Saturday, March 22, 2008

Inconsistencies in Toledo's budget and a challenge to City Council

Earlier this week, I posted numerous questions about the 'assumptions' Mayor Carty Finkbeiner made in his 2008 budget for the city.

One of the questions I raised was about the revenue projections. Finkbeiner's estimated 2008 income tax revenue:

"Income Taxes are assumed to grow at 2.5% in 2008 over an estimated 2.6% growth rate for 2007 over the 2006 actual Income Taxes."

I questioned the income tax collections for the first two months of the year in relation to projections. Today, The Blade reports that income tax revenue for 2007 was lower than projected - 2.5% less, in fact.

In 2006, the city collected $168,421,993 in income tax, but gave out refunds totaling $3,704,749. Net collections were $164,717,264.

According to the above statement from Finkbeiner, 2007 projected income tax revenue was supposed to be 2.6% more than in 2006. The 2007 amount was budgeted at $173,967,203 which is actually 5.6% more than what the city got in 2006 - not 2.6%.

The discrepancy is in the refunds. While the city paid out refunds of $3.6 million in 2004, $3.5 million in 2005 and $3.7 million in 2006, there was nothing budgeted for refunds in 2007. They've not included refunds in the 2008 budget either.

By budgeting and referencing ONLY what they collected and ignoring any refunds, the city is over-projecting their actual revenue. And they are basing their spending on this over projection.

Some might say that this is okay, considering that even with actual collections of income tax being less and overtime being more, the city still ended up with about $1 million in carryover. However, hoping that revenues and expenditures will somehow balance out to the good, as they did in 2007, is not proper financial planning.

The city needs to budget for income tax refunds - as they will certainly occur - and budget the spending based upon the net income tax line items, not just upon collections alone.

Which leads us to 2008 and more questions in light of this just-released information about the 2007 collections.

* Does the $169.68 million income tax revenue amount include the refunds issued in 2007? Or is this just the amount collected?

* If the $169.68 million amount is before refunds, what was the net amount?

* Has the city revised their income tax projections for 2008 as a result of this new information - and, if so, how much?

According to several reports about the city council finance committee meeting on Thursday during which these new numbers were released, the city has actually INCREASED their revenue projections to $253,271,089, with the additional money coming from $1.1 million in unclaimed funds which can, by law, be deposited into the general fund, and about $400,000 which is half of the carry-over amount from 2007 (the other half is supposed to go into reserves - or the 'rainy day fund.')

So if this new revenue amount is based upon these two additions to the budget, the city has not reduced its income tax revenue projections. If they budget a 2.5% increase (which is certainly not a guarantee in light of the layoffs and lack of meeting projections in the first two months of the year), will we find ourselves short of income in 2008?

Sadly, the city did not publish a year-to-date actual budget when they published their 2008 projected budget. They list only the 2007 budgeted amounts, so citizens (and council members???) see only what was actually spent in 2006 and what they planned to spend in 2007. If we could see YTD figures as of the date of publication, we'd have a much better understanding of what was being planned for 2008. But perhaps that's the point?

On March 18, I sent an email to John Sherburne, the Finance Director, asking questions about the many assumptions in the 2008. No - I've not yet gotten a response, but it appears that some of the questions were addressed during the finance committee meeting Thursday.

Unfortunately, most citizens interested in the budget weren't at that afternoon committee meeting. And, while city council plans a committee of the whole meeting Monday at 2 p.m., it's not likely that citizens will be able to attend at that time, either. Council plans to vote on the budget during their regular meeting on Tuesday.

During my guest hosting stint for Brian Wilson on WSPD yesterday afternoon, Fred Lefebvre called in and made an excellent suggestion. To challenge city council members to refuse to vote on the budget until all questions are answered - satisfactorily. I agree.

Many council members are livid over just learning that the city has an unclaimed funds account that can be accessed (to the tune of $1.1 million) to help balance the budget. They should demand explanations about how long city administrators have known of the availability of these dollars and when they decided to transfer the monies to the general fund ... and why council wasn't informed of this earlier. They should also demand answers to the 'assumptions' originally made and whether or not the assumptions from November of 2007 are still valid and accurate today.

If you agree, call city council and tell them (419-245-1050). Government is supposed to work for us and they should not be allowed to get away with these types of inconsistencies and obfuscations with our money.


Hooda Thunkit (Dave Zawodny) said...


Are familiar with the term "SWAG" computations/calculations?

The budgeting process in Toledo is practiced as a Black Art, involving many, many mysterious and (deliberately) incomprehensible methods and procedures designed to confuse, misdirect, conceal and wear down the faint of heart.

And because there is no known science involved in Toledo's budgeting process, what you get are fictional "WAG" calculations which contain no discernible science; hence, I prefer to call Toledo's document a "Fudge-it," which is more accurate/descriptive than not ;-)

For the members of Council, this obfuscation/trickery is played, even upon them, by the mayor and his inner circle.

The glaring inconsistencies are obviously slip-ups, on the part of overconfident upper management, too used to getting their way with little questioning and resistance; and that have become comfortable and complacent in their increasingly sloppy ways. . .

And, don't expect any direct answers from them either; they're complacent and comfortable ignoring the sunshine laws, with no serious challenge of consequences for their non-responsiveness.

HTH :-)

navyvet said...

Hi maggie,

I wrote to you earlier today at The Death Star. I did it to keep what's left of my sanity.

Despite fantastic efforts by you and your peeps...especially Karen S., the city train called "Toledo" continues down the track to nowhere and the administration sees no need to look back at their mountain of errors to perhaps learn something. Not with the current mayor.

Carty may get results, but they are not the kind needed by the city. If he feels its ok to blame the Marine disaster on a recently deceased police officer, he could not get much lower. The slower the mayor speaks, the more he lies.

He was shocked to learn of the financial troubles at the Erie Street Market.

He was in the dark concerning the training planned by the Marines.

Only days ago did he learn about the "unclaimed-check fund"...or so he says. One has to wonder what Mr. Reinboldt does all day?

Much will be learned at the Council meetings on Monday and Tuesday. I plan to attend both meetings. What are vacation days for?

Not that the meetings will impact the budget. With the help of his enablers, Carty will get his wish...and The Blade will continue its efforts to save the Tiffin Court House.

The budget will be approved and then Council can go on to important things like swimming pools, pot holes, etc. In the meantime, the impact of the budget will be treated like mushrooms...kept in the dark.

Thanx for your energy, drive and determination.


-Sepp said...

I tried to call you on air the other day but the roads turned to complete crap just over the Michigan line so I got off the phone.
The good news is that I'm now a part of that missing 2.5% tax base since I no longer pay Toledo's income tax!

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