Toledo Mayor Bell expects 2011 budget surplus of $326,000

Press Release:

Mayor Bell announces year end financials, surplus anticipated

Mayor Michael P. Bell today announced the year end financials that have been sent to independent auditors for review and certification. Those figures include a report of income tax revenues totaling $153.58 million and an anticipated surplus of $326,000 to be directed to the budget stabilization fund.

“Three years ago I said that by applying well established management principles the City of Toledo could get our budget under control while preserving the services government was created to deliver: police, fire, refuse collection, street improvements and parks,” said Mayor Bell. “My administration has worked hard to ensure we continue to provide these services to residents of the city without increasing taxes, without mass layoffs and through greater partnership with public and private entities.”

Facing a projected $48 million deficit in 2010 when Bell took office, the city engaged unions in difficult but necessary negotiations for concessions; implemented benchmarking and best practice analysis to streamline services; divested services that were not provided efficiently by the city, but were accessible through private partners; and worked with local governments around the region to determine where we could mutually benefit from shared services.

“The city was not able to achieve this alone, our unions played a vital role that cannot be overlooked. Our municipal neighbors facing many of the same challenges were open to collaborating with us, and though change is often difficult, our citizens were patient as we looked for the best way to continue providing them with services they deserve and without increasing taxes,” Bell added.

The administration cautioned that there are still challenges ahead as the city works to wean itself off of reliance on capital improvements funding. While 2012 will be an ambitious year with $28 million in road repair projects and a total of $60 million in capital improvements, the city cannot and should not continue to rely on capital funds as a stop gap for still lagging revenues.

“Ideally our bond agencies would like to see the city demonstrate a permanent source of revenue and an end to our reliance on capital funds to support operations,” said finance director Patrick McLean. “I’ve very pleased with the financial management and oversight that we’ve been able to implement over the last two years. It was a bit of a culture change for some in our system, but our financial situation is stronger and more stable as a result.”

The 2011 financials have been submitted to independent auditors for review. Once certified they will be made available through publication of the comprehensive annual financial report. The city is projecting $156 million in income tax revenues for 2012, up from a 2009 low of $141 million, but still lagging from a 2007 high of $169 million.

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Fallacies surrounding the 'privatization' of Toledo trash service

Let's get this perfectly clear - Toledo is not 'privatizing' its trash service even if it decides to go with a contract with the county which would contract with a private company to do the collection.

True privatization would not have government involved at all.

The local paper's take on the matter, which actually supports the proposal currently before council, is that the city 'subsidizes' the trash service:

"Most Toledo residents who recycle pay the city $8.50 a month to collect their refuse. Senior households that are eligible for homestead-exemption discounts pay $5 a month. These fees do not cover the $16.5 million annual cost of trash collection; the city pays about $7.5 million a year to subsidize the service.

That expense has become harder to bear during the recession. It has required the city to shift money to its general fund from its capital budget, restricting the city's ability to fix streets and make long-term infrastructure improvements."

First, all tax dollars go to support city services and the trash tax referenced goes into the general fund - not a fund dedicated to paying just for the service. This means the trash 'fee' is actually a 'tax' to be used for anything council decides and not just for the collection of garbage.

Second, our 'temporary' (since the 1980s) 3/4% payroll income tax was supposed to be going to provide this service. Now, in addition to our taxes and our fee, the city still needs more money - not just for trash - but overall. If council had eliminated spending in other areas, it would have the money for this 'service' which many believe is a proper function of government.

Lastly, the editorial board seems to think that council had 'no other option' but to steal from the Capital Improvements Fund in order to meet it's annually general fund operational expenses. Nothing could be further than the truth. Council could have made tough choices in the past to STOP SPENDING, but that's not what they did.

My take on such things is that if you can look in the Yellow Pages and find companies who do a function, there is no need for government to do it as well. But if we're going to 'privatize' our trash, why don't we just go all the way instead of contracting with another governmental entity (Lucas County), which will then assign it to a different governmental entity (the Lucas County Solid Waste District) which will then issue a contract for a private company to do the work?

In the suburban communities, the property owner contracts for the services directly and it seems to work just fine. Despite the naysayers who want to claim that *some* Toledo residents aren't responsible enough to do this kind of thing on their own, I believe that it could work as well inside the city limits as it does elsewhere.

