Overdrawn
Accounting for the Tax Hike
By Steve Croyle & David Lewis |
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Since 2002, Columbus has spent more than it has generated in revenue, a phenomenon known as "structural deficit." Now, due to the economic woes wracking the Midwest, the systemic problems with the city's budget management must be solved as quickly and permanently as possible, and Mayor Michael Coleman is pushing for an increase in the income tax rate.
City officials say Columbus can't afford not to pass Coleman's proposal, estimated to generate nearly $100 million. While revenues have always been low, the city's "rainy day fund" has traditionally been used to plug the holes...but now the floodgates are open, and options to stop the bleeding are few. The city is facing a revenue shortfall of around $10 million for this year, and a projected shortfall of more than $115 million for 2010. If voters nix the tax increase on August 4's special election, local government could be forced to make drastic cuts, including layoffs throughout the public safety department.
The mayor's spokesperson, Dan Williamson, told 614 in a phone interview that Coleman has been making cuts to city spending every year he's been in office, but the city's operational budget has been woefully thin. He alluded to the economic boom of the 1990s, intimating that the city was able to dodge income tax raises because of the robust job market and exceptionally low unemployment rates of the time.
Opposition
Financial consultant Matt Ferris, a Republican opposed to the tax hike, is running for a City Council seat this fall. "We need to stop feeding the beast," he said. "We can't afford to pass this tax increase. It only masks the issue of spending and transparency."
Ferris doesn't buy the city's projected shortfall.
"It's based on City Hall's wish list," he explained. "Their spending target doesn't make sense. They can make the shortfall as large as they want."
Ferris has been gathering information on city spending, a task he says is not easy. You can't find a line-by-line report that breaks down the big numbers, so Ferris has been requesting those figures, one department at a time, and he is "piecing it together." He believes that he has a pretty good grasp on the city's actual budgetary needs. Ferris says that the discrepancies, at first blush, are shocking.
"We need to verify these figures," he said, "but we'll be releasing our findings in a couple of weeks."
Special Election
The August 4th special election will cost taxpayers between $573,000 and $877,000 depending on whether Republicans get their way and have absentee ballot applications mailed to voters.
Officials say the proposed tax increase, from 2 percent to 2.5 percent, needs to be considered by voters via a special election.
"When we received the budget projection, it was too late to get on the May ballot, and waiting until November wouldn't give us enough time to submit next year's budget," said Williamson.
Ferris isn't so sure.
"I don't trust anything out of City Hall...the city government has spent 10 years in the shadows," he said. "We need more transparency."
In spite of Williamson's insistence that Coleman has continually cut the city's budget since he took office, there are concerns that the city hasn't always spent its money wisely.
In January, the Columbus Dispatch reported some figures associated with Columbus' Home Again program, namely a loss of $1.7 million. Theoretically, the program is supposed to encourage economic development by improving residential properties in impoverished neighborhoods - but, in most cases, the city is only getting back half of what it puts into purchasing and renovating these properties, especially after the crash of the housing market. In reality, the program often yields one nice house surrounded by decaying properties that are either abandoned or provide a base of operations for criminals. Ferris said there's no evidence that this program is revitalizing blighted neighborhoods.
"It's a poster child for government waste and inefficiency," Ferris said.
The City of Columbus also invested heavily in the lighted archways that straddle High Street throughout the Short North. Although the arches are aesthetically pleasing, they might not have been the most practical use of funds. Do the arches increase commerce? Probably not, and since regular street lights still line both sides of High Street, safety and security aren't enhanced either. More confounding is the fact that Columbus was rooked by the first contractor, who opted to install an expensive and inefficient fiber optic system that never worked properly. After a number of studies, Columbus hired another contractor to install an expensive LED lighting system. Columbus financed $2.4 million of the original project cost and now covers the maintenance.
With six active choppers, Columbus has nearly twice as many helicopters as most cities its size. Dallas has only four helicopters, despite having a population almost double that of Columbus, with a third more land area.
These helicopters, purchased since 2000, cost more than $1 million each. According to city records, another helicopter purchased as part of a multiple-aircraft contract is due to join the fleet in August.
