Lee Educates Public About Money Flow

John Marshall Lee is a man on a financial mission to make government open, accountable and transparent, in what has become an acronym for government officials on every level to eat their OATs. Add an h as in honesty and now you have what he terms an OATH. Lee asks lots of questions in the hope to spur government officials to action in the cause of protecting taxpayer dough. He does so in presentations and emails to officials and commentaries such as the one that follows addressing information in the Comprehensive Annual Financial Report and other items. From the “time will tell” man.

Regarding City transparency along with open and accountable governance, it should be noted that:
· The monthly financial report is not provided by OPM or Finance Department on the City web site at this time, even in its Executive Summary format. The narratives could provide a solid education to taxpayers about where the money flows in and then where it is spent.
· The CAFR 2015 can be located at the Finance Department site. However, two equally important sections of the external audit are State and Federal Single Audits each year. Revenue approximating $170 Million is accounted for by source with comments on whether internal controls are materially weak or show significant deficiencies. Should these reports stay unknown to the taxpaying public?

When I reviewed the CAFR 2014 I noted at least 20 errors that indicated a failure to review the material professionally. I formally identified them in comments to the City Council. Some of those were corrected in this year’s edition, but other errors are present. By comparing the 2015 edition to the 2014 edition I came to see important information and relationships important to the taxpayers, and therefore critical to Council understanding when reviewing fiscal issues.
· An important notice is not presented early and that is that the 2014 report required a restatement that made a significant change in City results. See page 7. Why not?
· Page ii indicates: “The City is funding its pension obligations as recommended by actuaries.” More than 30 latter pages deal with retirement plans for City employees past and present, but this statement gets no evidence from an Appendix report signed by actuaries and indicating a date certain. An opposite impression is actually created.
· Page iii repeats an error from the previous year when it states: “The City’s taxable base remains steady and is demonstrating some growth with the October 1, 2013 with a Net Taxable Grand List at $7.1 billion.” For two years in a row the City has reported on the wrong year, not the most recent, and therefore indicates a story that is clearly out of step with actual knowledge by City leaders who saw data in 2013 that they chose to hide from the public by going to the State.
· Page vi mentions financial initiatives in the narrative but provides little or no information in charts or otherwise to prove the statements. It also references the Internal Service Fund which had a dramatic decrease in outstanding in risk financing claims but extended the amortization period to 5-10 years, from 3-5 without any rationale.
· Page vii references the Reassessment but nowhere indicates where the Grand List as well as the Net Taxable Grand List of properties is accessible to taxpayers for understanding the effect of PILOT, tax abatements, and other programs that decrease the revenue from certain properties. It also does not provide an opportunity to see how much land and buildings are owned by the City and to what purpose.
· Page vii also comments on investment policy: “the City seeks a long-term above-average total return consisting of capital appreciation and income, while placing an emphasis on preservation of the principal.”

A look at page 93 that shows Pension Plans actual returns of about 1.2% annually for 2015 compared to over 15% in 2014 the previous year shows the difficulty faced in a volatile market. I also indicate in my opinion that the Assumed rate of return for plans shown in the CAFR are too high, and therefore misleading because this allows continued underfunding of pension obligations.
· Page 4 and page 45 contrast by showing that Long Term debt increased by $424,776,804 rather than decreased by $36.7 million during fiscal 2015.
· Page 43, # 6 reports on Bulk Lien Sales. What date was the sale in FY 2015? Is it a coincidence that the proceeds of $8,204,855 is identical to the sum reported for FY 2014? Error or coincidence?
· Page 49 references Tax-Anticipation Notes payable. The CAFR 2014 reported on the November 19, 2014 TAN for $50 Million carrying an interest rate of 2.0% when the 2014 report indicated a 1% return. Error?
· The Wheelabrator property tax court case of seven years development presents a narrative on page 51 and 52 that should be read by every Council member. What does it mean? What are the implications if the City bears a significant responsibility and legal expense for continuing this case? What type of financial risk do we bear? Why stay in court when experts FOR THE CITY cannot support the values the City indicates for the assessments? Can we look at a worst case risk?
· Pages 54 to page 73 cover many aspects of pension plans. It is a subject to itself, for another day, but note the “assumed returns” for different Asset Classes and the difference between expected real rate of return 4.88% and the discount rate used to measure the plan at 8.0% (page 57). And page 60 indicates that Alternative Investments have a Long Term Expected Rate of Return of 70% annually!!! Typo error? Failure to proofread? Professional review?

Will you hold a meeting with the public present to review this document when you have come to terms with it? It is not required by the Charter but it would be a refreshing sign of change by the Council to look at all the numbers, especially when the Balance Sheet and the Operating Budget are each in the “red.” And acknowledgement by all parties that the City is in serious fiscal difficulty may make necessary budget cuts and capital deferrals more possible than if everyone assumes that all is in order. Are you open to learn more and be responsible to the people of Bridgeport financially? Time will tell.