Memo from Mike Rundle about city budget

The following is the text of a memo from Lawrence City Commissioner Mike Rundle about the city’s 2004 budget.

July 10, 2003

TO: Mike Wildgen, Debbie Van Saun, Dave Corliss
FROM: Mike Rundle
RE: 2004 budget related matters
CC: Mayor and Commissioners
Joel Mathis, Jeff Golimowski

The police union representatives raised questions regarding the transfer of enterprise funds to the general fund for the purpose of paying expenditures not related to those utilities. Prior to our next budget study session could you have the city attorney report on the limitations in state statute or any other limitations such as restrictive bond covenants that preclude transfer of monies from the Utilities Enterprise Fund to the General Fund. I’m not eager to go down that road but I recognize that this may be or is fundamentally a City policy that can be changed by the policymakers.

If this is an option open to us it appears to me that one step in closing our budget gap could be by use of funds in the non-bonded construction from the 501.7800 account and/or aggregated contingency funding without affecting utility operations. Could staff point to all of the options that we might consider that would not affect utility operations for the coming year?

In a more general vein I would like to add another avenue for consideration by the city commission and review by staff for closing the gap in revenues and avoiding or reducing an increase in taxes. I’ve compiled data from previous budgets some of which follows at the end of this memo. My figures and calculations may have inaccuracies that will be caught by staff but I believe they reflect general trends.

That data shows that staff has a great record of leaving us in a financially secure position at the end of the year. This year and the coming budget cycle differ from the past few years in many respects from the flat sales tax and loss of state funds. However, the general fund balances historically exceed the amount of revenues we’ve lost. In our effort to keep the mill levy increase down could we adjust our projections of income and expenditures? That is, could we comfortably assume we will bring in 1% more in revenues and still remain on target for our balance? 2%? 3%?

I am looking at the budget history of the General Fund using the data the staff recently compiled for actual year end figures as well as the figures I’ve compiled on our estimated or budgeted revenues and expenditures. I’m looking for specific areas to recommend where we might comfortably make less conservative projections. I do not have those recommendations yet and I will continue to work on them. Could staff look at the revenue categories and provide an indication of the areas they believe there might be some room for higher revenue projections? For example, could we adjust the projected rate of delinquencies one or two percentage points and remain in a comfort level?

Similarly, expenditures generally come in under budget; this is the other half of the success in achieving the healthy fund balances forward each year. Could we comfortably increase our projections of unexpended funds in the same manner suggested above with revenues? As commissioners I do not believe we have any detailed understanding how staff has managed to achieve the very positive record illustrated in the figures below. I know staff is taking some steps to reduce current year expenditures. I think it may be good to know whether staff is also continuing with the management strategies that have lead to the healthy balances of past years?

Mayor Dunfield indicated, and I think the entire commission agreed that we do not want to make blanket cuts on city services in the 2004 budget but want to maintain our support for those areas that have strategic importance. I believe we need to be looking now to find savings in current year expenditures and we need to work on this throughout the year. However, I think it is the wrong approach to cut expenditures across the board by some uniform percentage. Rather, it seems critical to encourage every city employee to look for ways to save money; it will help ensure the security of their job and make possible any improvements to salaries and benefits; and I believe it could contribute to higher morale and greater teamwork throughout the city. Could you indicate if you have taken any initiative in this area, or if this is something that the City commission needs to direct staff to do? I have a clear indication of interest in this style of management to date.

Some specific areas for consideration:

1. reduction of transfers from the general fund to other funds
2. elimination of contingency funding altogether in the general fund
3. Push all possible outside agency programs to Alcohol Tax funded funds to save room in the general fund. (Alcohol Tax Fund and Special Recreation Fund).

In conclusion, I don’t want us to take unreasonable risks. However, I think it may be unreasonable to raise taxes if we can expect to bring in added revenue or continue as we have in the past to carry unexpended funds forward at or near the rate we have in past budget cycles. Our adopted policy is that we want to have a minimum 15% balance forward to start the next year. Staff encouraged us to allow for a maximum of 30%. However, Government Finance Officers Association indicated that was not justified except under special circumstances which were outlined in their official policy recommendations. To my knowledge staff has not identified the GFOA accepted circumstances for carrying forward a balance above 15%.

I know this is a challenging budget year. I hope that we can meet those challenges without undue burden on the tax-payers, without compromising our fiscal health and at the same time taking good care of the employees who deliver the high-quality of services we enjoy in our city.