Friday, February 13, 2009

Finkbeiner proposes to raise taxes to balance the budget

Yesterday, Mayor Carty Finkbeiner made several suggestions to balance the city's budget.

I must admit to being confused about just how much is needed because the numbers coming from the administration change each time someone references the deficit. Last week, city council was told they needed another $8.1 million for 2008 - after closing out some Capital Improvement Projects to cover an $8 million hole.

Today, the mayor's power point presentation said $2 million was needed to close out 2008, but, despite having passed a balance 2009 budget, there is projected to be an $11-12 million hole yet this year.

According to today's paper,

Even though Mr. Finkbeiner proclaimed the city's budget as balanced, his plan only partially addresses an $8.1 million shortfall from 2008. Under the plan, the city will close the books on last year with about a $1.7 million deficit, which is in violation of the law.


I guess the 'bottom' line is that council still needs to find about $14 million in cuts between last year and this year.

So one of the ways Carty plans to cover that hole is by changing the way Toledo's payroll income tax is charged.

How it works:
The current rate of payroll income tax is 2-1/4%. A Toledoan who earns $50,000 owes the city $1,125 per year. Toledo has reciprocity on income taxes with surrounding communities.

If you live in Toledo, but work in another city, Toledo has allowed you to deduct whatever you pay in payroll tax to that other city from what you owe Toledo.

For instance, if you work in Maumee, you'd be paying them $750, so the only amount you would owe Toledo is $375 ($1,125 minus the $750). Under Carty's plan, you'd only be able to get credit for half the $750, so you'd now owe Toledo $750 ($1,125 minus $375).

If you work in Oregon, which has the same income tax rate as Toledo, you'd be paying them $1,125 and nothing to Toledo. Under Carty's plan, you'd get credit for half of that amount, which means you'd pay Oregon $1,125 and Toledo $750.

This is a tax increase for every person who decided to stay in Toledo even though they work in another city. Carty said this will raise $5.2 million per year.

I think it will make people want to move out of Toledo.

But that's not the only change he's suggesting.

On May 1, the garbage tax for people who recycle was supposed to go down from the $2 we're currently paying to the new rate of $1. He has proposed keeping the rate at $2 which will 'save' $175,000. Of course, it 'costs' citizens the same amount, but Carty seems to have a disconnect between the needs of the city versus the needs of the citizens.

A new fee he wants to create is a charge for Fire Department response to fires. He says that most insurance companies have a cost recovery provision of between $500 and $1,000. He plans to bill you and get that reimbursement from your insurance - the same way they bill for emergency response to a car accident.

Again, there is a disconnect. I think the mayor sees this as 'free' money to the city, failing to recognize that such public policies just end up raising the insurance rates of everyone in the area.

Carty does suggest some cost cutting: savings from the on-going contract negotiations with police unions, removing one fire engine from service, some layoffs for AFSCME Local 2058 - the supervisory union, going to four 9-hour work days for all exempt employees, automating garbage pickup.

But most of these cuts are across-the-board types of things. He has not, as far as I can ascertain, gone through an overall evaluation of current city services in order to eliminate the ones that are not mandated in the charter. According to the budget passed by council for 2009, we still have a youth commission, which might be nice, but is certainly not necessary.

So, the approach is to raise taxes. From all components of the plan he presented, the most money is generated by the change in income taxes - $5.2 million. Even Republican Councilman George Sarantou, who admitted the change may make some people want to leave Toledo, said he believes people realize the city's need for the funds. He has previously bragged about how much they've cut out of the budget over the past several years.

And Carty said the same thing during his presentation. One power point slide claimed:

"Over the past two years this administration has cut $25 million from the budget. This combined with the estimated $14 million we are cutting today equals $39 million, which is 15.6% of the total general fund budget."

Now, I didn't think this seemed accurate, so I used the link on the left to view the city's budget. Here's what I found for the General Fund expenditures:

2006: $234,312,215.50 (actual spent)
2007: $242,752,864.71 (actual spent)
2008: $254,098,779.08 (estimated - still don't have final numbers)
2009: $249,369,853.02 (approved by council)

According to these figures, spending from the General Fund has increased - not been reduced. I can only surmise that the 'cuts' being referred to aren't really cuts in spending, but 'cuts' in the amount of increase - kind of what Washington does...

Now, there is a decrease of $4,728,926.06 between 2008 and 2009 - and the mayor did propose more cuts totaling $10.3 million. It would be fair to say that if the mayor's cuts are approved, combined with the approved budget, there is a $15 million cut between last year and this year, if last year's spending was close to what was estimated.

But that's not $25 million over the last two years.

Regardless, the problem continues to be spending. The solution isn't to 'inflate revenue assumptions' or raise fees. The solution is to cut the budget of unnecessary expenditures, eliminate departments, boards and commissions that cost money but have no real purpose or enforcement, and develop a business-friendly environment by not taking over private business functions that, despite claims, really don't generate revenue.

10 comments:

Tim Higgins said...

