s nice to see this discussion, but I think you are all thinking much too small. We are in a recession. Worse yetm our property tax base is formulated (currently) on wildly inflated assessment values. That will be corrected in the next couple of years with severe inpact on revenues.
Anybody notice that the owner of Glenbrook is staggering toward bankruptcy? You know, the mall that local authorities assessed as the most valuable mall per square foot in the state of Indiana. Their appeal seeks, as I recall, a reduction in taxes of about a million dollars.
Every new development of any consequene has been run through the Redevelopment Commission or abated, so we are years away from that revenue being available for municipal purposes. If jefferson Pointe declines in assessed value (and I bet it will) all the bonds backed by TIF revenues are going to fall to general revenues to pay the deficiency.
Now is the time to cut all non-essential programs and staff. Let people pick up their own leaves and end the summer kids programs at the parks, as easy examples.
JQ,
1. Declining COIT & CEDIT - No doubt about it. That’s exactly what council Tom Smith has been saying since the budget meetings began. He wants to cut now because the writing is on the wall.
2. Gas Revenue - None of that money goes into the general fund so the budget we’re talking about here doesn’t depend on it. If it drops then street work will have to be reduced though. There was a dip in the 2008 budget by about $800k and they are predicting a return in 2009 back to 2006-2007 levels.
3. Declining House Prices - You’re assuming the assessed value and the market values will be correlated. I don’t actually believe that despite what the new state requirements say. The assessments lag 2 years behind so if the assessments do drop then we will see that decline in revenue in a couple of years. I think a more serious problem are major business closings as mentioned by Mark in the above comment.
I agree that pretending everything will be ok in a year or two is wrong and that we need to cut expenses now. I guess I should’ve stated that my plans are really not-to-exceed plans. But by all means we should work to cut as much as we can just in case…
Jeff,
I think we pretty much agree then. However, with regards to the the gas tax that none of it can go into the general fund is true. But general fund money can go the other direction, into road work, if such is needed. That is only the reason I mentioned it.
What concerns me and I sure hope I am wrong is when the federal bucks get handed out Fort Wayne/Allen County/ Indiana get short changed because we have used balance budgets. That the vast majority of the money goest to cities/counties/states that never balanced their budgets. I mean Detroit wants 10 billion because of short falls. The state of California wants 11 billion because they could not live within their means.
Enough ranting for now…..
Well, official inflation rates are generally understated for obvious reasons,aren’t they? Both political national parties are quite comfortable with 3 to 5% inflation rates. These policies inflict damage mostly to local governments who don’t have the option of printing press money. Voters, however, never make the connection and are too trusting of “official” numbers and the disinterested governance of places like Fannie Mae and Freddy Mac….
Stagflation is here.
Deflation is our current financial mode as we are printing money faster than we sell goods & services.
Inflation will come when the products & services
we need will not match our needed goods/services/ money flow…saved or borrowed.
I think America has a great deal to think about how she correlates to the rest of the world.
We are limitied by TV, radio…
FT.com has some great Financials of all the world.
The world wide web is infinite. And so is the news