People Say the Darndest Things

Thursday evening (October 22) the NAACP held its Candidates' Forum. Prior to the candidates speaking the FOP and CODE Presidents spoke. The FOP represents police officers and CODE represents middle managers in the city. Among the many things they said, each talked about how the accountant hired by the two unions to challenge the City Manager's deficit projections had found all sorts of money and that the projected $51.5 million deficit for 2010 could be closed with the monies identified by their accountant. I assume they will continue to say this as council proceeds to close the deficit before the end of the year.

So, I thought you might like to read what the city's Budget Director had to say in response to the CODE/FOP accountant's assertions. Also, remember that the court totally dismissed the two unions efforts to obtain a restraining order against the city based on their assertions about "found" money and their allegations that the City Manager was not being accurate in his assertion that we had a deficit.

The following is a response from Lea Erikson, the city's Budget Director, on October 23, 2009 to an inquiry from my office.

Here is my preliminary analysis on the accountant’s affidavits:

Burke & Schindler used flawed logic when developing a projection for items for which annualized appeared to be less than the 2009 budget amount.

1. The City’s expenditures generally do not get expended throughout the year in a straight-line fashion (i.e. you can’t say that expenditures should be 50% of budget 50% of the way through the year). There are many reasons for this including:
1. Many municipal operations have seasonal peaks and valleys with their expenses such as winter operations which is heavy early and late in the year or Aquatics which is heavy in the summer only.
2. Personnel expenses are incurred 26 times through bi-weekly payroll, not 1/12^th each month.
3. Personnel expenses are not level from start to finish since there are contractual pay raises such as Fire’s 3% COLA which started in June and AFSCME’s 3% COLA which started in August.
4. Contracts with outside entities are entered into throughout the year and so there is no way to generalize those expense.
5. Supplies and other purchases do not happen in a straight-line fashion throughout the year.
6. Other expenses may not occur until later in the year.
2. Since the City’s expenditures do not get expended throughout the year in a straight-line fashion, the Burke & Schindler’s annualization technique was flawed.
3. Since Burke & Schindler only compiled results of items which appeared to be under expending, they completely ignored items that may appear to be overspending. When using their same methodology of annualization with ALL line-items in the budget, the result shown that the City is projected to overspend its departmental General Fund Budget by $10,223,000. Obviously, since the methodology is flawed, the Office of Budget & Evaluation is not concerned that we are on track to overspend our budget by that amount. A proper budget monitoring activity looks at spending on all line-items and makes professional assumptions based on knowledge of operations when projecting spending for the remainder of the year.
4. In the case of the statement: “total projected unspent amount within the Police Department is at least $1,000,000”, when you use actual Police Department budget report totals (versus only a few line-items) and use the same logic and the same annualization, the department now has a deficit of $4,866,695 rather than savings of a $1,000,000.
5. While there is a budgeted amount with every line-item, departments have the ability to expense items less than or greater than the individual line-item budget. City Council approves the budget at the Agency level (not the program level) and at the higher level expense categories of Personnel, Other Expenses, Properties and Debt Service. City Council does not appropriate to the line-item detail. Therefore, in order to be flexible to meet departmental needs, departments can over spend on certain line-items as long as they under spend on other items to remain in balance within the appropriated budget amount. When there is a case where there is projected overspending in total within an Agency, since accounts must be balanced, the Administration with the approval of City Council adjusts the agency budgets in the Final Adjustment Ordinance that is presented in November of each year.
6. In the case of the identified $998,000 in items with no expenditures to date, the same caveats above apply. Really a comparison could be made to the number of line-items and amounts that have already overspent their entire annual budget as of August 20, 2009. There are 1,310 expense line-items within departments that show a collective overspending of $32,586,890 as of August 20, 2009. Since there are other items which are under spent by this amount and more, this is not an issue of great concern to the Office of Budget & Evaluation.

Municipal budgeting and fund accounting are not simple and straightforward, and therefore, true projections of over or under spending require detailed analysis that looks at budgets within the context of departmental operations and financial procedures.

