City Budget Reset Stalls for Council

By Bill Dries

Memphis City Council members looking for a five-year budget plan of some kind last week were told by city Chief Financial Officer Robert Lipscomb that most of the ideas hadn’t been properly vetted yet.

Memphis Mayor A C Wharton Jr. makes his case before the City Council for a set of budget options in the wake of a state report that has forced a resetting of city budget priorities.

(Daily News/Bill Dries)

He called 2014 a year of transition, referring to the fiscal year that begins July 1.

“I think we’ve got to make sure we don’t jump ahead of ourselves and make sure the solution is worse than the problem,” he said.

The solutions for the next five years beginning with the new fiscal year July 1 are for city financial problems cited in the state comptroller’s office report released earlier in May.

“We’ve pushed the reset button,” said Memphis Mayor A C Wharton Jr. during a break in the Thursday, May 30, session of the council’s budget committee. It was to be a wrap-up budget session.

But the committee meets again Tuesday, June 4, for another review and several council members expressed doubt that the full council will approve a budget resolution then or the first of three readings of a city property tax rate.

Adding to the frustration of some council members, Lipscomb pitched a capital improvements project as they talked of altering the city’s overall financial trajectory after years of calling for longer-range budget planning.

The plan by the administration to move Memphis police headquarters out of the Shelby County government-owned Criminal Justice Center to the old police building at Adams Avenue and Second Street would be paid for with money the city pays the county to occupy space in the CJC.

“If we can start dealing with public safety as a unit … we think that’s a way to go,” Lipscomb said. “We think to have one building and one site is really a good start.”

And he said the administration is seeking legal opinions on a shift of an estimated $30 million in capital revenue the city planned to spend at the Mid-South Fairgrounds and using it for an “immediate fusion” of operating expenses.

“That gives us enough relief to have a reasonable rational discussion about this,” Lipscomb said.

The transfer of funding from one account or pocket of city government to another, however, sounds very similar to problems cited in the state’s report, which was critical of the balances of some city accounts in which money was shifted to and from them to find immediate cash for a project.

The council was forced at its May 21 meeting to spend $11 million of city reserve to replenish three accounts cited in the state report.

Wharton and his administration presented scenarios for paying more on the city’s debt, which was restructured in 2010 with higher debt payments pushed into future fiscal years starting with the one that begins July 1. The options also included paying pension and other post employment benefits (OPEB) obligations completely or partially.

All are items the comptroller’s office report said city government should focus on paying down instead of pushing the debt and obligations into future fiscal years.

The scenarios were mapped out for their impact on city government if the council kept the existing city property tax rate of $3.11 and if the council increased the property tax rate to $4.83 to fully absorb the cost of $181.4 million and fully restore the 4.6 percent pay cut all city employees took two years ago.

The $3.11 tax rate scenarios involved partial payments in the first fiscal year with a goal of meeting the obligations over several years or paying it all in one fiscal year.

The first scenario included laying off 1,420 city employees and the second included laying off 3,250.

A fourth scenario is a 25-cent property tax rate hike to a rate of $3.36 that Wharton says would produce the same amount of revenue the city gets with the $3.11 rate, taking into account the drop in property values from the 2013 property reappraisal.

The frustration for some on the council was that Wharton didn’t indicate what he backed.

“We’ve got perfect world over here and we’ve got Hades over here,” Wharton said of his approach. “To understand where you ought to be, you need to understand what is on either end of the spectrum. … If you say I choose Path A then do you want to go two miles down Path A, three miles, five miles?”

“Take a stand on something,” council member Kemp Conrad told Wharton at one point.

Conrad described the budget deliberations as “a broken-down process” with “asinine meetings” in which the council and administration “try to Frankenstein a budget.”

Council member Janis Fullilove pushed hard for answers about the origins of the financial problems cited in the state report.

“I can’t answer how we got into this situation that we are in at the 11th hour,” she said. “And then Mr. Mayor you tell me you don’t know because there are audits being taken every year and this stuff just kind of went on. That indicates to me that maybe you shouldn’t be the mayor of Memphis.”