There was no plan

Toledo City Council and Mayor Carty Finkbeiner have debated, for what seems like years, the issue of garbage collection. Questions of whether or not to automate the process, contract it out, purchase new trucks, purchase cans for the citizens, what to do with the workers who have a contract that requires the city to find them other jobs if they automate....and all the myriad of follow-up issues that go along with any potential answer have been discussed.

I've been a proponent of contracting out the service because it would save me (and everyone else in the city) money. That's just a no-brainer.

The politicians, however, did not agree and in February voted to issue $9.6 million in debt for new trucks and garbage cans.

Many people asked how the city was going to actually pay for this new debt, considering the financial situation of the city, facing - still - about an $8 million debt for 2009, and as much as a $25 million deficit for 2010.

My question revolved around the difference in costs between subcontracting the service versus automation. I've still not seen a fiscal analysis of the two options and doubt one even exists.

Today we find out the truth - council had no plan for how the city was going to cover the costs of this purchase. They were just going to 'hope' that the money would be there, despite knowing that they couldn't meet current obligations, much less a new one.

So what are they going to do? Scramble for funds.

According to law, approved by the voters, a portion of the 'temporary' 3/4% payroll income tax goes directly into the CIP to fund various long-term projects in the city, like roads and major purchases. Often, the (correct) decision has been to issue notes or bonds for those purposes and pay the debt from the CIP. Additionally, the city has placed a restriction on itself that not more than 90% of the amount transferred from the 3/4% tax each year can go toward debt payments. This allows other projects to also be covered while keeping the city from incurring too much debt.

Now Joe McNamara wants to use the CIP to pay for the debt for the new trucks and cans. (Lisa Renee at Glass City Jungle has the press release.) Except that using these CIP funds for this purpose requires council to waive their 90% limit on debt.

From today's paper:

Mr. McNamara wants to use most of the money to pay 2010 debt-service costs for the purchase of automated trash trucks and containers.

He said the plan would cut the city's $7.8 million deficit by $2.5 million.
...
Mr. McNamara said it would be fiscally smart to go ahead with the plan and waive the policy, because the debt for the trash trucks and containers has been issued.

See? We'll just use CIP funds to make the first payment because we have no money in the general fund to cover our obligation...and look! By making this decision, we've cut our deficit!!! Aren't we smart!

This is the equivalent of taking out a loan to purchase a new boat when you can't make your mortgage payments - and then deciding to spend money out of your savings to cover the boat payment. That's really smart, isn't it?

So we're left with only one conclusion: city council made a decision to purchase items and had no plan for how to pay for them.

Well, perhaps that's not quite right. They planned to pay the debt, but didn't look at what other items would have to be cut in order to make that payment because there is only so much money available - and all of it is spoken for.

In fact, they've got more expenses than revenue - which they KNEW - but decided to add to the expenses anyway!

So the plan that will probably pass at next Tuesday's council meeting will be to waive their 90% limit on debt payments out of CIP and use those funds to cover the debt for the new garbage trucks and the new cans (because, you know, we just can't be trusted to purchase our own cans so we have to have government do it for us - and charge us more than we'd pay otherwise).

These people did not think. They didn't follow through on the implications of the purchase to get to the point of actually paying for it. They were well aware of the current deficit and the projected future one. They were well aware of the decline in revenues - and the potential that lost revenues would never return. They were well aware of the fact that the city was having trouble meeting every day obligations without adding even most costs.

And they put us another $9.6 million in debt anyway.

Remember - Joe McNamara, Phil Copeland, George Sarantou, and Steve Steele are up for election in November. Do you really want 'more of the same' when it comes to these kinds of financial decisions being made on your behalf?