Maggie,

After reviewing the PowerPoint presentation, all I can say is,

"Welcome to the Carty the Magnificent's Magical Mystery Tour. Watch as our intrepid magician makes money appear and disappear. Be amazed as he pulls more debt out of a hat again and again and again. Gaze in wonder as his able assistant Robert Reinbolt makes budget numbers change in size and shape right before your eyes.

Bring mom, bring the kids, and bring your friends to a once in a lifetime show full of folly, fiction, and slight of hand seldom seen before."

I keep asking myself ... I mean, I know that the band was playing; but was there a magician performing on deck as the Titanic was going down>

2Bn11FA said...

Well I think I learned something today. I have always thought that reciprocity meant that cities would withhold taxes for non-residents then swap them with the other cities in the area to "square-up" the books. So, if I live in Maumee but work in Toledo, Toledo would send my withholding to Maume and vise-versa. now I know better. I sure hope there is a City of Toledo left for the new mayor to rescue!

Mike said...

I haven't seen the most recent iteration, but the one from November that is posted on the City's website seemed to have quite a bit of room in it.

There was line items in every department for "Food and Forage"; $22,000 in the General fund alone, $12,000 for Water Operations, Fleet Operations get $12,500 for food.

There were staggering numbers for "clothing and linen" (I assume these are uniforms, but I'm not sure why anyone other than Police and Fire need uniforms). The General fund allows for nearly $244,000 for that line item, and Sewer Operations are allocated $85,000 for clothes. Police have their own line item for uniforms at $305,000; Fire gets $240,000.

Water Operations has $86,000 budgeted for seasonal help and interns! Fleet Operations gets $6,800 for interns....really?

Sewer Operations have a $2,000 advertising budget. Good thing too because otherwise people would be still using outhouses.

The municipal tow lot spends $31,000 in office equipment rental, another $13,000 in "Drug, Chemical & Lab Support", and $3,000 in publications!

Rather than cut back on Police and Fire, do we really need a Youth Commission? ($114,000) I'm sure it's nice to have when your coffers are overflowing, but seriously...no police class.

We're raising taxes and cutting safety budgets, but we have an affirmative action department (apparently, purchasing cannot handle compliance on their own), and is anyone on the City payroll still driving a city car? Oh yeah, Human Resources gets a $4,200 car allowance. 'Cause HR travels a lot.

This isn't a ton, but it does add up. There was a number of other red flags that went up reading through it, but I don't have the time or the inclination to waste effort in trying to understand why taxpayer dollars are being spent on this stuff.

Maggie Thurber said...

Mike - the current version is what was passed by council with three amendments.

* they eliminated a city auditor position in order to put that money toward CareNet

* they took some money out of the parks fund and put it into the general fund to pay for the staff person at Friendship Park Senior Center

* they took money out of CIP (pending approval by voters in September) to pay for a police and fire class at the end of the year (they also voted to put the issue before the voters because they would be using money from the 3/4% income tax that is supposed to be split between the Capital Improvements and General funds)

So, you're working with the current document - and I agree that there is significant room for cuts in multiple line items.

toledo1 said...

What the mayor is yet again ignoring is the fact that the fire department has a minimum manning of 103 and cannot just tell them to work with 99. All that will do is go to arbitration and cost the city more money only to end up back at the SAFE level of 103. I fear for the police department that keeps shrinking each year as crime keeps rising. Then the city asks for concessions from them too. Isn't working with less people to protect you concession enough? I am not saying that some concessions should be made as all need to pitch in during this hard time, but the police department is conceding plenty by risking themselves everyday in an increasingly dangerous city.

Maggie Thurber said...

Toledo1 - I think everyone agrees that there are some concessions all union members can make to 'help out' with the situation...but I agree with you that police and fire are primary statutory requirements and shouldn't be cut when there are other things in the budget that could come first.

And great point about potential challenge to the minimum-staffing levels. Whether or not a person agrees with the level, it's in the contract and needs to be honored until the contract is (if ever) re-negotiated.

Maggie Thurber said...

Toledo1 - you called it!

From The Blade:

A Lucas County Common Pleas Court judge granted a temporary restraining order Friday, stopping the Toledo administration from moving forward with a plan to reduce firefighter staffing levels by eliminating one ladder truck from daily service.

Less than 24 hours after Mayor Carty Finkbeiner announced a plan to reduce the firefighter line strength from the contractual mandated 103 per day to 99, the Toledo firefighters union filed a complaint to stop the change from going forward.

toledo1 said...

Did he really think they were just going to say okay? If that were the case, then next year during budget issues, it would go down to 95, then 90, etc.. It is a slippery slope to a very unsafe situation, much like what police are experiencing right now.

toledo1 said...

Even more updated, the union won a restraining order against that reduction. So in the mayor's "attempt to save money" he is already costing the city money.

Hooda Thunkit said...

Maggie,

I can find another ~$25 mil., don't buy the garbage and recycling bins and don't buy the one-armed-bandits and PRIVATIZE the garbage pickup.

Further, sell off the existing garbage/recycling vehicles and pocket the money (in the General Fund).

Oh, but that would also mean giving up a significant portion of the 1-1/2 % tax, a similar portion of the additional 3/4% "temporary tax" and ALL of the additional garbage and recycling fees.

Oh well, never mind. . .

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