VOL. 128 | NO. 116 | Friday, June 14, 2013
Council Faces Pressure in Financial Crisis
By Bill Dries
The Memphis City Council is caught between hints of a state takeover of city finances and the possibility of a lawsuit by most, if not all, of the city’s municipal labor unions in a fiscal crisis that is also evolving into a significant labor dispute.
Memphis City Council faces several financial scenarios at the end of their budget season that are becoming more complicated, including lawsuits and the threat of state takeover.
(Daily News File/Lance Murphey)
And Tennessee Comptroller Justin P. Wilson let City Council Chairman Edmund Ford Jr. know in a letter Wednesday, June 12, that time is running out to fix problems he cited in a May report.
“The council should decide the city’s priorities,” he wrote. “If the council does not do this, someone else may end up doing this. This budget may well be Memphis’ last clear chance to determine its own future.”
Wilson’s May report was critical of the administration of Memphis Mayor A C Wharton Jr. for its 2010 decision to restructure the city’s debt, pushing it into future years. And he cited concerns about the city’s liabilities for pension, retirement and health care benefits of former and current city employees.
And Wilson said the city would not be allowed to issue future bond debt or restructure the debt further unless it specifically replenished three city accounts that had been depleted through advances and transfers to other city accounts.
The report forced Wharton to reset his April budget proposal. Even before that, he recommended, and the council approved in May, the use of $11 million in city reserves to replenish the three city accounts cited in Wilson’s report.
Meanwhile, an ad hoc council committee met for less than an hour Wednesday to see if it could find some common ground between the administration and municipal labor union leaders.
June 12 Letter
The union leaders, in a June 7 letter to Wharton, indicated they might sue the city if Wharton’s budget reset plan that changes employee benefits like longevity pay, health insurance benefits and paid leave as well as holiday pay is approved by the council.
Union leaders take the position that the terms are a done deal in memorandums of understanding between the city and the unions.
Wharton proposed the changes in response to the state comptroller’s report.
Without the changes, Wharton has proposed a 15-cent property tax increase above the new recertified city property tax rate of $3.36. The current city property tax rate is $3.11.
The 15-cent tax hike would cover a $10 million increase in the city’s debt payments due in the new fiscal year starting July 1. The increase is the result of the 2010 refunding bond restructuring of city debt mentioned in the state report.
The tax hike would also restore $5 million to the city’s reserves. That would partially cover $11 million from the reserves the council approved at Wharton’s request last month to replenish the three city accounts the comptroller’s office said had to be replenished.
Wharton proposed the changes in employee benefits as well as the layoffs of 300 city employees and the buyout of another 100 as reductions that would diminish the amount of the tax hike or eliminate it entirely.
City Chief Administrative Officer George Little told council members Wednesday that union negotiators were aware earlier this year during contract talks that the changes were a possibility. The union leaders argued there is a critical difference between the changes being a possibility and becoming the new terms of a memorandum of understanding.
Union leaders indicated they might be willing to talk about the terms of a buyout and ad hoc committee Chairman Harold Collins moved the discussion of that to Tuesday, June 18, council committee sessions.
On the other issues, Collins told all sides he was looking for a simple basis for further talks mediated by the ad hoc committee between the administration and the unions.
“If we can’t, it’s OK,” Collins said at the outset.
Most council members expressing opinions on the labor dispute say they don’t want to see the council get into negotiating new terms for employees. And some on the council also question whether the full council is bound to approve a city budget that includes contract terms approved by a council impasse committee.
The impasse committees pick between the final offers of each side when they cannot otherwise reach an agreement on economic issues.
In the current city budget season, a council impasse committee approved a 4.6 percent pay raise for Memphis police even though the administration recommended in its original budget proposal only a 2.3 percent pay raise for all city employees starting in January, halfway through the fiscal year that begins July 1.
City Council member Myron Lowery said he is awaiting legal opinions on the issue from City Council Attorney Allan Wade and City Attorney Herman Morris by Tuesday’s council session.