Monday, March 19, 2018

"Low hanging fruit has all been picked" - Barbara Whitehorn, CFO, City of Asheville

Low Hanging Fruit... a course of action that can be undertaken quickly and easily as part of a wider range of changes or solutions to a problem: first pick the low-hanging fruit (dictionary.com)
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"The challenge lies in balancing the budget when the "low hanging fruit" has all been picked." 

Barbara Whitehorn, Chief Financial Officer, City of Asheville
March 20, 2018 Staff Report re: Operating Budget Worksession


And with that warning, the City kicks off this year's budget worksessions with the first session being held Tuesday, March 20th at 2pm. Why such a negative start? Because this year's budget has a deficit of almost $6 million, about 4 times the usual 1.5 million deficit.
"In total, the normal operating gap of about $1.5 million, combined with the unfunded and/or under-funded enhancements drives the $5.9 million budget gap"
Rose colored glasses
Why this warning when everything seemed so rosy last year? The City has seen unprecedented growth, an average of 30% higher property tax revaluations, continuously increasing fees and charges for stormwater, parking, building permits, and more.

Despite all of this it appears the City is preparing itself for a looming financial crisis - one that is set to increase year over year for the next five years, starting with the 2018-19 budget if cuts are not made.  If this keeps going, the 5 year forecast predicts a $28.5 million deficit if there is "sustained economic downturn" and at best a $2 million deficit if there is sustained economic boom.  Lacking any new sources of revenue, Ms. Whitehorn recommends...
"In the absence of new revenue, adding programs or projects to the operating budget requires an offsetting reduction which will require service reductions." 
In other words folks, you gotta cut something before you can add something.

The Cause 
According to the March 20th report the City implemented programs and projects last year for which it did NOT have full-year funding for and instead decided to kick that can down the road and address it in this year's budget.

Here's some of what is causing the problem:
  • Transit contract and additional transit service expansion
  • Additional FT benefitted employees and their ongoing costs 
  • The $500,000 paid out in February to employees in the City who were not making "market" rates.  (NOTE: we've asked for this list of employees, their names, titles and positions and amount of additional compensation and are waiting for the records to be produced). 
  • The new Office of Equity and Inclusion which costs $350,000 a year
  • The audit of police procedures and training which will cost between $200,000 and $400,000 plus ongoing costs to implement whatever they come up with.
  • AFD retirement city plan match
  • APD patrol improvements and realignment of districts
What is the City's low hanging fruit? 
In year's past the deficit is usually around 1.5 million.  The City is used to that and will then begin to identify efficiencies and savings.  Apparently, the City's budget department has exhausted all those efforts in this year's plan and is asking Council to go beyond the "easy effort" and make harder decisions.

Not mentioned but also contributing to the issue:
The City's 5 year capital improvement project budget has gone from $53 million to almost $200 million in FOUR short years. Much of those projects have been partially funded through City general funds and by debt for which the City will be paying for more than 30 years.

Remember RADTIP: And of course, there's RADTIP, the City's boondoggle on the River.  Just one week after last year's budget passed it was announced that the City was short $26 million - the shortage causing shock and awe by the City Council.

In short, this is a recession of the City's own making.  We haven't even considered the ongoing (and yet to be paid) cost of the properties taken for RADTIP or the lawsuit from the recent video leaked wherein Mr. Rush has now filed suit.  We haven't considered the ongoing maintenance costs of the City's $200 million development projects. We haven't considered the possibility of an economic downturn. Instead, we have created the perfect environment to lose our tenuous hold as we have to climb higher and higher than the low hanging fruit.

Cuts, changes or pretext?
Last year the "Million Dollar for the People" campaign began during the budget worksessions as Council struggled to find ways to cut the 1.5 million deficit.  In the end, a little was cut from each department while preserving certain additions such as the transit extension and money for APD. This year the City has to address a $6 million deficit.  What will it cut or is this simply pretext leading to a property tax rate increase on property owners?


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