Mayor Carty Finkbeiner delivered a balanced budget proposal to Toledo City Council members last night, as he was required to do by law. It's a very lean budget with some good and some bad ideas.
Below is the information provided to City Council, with my notes following. Please note that some of the figures I reference are projections because the City has not yet closed out its 2008 accounts, so the final figures are not available.
• Income Taxes are estimated to decline in 2009 approximately 2.09%, or $3,603,078 from the 2008 estimate, reflecting 2007 levels.
In 2008, Incomes Taxes were estimated to be 2.5% more than in 2007. Interestingly, 2007 estimates were 2.6% higher than in 2006. The problem is in current collections. According to the October Finance Committee report, as of September 2008, overall tax revenue to the city was down "nearly 6% from 2007." The only way to tell if this is a good projection would be to compare it to the 2007 final amounts.
• Property Taxes are estimated at $18.6 million for 2009. This is a decrease of about $200K. This decrease is due to a decline in property values and a rise in the number of delinquencies.
According to the spreadsheet the administration provided to council in October, the 2008 budget for Property Taxes was actually $19.1 million - not $18.8 million as indicated in this statement. Additionally, the revenue from this category is down - 11% as of the end of August - so this revenue line item may be higher than can actually be expected.
• Estate Taxes are projected at $4.0 million in 2009.
2008 Property Taxes were estimated at $5.6 million. 2007 income in this category was projected to be $4.4 million, so this appears to be a realistic budget amount.
• Local Government Funds are provided for at $17.9 million in 2009, the same as provided for in 2008.
If state tax revenues and income continue to decline, is it realistic to expect that we will have the same level of disbursement from the LGFs in 2009, or should we budget for LESS than we received in 2008?
• General Fund Interest Income is estimated to yield $2.5 million in 2009, an increase of $200K over 2008’s budgeted amount but equal to anticipated 2008 actual revenue. Interest yield for 2009 is expected to be consistent with what we are experiencing in 2008.
As interest rates decrease, is it reasonable to expect the same yield as 2008? And if we have less income and less funds on which to earn interest, is this truly an accurate budget projection?
• Red Light Camera revenue is provided for at $2.584 million for 2009. While this is the same as for 2008 it reflects an increase over actual collections for 2008.
So what makes the city think that it's going to have INCREASED collections from these cameras in 2009? Every study - even from the camera companies themselves - show that income/revenue from the cameras decreases over time. So far, in 2008, red light/speed camera revenue is $750,000 less than expected. What evidence does the city present to document why they think they'll have 30% more income in this line item? Do they plan to add more of these cameras to get to that point? And what will happen if residents, like those in Cincinnati, pass a charter amendment to prohibit the cameras? These are the contingencies the city should think about and build into their budget projections.
• Refuse Collection Fees are projected at $4.7 million for 2009.
First, this is less money than what they budgeted in 2008, which counted on a 90% collection rate. What is the current collection rate and is it consistent with this much revenue?
Also, the city is currently in a lawsuit over the legality of this fee. What happens if they lose and the court determines this is actually a tax and not a fee? Not only will the revenue not be there, but the city may be forced to repay all it has collected. That contingency is not accounted for. Additionally, if the budget for trash collection is actually reduced, as planned, then the 'justification' for the additional fee - to fund the department - is no longer valid, thus increasing the likelihood that a court will see this 'fee' as a general revenue fund 'tax.' Now, the city may be confident in its position on the lawsuit, but ... what if???
• Cable Vision revenue is budgeted at $2.9 million for 2009. This is an increase of $260K, which is predicated on an increase in the franchise fee from 4.5% to 5% effective January 1, 2009.
• The Revenue Estimate assumes the transfer of $2 million from the Economic Stabilization Reserve in 2009.
I couldn't find an 'economic stabilization reserve' listed in previous budgets. So if this is the new name for the 'rainy day fund,' I'm not sure there will be anything left in that account after the city balances it 2008 budget. If it's not the 'rainy day fund,' then what is this fund supposed to do and why is it acceptable to use it for a purpose other than intended?
There are a lot of good things in the expense assumptions: no pay increases, elimination of vacant positions, increases in health insurance co-premiums, using grants instead of the general fund - for demolishing homes, elimination of tuition reimbursements, and some savings as a result of fully automating the garbage pickup and switching to one-man instead of three-man crews.
However, there are some not-so-good things in the expenses as well: a planned four-day shutdown may not be possible, considering the legal challenge being mounted by the unions; there are no police or fire classes, despite planned retirements; gasoline costs have gone down in the past two months and while this is a very unstable commodity, projecting costs in this area is very difficult; and the expectation that they will be able to balance the 2008 budget with no negative carryovers, despite a projected $10 million deficit.
• Staffing for 2009 was based on the elimination of all vacant funded positions as of October 28, 2008. The only exception to this rule is vacant Communication Personnel positions in the Police Department.
• Labor rates were frozen for 2009 consistent with the expired bargaining agreements. Local 20 was increased by 3% as a result of the arbitration agreement for 2009.
• Overtime increased by $1.9 million excluding fringes for the General Fund in 2009. This change from 2008 was specifically within three areas: Police, Fire and Solid Waste. Police was reduced as a result of the closing of the NorthWest Station; Solid Waste was reduced as a result of the implementation of the Solid Waste Plan as described elsewhere. An increase in Fire was the result to fully provide for minimum manning in 2009.