After all, if going with a private supplier is *good*, wouldn't eliminating all the middle men be even *better*???

The problem isn't our trash service or even how much it's costing. The problem is the overall costs of government relative to the amount of revenue they receive. Government spends more than it takes in, and Toledo is no exception, as our years of deficits clearly demonstrate.

No matter what plan the Council goes with, we will still be paying - one way or the other. Don't get me wrong - we should, each of us, pay for our garbage service. But if I'm going to pay, why don't I get to choose how I will do so, with the ability to not pay government if I opt for a private supplier who will give me a fee based upon my usage of the service?

Sadly, that's using logic and reason and we don't seem to do that here. Instead, the thinking that got us into this position in the first place will continue to permeate our area - until there's no one left.

Same old, same old on Toledo's budget

Toledo is facing a budget deficit. That's nothing new.

City Council has to pass a balanced budget by the end of March and, counting today, there are only three days left and still no budget. That's nothing new, either.

Council is debating 'privatizing' garbage service and, though the recent incarnation of the idea has some twists to it, even that is nothing new.

They're even considering - again - taking money from the Capital Improvements Fund to balance the General Fund. So we have a 'rob Peter to pay Paul' solution which, as well, is nothing new.

And they are discussing 'raising' the revenue estimates to cover the spending estimates, though our recent record is that we don't reach the increased targets for revenue, though we often exceed the targets for spending. Again, nothing new.

Toledo will pass a balanced budget by the end of the month - of that I am sure, though what form it will take is still any one's guess. I don't agree with all the individual line items, but I do applaud Mayor Mike Bell and members of city council for a more 'amicable and open' discussion than what has existed in the past. So while the tone is 'new' - the issues aren't.

Will we spend up to $60,000 a year in order to hire a lobbyist to represent us in Columbus? Will doing so be an implicit admission that our state reps are failing to do their jobs? Will voters even care - about the expenditure or the implications of the council thinking they *need* a lobbyist?

Will we turn over our garbage collection to the county which will then contract out to a private company who will then charge us roughly the same as what we are currently paying? If we do so, where will all the employees who were doing that job go since the city, by contract, has to find jobs for them within the city??? Will we really *save* any money when we'll be paying for the old garbage collectors as well as the ones employed by the new contractor?

Will we be able to eliminate the garbage tax? Or is it exactly what people claimed all along - just another tax council was able to pass off as a fee to fund their continued overspending?

Strangely, I could substitute any number of minor spending items for the lobbyist and have published this exact post several times in the past.

Perhaps I'm just cynical today, but we seem to be having the same discussions over and over again. Some of the names and the spending items are different, but too many of them are the same - the same old, same old that just demoralizes the taxpayers and voters of this city.

No wonder we're losing population and businesses. Who is 'stuck on stupid' now?

Toledo trash tax going up?

The City of Toledo is looking at another budget deficit for 2011 - this time around the $5 million mark. Which is no surprise considering that Council has not been as serious as they need to be about reducing expenditures.

They're probably thinking that if they can continue to push the costs into future years (as they repeatedly done in the past), the economy will eventually recover enough to address most of the problem. It's hopeful, but certainly not a solution to the continuing budgetary problems the city faces.

As this has been an ongoing problem, an ongoing solution has been the imposition of taxes. Under the guise of a 'fee,' they've passed a trash tax - basically charging homes for the collection of garbage, despite the fact that our 3/4% payroll tax (and just about all other taxes) is supposed to be covering that service along with the basic services of government.

And just like with most government taxes, it was sold as being temporary with a reduction over time to zero, only to find that it's gone up ... and up ... and perhaps, up again.

An item that was not discussed in last week's council agenda meeting made an appearance last night during the regular meeting for a first reading:

Amend TMC Sec. 963.03(b) to increase refuse collection fee, $15/$8.50/$5 to $12.50/$7.5

Prior to March 31, 2010, the tax was scheduled to be $8.50 per month for residents but would be only $1.00 per month if you recycled. Facing - yes, you guessed it - budgetary shortfalls last year, council scheduled the tax to be $15.00 per month for everyone. But then they put Issue 5 on the ballot, a measure to move money around between general and capital improvement funds, and Mayor Mike Bell promised a reduced trash tax if the measure passed.

