City Council Vice President Fred Richardson said during a Finance Committee meeting last week he would abstain from a vote for Mayor Sandy Stimpson’s proposed budget amendments until he received satisfactory answers to a list of questions he emailed the mayor March 17.
He didn’t say whether satisfactory answers would earn his endorsement for the amendments, but in an apparent attempt to placate a City Councilman who has defended the city’s current budget, Stimpson delivered his responses late last week.
The exchange is printed in its entirety below:
Richardson: When I was at the University of South Alabama my economic professor taught us this concerning a deficit: “A deficit is the amount by which a sum falls short of some referenced amount.” Using this definition, as this relates to our budget, are you forecasting that the actual amount of revenue we collect in FY 2014, will be less than the actual amount of revenue we will be required to pay out for this same year?
Stimpson: We estimated that if we did not amend the budget we would have a similar problem in FY2014 that we had in FY2013 when certain departments and cost centers overspent their budgets. The amended budget “trues up” certain cost centers based on what was actually spent in FY2013 and makes the budget more transparent and understandable so that department heads can reasonably manage their budgets.
Richardson (continued): Or, are you using projections and speculations to reach this conclusion. Tell us what conclusion you reached and how you arrived at your conclusion.
Stimpson: We engaged in a sound process that was fact driven and arrived at the FY2014 amended budget by having department heads submit their own budgets and comparing cost centers to what had been spent in FY2013.
Richardson: This is a request that you please present us the facts, showing each line item that you expect to exceed the budgeted amount…
Stimpson: We previously presented a worksheet, a copy of which is attached hereto (2014 Amended budget), comparing FY2013 actual amounts spent to FY2013 adopted budget, FY2014 adopted budget and FY2014 proposed amended budget.
Richardson (continued):…and why; and, tell us why you can’t cut back on just those line items that are in excess in order to bring the budget back in balance.
Stimpson: For cost centers like the jail and Strickland Youth Center, we pay according to what we are billed by the County. We have no control over their costs and our contracted obligations. The Council has been given the increases and decreases in the worksheet provided at the March 18 Finance Committee meeting.
Richardson: For what reason did you elect to almost alter the entire budget just to amend it.
Stimpson: The departments submitted what they estimated their budgets should be, keeping in mind the financial limitations we are facing. For cost centers, we looked at what had been actually spent in FY2013.
Richardson: Did you elect to follow the Birmingham, AL 1955 Act that created their government, rather then the Zoghby Act, when fashioning your so called budget amendments?
Stimpson: We are adhering to the Zoghby Act.
Richardson: The resemblance is starling (sic), our law firm is the same, but the law we are under differ. In the budget document you submitted to council you listed three columns, all speculative: Adopted, Proposed Amended and Amendments. We need you to add columns to show the actual funds collected for FY-2013, and FY-2014 actual, year to date.
Stimpson: The actuals for FY2013 are contained in the worksheet attached. The FY2014 actuals are contained in the monthly financial statements posted on the City’s website (http://www.cityofmobile.org/financials.php) plus any year end adjustments that were made.
Richardson: If your evidence, regarding the condition of the city financially, will include information you received from our contracted auditors, we need the auditors to furnish us the same information. We hired them.
Stimpson: Mark Chapman and April Boudreaux of Smith, Dukes & Buckalew were at the March 18 Finance Committee meeting and answered all questions asked of them. Additionally, they provided a letter to the City Council on March 21 addressing the unassigned balance of the General Fund as of September 30, 2013, and the status of the audit.
Richardson: It will be helpful for you to have your budget director in all Finance Committee Meetings. I have been informed, not by the administration, that the city ended FY-2013 with a $4.5 million deficit, and, that we started FY-2014 off with the same deficit. If either or both are true, please provide the essential facts and supporting documents to substantiate your claim: No speculations.
Stimpson: The deficit in the City’s unassigned balance of the general fund was discussed by the auditors at the March 18 Finance Committee meeting and the exact amount is $4,296,203. This is not based on speculation; it is based on the City’s general ledger taking into account all year end adjustments.
Richardson: In your Budget Amendment message, you stated the projected year end deficit is $21.6 million. Amending the budget will not close this gap, if your projections are true. Please provide us your plan to put the city on sound financial footing.
Stimpson: Amending the budget and monitoring its progress will put us on the road to sound financial footing. The amended budget takes care of last year’s deficit, and by each department managing their own budget and not overspending what is budgeted; we should end the year with a positive unassigned fund balance.
Richardson: Why are you giving any department more money when we are projected, by your own calculations, to run a $21.6 million deficit? State the extreme emergency, when adding additional funding to any line item.
Stimpson: Some department’s budgets were increased because we asked each department head to submit streamlined, realistic budgets. Several departments last year just kept spending when their budget was exhausted. This year that will not happen because each department knows exactly what they have submitted. Several cost centers which have already been discussed had the same problem (jail, youth center, health care, etc.). For example retirees insurance had actual expenditures in FY2013 of $4,653,421 but only had budget of $4,200,000 for FY2013. It is unrealistic to think $4,200,000 is adequate.
Richardson: Why are you proposing to give private contractors hundreds of thousands of dollars more, knowing, according to your own projections, that we can’t meet our own financial obligations?
Stimpson: Performance contracts have been adjusted to reclassify the three contracts (Penelope House, Boys & Girls Club, and Child Advocacy Center) that had been hidden in the police department’s budget back to the performance contract line (the police department’s budget was reduced by a corresponding amount). The amendments made in October 2013 regarding the CLA and People United and approved by City Council have been included in the amended budget and $212K has been added to the Exploreum contract for the utilities the City pays for them. These are the only changes to the performance contracts.
