story by Ryan Saylor
rsaylor@thecitywire.com
After three and a half hours of discussion, analysis and frank comments by a department head on Monday (Nov. 17), the Fort Smith Board of Directors will hold another budget meeting on Nov. 25 to review City Administrator Ray Gosack's proposed method for reducing costs and raising revenues to budget for a 1% cost of living (COLA) raise and step and merit raises for all city staff.
The evening's budget discussions started with a review of enterprise funds, including the civic center, utilities, and streets followed by a discussion of outside agency and non-departmental funding.
Following a review of the enterprise and non-departmental funds, City Director Philip Merry presented his proposal that would provide the 1% COLA and step and merit pay increases at a cost of $644,880. Merry's figure cites a previous total provided by Gosack.
In order to fund the raises as well as fund increased contributions to the quickly depleting police and fire pension fund, Merry proposed a combination of instituting a business license fee that could bring in $1.8 million; increasing franchise fees from 4% to 4.25% on gas, electric, telephone, and cable television that could raise $412,000; imposing an additional 1% on cable television franchise fees to raise $129,000; raising alcohol-related permits and fees to bring in an additional $89,000; and increasing fees at Oak Cemetery to raise an additional $25,000.
Coupled with Merry's proposed $2.455 million in revenue enhancements was a proposal to cut $394,395 from the city's budget for a total additional revenue of $2.849 million.
When subtracting $644,880 from the total to account for the 1% COLA and step/merit raises, Merry's plan would still add $2.205 million to the city's coffers that he suggested could be thrown toward the pension contribution fund, which is expected to go broke as soon as 2019. Gosack's proposed budget for fiscal year 2015 already included an additional $600,000, but he noted that it would only delay the insolvency of the fund by one year to 2020.
Prior to the Board directing Gosack to identify areas where he could cut to afford the pay raises for city staff, City Director Keith Lau pointed out that Gosack's proposed budget only had a 7.5% reserve, or $3.46 million, set aside. In previous years, the fund has ended with 17.8% (FY2011), 19.7% (FY2012), 15% (FY2013) and is expected to end FY2014 with 11.7%. The dollar amounts are $6.88 million (FY2011), $7.34 million (FY2012), $10.07 million (FY2013) and $5.59 million (expected FY2014).
But Lau pointed out on page 22 of the proposed budget Monday, just as he did last week during a four and a half hour meeting on the budget, that the city has policies in place for how to deal with reserves dipping below 15% as is expected with FY2014.
"If the contingency reserve is between 10% and 14.99%, then operating and capital reductions will be required," the policy reads. "If the contingency reserve is between 5% and 10%, then personnel reductions, including service will be implemented.”
Lau noted to Merry, "If you give your increases and you continue to spend down in your fund balance, we're going to be negative in 2017 or '16 in the general fund balance.”
City Finance Director Kara Bushkuhl told Lau that the city always conservatively budgets but ends up with larger ending balances than it projects and said the general fund would not end up in the negative because any remaining reserves in each fiscal year are rolled over into the next year's general fund budget. While it sometimes results in the city showing it spending more than it takes in in revenue, she said it balances out and said it was "the difference" between government budgeting and private-sector budgeting, an explanation that did not sit well with Lau and prompted him to bring back to life a phrase he coined during last year's budget meetings.
"If you don't stop that, you're going to have $1 million in the bank at the end of 2016," he said, to which Bushkuhl replied that the city would have more than $1 million available by that date.
"That's faith-based budgeting," Lau replied, later adding that the city was essentially "robbing Peter to pay Paul.”
City Director Mike Lorenz voiced support for Lau's stance on the 15% reserve, though in the end no action was taken to ensure the fund balance increases with focus shifting to proposed pay raises. Lau said even if Merry's proposal were fully implemented, it would still fall short of what he said is $3.4 million needed to fully fund the pension contribution fund and have available reserves at 15%.
And none of the discussed plans Monday included any possible funding to address federal mandates from the U.S. Department of Justice to address the city's decades-long violations of the federal Clean Water Act. Mayor Sandy Sanders said a ruling could come from the DOJ within weeks, with Utilities Director Steve Parke telling the Board he could be returning to the Board either next month or early in the new year to approve rate increases to pay for whatever order is handed down by the feds. Neither confirmed that a deal had yet been reached with the federal government.
The city and the DOJ recently met in Dallas in a last ditch effort to avoid litigation following the city's announcement that it expected a lawsuit by the feds following a breakdown in negotiations. The latest meeting was organized by Attorney General Dustin McDaniel, D-Ark.
During Monday's budget hearing, Parke and Sanders voiced opposition to Merry's proposal to impose franchise fees on water and sewer utilities due to the coming settlement. Merry asked whether the money to comply with the consent decree would come from the general fund (it would not) and why it was being discussed in relation to fee increases, to which Vice Mayor Kevin Settle sternly said, "Because the citizens are going to bear the cost.”
As the meeting was winding down and the Board was narrowing its proposals for Gosack to work through before next week's meeting, Lorenz suggested as a cost saving measure freezing or eliminating positions that had been vacant for several months or longer but were still being included in the budget proposals for city departments. Parke had told the Board during his earlier presentation of his budget that vacant positions in the utilities department were having duties split between employees and in some cases, having service suffer to leave a position open during slow revenue periods before filling a position.
With Lorenz proposing leaving the positions vacant to save money, Parke rose from his seat in the middle of the room and said Lorenz's proposal was going to hurt all department heads across the city.
"I think we have some department heads among us who have managed to run things like a business, but then we're not being rewarded or recognized if we do those things," he said.
A meeting location has not yet been announced for next Tuesday's meeting at 6 p.m.
Additionally, Lau has requested an executive session for tomorrow's (Nov. 18) regular Board of Directors meeting. Asked why he called for the session, Lau would only say it was to deal with a personnel matter. Executive sessions are closed to the public.