The Politics of Surpluses: Fudging the Numbers
In the 2010-2011 proposed budget, the General Fund is projected to bring in $76.3 million in taxes and state profit sharing, and spend $77.9 million dollars, with a $1.5 million dollar deficit (provided all of the City Administrator’s proposed cuts are adopted). Over the past three years, the city’s General Fund has been pushed, pulled and manipulated inexorably toward structural deficit. The 2009 budget book has a message from the City Administrator that includes this: “For the foreseeable future we will continue to experience 1-3% revenue shortfalls with each annual budget.”
The result, of course, has been the decimation of our city’s human capital, and the ongoing deception that the loss of 239 city staff, including almost half of our firefighters and over 100 employees (civilian and sworn officers in our police department) has saved taxpayers money. In campaign literature we’ve read time and again that this “streamlining” has saved taxpayers $10 million dollars per year. It’s a cruel deception, not only to those who were dismissed from their jobs for no reason other than sheer managerial incompetence, but also to taxpayers who trusted that they were being told the truth.
In a February 9, 2010 presentation before Council, the City Administrator claimed that the “streamlining” of city government had saved taxpayers $25 million dollars since 2002. Below you’ll find the nifty chart he used to illustrate this fairytale.
Why is it a fairytale? Because the city’s income tax returns don’t corroborate Mr. Fraser’s claims of saving $25 million dollars on employee wages and benefits since 2002.
Here’s a graph with information from Ann Arbor’s income tax returns filed between 2000 and 2009:
|Fiscal Year||Number of FTE and Contract Employees Claimed||Wages Claimed|
|2000||1,230||$49.6 million dollars|
|2001||# of employees not recorded on tax return||$58.7 million dollars|
|2002||1,149||$55.9 million dollars|
|2003||1,102||$54.7 million dollars|
|2004||1,079||$54.2 million dollars|
|2005||1,128||$57.5 million dollars|
|2006||1,104||$60.3 million dollars|
|2007||1,069||$57.2 million dollars|
|2008||1,018||$55.3 million dollars|
|2009||1,029||$54.7 million dollars|
You should, of course, have an immediate question: Where’s the purported $25 million dollar “savings” Mr. Fraser told Council has been realized by the “streamlining” of those 239 employees? It cost exactly the same amount in 2009 to compensate our city employees as it did in 2003, when Mr. Fraser was hired. The next question is why the total number of employees declared to the IRS doesn’t match information presented to the public by Mayor Hieftje and Mr. Fraser. In December of 2009, Mr. Fraser, in a presentation to Council, told the group that as of December 2009 Ann Arbor employes 756 people.
One of most frequent questions I get from voters is where our I’ll find the money to fund core services, such as police and fire. The short answer is that the money is already there. Finding it is not a difficult task. One simply needs the financial skills to know where to look. Ann Arbor also needs leaders who will no longer allow city staff to fudge numbers and data to support their requests for funding and their claims of competence. Something else has been happening, something even more disturbing than the false claims of savings and the patently absurd claim that our services have not been systematically reduced.
First, we must keep in mind that Mr. Fraser has inaccurately projected revenue shortfalls in our General Fund since 2003, when he began his job as City Administrator. There have actually been budget surpluses in the General Fund since 2003, with the exception of 2009. This is significant, because those projected deficits have resulted in convenient opportunities for certain City Council members to “rescue” items budgeted to be “cut” thanks to the projected pretend shorfalls. This happened for several years to the Human Services funding. It would be eliminated in private meetings by the Council’s Budget Committee, then “saved” by Council members in public. In this election season, look for Council members who claim to have “rescued” the Burns Park Senior Center from the chopping block, as well as Mack Pool. Look for a Council member to “rescue” Allmendinger Park residents from the outrage of football Saturday parking—a “revenue source” proposed in the current budget to raise under $40,000.
These phantom budget shortfalls have been used to pad political résumés of those on the very Committee (the Council Budget Committee) that oversees the city’s budget. This cycle of projecting General Fund deficits, targeting high profile programs for elimination, then Council members stepping in and “saving” the high profile programs is nothing short of remarkable in its political ingenuity. The result has been budgeting and governance by three ring circus. P.T. Barnum would have loved the showmanship.
Meanwhile, because our elected officials were not prepared to dig through the city’s audited financial statements, or well-versed enough in finance to understand the statements, over the past half a dozen years, the citizens of Ann Arbor have been bilked out of over $100 million dollars. How? The oldest game in the book: over-charging for services.
Let’s start with water. Water flows to the lowest point, but in Ann Arbor the money poured into the coffers of the Republic of Water, Sewer & Stormwater Management runs right into a consolidated savings account. In that Utility Fund there is a $59.2 million dollar surplus, according to the most recent audited financial statement posted to the city’s web site. In essence, the City of Ann Arbor has over-charged residents $9.9 million dollars per year over the past six years for water and sewer in order to accumulate the surplus of funds—unrestricted funds—funds that are not earmarked for any purpose whatsoever. Sue McCormick, the city’s public services area administrator, has been allowed to amass a $59.2 million stash of our tax dollars.
Yet, on April 13, 2010, Sue McCormick went to Council and announced that Ann Arbor taxpayers need to pay more for water and sewer. Why? Because Ann Arbor has, according to McCormick, the “second lowest rates” in the state.
Water — $9.3 million
Sewer — $44.7 million
Street Repair Millage Fund Balance — $19.4 million
Stormsewer — $5.2 million
Solid Waste — $8.9 million
Fleet Surplus — $7.5 million
IT — $4 million
Project Management — $1.5 million
Central Stores — $1.6 million
Total unrestricted fund surpluses: $102,100,000
That surplus $102,000,000 belongs to the taxpayers. So what can be done?
Our city’s budget needs to be examined closely, and Council must implement policies that keep departments from building up surpluses greater than, say, 10 percent of the department’s annual allocation. The surpluses above are the result of inflated charges the city levies on residents, as well as on its own units. The fleet department charges other departments $160 per hour for labor, and $300 per day to use a city-owned sedan. As a result, the fleet fund has a $7.5 million dollar surplus. Meanwhile, the Fire Department is sitting on fire fighting equipment and trucks that are outdated and need to be replaced now. The Street Repair Millage Fund balance is $19.4 million dollars, and the millage raises almost $9 million additional dollars each year. Meanwhile, Ann Arbor has the third worst roads in all of Michigan, and thanks to delays in repairing our roads will have to pay seven times more money to fix them than if the repairs had been made in a timely manner.
Here’s a news flash that shouldn’t come as a surpise: No city with $102,000,000 million in fund surpluses needs to cut police, fire, privatize its golf courses, stop tending its parks, or start charging residents $3 to drop off recycling. Between 2006-2009, Ann Arbor taxpayers paid $1 billion dollars in taxes, fees and debt to our government. Since 2000, Ann Arbor taxpayers have, collectively, funded our city government to the tune of $2.5 billion dollars in taxes, fees and debt.
The current administration has collaborated with city staff to spend every single dime of that $2.5 billion dollars—and then some. The current proposed budget is a sham and a shame. It represents neither the priorities of the taxpayers, nor an honest representation of our city’s true financial position. Council should direct the City Administrator to return to the General Fund all of the money from the total $102,000,000 million in fund surpluses, where such charge-backs are permissible under the auspices of the Charter, then re-fashion a budget that not only funds existing core services, but deflates the municipal service charge on which the budget is based by at least 20 percent in every department that currently has an accumulated fund surplus.
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