The Daily Chronicle is irritating me this week.
DeKALB – It wasn’t long ago that DeKalb had only a $22,000 surplus in the general fund.
Now, with the Fiscal Year 2011 audit almost complete, city officials say they are looking at a $6.3 million surplus.
The DeKalb City Council on Monday will be asked to amend last year’s budget, allocating $3.6 million of that surplus into eliminating the deficits found in funds for the city’s airport, workers compensation and capital projects.
[...]
The big gains in the general fund came from a variety of sources, Assistant City Manager Rudy Espiritu said, but primarily can be credited to a bigger return on investments, bigger gains in city revenues and cost-cutting measures such as the 20 layoffs the city approved in 2010. [emphasis added]
This is not the first time they’ve mentioned only the layoffs and left out the Voluntary Separation Program (VSP) and in this case it’s not forgivable. Why? Because the VSP was specifically designed to help eliminate General Fund deficits that, earlier in the year, were projected to grow to $5 million by 2012.
Let me put it another way: they mostly closed the gap by getting rid of people, but that doesn’t really fix the things that need fixing. Here’s the comment I left at the DC website:
This is not the complete story. In mid-2010, the city laid off 19 and terminated one. There was also a voluntary separation incentive and 14 people took that. I should HOPE they’d see some savings from getting rid of 34 people. The problem is, while it makes the budget numbers look good temporarily, the structural issues remain. If growth remains stagnant, we’ll be right back in the same old bad boat in a year or two. Key to the structural issues will be the new labor contracts. Keep your eye on those.
Crow as the city will about how they’ve brilliantly managed the challenges of the Great Recession, in my view there’s nothing special about it. Since 2008 they’ve raised taxes, fees and fines 12 ways to Sunday, gotten rid of workers and even borrowed money to get rid of workers.
Also, they cannot even explain why sales tax revenues seem to be recovering (I’ve asked.) What if it’s related to a temporary phenomenon, such as the relatively low gas prices we’ve been enjoying?
There was an alternative proposal to 2010′s Reduction in Force, and that was a 12-1/2% across-the-board reduction in wages. Now, that — THAT would have been brilliant. It would have saved jobs and reset wages to levels the struggling residents of this city could better afford. It undoubtedly would have produced positive effects in the pension situation and in the local economy. It would have been good for DeKalb.
5 comments
Comment by Mac McIntyre on November 13, 2011 at 2:52 pm
Some of the purported surplus comes from rolling over (extending) existing debt.
Forgiveness of Debt
Debt forgiveness occurs when a government creditor entity in one economy formally agrees – via a contractual arrangement – with a debtor entity in another to forgive (extinguish) all, or part, of the obligation of the debtor entity to the creditor, the amount forgiven is treated as a capital transfer from the creditor to the debtor. That is, the balance of payments reflects a reduction of the liability offset by the transfer. Similar treatment is applicable when a government entity’s debt is forgiven by agreement with a creditor entity in another economy.
The City of DeKalb is forgiving debt from the blackhole airport fund and the workman’s comp fund?
Comment by yinn on November 13, 2011 at 5:01 pm
Purported surplus is right. Over the past few years they’ve incurred not only more debt but a new way to incur debt (capital leases). They also have a way to take overtime off-budget (comp time policies) and unless I’m mistaken they are using the unexplained FY2011 sales tax recovery to project these revenues instead of the usual 3-year running averages. That’s why I call FY2012 the “pretend” budget.
I can’t wait for the FY2011 CAFR to come out!
As for debt forgiveness, though, I must have missed something! This is something more than the usual interfund transfers?
Comment by Mac McIntyre on November 13, 2011 at 7:14 pm
I don’t understand it yet because I’ve been busy on the other issue to delve into it. If I read the material correctly there are some significant figures of debt forgiveness. I don’t know how you can forgive your own debt. The definition I gave in my earlier comment came from wikipedia sources. According to that we’re creating a whole new method.
Comment by yinn on November 14, 2011 at 7:29 am
Ah, I’ve looked at the chicken stuff, the library stuff and the Sycamore Road marketing report (finally! Sales leakage numbers!) but nothing else. I’ll try to look at the rest today.
Comment by Kerry Mellott on November 14, 2011 at 3:01 pm
Yeah, I looked over the 363 pages last night. Mostly the library (~100p) but also the rest, less closely. What I found most amazing in the whole was the journal article by contracted City of DeKalb Atty Dean Frieders at the very end of the agenda stack. Looks to be a pretty good piece on how to avoid getting caught in a snare when dealing with public building projects. What I find hilarious (or tragic, depending on your perspective) is how he seems to ignore his own good journal article advice while advising the city on the legality of the Library situation. Plan? What Plan? Just my own opinion, of course, and still need to read that journal article more deeply…but I see a contrast so far!
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