The cost? $1.356 million.
According to last year's annual report released by the Columbus Police Department, the city spends nearly $4 million a year on the Helicopter Division, including fuel, maintenance, and the salaries of the Division's 18 pilots. The CPD insists that the helicopters are a valuable asset, but larger police departments covering more square miles get by with far less air support.
Well-maintained helicopters have a great resale value. Columbus recently sold one of its inactive helicopters for $510,000, and another is on the market, although it is not airworthy.
Granted, these are minor boondoggles when considering the nine-figure shortfall Mayor Coleman says Columbus is facing for next year, raising questions about what other pricey little gremlins are hiding behind those figures.
- According to CPD's annual report (2008), Columbus carries 2.4 officers for every 1,000 people. That's higher than the national average, which is at 2 per 1,000. Indianapolis, which is slightly larger than Columbus is at only 1.6 per 1,000. San Diego's police department gets by with 1.5 sworn officers per 1,000.
- The biggest expense listed in the Police Department's budget is personnel: more than $270 million. City Auditor Hugh Dorian's office confirmed that more than $10 million of that figure is attributed to overtime wages, and that's not all. The city is obliged to match the pension investments of its workers to a point, but currently, taxpayers are rather generously over-funding those pensions, at around $40 million of non-required expenditure.
- According to Policepay.net, a nonprofit group that surveys police department staffing, departments save money by hiring civilian workers to do the jobs that don't require a badge and a gun. Wrestling away those desk jobs from sworn officers requires a firm hand with the union, something Mayor Coleman has only started to show recently.
- Overtime spending for Department of Public Safety workers is often cited as a major flaw in city administration. Last year, the near $17 million overtime budget was exceeded by $4.4 million.
In a published 10-year plan for reform and efficiency, based on the findings of the Economic Advisory Committee appointed last year to assess the structural deficit, the Mayor and City Council agreed to address all of those issues and more, particularly the pension matching. The first line of the first item in the document reads, "The practice of paying the employees' share of retirement costs cannot continue."
Unfortunately, many of the cost-saving efforts described in the plan will require negotiation with various unions, and now is a tough time to take on every single one of them, especially since they have endorsed his tax rate increase proposal. Also, there is no clearly delineated timeline for any of the measures to be implemented, unless you count "ten years."
In August 2008, the Mayor reported an expected deficit of $75 million for 2009. By November it was $80 million, but now the city has found ways to trim that figure down to $10 million. Now, 2010 is supposed see a deficit of over $100 million, despite indications that the economy has slowed its descent. So what in the hell happened?
Hugh J. Dorrian, who has served as City Auditor since 1969, says that much of the problem has been the historic economic downturn, the likes of which he has not seen in the nearly 40 years he has served as the city's primary accountant. Between retarded job growth and skyrocketing unemployment, revenues from income tax have hit the toilet, and when the Federal Reserve began cutting interest rates last year, city officials watched in dismay as returns from "safe" investments dwindled.
"We are looking at four years out of the decade where there has been no growth, and three of them have been downright negative," Dorrian said. "And 2009 has been the worst year of negative pacing in the history of the income tax, which began in 1938. It is difficult to imagine how rapidly and deep this downturn has occurred, certainly the most rapid and the most deep in my career.
"This downturn has greatly exacerbated the problem, but it is not the sole reason for the problem... Oh, David, I've been advocating a tax increase for three years now," said Dorrian.
While the increase will allow for capital improvements that are already in the works, including equipment purchases and repair projects, the increase would not provide for additional projects...or anything else.
"...I always try to emphasize [that] the passing of this increase will not in any way allow for the expansion of city government," said Dorrian.
Dorrian said the difference between having the special election and waiting until November is about $15 and $20 million dollars - and a lot of layoffs. He believes that some layoff notices would be mailed out as early as the end of August if voters reject the proposal.
"My view is that, even with the increase, the city is going to have to tighten its belt...if [the voters] disapprove it, I interpret that to mean, downsize the government, lay off some people, and continue tightening up the belt," he said. "Whatever the message the voters send to us, it will be our job to implement it."
Originally Published: July 1, 2009
