Thank you to The Capital for publishing the following op-ed this weekend about the budget and the steps we are taking to get our fiscal house in order.
Guest Column: Taking steps to put Annapolis on solid financial footing
By JOSH COHEN
Recent developments have undermined public confidence in the city’s ability to manage its finances.
Our downgraded bond ratings, the continued need for short-term borrowing, unanticipated bond payments and misallocation of bond proceeds – each is evidence of the city’s financial challenges.
We got into this situation primarily because of two underlying problems: poor financial planning and lax management controls over several years. The City Council and I are committed to correcting both of these shortcomings and putting the city onto solid financial footing for the long term.
The city’s financial management strategy encompasses five distinct areas: cash reserves, expenses, long-term liabilities, operations and revenues.
BUILDING CASH RESERVES: Over the past five years, the city has spent some $29 million more than it collected. This overspending was covered in large part by depleting our once-robust cash reserves.
Our finance director has determined the city needs cash reserves of $21 million to end our reliance on short-term borrowing. The recently approved 2012 budget is projected to make significant progress by increasing our cash reserves by $10 million.
We are on a path to end short-term borrowing within three years. This year we needed to borrow $20 million. Next year we expect to borrow $10 to 12 million. We expect to reduce our borrowing to only a few million dollars in 2013, which should be the last year we need to do so.
REDUCING EXPENSES: Last year, through layoffs, furloughs and other measures, we cut our budget by 13 percent – the largest cut of any of Maryland’s 157 municipalities.
The cuts have impacted services across every department. The fire department has eliminated a ladder truck crew and delayed replacing a 14-year-old ambulance. Police officer, dispatcher and crime lab positions are being kept vacant. A review planner position is being kept vacant, adding costly delays to the review process. A new weekend liquor inspector position has been shelved. Street-end parks and medians are not maintained as regularly, sidewalks are not cleaned as frequently and trash cans are often overflowing. These examples are just a glimpse.
In short, we are living in a new era of austerity. These service cuts are not sustainable for the long term, but are a necessary response to the economic downturn.
LONG-TERM LIABILITIES: We also face long-term liabilities such as our police and fire pension, which is significantly underfunded. The City Council just ratified a fire union contract that lays out a three-year schedule to increase the firefighters’ contributions from 3.5 percent to 6.5 percent. Additionally, the city – which makes no contribution presently – will contribute 6.5 percent by the end of this period. The combined contribution of 13 percent will be almost four times current levels.
These benefits come at significant cost, and we will be rigorously benchmarking best practices to assure our citizens we are market competitive for a municipal government.
MANAGING OPERATIONS: The fact that several citizens testified during the budget process that they thought the city was spending too much is reason enough to take their concerns seriously, examine them rigorously and report back. Where we need to improve – we will do so.
We need to continue to do a better job managing the resources that we have by enhancing and measuring productivity. Sometimes we can enhance productivity by allowing the private sector to compete to provide a service. We are in the process of examining that alternative in the area of trash management. What we learn there can then be applied to other areas of the city, if it appears prudent and cost effective.
City Manager Mike Mallinoff and Finance Director Bruce Miller are overhauling our internal financial controls. We have ended the commingling of bond funds and separated those dollars into restricted accounts. We are converting our software to a 21st century financial management system that will dramatically enhance internal controls and accountability. We will continue to build on these measures in the months and years ahead.
RAISING REVENUES: Unfortunately, we cannot reposition ourselves without also addressing the revenue side of the ledger sheet. The fiscal 2012 budget raises the property tax rate by 3 cents and increases water and sewer rates, solid waste and stormwater utility fees, and bus fares.
These increases will impact every resident and business in Annapolis, and they could not come at a worse time. But they are necessary because for too long we have been paying artificially low fees that have contributed to our deficit each year. We are now in the unfortunate but necessary position of having to pay more despite receiving less.
By addressing all of these areas openly and honestly, we are fundamentally transforming our government to be more effective, efficient and transparent. Looking ahead, the City Council and I will undertake a comprehensive strategic planning process this fall to re-examine our services and re-evaluate our priorities for the future.
Together, we can make Annapolis the best run city in the state. This is my goal and my commitment to you.
The writer is the mayor of Annapolis.