It did pass so the tax went to $15 for people who don't recycle, $8.50 for those who do and $5 if you have a homestead exemption.

This ordinance would actually reduce the tax by $2.50 for people who don't recycle, and by $1.00 for those who do.

***Side note: Why they decide the people paying more should get a larger reduction is beyond me - they certainly don't apply that logic to income taxes!
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But those with homestead exemptions who are currently paying $5 will have to pay $7.50 - the new recycling rate. According to the latest Census Bureau figures, roughly 13% of Toledo residents are over 65 and eligible for the homestead exemption. Unfortunately, I couldn't easily determine how many households that is - or if that is a larger or smaller number than the number of households that are not recycling.

It appears, though, that seniors will be paying more to counter the decrease non-recyclers are going to get.

Of course, I think the trash tax is wrong and that we shouldn't have one in the first place. But since it appears council is going to do it, it would be preferable for them to not change it every year based upon their ongoing failure to present a budget that has the city living within its means.

City's trash numbers don't add up

Toledo City Council held a committee meeting yesterday to discuss 'turning over' the city's trash pickup to Lucas County. Dave Welsh, the director of public service, gave the committee information about the income and expenses of the service. According to today's paper (link), here is the report:

Dave Welch, the city's director of public service, said the trash operation costs Toledo $16.5 million annually. A monthly $8.50 trash fee generates about $9 million toward that cost. The rest is paid for with income taxes collected by the city.

"If you want to make this a true enterprise fund that pays for itself, you would have to raise that monthly fee [to] $17.25," Mr. Welch said.

But the city's own budget figures show something else completely. This is the line item for Refuse Fee revenue from the 2011 proposed operating budget:

24100 - REFUSE COLLECTION REVENUES:
2008: $ 4,966,035.04
2009: $ 4,700,000.00
2010: $ 13,124,736.84 (budgeted)
2011: $ 8,928,000.00 (proposed)

In addition, there is a line item for Refuse Disposal income:

406910 - REFUSE DISPOSAL
2008: $ 368,279.39
2009: $ 350,000.00
2010: $ 375,396.80 (budgeted)
2011: $ 651,000.00 (proposed

So if the trash fee only generates $9 million a year, why did the city collect $13 million last year in fees and another $375,400 for individual disposal? If he was referring only to the 2011 proposed/projected collections and only for the garbage tax itself, his statement is understandable. But it's not a complete picture.

Then he says that the trash operation costs the city $16.5 million annually. However, the budget shows the following for expenses:

24100 - REFUSE COLLECTION EXPENSES:
2008: $ 11,603,270.67
2009: $ 10,192,454.93
2010: $ 7,714,761.53 (budgeted - though it was originally $7,211,259.06)
2011: $ 5,438,208.36 (proposed)

This is a far cry from $16 million.

Is it possible that there are other costs not described in the budget as 'refuse'? I suppose, but when a citizen looks at the budget and adds up anything with 'refuse' or 'waste' in the line item description, they don't total $16 million.

The Bell administration is to be commended for reducing the refuse collection expenses. The cost in 2010 was a 24% decrease from 2009, even though the city did forget to budget additional costs for fuel for having to go up and down each street twice with the automated trucks.

But when council is told the expenses are $16 million, despite the budget showing it's not been anywhere near that amount for at least the last 3 years, questions should be asked.

Prime example for banning 'me-too' clauses in union contracts

I've previously written about 'me-too' clauses in public sector union contracts - how they distort the give-and-take of a negotiation process and lead to increased costs for taxpayers.

Nearly all the government union contracts in Lucas County contain them, in effect guaranteeing that any benefit negotiated by one union will be shared by others - without the corresponding concession that resulted in the first union gaining the benefit.

Whether wages, pensions, educational reimbursement, or any other term that can be negotiated, it is likely that you will find such benefits are identical across the governmental jurisdiction because of this clause in the contracts.

My position when in office was that 'me-too' applied to concessions as well as benefits. I often told unions they could have the benefit if they were willing to give up whatever had been traded to get it, which effectively ended all such discussions on the matter. While I believe such clauses distort the negotiation process and are bad in a significant number of ways, today we have a prime example (an 'unintended consequence' effect) showing why they should be banned.