As to the numbers in the memorandum, the City also does not receive revenues in a straight line manner, so if you look at page 3 of the Net Revenue detail report attached to the memorandum, the better comparison is the current year to date ($208,915,846.23) versus the prior year to date ($218,915,846.23) which shows to date, we brought in $10,790,376.50 less revenue than last year at this time. When you factor in the fact that we were counting on growth in revenue this year compared to last year, it shows how Finance can say that we are $14.1 million behind forecast year to date in the July monthly finance report (available on council on-line). Based on Finance’s professional assumptions about how this carries out the rest of the year, that explains the projected $28 million revenue deficit by the end of the year.

In their memorandum, the unappropriated surplus calculation of $12,656,282.07 is not an actual YTD amount since two of the components that go into that calculation are projected expenditures and projected revenues. In this case, those amounts assume that we spend every penny appropriated in the budget in the General Fund and that we receive every penny “forecasted” in the general fund. Since the forecast has not been officially reduced to reflect the projected $28 million deficit, the $12.6 million is not true money. You can see the calculation of the $12.6 million and see what the revenue would have to be received to truly get $12.6 million by the end of the year. For comparison I showed what we projected in the original budget (see the General Fund appropriation ordinance last page) and the May Finance Report (available on council on-line). The reason for the big increase between May and June is that we cut the projected operating expenditure line by the June mid year General fund budget reduction approved by Council (revised plan A). When Finance officially lowers the revenue estimate through the amended certificate of resources the unappropriated surplus will be a negative number (discussed on page 2 of the July monthly report).

In their memorandum, the reference to page 172 of the Net Revenue Detail report of $885,960,242.33 this year compared to $844,171,567.95 last year is completely erroneous. They cited the TOTAL revenue amount which is really the total of all 172 pages of net revenue detail (keep in mind that the General Fund only represents the first three pages) and called it revenue from “investments”, when in fact it is the total revenue collected from all sources including General Fund, Enterprise funds, other funds, capital funds, grant funds, etc. My only guess why they thought it was revenue from investments was that the first revenue item listed on that page was titled Rents and Investments (notice the fund number is 980 which is our capital fund.)

This is just my preliminary analysis and this doesn’t represent the Administration’s official opinion on this. Since this is a court case, we have to be careful how information is presented, but I just felt that I had to give you comments per your request.

Thanks,

Lea Eriksen
Budget Director
City Manager's Office, Office of Budget & Evaluation
Suite 142, City Hall
801 Plum Street
Cincinnati, Ohio 45202
P 513-352-1578
F 513-564-1717
E lea.eriksen@cincinnati-oh.gov
www.cincinnati-oh.gov

Saving Energy-Saving Tax Dollars

Read the report from the Office of Environmental Quality on the energy saving measures beings installed in 39 city buildings. These are the measures referred to by a local restaurateur as, "$5 million for City Hall windows." Just goes to show that what is good for the environment can also be good for the wallet.

The Rest of the Story-What some people conveniently forget to say.

This past Sunday, a number of items appeared in the Cincinnati Enquirer that warrant a response because of the misleading nature of the statements. It is unfortunate that the techniques, values, and ethics of national attack politics have now arrived in Cincinnati.

One of the items was an ad that attacked Council members Harris, Thomas, Cole, Crowley, and me on a variety of subjects. A well-known restaurateur sponsored and signed the ad. It is unfortunate that neither he nor his staff took the time to check their facts.

The recession has severely impacted the City of Cincinnati. The Mayor and Council closed a $28 million General Fund deficit this year and will have to close a $40 million General Fund deficit for 2010. It is important to note that the deficit is in the General Fund because the cause is reduced income tax and other revenues into the General Fund. Simply saying City Council approved this or that expenditure, even if true, may not be relevant because the source of funding could be the Capital Budget or Enterprise Funds or state or federal grants.

As for the issues used to attack Council members Harris, Thomas, Cole, Crowley and myself in the ad, I will take each one and provide... "The rest of the story..."

1. "...decided it was more important to spend $5 million to replace windows at City Hall, than to keep the people safe..." Enquirer ad, 9-27-09 p C5
Response: The city executed Energy Services Performance contracts with Ameresco and Honeywell on June 29, 2009. The contracts allow for the installation of nearly $5.6 million worth of energy efficiency upgrades to City Hall, the Convention Center, Centennial 2, various police and fire stations, and other buildings maintained by City Facility Management. A total of 40 buildings are affected. These lighting, heating and air conditioning, building automation, and building envelope upgrades will reduce the City's energy use by 3,290,539 kWh, generate 45, 817 kWh of renewable energy, and reduce greenhouse gas emissions by 3,413 metric tons each year. The majority of the work will be self-funded with guaranteed energy savings (a minimum of $450,000 annually) and energy rebates...$351,675 of Energy Efficiency Conservation Block Grant funds (aka stimulus funds) will be used for gap financing to make the first-round projects work. $239,380.77 is from the General Fund, but is not from tax receipts. It is money repaid to the city by Duke Energy for overcharging the city. FYI Memo from the City Manager to Mayor and Members of Council 6-30-09.

