Three weeks after introducing amendments to cut the city’s $72.1 million budget, the administration of Mayor David Roberts is back to square one because the state’s Local Government Finance Board said that there are multiple errors in their work.
In September, Roberts introduced the city’s preliminary budget, which called for $72.1 million in total spending, a steep increase from last year. In December he introduced an amended budget, one that was significantly smaller at $69.9 million, and was under the state’s spending increase cap.
But after review, the state said there were problems and that the city needs to start the amendment process anew. The errors were significant enough that the City Council was forced to officially rescind the budget amendments Wednesday night.
Now, without a budget that can be voted on, there are several uncertainties, including how big the budget is going to be and when it might be ready. The budget covers spending from July 1, 2004 through June 30, 2005, and should have been approved months ago.
The city’s finances are a pressing issue considering that there is a mayoral election in May where the city’s finances will be a major campaign issue.
Since the fiscal year is already halfway over, the city has been forced to operate on temporary monthly budgets. With each day that passes, the city loses flexibility in how it can cut or modify the spending plan.
“It’s January and we don’t have anything that resembles a final or acceptable budget,” said Councilwoman Carol Marsh, who is a vocal critic of the administration and a likely mayoral candidate.
But City Business Administrator Richard England said the changes won’t be extensive.
“They caught us on technical nickels and dimes,” he said.
The ‘errors’
According to England, he received a call from the Local Government Finance Board, which is the branch of the Department of Community Affairs that has oversight on municipal budgets, at around 2:30 p.m. on Wednesday afternoon, just hours before the council meeting was to be held.
“They determined that there were several items that were wrong in [the budget amendments],” said England. “The bottom line is that we are going to have to readjust the budget.”
The area where the state had problems was in how the city’s financial staff attempted to move some expenses outside of its “cap.”
According to state law, cities are only allowed to increase their budgets by a certain percentage every year. But there are numerous exceptions to this rule. Not everything has to be counted toward the increase in spending limits. For instance, the public library and the Parking Utility are considered to be “outside the cap.” Because the introduced $72.1 million budget was well over the state-allowed spending increase, the administration’s budget team attempted to move money outside of the cap.
For example, all of the city’s phone services are inside the cap. But since the library uses phone services, their portion of the phone bill can be moved outside, said England. But after reviewing the city’s work, the state has said that the city did not do the calculation correctly.
When asked how much he expects the city to be over the state-set spending threshold, England said the “changes are not going to be drastic.”
“We are not going to be in the $2 million range [over the cap limit],” he said. “It’s going to be more in the $100,000 range. I think [the amended budget] will be closer to $69 million than it will be to $72 million.”
What if…
If the city does want to spend more than the set increase, it must ask the state for a “cap waiver.” The state has been very clear over the past year that it will not be granting cap waivers unless there are extraordinary circumstances.
Asked if he thinks he can get the budget under the cap, England said that “based on the input we got from the state [on Wednesday], that may no longer be possible.”
While England in the past has said that the state mostly likely wouldn’t be receptive to granting cap waivers, he said Wednesday that if it is whittled down enough, it might be worth trying.
“If we can get down [to a couple hundred thousand], we might have cause and justification to go before the Local Government Finance Board,” he said.
Mayor David Roberts has called a special City Council meeting for Monday at 6 p.m. so the council can authorize the finance team to go before the Local Government Finance Board to seek a cap waiver. If the council aggress to do that then the city will attempt to get on the agenda for a Local Government Finance Board meeting, which could be anywhere from next week to months from now. Then if the state grants the cap waiver, the City Council can vote on the budget.
Who are you going to call?
Roberts’ critics are using this as another opportunity to paint the administration as a group that lost control the budget process.
For the past year, the council minority has repeatedly asked for Acting CFO Louis Picardo and representatives from the city’s auditing firm, Ernst & Young, to attend council meetings, but they haven’t. The council minority has been hyper-critical of the mayor’s budgets, and especially massive overspending in last year’s budget, which was over $5 million. That budget was partially prepared by Picardo and Ernst and Young.
Part of the reason this year’s budget is so high is to pay back some of last year’s spending increases. Some of those increases had to do with spiraling health insurance costs that have affected many cities.
Several months ago, the council minority proposed a resolution to fire the pair from their positions, but the council majority later reversed that vote.
Wednesday, the minority asked again how an accurate budget ever be created if the CFO and auditor are never made available for questioning by the council.
While England, who by his own admission is not an expert on municipal budgeting, did his best to answer the council’s questions, there are hardly ever any finance experts made available.
“It doesn’t bode well when your CFO and auditor refuse to show up at City Council meetings,” said Marsh. “It just goes to show you what a mess our finances are in. If the books were in good shape, I’m sure they wouldn’t have any problems attending meetings.”
But now, even the council majority would like to see the auditor and CFO at the meeting. The council passed a resolution unanimously requiring Picardo to attend the next meeting.
Because it’s not in their contract, the council can’t force Ernst & Young to attend, but they did pass a non-binding resolution requesting a representative from the firm at the next council meeting.
The council minority also asked that Ernst & Young submit the 2004 audit, which was due Jan. 1. “Why are we paying their bill on time when they can’t get us the audit on time?” asked Councilwoman Theresa Castellano. She added that if they delay any longer, the council should consider taking action.
“That is something that’s in their contract,” she said.