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VOL. 128 | NO. 108 | Tuesday, June 4, 2013

Wharton Points to Decisions Beyond Budget Dilemma

By Bill Dries

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The city of Memphis debt issues that prompted a critical report from the Tennessee comptroller’s office stem from the city’s 2010 decision to refinance the city’s debt and push it further out instead of dealing with it then, says city finance director Brian Collins.

“The problems we’re having now aren’t so much associated with the total debt that we have in all of these projects,” Collins said on the WKNO-TV program “Behind The Headlines.”

The program, hosted by Eric Barnes, publisher of The Daily News, and including Memphis Mayor A C Wharton Jr. and city Chief Administrative Officer George Little, can be seen on The Daily News Video site, video.memphisdailynews.com.

City finance director Brian Collins and Memphis Mayor A C Wharton Jr. spoke on the WKNO-TV show “Behind the Headlines” about the city of Memphis’ debt issues, which prompted a critical report from the Tennessee comptroller’s office.


“We have a somewhat artificial crisis around debt more associated with the restructuring that we did a few years ago to lower our debt service costs during those years and move that debt service cost to today,” Collins said.

And a second “scoop and toss” restructuring, as it is known, is pending before the Memphis City Council.

“Payments were lower for three years and now they are scaling back up and they will stay up and continue to go up for about eight or nine more years,” Collins said of the impact of the 2010 restructuring.

The decision on what would be the second “scoop and toss” restructuring in four years is likely to be the first in a series of post-budget season decisions the Wharton administration and the Memphis City Council will continue to make.

“We’re not in terrible shape,” Collins said in comparing the city’s debt restructuring to different types of restructuring done in Shelby County government. “The restructuring that’s on the table is going to benefit us in terms of interest rates. But we didn’t have as free a hand as they’ve had recently to refinance and to cash in on those lower interest rates.”

The city’s overall debt stands at approximately $1.2 billion, most of it from accumulated projects over the last 20 years.

To make the needed dent in that debt that state fiscal leaders recommend and can require to an extent, Wharton said there are some tough decisions coming once the new fiscal year is underway as of July 1.

“It is a tough balancing game. You want to pursue austerity where you can. But you can’t just close down growth opportunities in the city,” Wharton said. “We’ve got to have a growth strategy. We cannot go on just an austerity or cut strategy alone. It has to be balanced.”

City Chief Administrative Officer George Little warned of obstacles to a balanced budget, including a 4.6 percent pay raise for police.


Little pointed to competing philosophies by the mayor and the council.

“We’ve reduced our revenues over the last three years,” he said. “We’ve made cuts on the expenditures side in everything but police … and yet the tax rate has gone done even in excess over that.”

In two to three months, the administration will have recommendations on changing city employee benefits that council members are already seeking from Wharton.

Wharton said the recommendation include moving toward private sector type benefits ala 401(k) type plans.

“Give us the options on how you do that. We’ll be working with a number of folks to pursue that actively within the upcoming fiscal year,” he said. “Our usual positions – as we call it a fully loaded position – is about $50,000 (a year). That’s ranging from the lowest to the highest if you averaged it out. To the degree that we can bring the benefit package more in line with the private sector based on what we can afford, the fewer folks will have to go out the door.”

And if city employees are laid off, it would likely be in public safety to make any real impact.

“I don’t want to give anybody the impression that by nibbling around the edges, getting a few grass cutters out of the parks division ... that we’re going to be able to make the big changes that we are going to have to make,” Wharton said. “We are going to have to reexamine fire and police. There are going to have to be some changes in the way we do things.”

PROPERTY SALES 50 389 12,758
MORTGAGES 21 248 8,003
BUILDING PERMITS 295 813 29,934
BANKRUPTCIES 35 164 6,064