Our financial situation is serious and out of control. Our current financial crisis is born of a lack of accountability: our finances have gone for years without audit and reconciliation, yet council has continued to spend without knowledge of what is available. Consequently, we are in what I call “functional bankruptcy”. Let me explain.

If a business has liabilities greater than assets, expenses greater than income, no cash reserves, or reserves less than able to sustain the business for any appreciable time, it can be classified as bankrupt. Alternatives are either to restructure under Chapter 11 if expenses can be reduced, contracts renegotiated or broken, and some hope of increasing cash flow to exceed outgo. If not, the business would be forced into Chapter 7, dissolution.

Our city, as reported by our media, has liabilities far exceeding cash flow, including reserves. The long term liability of employee benefits, including insurance, the current liability of employee insurance, the almost non-existent reserve funds, the need for more policemen, the crumbling sewer lines, the failing water lines, the need for more and better equipment for city departments such as police, fire, utilities, park maintenance, and many other areas are begging for increases in funding. Yet ongoing city functions must also be funded. And potential losses in lawsuits such as the Vista hotel debacle may just break the city if the plaintiffs win, as one has in the first round of suits (and the city spent over $1 million on legal fees even before the case went to court, so even if the city wins, it may still lose).
 
Unlike a business, our city will not have to file Chapter 11 or 7. It can function, borrow money to continue, and raise fines, fees, property taxes and business license sales tax to make up the shortfall. Hence, what I refer to as functional bankruptcy. The politicians can charge us more for their lack of fiscal responsibility by simply forcing citizens to pay more, much as the Mafia forces a business owner to pay more.
 

Truth in Accounting

Our city needs an extreme overhaul of our fiscal policies, and as mayor I will push that, starting with truth in accounting. The water and sewer fund needs to be just that and for that only. Recently, news reports said that the head of utilities estimated an up to $500 million liability in current water and sewer projects. At current water/sewer revenue, without factoring inflationary elements, borrowing no money so there would be no loan interest and principal, and using only the profit from the revenue, it would take over a decade to fix current problems, which does not include future problems. The water and sewer fund has been robbed over the years, giving a false sense of accounting. Hospitality tax funds have been used for other than the legislated, again a false sense of accounting.
 
To put truth back into accounting, we must lock in revenues earmarked for specific areas, and not move them as in a shell game. It is always a tendency of politicians to spend on whatever needed to obtain reelection, passing liabilities off to future politicians as current politicians always expect to go on to higher office, leaving the problems, and blame, for someone else.

Timely, Accurate Financials

We must have timely financial information. Council must have current, accurate information upon which to make responsible decisions. Yet our city has gone for years without our books being properly closed and audited. Our council has consequently spent past the city’s means, and the citizens are likely to suffer through multiple increases. I cannot understand how our council could allow our books to fall so far behind and not take immediate action. To our citizens, it appears a lack of care and competency.  The state requires timely information from local governing bodies, but there are no teeth in the law. The legislature is proposing to put penalties in, but I do not believe they are strong enough, nor penalize the incompetent parties. Rather, they penalize the taxpayers.

My proposal to correct the failure to have timely financial reports is to penalize the members of the council, rather than the taxpayers via state fine against the city of some amount per day, as being debated in the legislature. How will making the city pay a fine from city coffers punish the council members? My proposal is to require the books be balanced and audited no later than 6 months from close of fiscal year, which is more than enough time to do so if the books have been kept current and accurate over the year. Should the books not be completed on time, all members of council should be forced to resign, a new election called 45 days hence, and the current members unable to run in the new election. The state, in conjunction with city management, would run the city until the new elections.

A radical proposal? Maybe, but having financials go unresolved and unaudited for 2 years is far more radical. Any business that had employees unable to close their books in that time would replace those employees. The same should apply to politicians that do not protect the citizens’ interests.

Transparent Financial Information

I have proposed for years that ALL city information be put on the web for citizen knowledge and review. ALL financial information must be part of that, including settlement amounts of suits filed against the city and settled out of court, to the fullest extent possible as allowed under state or federal law. If no other way, at least by lump sum. If all financial information had been put on the web, check by check, item by item, it is very likely that a citizen would have caught the double, triple, even quadruple payments the city made for the same bill. It is the people’s money. Why should they not be able to see how and where spent?

Complete Reevaluation of City Finances

How and where we spend money is important, and the citizens should know through financial transparency. Then they can begin to weigh on an overhaul of city finances. I would propose to council that we have a citizen finance committee to provide input and oversight of city finances. The committee would work with city financial officers to obtain and insure current information, and would provide public suggestion and concern. Joint quarterly public meetings with the oversight committee, the city financial officers, and council would be required, in order to insure timely, accurate information, and corrections and improvements as needed.
 
With the current city financial crisis, the impending layoffs and cutbacks of city employees, including police and fire, it is more important than ever to analyze our spending and apply our money to the most important services first, such as our necessary infrastructure needs of clean water, functional sewers, adequate police and fire, trash pickup, building inspection, prompt plan review and building permitting, safe roads and sidewalks, to name a few. Necessities come first, should always, and should be protected from shortfall.
 
Reserve Funds and Future Liabilities

The economy goes in cycles, as easily seen over the past 40 years. When times are good and an excess of revenue (over budgeted amount) is taken in, it should be put into a reserve fund for future downturns, such as we are in. Just because we have an excess does not mean we must spend it, especially to finance airlines and other private sector type projects that compete with the private sector that provides tax revenue. It is common sense for individuals to put some money away in good times to prepare for contingencies, including downturns. The same should apply to our city.

In addition, there must be some sort of long term accounting for long term needs. For instance, a sewer pipe may have a 50 year life. If so, 2.1% should be allocated yearly and reserved to address the future maintenance. That way, with an extra 0.1% per year plus interest income, there should be enough for that repair/replacement, hopefully including inflation.
 
The best way to properly account and display might be to have every project provide an estimated project life and a time line of any needs during that life. Build a grid with the projects and list annual and cumulative reserves beside the projects. That way citizens and city officials alike can be aware of upcoming costs and needs.
 
It will take time to dig out of our financial crisis, and it will take sacrifice. But with responsible fiscal policy, a cooperative council, and citizen input, we can restructure our city finances in such a way that can insure a secure future and become financially fair and strong.