2. "...Over-the Rhine was the most violent neighborhood..." Enquirer ad, 9-27-09 p C5
Response: Violent crime in Over-the-Rhine for Jan-May 2009 was 36% lower than the same period in 2005. The study that resulted in O-T-R being called the most violent neighborhood in the US used data that was outdated and did not use as its basis the entire 110 square blocks of Over-the-Rhine. It only used a ten block area in the northwest sector of Over-the-Rhine and in the West End. The study's methodology is highly questionable and intellectually suspect. Repeating its flawed conclusions does a tremendous disservice to the residents and businesses there and to the organizations and individuals who have invested over $84 million in the community. Visit UrbanCincy.com

3. "...to lay off 138 police officers unless every officer accepted a pay cut." Enquirer ad, 9-27-09 p C5
Response: One element needed to close the $28 million deficit in the city's 2009 General Fund was city employees agreeing to take cost savings days. When originally proposed by the City Manager, every employee paid out of the General Fund would take 6 cost savings days. The unions had to agree to this for those employees in the city's bargaining units. The City Manager and Chief Streicher were instructed to make sure that any police cost savings days would not impact street strength. In a memo dated, August 5, 2009 they specifically stated the layoffs would not impact street strength. Ultimately, the 138 police officers were not laid off because the union agreed to accept a salary reduction of $1,151.69 per officer, which averages out to approximately 4.6 cost savings days per officer. FYI Memo from the City Manager to the Mayor and Members of Council, 8-5-09

3. "...these same council members voted against taking pay cuts themselves." Enquirer ad, 9-27-09 p C5
Response: Cincinnati City Council members have not increased their salaries since 2006 even though by law, the members are entitled to the increase. Due to inflation over this same period of time, council salaries have remained static, but the purchasing power has declined. In 2006 council did not take a 3% increase. In 2007 council did not take a 3% increase. In 2008 council did not take a 7.7% increase. And, in 2009 council did not take a 7.7% increase. As for council members taking cost savings days, individual members of council are writing checks to the city for the equivalent of between five and six cost savings days.

"So instead of providing funding for public safety, he (sic Thomas) and his colleagues chose to:
4. ... hire a tree trimmer..." Enquirer ad, 9-27-09 p C5

Response This position is for a Tree Maintenance Worker paid a salary of $37,026. The Park Department needed this position to insure the safety of residents and employees. The responsibilities include pruning and removing hazardous trees along park roadways, around picnic areas, and playsets. The person will use an aerial lift truck or rope and saddle. It is paid out of the General Fund. Source: Report from the City Manager to Mayor and Members of Council, "Second Quarter 2009 General Fund Hire Authorizations," 9-2-09

5. ...and a climate control coordinator..." Enquirer ad, 9-27-09 p C5

Response: All general fund funding for the Climate Protection Coordinator was eliminated as part of the mid-year budget correction. The position is now part-time and is funded entirely through an Energy Efficiency Conservation Block grant (aka stimulus dollars) from the federal government.

6....and to spend $3 million on recycling containers..." Enquirer ad, 9-27-09 p C5
Response: Council has not voted to spend $3 million on recycling containers. In May 2008, council asked the administration to review the recycling program and recommend how we could increase the rate of recycling, share to a greater extent in any revenue from sale of recyclables, and increase the amount of money the city saved by avoiding landfill tipping fees. The original motion was extensive, and also directed that workers received a living wage for sorting recyclables.

The Office of Environmental Quality worked diligently and developed a plan that achieved the objectives of council.It would increase the amount recycled by 300% and create 20 new jobs at sorting facilities and 36 new jobs at recycling manufacturing facilities. It also would decrease greenhouse gas emissions.

The city currently spends $2.3 million for its recycling program.

So...where did the $3 million figure come from?