The Toledo Police Patrolman's Association (TPPA) has filed a grievance with the City of Toledo over the merger of the Toledo and Village of Ottawa Hills Fire Departments. You're probably wondering why in the world police would object to this merger. They're not objecting, they just want their 'me-too' clause enforced.

In 2009, Toledo City Council approved a contract extension for the TPPA and it included the following:

Other Bargaining Units The City will provide the TPPA with any greater economic benefits provided to the Toledo Firefighters and/or the Toledo Police Command Officers Association that they may receive either through settlement or impasse proceedings including fact finding and/or conciliation.

So the city - meaning council and the mayor - have previously agreed that any 'economic' benefit that the Firefighters or the Command Officers may negotiate, regardless of what they give up in order to get it, must be given to the members of the TPPA. These are the legally-binding terms the city must meet as they approved the contract and the language.

One of the things negotiated in the fire department merger was protection of seniority for the Ottawa Hills employees. When they become Toledo employees, they will earn wages and vacation time based upon their number of years with Ottawa Hills.

And that's a problem for the TPPA because they have members who previously worked in other jurisdictions who did NOT get similar credit when they became Toledo police officers. They are making the logical case that this is an economic benefit afforded to another union and they are, per their contract, guaranteed the same.

"The TPPA demands that each affected member be properly reimbursed for their back wages and annual vacation accrual. The TPPA further demands the affected members continue to receive the appropriate rate of pay and annual vacation accrual according to the steps they should have began with had they been properly credited with their prior service."

To make matters worse, I understand that TPPA, as well as the Toledo Police Command Officers (TPCOA), Firefighters Local 92 and the Battalion Chiefs union all told the city ahead of time that they would pursue such a grievance if the city went forward with their plan for granting seniority to the Ottawa Hills employees.

If the TPPA wins the grievance, it will cost the city millions to pay back wages and vacations for 200-300 police officers (estimated number affected) and the other related employees, since they were first hired into the city. It will also dramatically increase the 2011 budget and, accordingly, our projected deficit. Remember - last year they deferred overtime payments into 2011 to help 'balance' the 2010 budget and pay out the time at a higher rate of pay. Those payments will be even more if TPPA wins.

When they calculated how much the merger could cost us, did the city include the cost estimates of how much more it would be if they lost the grievances they were told would be filed? I certainly don't remember hearing about them.

Now, you could say (and I'm sure the city will argue) that a merger is a much different circumstance - and they should be correct. But this is a union contract and arbitrators and judges who decide such things are not bound by common sense - or even taxpayer interest. They are bound to examine the terms of the contract before them and TPPA can make a strong argument under their me-too clause.

But you just never know when it comes to deciding a grievance, which is why such terms should not be in contracts in the first place.

Unions should not expect to get something they didn't bargain for simply because someone else did. Unions should negotiate their own terms and be willing to abide by them. If they like the terms in another union's contract, they can seek to include them when their contracts expire.

But it is the elected officials who make the final decision and they should 'just say no' to any contract that includes such unfair terms - and they should be replaced if they don't have the will to do so.

In the meantime, Toledo administrators will spend time to fight the grievance and hope for a favorable outcome. Should they lose, they will be forced to either grant the seniority, vacation and back pay to hundreds of employees, or renege on the terms of the merger.

Either way, I believe the real losers are the Toledo taxpayers.

Toledo's 2011 budget

What have you heard? What does it look like? Did we have a deficit in 2010? Are we looking at cuts for 2011? Where are any cuts going to come from? What meetings has Toledo City Council held on the subject?

Are you as clueless about this as the rest of us? Are we on track to passing a final operating budget by January 31, 2011?

The mayor released his proposed budget in November as required by law.

At that time, we learned we will have a deficit to address for 2011, partly because the 2010 budget was 'balanced' by deferring overtime payments and pay increases to 2011. So, despite the fact that we are not anticipating any significant increase in income in 2011, we're going to have to pay for items from 2010 on top of the items already in the budget for 2011.

There are many questions to be asked about our budget this year. I want to know what revenue items from 2010 failed to meet their projections. We know the city 'balanced' the budget with projected income from the sale of city property. Did we sell everything we planned to - and at the price we estimated? What about the projected income from sale of property in 2011? Are any of these properties the same ones that didn't sell in 2010?

