OIB Poll: What’s Your Take On Chief Gaudett Resigning And Staying?

Doug,
Thank you for your interest and for reading the input that caused you to question.
First off, we are in the FY 2015-16 budget created by Finch (and company). The G2 administration finds enough in error because of excessive overtime, and other expense overruns because of failure to budget line items that should have been included as well as a failure to pay attention to State actions by projecting revenues from the State that had not been available the previous year. There is a “hole in the budget” for sure. And the $20 Million projection already assumes an employment freeze of sorts that will save $4.5 Million of what we have called “ghost positions” in the past. They were empty and were meant to stay empty, allowing a positive variance to offset deficits in other departments or line items.

The Comprehensive Annual Financial Report on the FY2014-15 budget is complete and was delivered by Ken Flatto to City Council last evening. It was put up on the City Finance Department site today.

Regarding the “Undesignated Fund Balance Policy” of the City, mentioned under “Budget and Accounting Policies” commonly the usual statement: “To maintain a balance of funds within the total unreserved, undesignated fund balance to be available for unforeseen contingencies.”
POLICY (as stated in 2013-14 budget) “The sum of all components identified for the undesignated fund balance level will be set at no less than 8.0% of annual operating expenditures and other financing uses (transfers out) of the prior audited fiscal year with the annual approval by the City Council. In the event that the undesignated fund balance exceeds 12%, the amount exceeding this percentage may be available for appropriation at the discretion of the Mayor with the approval of City Council.”

I remember no discussion or change of that policy in the past two years so let us assume it is still POLICY whether practically observed or not.

On page 4 of the 2015 CAFR it states “the total fund balance for the General Fund alone was $13.7 million; $13.4 is unassigned. Available general fund, fund balance at year-end represents 2.4% of total general fund expenditures, $552 Million.”

Now, to answer your question, the City fund balance may have been around 8% when Ganim was Mayor the first time for there was $55 Million and a lower operating budget, but Fabrizi, Finch and Finch2 terms continued to reduce the number while Operating budgets generally increased.

I therefore follow your logic, if Ganim, Flatto, Nkwo and others do their best by close of FY2016 on June 30, but can only reduce today’s projections (net of “ghosts” and reduced Principal and Interest in spring from refunding) to $17 Million and then further by managing Overtime and closing down most expenses in each department to arrive at a $13 Million deficit, and our City fund balance of an equivalent amount of $13 million to be reduced to $0. The cupboard would be bare! Sobering? I would think so.

This negative might serve to concern rating agencies going forward. Lower rates tend to increase cost of borrowing funds, whether short-run Tax Anticipation Notes or longer-term bonding. However, at the moment we are at a historically low interest period for municipal issues. Will it continue this way for long? What do we need to do to deal with this issue and others after taxpayers get serious? Time will tell.