Well, to improve participation rates the administration recommended a program that includes a Recycle Bank and the use of 64 gallon wheeled carts. The program also moved the city into the modern age of RFID's (Radio frequency identification devices, known to most people as barcodes) to allow for tracking of participants so they could receive rewards for recycling.

The cost of purchasing and providing 64 gallon wheeled carts to all households in four family or smaller units and all single family homes is $3.5 million. The administration proposed to finance the purchase with a lease that covered the cost of the $3.5 million and would have required annual payments of approximately $462,000 a year (Option1). The savings projections previously referenced include the cost of the lease. Source: Report from the City Manager to the Mayor and Members of Council, "Recycling Program Enhancements/Cost Savings," 8-3-2009

7. ...and $1.5 million on sidewalks..." Enquirer ad, 9-27-09 p C5

Response: This reference is a true mystery. I can only assume the sponsor of the ad was referencing an ordinance to pay for sidewalk repairs. The amount was under $700,000. The amount is recouped through sidewalk assessments to property owners whose property abuts the sidewalk.

It is unfortunate when a respected member of the community is mislead into making public statements that are factually untrue. It is understandable, however, because public finance and the city's budget are complicated -more complicated than the books of most restaurants. In the future, one can only hope that he will take a little more time to do his due diligence.

Deficits, Lay offs and Recessions

Beginning in June of this year, the global economic crisis hit home in
the City of Cincinnati. The Administration informed City Council that
due to lower than expected tax revenue, we were faced with a 2009
deficit of $20 million. Recognizing the devastating effect such a
deficit could have on the citizens of Cincinnati, Councilmembers Cole,
Qualls, Thomas, Harris, and Vice-Mayor Crowley, presented a plan that
made substantive cuts while protecting critical City services. Had we
not passed this plan, 902 City Employees would have received layoff
notices, including 302 police officers and 230 firefighters.

It is important to note that no one wanted to layoff any City
employee, especially in the area of Public Safety. But it is also
important to note that since 2000, Cincinnati Police and Fire staff
levels have risen approximately 6%, while General Fund staffing levels
for all other departments have been cut by 29.9%. Over the same time
period, public safety department budgets rose 37.1% (33.8% for Police
and 43.3% for Fire), while non-safety General Fund department budgets
fell 10% overall. Public Services fell 18.9%; Economic Development
-25.1%; Finance -29.9%; and Community Development -6.7%.

On July 17, when faced with a deficit that grew to $28 million, the
City Manager announced layoffs would be necessary in 2009. He did,
however, emphasize that layoffs could be avoided this year if the
unions agreed to cost-savings days and to forgo cost of living
increases for 2009 that were awarded by an arbitrator. To close the
gap, General Fund departments made reductions in their budgets ranging
from 2.7% to 11.2%, with eleven departments –taking cuts of 5% or
more.

Mayor Mallory, supported by Councilmembers Cole, Crowley, Harris,
Thomas, and Qualls undertook negotiations with the city’s labor unions
and the Administration to find substantive cuts and reasonable
concessions from the unions.

These negotiations were successful and were reflected in the plan passed by a majority of City Council on September 4.

While we are all grateful for solving this recent crisis, we know that next year will be worse. Cincinnati does not exist in a bubble. This is a global recession, not a local one. Other cities are facing very similar budget problems.

• Philadelphia - Laid off 3,000 workers, reducing garbage collection
to once every other week.
• Atlanta - Four rounds of layoffs, increase in property taxes, and
mandatory furloughs for all city workers (including police, fire, and
others).
• Miami - Deep pay cuts (ranging from 6% to 15%) and pension benefit
reductions or the elimination of 191 sworn police officers, 305
general union employees, 5 firefighters, and 110 nonunion workers.

The plan that the council majority passed on September 4th is responsible, possible, and
reflective of the times. We did not demand layoffs and we did not make
the quality of life unbearable for our citizens. We asked the unions to meet us halfway. And we are glad the CODE and the FOP agreed. It is unfortunate that AFSCME did not do so.

The Rest of the Story-What the Enquirer did not tell You About Recycling

Reading yesterday's Enquirer would lead many people to believe that in the midst of a severe crisis that threatens to put people out of work, the majority of council would add $3.5 million in new spending for recycling carts.The article gives the impression that this new $3.5 million would actually come out of this year's or next year's budget. Read on if you are interested in

The Rest of the Story...

