Council Approves Budget with more Spending and less Taxes

The Democratically controlled Common Council voted to approve a budget which restores funding to a myriad of programs cut by the mayor, increasing expenditures from $128.5M to $129.7M. Despite this substantial increase, there would be no increase in taxes under the Council's budget.  While the mayor's proposal included a mil rate increase of 1.0, the council's budget keeps the mil rate constant.  

The council was able to balance a budget that has increased spending and level tax revenue by using $1.5M of revenue from the anticipated sale of a city park, an anticipated $1.75M in revenue from the NRG Power Plant, and by taking $1.5M from the city's Fund Balance.  

The vote on the budget was strictly along party lines, with all 4 Republicans voting against it, and all 8 Democrats voting for it.  

Programs and positions restored

The Democrats restored funding to a wide variety of government services in the community.  The numbers which follow are approximate differences between Mayor Giuliano's proposed budget and the Democrat's budget, lumped to give a rough sense of the budgetary changes.  The increases were: youth sports ($85k), youth summer work program ($45k), senior citizen activities ($16k), art support services ($35k), health support ($230k), community events ($65k).  The Board of Education budget was increased by $200k, and 5 vacant police officer positions were filled ($250k).  

Rejection of Union Concessions to City

The Council rejected the Memorandum of Understanding (MOU) that was reached between Mayor Giuliano and a coalition of unions representing city workers.  The MOU delineated over $1M in concessions that the various unions were willing to take in order to help the city balance its budget. These concessions included unpaid furloughs, changes in health benefits, and an agreement that some positions would not be filled immediately. 

This agreement arose following an initial meeting on January 30th, between Giuliano, department heads, school board, school superintendents, and representatives of all the city unions. The Democrats refused to participate in those discussions.   

The Democratically proposed budget gives back to the unions the furloughs and the positions.  Councilman James Streeto said that he could not accept a package of concessions which included no hiring of 5 police officers, "The reduction of police numbers was from the get-go a problem for me."

Several dozen union members attended Thursday's budget hearings, and were clearly annoyed to see the Democrats on the Council refuse the concessions that they had agreed to.  

In interviews with The Eye after the meeting, I asked why union members would be upset at no longer having to take the furloughs and other concessions they had offered to the City. Councilman Klattenberg was mystified by the union members' anger, but he offered a suggestion that perhaps the union leadership had invested so much in the negotiations within and between unions that they were disappointed it was all for naught.  Mayor Giuliano said something similar, "Unions are [now] feeling that [negotiations and concessions] was all B.S.  They feel they were kicked in the head."  Councilman Bauer suggested that union members were taking a broader, long-term view of their job security and were haunted by the specter of future layoffs, "By putting the city in a weaker position [with this budget], next year there may be layoffs. This injects job uncertainty."

Increased revenue without a tax increase

To pay for the increased services and their refusal of Union Concessions, the Council decided to allot money from the expected sale of a park to cover the City's operating budget. Cucia Park is a city owned park which the Army has chosen for their military training facility.  The city anticipates receiving at least $2M from its sale to the army. 

The Council budget uses $1.5M of anticipated Cucia Park sales revenue to offset the increased expenditures and rejected concessions for the 2010 budget. Klattenberg said that money from the sale of Cucia that is beyond the $1.5M would be used to restore the Fund Balance.   In response to criticism of the use of anticipated revenue, Klattenberg said, "I believe that you need to have confidence based on professional judgement that the money will be there... To not include money that is anticipated would be irresponsible."

The Council used a similar strategy last year, when they included the proceeds of the anticipated sale of city-owned Remington Rand Building to balance the 2009 budget. That sale did not materialize and money was withdrawn from the Fund Balance instead.  

Another controversial source of revenue in the proposed budget is the use of this Fund Balance money to pay for the operating budget.  The Council more than doubled the amount of money that Giuliano wanted to withdraw. Both Giuliano and Klattenberg told me that City Finance Director Carl Erlacher was alarmed at the depletion of the Fund Balance, which serves as a reserve of last resort for the city.  The Democrats said that the level of the Fund Balance (about 7.6% of the annual budget after the coming withdrawals) was consistent with sound municipal accounting principles.

The use of the Park sales money and Fund Balance withdrawals allows the City to achieve a balanced budget with an increase in expenditures but no increase in the tax rate, which would stay at 25.5 mil.  

Mayor to test budget with staff

Giuliano has 5 days to either accept the budget as passed by Common Council, or to veto it, according to the City Charter.  He promised the Council to make a good faith effort to implement the budget as passed by the Council.  He said he would consult with the Finance Director, as well as other Department Directors to see if this was feasible, "If I don't think we can make it work, the Charter provides me with a means to bring that to your attention."