The news went from bad to worse during Mayor Sandy Stimpson’s press conference on Dec. 30. The first blow came to city employees who learned they would not be receiving a raise on Jan. 1, 2014, as promised by former Mayor Sam Jones when he was running for re-election.
The next jab will affect the entire city — Mobile’s general fund has $15 million less than was supposed to be there and a new budget will be needed for the current fiscal year.
Although the news was bleak, Stimpson urged citizens and employees to be optimistic and said this is just the first in many steps to making Mobile a better place.
“The first step toward becoming the safest, most business and family friendly city in America by 202 is to get our fiscal house in order. The bad news is that our current municipal budget is unsustainable and not consistent with state law requiring a balanced budget,” he said. “With the assistance of the city’s auditing firm, Smith, Dukes & Buckalew, our assessment of city finances revealed that we have been living beyond our means and corrective action is needed immediately to avoid unintended financial consequences.
“Luckily we found out at the end of the first quarter. To correct this four or five months down the road would have been much more difficult.”
The external audit’s preliminary findings show that as of Sept. 30, 2012, the city had a balance of $11,371,036 in the general fund. However, one year later the general fund went to a negative $4,439,607. That means the city ran a $15,810,643 deficit that year.
In a release from the Stimpson administration, it states “this shortfall has a ripple effect across all city departments, hampering our ability to tackle major problems, including crime, blight, infrastructure and other key areas of city government.”
It also means city employees will not receive a 2.5 percent raise that was promised by Jones during the election.
Stimpson broke the news to the employees in an email.
“The previous administration budgeted a 2.5 percent pay raise to go into effect on Jan. 1, 2014,” Stimpson said the email. “Unfortunately, at this time, I cannot authorize the pay raise due to critical budget shortfalls that must be addressed.”
Stimpson asked for the employees to enter into a partnership with him to help move the city from good to great. The discovery of the shortfall means the Stimpson administration will now get to work on creating a new budget for the current fiscal year that will be balanced. The budget that was passed before Jones left is believed to be more than $15 million out of balance.
Stimpson and his staff will begin meeting with city employees and department heads to determine a new budget.
That budget will be presented to the City Council for a vote. In order for it to pass, the budget will need five votes.
The timeline for the budget is still being crafted.
“We are hoping in a month we will be close to having a budget, but meeting with department heads and developing a new budget may take more time,” Stimpson said. “It’s premature to have a set timeline, but we will be working toward it.”
Stimpson outlined two fiscal pillars the city will now operate under — to be fiscally transparent to the citizens of Mobile and be responsible stewards of their tax dollars and for the city of Mobile to realize its true potential.
“The citizens have a right to know where and why every dollar is spent and we are setting in motion a process to make that information available like never before,” Stimpson said. Under the previous budgeting process, even some department heads were in the dark about the true cost of their operations. From this day forward, each department head will be an active participant in the budgeting process and will be held responsible for managing their expenses.
“This is truly a time of optimism for our city and we cannot allow poor financial management to undermine our success,” he said.
City Finance Director Paul Wesch explained briefly how the city ended up losing $15.8 million over the past year.
He said one large cost came from the health care plan, which the city funds by itself.
“Throughout the year, there were no reports of over spending, but at the end of the year, the city had spent $2.5 million more than what was budgeted,” he said.
Stimpson attributed the $15.8 million deficit to “a spending problem across all departments.” He said the operational spending, which deals with salaries, was one part that was over budget.
There is a lot of work for Stimpson and his staff, but he said they are ready.
“The problem we face with our budget is serious, but it is not catastrophic,” he said. “We are taking corrective action now so that we can meet our obligation to the citizens of Mobile.”
Efforts to reach former Mayor Jones for comment on this story were unsuccessful.