Richardson: Please provide the formular (sic) we are obligated to use when paying Strickland Youth Center. What did the County budget for Strickland? Did you calculate your “Realistic Projection” for Strickland by deducting our amount out of the overall county budget? If not, why not?
Stimpson: For the Strickland Youth Center in FY2013 we paid $3,465,890. This amount included $1,030 due from FY2012, $151,229 due from FY2011 and $82,862 due from 2010 so the amount paid in FY2013 for 2013 was $3,230,769. In FY2014, we paid the final September 2013 bill for $18,426. So the total paid for FY2013 was $3,249,195. The county does not anticipate the Strickland Youth Center expense to go down in FY2014 and therefore we have budgeted $3,250,000 for FY2014. What we have paid for the Strickland Youth Center for the past five years is attached. Also attached is the 1919 law we follow.
Richardson: In the Fire Department the Advance Life Support (ALS) is crucial in saving the lives of our citizens. Your amended budget shows a deduction of $1,393.893 from that line item. Please explain why you are removing funds from this line item.
Stimpson: The ALS budget was submitted by the Fire Department. The reduction is due to budgeted positions that are unfilled being taken out of the budget by the fire department. This included a cadet class and because the cadet class was removed the professional and technical expenses of $150,000 that went with the class were also removed.
Richardson: Many of our first responders are paid for by way of federal grants. Money were put in the fire and police departments to pick up these employees when the grant money expires. I noticed that you are cutting funding from both departments. Can you assure us that we will NOT lose employees in aforementioned departments when federal grant money expire? Why are you cutting the budget of our first responders?
Stimpson: As communicated in the March 18 Finance Committee meeting by the Police and Fire-Rescue Chiefs, their respective Departments requested and received waivers for employee head-count tied to relevant grants or have previously met all of the outstanding requirements for such grants. There are no layoffs included in the amended budget for any employees.
Richardson: As you roll out your amended budget, cutting and adding in virtually every department, are you aware that only one forth (sic) of the penny can be budgeted to the general fund? And, in light of that fact, have you made increases to the general fund budget out of funding reserved by council, for that purpose only?
Stimpson: We are aware that only ¼ of the fifth penny can be allocated to the general fund. The first four cents do not have dedicated revenue restrictions. We anticipate an increase in revenues and that increase will be allocated appropriately between the City’s different funds.
Richardson: Can you assure us our national bond rating will remain the same after you finish cutting the budget and when these cuts adversely affect the city’s ability to respond to unforeseen emergencies?
Stimpson: We cannot assure you what our national bond rating will be as that is not our decision. The rating agencies will see that we had a deficit in FY2013 and we want them to see that we are proactively addressing the situation and strengthening our financial position in the long run. We anticipate they will look favorably on these actions.
Richardson: Regarding our employees health plan. You projected it was under budgeted by $3,544537. This particular issue has been upon us for years. Tell us what you plan to do about it. Healthcare cost is not getting lower, it’s just the opposite. The city has a Healthcare Committee, made up of mostly city employees from various department. They are there to advise the mayor on healthcare issues. Have you ever had a meeting with them to hear what they recommend? They know the city can’t keep paying 80% of their healthcare cost, including retirees. What’s your plan?
Stimpson: No meetings have been held thus far and no plan has been formulated.
Richardson: Since you had a concern about what was in the budget for Metro Jail and was it enough, why didn’t you take the County’s FY2014 budgeted amount for Metro Jail and deduct our 35% out and leave it be? You budgeted about a million more than what 35% came to using the county’s budget. Why? After all, it is their jail, not ours.
Stimpson: We are required by contract to pay 35% of the County’s jail cost. Attached is a 10 year comparison of what we have had to pay the county for our 35% share. In FY2013 we paid $8,215,892 for our share of the jail. In the adopted budget FY2014 $7,625,000 was allocated for the jail. In the amended budget it has been raised to $8,300,000.
Richardson: The Zoghby Act, 11-44C-56, states the following: At the request of the mayor, the council may by resolution transfer any unencumbered balance or portion thereof in any general fund appropriation from one department, office, or agency to another department, office, or agency.
YOU ELECTED NOT TO ADD A COLUMN TO SHOW US EXACTLY WHERE YOU WERE MOVING MONEY TO, WHEN SUBTRACTING; OR WHERE IT WAS COMING FROM, WHEN ADDING, AS REQUIRED BY ZOGHBY: why?
Stimpson: The form of the Amendments to the Budget comply with the Zoghby Act.
Richardson: When you finish with your amendments and if they are approved, can you assure this council and the citizens of Mobile that you can continue to provide the same level of service.
Stimpson: We have asked the department heads to submit budgets that are streamlined, but realistic to provide adequate levels of service. We trust what was submitted will meet these goals and it is our intention to work with the departments to give them the tools they need so these goals will be met.
Our plan is to monitor the budget, help department heads manage their budgets and give them the tools they need to operate efficiently. We will continue to refine and improve the process so that both our operating and capital needs can be met. When the FY2015 budget is done we plan to forecast for FY2016 and FY2017 so the employees, the Council and the Citizens have an idea of where we are going and what we intend to accomplish.
Richardson: Your response to the above will help us in making an overall assessment regarding the financial condition of our great city and what decision to make in light of that assessment. The past mayor had this budget for only 33 days, from October 1 to November 3. This budget has been your and you have made it a theme for months. It is time to get to the bottom of it, find a solution and move on.
Stimpson: We agree!
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