VOL. 128 | NO. 123 | Tuesday, June 25, 2013
Council to Take Final Votes on Budget
By Bill Dries
The most critical vote at last week’s budget-dominated Memphis City Council meeting may have been the vote to adjourn leaving final budget decisions pending.
It left a week for all sides in the ongoing budget drama at City Hall a wealth of time by political standards to build support for their respective positions.
Memphis Mayor A C Wharton Jr. talks with Memphis City Council attorney Allan Wade. The council goes back to work Tuesday on a city budget and tax rate for the new fiscal year.
(Daily News File/Lance Murphey)
The council meets in special session Tuesday, June 25, at 3:30 p.m. at City Hall, 125 N. Main St.
The council had a voting majority last week for amendments that cut $24.4 million from the operating budget proposal of Memphis Mayor A C Wharton Jr. That includes laying off 100 city employees immediately and losing another 300 through attrition probably over several years. The calculation does not include the council’s decision to pass on Wharton’s proposal to set aside $14 million for a buyout offer to the group of 300 employees.
The meeting adjourned with varying estimates on what the cuts mean to the city property tax rate the council also has on its agenda at Tuesday’s special meeting.
Council Chairman Edmund Ford Jr. put the amount at a $3.24 property tax rate. Council member Shea Flinn said it was closer to $3.30.
Whatever the correct estimate, it is below the $3.36 recertified tax rate Wharton submitted to the state and which the state signed off on. The recertified rate is the property tax rate that it is estimated would raise the same amount of money for city government taking into account property value lost in the 2013 property reappraisal.
Council member Jim Strickland had a goal of holding the line on the current $3.11 tax rate in his budget plan. His budget proposal has a total of $26.3 million in cuts and other reductions. But parts of it didn’t have a seven-vote majority on the council last week.
Expected to be first up among the amendments at Tuesday’s council session is a plan by Ford that originally had $54.7 million in cuts or other reductions. That number changed and the list is shorter because some of what Ford wanted was done in the Strickland amendments that were approved last week.
Ford’s plan still includes spending $11.8 million of the reductions to restore years of cuts in library and community center services.
The tax rate of $3.51 Wharton proposed, and still backed as recently as last week, is the recertified rate plus a 15-cent tax hike with 5 cents to fund $5 million toward the city’s reserve fund and 10 cents to fund $10 million toward the city’s debt.
The council approved using $11 million of the city’s reserve fund last month to replenish three city accounts Tennessee Comptroller Justin Wilson ordered the city to restore. He found problems with the accounting for the money that was supposed to be in the accounts. The culprit was inter-fund loans and advances in effect from one pocket of money at City Hall to another.
Wilson also said the city’s use of refunding bond issues that restructure the city’s debt is pushing debt to future budget years when the city should be doing what it takes now to pay down the debt. The restructurings are referred to as “scoop and toss” transactions.
City finance director Brian Collins said the bond restructuring approved by the council last week is less of a “toss” of the debt to future fiscal years with amendments to the refunding bonds the administration made this month.
It saves the city $8.6 million in debt service payments in the new fiscal year that begins July 1, according to Collins. He put that amount at 9 cents on the tax rate. And he says the “balloon” or increase in debt payment in later years is less than the original restructure plan.
Collins pointed out that Wilson didn’t advise the city against the second restructuring in three years although Wilson did say the city shouldn’t do a third time.
Collins said Wilson’s goal is a “truly balanced budget” and “a more realistic budget.”
Collins, who became finance director in September, also defined recent city budgets as “technically balanced” by “borrowing against our own savings.”
Wharton’s tax rate proposal of $3.51 is another reminder of the tax rate trajectory the council has pursued since taking office in 2008.
The $3.51 proposal is where the city property tax rate was in 2009.
Wharton said the 2010 restructuring of bond debt was a reaction to the council’s rejection of a tax rate he proposed in 2009 to pay Memphis City Schools the funding the council cut in 2008 in its first roll back of the city property tax rate.
But some on the council argue it wasn’t an either/or dilemma and that their intent was to make dramatic changes to the structure and size of city government. They also claim the tax roll back’s intent was muted when the savings was allocated elsewhere or spent by then-Mayor Willie Herenton.