• Severance is based on the 2008 estimate; Police & Fire changes were developed by Public Safety to reflect the potential impact of the DROP program in 2009.
• The 2009 Budget assumes pension pickups as appropriate by bargaining unit as follows: Local 7, Police, and Fire at 10%; 2058 and classified exempt at 8.5%; Local 20 at 8%, and unclassified exempt at 5%.
• Workers’ compensation is assumed at 5.3% (valued at $8.1 million) and fully provides for the 2009 Budget for the Workers Compensation plan including accrual of Incurred but Not Reported claims (IBNR) for 2009.
• Medical Budget increases are $540K (excluding co-premiums) greater in the General Fund for 2009 over 2008, and $1.75 million greater overall (including co-premiums as noted below).
• Medical co-premiums were also built into this amount (as a reduction) on the following basis: a full year for unclassified employees and Local 2058; a February 1, 2009 implementation for Local 7, and an October 1, 2009 implementation for classified exempt employees and Police.
• The City Obligation for debt on the Downtown Housing Projects is provided for at $978k for 2009.
• The Tax Transfer to CIP at 22% net of Tax Administration is estimated at $37.2 million in 2009.
• The Debt Budget is derived from the 2008 Book of Bonded Indebtedness for the 2009 budget. It also reflects changes anticipated in 2009.
• The 2009 Demolition program reflects a redirection of budget from 2008. Grants will provide for demolitions previously performed by the General Fund. Streets, Bridges, and Harbor will continue to perform these demolitions. It anticipates an overall reduction of demolitions in 2009 of 100 units.
• Downtown Employment Incentive Program (DEIP) amounts were provided by the Department of Economic Development at $593K for the year 2009.
• Layoffs are built into the 2009 General Fund Budget. It provides for four one-day layoffs for all non-essential personnel in 2009.
• There is no provision for Police or Fire classes in 2009.
• Utility Increases provided on the advice of the Department of Public Utilities Division of Utility Administration were as follows: Electricity @ 12% per annum or $392k over 2008; Gas @ 15% per annum or $166k over 2008; Water @ 5% per annum or $9k over 2008; Sewer @ 10% per annum or $40k over 2008; and Storm Sewer @ 25% per annum.
• Municipal Garage Costs were assumed to rise by $1.3 million in 2009, even after a 10% cutback as a part of a deficit reduction plan due to the significant increases in the cost of fuel, parts, and labor they have provided for in their 2009 proposed budget.
• Facilities Budget in 2009 is relatively flat due to an approximate 10% cut as a part of the same deficit reduction plan mentioned above.
• ICT and Printshop charges were reduced by approximately $175k, also as a result of the deficit reduction plan.
• Risk Management Fund Budget was increased by $333k over 2008.
• The Solid Waste Budget assumes the commencement of implementation of full automation in 2009 including the implementation of the “Columbus Plan” in January 2009. It also assumes the beginning of the deployment of the automated packers in September 2009, with the appropriate personnel and other changes necessary under the circumstances. (This is primarily the elimination of the current three person crews with simply a driver).
• The CJCC (NORIS) Budget was $1.58 million for 2008 and is being increased by $270k in 2009.
• The 2009 Proposed Budget assumes the following as related to Criminal Justice: Courtroom Security with no change in operation is provided at $1.9 million; the Jail contract with the County at $1.3 million; Work Release at $580k; no provision for Public Defender or Hospital Services (as a part of the contract to be signed with the County for the above mentioned Jail Contract); Pretrial Services at $787k; and Pretrial Detention at $1.29 million.
• The City is advising CCNO that in 2009 it will no longer pay for overutilization of beds for prisoners. This, in conjunction with the assumption that credits from them will remain relatively unchanged from 2007-8, will provide for a reduction of approximately $500k in 2009’s budget.
• The 2009 Proposed Budget reflects the first year of a five (5) year chargeback of the bonded portion of the SAP-ERP or $1.322 million for 2009 from the General Fund. The total cost to be recaptured for the bonded portion of the project is estimated at $11.5 million. However, as a part of the deficit reduction plan, reimbursement to the CIP for the implementation of the ERP in 2009, originally estimated at $1.3 million, has been deferred.
• The 2009 Proposed Budget eliminates all funding for Swimming Pools and the T.O.R.C.H. program.
• Both the Clerk of Courts and the Municipal Court are being requested by the Administration to reduce their budgets in 2009 by 5%. The proposed budget reflects the effect of this change at $309k and $429k respectively.
• As a part of the deficit reduction plan all tuition reimbursement has been eliminated in the General Fund for 2009.
• A layoff is programmed into the 2009 Proposed Budget to reduce personnel costs, net of estimated unemployment by $2.54 million.
• THE 2009 BUDGET ASSUMES THAT THE FINAL GENERAL FUND BALANCE SHEET WILL END THE YEAR WITH NO DEFICIT IN UNDESIGNATED FUND EQUITY. IT WILL BE ASSUMED AT ZERO FOR PURPOSES OF THIS PROPOSAL.
Despite some steps in the right direction, it appears from the preliminary information that no departments have been eliminated. The cuts are pretty much across the board without determining priorities for service and whether or not some of the existing services should be eliminated in favor of adequate/proper funding for mandated services.
And many of the questions I asked about the 2008 budget are still valid - and unanswered - including the impact of NOT making the planned changes as of the first of the year.
I hope, when budget hearings are held, we'll get much more interest in them than we have in the past, and that it won't be special interests lobbying for their particular line item.