In May 2008, council asked the administration to review the recycling program and recommend how we could increase the rate of recycling, share to a greater extent in any revenue from sale of recyclables, and increase the amount of money the city saved by avoiding landfill tipping fees. The original motion was extensive, and also directed that workers received a living wage for sorting recyclables.

The Office of Environmental Quality has worked diligently and developed a plan that achieves the objectives of council. In addition, the plan, if it were approved and implemented this year, would actually save $20,000 in 2009 and $240,000 in 2010. It would increase the amount recycled by 300% and create 20 new jobs at sorting facilities and 36 new jobs at recycling manufacturing facilities. It also would decrease greenhouse gas emissions.

The city currently spends $2.3 million for its recycling program.

So...where did the $3.5 million figure come from?

Well, to improve participation rates the administration recommended a program that includes a Recycle Bank and the use of 64 gallon wheeled carts. The program also moved the city into the modern age of RFID's (Radio frequency identification devices, known to most people as barcodes) to allow for tracking of participants so they could receive rewards for recycling.

The cost of purchasing and providing 64 gallon wheeled carts to all households in four family or smaller units and all single family homes is $3.5 million. The administration proposed to finance the purchase with a lease that covered the cost of the $3.5 million and would have required annual payments of approximately $462,000 a year (Option1). The savings projections previously referenced include the cost of the lease.

I invite you to read the Recycling Enhancement report and the lease proposal. Once you do, you'll know the rest of the story. Go to roxannequalls.com to download the reports.

Walking Denver's 16th Street Transit Mall

It is a wonderful 16 block walk that took me from my hotel past LODO. There are no cars, but unlike the failed "No CAR" pedestrian malls of the 1960's, it is bustling with people. Hybrid buses run up and down the mall constantly. It is intersected by streetcar routes. People are walking, sitting, eating, looking, hanging!

Check out the pictures!

CNU-Peter Calthorpe: Think Globally-Act Regionally

Peter Calthorpe is one of original founders of the Congress for the New Urbanism. His firm has done major regional plans, as well as urban revitalization projects throughout the United States.

"Now more than ever numbers matter. There is a need to quantify the benefits of urbanism. "

He holds true to the idea that urbanism is the answer to all the problems that confront us as a result of environmental change, not just a few.

But he is very aware that the benefits of urbanism must be proven with "numbers." But, the numbers only work at a regional level. The numbers do not work at a neighborhood level.

That’s why regional scale plans are at the heart of realizing the true benefits of urbanism. Metropolitan Planning Organizations (MPO’s) must do regional plans that integrate targeted reductions of vehicle miles traveled (VMT’s) and not just plan for more roads and more traffic.

California MPO’s must do this now. They have the authority to do it. If do not succeed, they do not get highway dollars.

“How we spend transportation dollars is the great form-giver of our regions and neighborhoods.”

Total energy consumption per household, including household and travel, is much less in urban neighborhoods than in suburban.

“It’s all about transportation, and transportation is about urban design.”

The Center for Neighborhood Technology compares Co2 emissions per household versus CO2 per sq mile. If you measure the emissions based on square miles- the result is sprawl. If measured by household, then compact urban form the most efficient.

“The residential market melt down was not just about market failure, it also is a result of building the wrong stuff.”

"AC Nelson wrote an article about future demand for housing. We have so overbuilt large lot single family in the suburbs, we do not need to build another. HBA may come back and do it again, but this is not the market!"

Scott Bernstein in Creating Livable Communities argues that the economies of households are based on transportation costs, and those costs are much higher for people and families in the suburbs. That is why transportation planning and land use planning go hand-in-hand. Focusing solely on vehicle miles traveled and green house gas emissions reductions will not get regions to target levels.

Calthorpe talked about how California’s new Climate Change Law avoids land use issues and focuses on VMT and GHG. "California cannot get to targets with Prius’s and bio fuels."

Every California community now must produce a sustainable community plan. Citizens just voted in high speed rail. The environmentalists have gained up against high-speed rail. They are worried that it will turn the central valley into a cheap bedroom community and will catalyze sprawl. They are right. Without regional planning, high-speed rail can become a catalyst for sprawl.

Jobs and housing balance within a region is very important. Want 5 mile commute sheds; otherwise get major commuting within the region and as metro regions merge between regions. The consequence is increasing separation of workers from employment centers with lower income workers having longer commutes.