Will the city stop the practice of pushing costs into the next year where they just keep accumulating without any plan for paying them?

Will council members stop spending on unnecessary things (like helping pay for the cost of the Symphony to go to Carnegie Hall) in order to have a budget that fits a realistic expectation of our income?

Will our income projections be realistic?

I'm waiting to hear when council will hold meetings on the matter. You'd think they've have them scheduled considering that we must pass our 'balanced' budget by March 31st.

If I hear anything, I'll let you know.

Toledo's 2011 budget

Press release:

FOR IMMEDIATE RELEASE
November 15, 2010

Bell Administration Releases 2011 Operating Budget
Mayor Michael P. Bell today released the 2011 Operating Budget at a press conference that included his administration’s finance staff, Safety Director, Police and Fire Chiefs and other directors. The Mayor made clear that 2011 again poses fiscal challenges for the city, noting an environment of increased expenditures and declining resources, but also emphasized that the budget includes no new or increased general fund taxes or fees.

As previously announced, the administration is anticipating a slight increase in income tax collections and have projected $145.5 million in 2011, 3.0% over 2010 collections. However, also as expected, local government funds from the state are projected to drop by $3.8 million as the state works with an $8 billion projected deficit.

The Bell Administration has recommended bridging the gap with $6.3 million transfer from the Capital Improvements Fund to the General Fund; $4.85 million in sale of assets, part of real estate negotiations that are currently in progress, but not expected to come to fruition before the close of 2010; and $3.3 million from trust fund balances moved to the general fund.

The administration will also work on a health care dependent eligibility audit, reduced utility expenditures and medical coverage savings. An early retirement plan will also be pursued. Responding to a survey taken in Spring 2010, approximately 150 City of Toledo employees said they may be interested in an early retirement buy out, however the administration hopes that some may have re-considered since that time.

The budget also maintains city services with the addition of a fire class and police class. Both safety forces expect significant retirements in 2011 contributing to lower manpower levels and making it necessary to continue to train new recruits to ensure delivery of safety services. The proposed budget includes funding for a class of 50 firefighters as well as a class of 25 police officers.

The Bell administration has also proposed to turn control of the City’s refuse collection operations to the Lucas County Solid Waste Management District beginning September 1, 2011. It costs the City approximately $16.3 million annually to collect and dispose of refuse, including the debts service on the new automated trucks and carts, landfill cell development and replacement costs for vehicles and carts. Current refuse fees bring in approximately $8.9 million in revenue per year. It is expected that regionalizing the service with the county will bring greater efficiency in service delivery and will save approximately $2.8 million in 2011.

Finally, Bell emphasized the future challenges lying ahead as the administration looks toward collective bargaining with six of the City’s eight unions. As costs, especially wages and benefits, continue to outpace revenues the City must make significant structural changes in employee compensation and benefits. The Mayor noted the critical role cost containment plays for the financial survival of the City and asked for Council’s help in making those needed changes.

The full City of Toledo 2011 Operating Budget is available online at www.toledo.oh.gov

Mayor's cover letter to city council is available here.
Budget is available here.

I'll be looking at the budget over the next several days and will post further after analyzing it.

Another budget deficit for Toledo?

This headline shouldn't come as a surprise to anyone. I heard a news clip this morning that said the City of Toledo is looking at another budget deficit for 2011.

Part of that deficit is due to spending obligations carried over from 2010. As I wrote in May in "New TPPA agreement just postpones the inevitable," any money 'saved' in 2010 wasn't really 'saved' if it had to still be paid in 2011 - especially if the cost would be higher next year. From that commentary:

In fact, deferring the overtime payments to 2011 and then paying it at the 2011 increased pay rates means that this little deal will actually cost the taxpayers 3.5% more than it would cost us if we just went ahead and paid it when earned!

That's not a savings!

So now we're hearing comments that we could have a budget deficit in 2011 because of this agreement that was supposed to save us money.

Common sense should have told everyone that there would be no savings when you defer compensation and then pay it at a higher hourly rate. But city council members voted to do just that.

I can only wonder how much the trash tax will be next year.