Analysis: The FY 2011-12 Omaha City Budget

NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
STOP THE SPENDING: NTF ANALYSIS OF THE FY 2011-12 OMAHA CITY BUDGET.

 BACKGROUND.  In his presentation to the city council, Mayor Jim Suttle declared that “Our budget is another shining example…” and “The 2012 budget reflects responsible spending and responsible savings.”  He crows about his “minimal tax increases,” which have totaled a 15% hike in our property taxes.  In reality, his budget more resembles a local version of a spendthrift Obama Budget.  Total expenditures reach 10% higher than the previous budget (p.11), which itself had raised spending by 11%, thanks to his previous unpopular tax hikes, e.g., restaurant and bar tax, providing more revenue than anticipated.  Total spending is $754.8 million.   

UNSTABLE REVENUE STREAM.  Examining all revenues, sales tax revenue is calculated at a 3% increase for FY 2011-12.  Bond sale revenue increases by 99%.  Services and miscellaneous revenues spiral up 17%.  The restaurant and bar tax increases by 29%, $4.3 million more than expected.  Total revenues rise by 21% (p. 11).  Plus, the budget carries forward from the last fiscal year $3 million (p.13).  In the General Fund, business license and permit fees rise by 18%, investment income by 83%, and miscellaneous revenue by 100% (p.23).  2012 anticipated revenues pegged for street maintenance are higher than projected expenditures, so the commuter wheel fee dashed by the legislature was not necessary (p.28).  All city funds revenue is up by $139 million (p.101).  Vehicle rental occupation tax $$ will rise by 13%, hotel/motel occupation tax revenues up by 7% next fiscal year (p.102).  Total hotel and convention center revenue is up by 11.43%, keno by 15.81%, and Lewis & Clark Landing revenue up by 1.29% (p.12).  However, general property tax revenues scheduled to rise by less than 1% (p.100), as valuations are flat (p. 108). This most stable tax available to the city offers a warning for spending controls.   Interest income rate of return pegs at a low 1.7% next fiscal year (p.113). Other revenue sources, such as rents and royalties, street and highway funds, (p. 115), and concession and hotel fees are falling, or are stagnant, like vehicle taxes (p. 101), sales taxes (p. 109),  parking meter fees, rescue squad fees, (p. 103), and total charges for services (pp. 102-103).  This instability in the revenue stream should alert city government to not increase spending by a substantial amount!

 WISHFUL REVENUES.  The destination and sales development office of the tourism bureau estimates 100,000 hotel rooms booked here in 2012, yet the number fell from a 2011 estimate of 87,000 in 2010 to 85,000 in 2011 (p.296).  The budget debt service unrealistically forecasts a property tax collection rate of 100%, including prior year collections, though the city never has attained this goal (pp.12,100).

 TIDAL WAVE OF SPENDING.  The budget raises appropriations for the Parks & Rec. Dept. by almost 8%, Convention & Tourism Bureau costs up by almost 5% (p.11). For the last and upcoming fiscal years, this agency has spent more tax $$ than it accrued in revenue (p. 43). Pension costs in the latter bureau rise 17% in the budget (p.302). Public Works pension costs rise by 15% and 22% in 2 dept. sections (p.311). Retiree supplemental pension costs have risen, and retiree COBRA health insurance costs are up by 7.5% (p.147). The mayor’s office budget rises by 5%, mostly for employee salaries, though the number of employees is fewer (p.158), and though total city council employee benefits have dropped in cost (p.164). Finance Dept. up by 16.48%, and employee benefits there up by 5.65% (p. 12). A huge increase in Finance Dept. employee salaries (p.129) and in the Convention/Tourism Dept, 7%-21% (p.144). Administration funding for the Finance Dept. rises by 45% (p. 190).  In this dept., 4 fewer in accounting but $73,000 more in pay (p.191).  Pension and insurance costs spiked in this dept. (p.195). Some total Finance employee benefits rose by 30%, and supply costs rose by 81% in 1 division (p.203).  A lesser number of city funds reconciled by this dept. next fiscal year, however (p.197).  3 new employees needed to handle the restaurant tax, which could be eliminated (p.202).  Budget preparation costs here rose by almost 15% (p.208).  Inflated salaries for a new dept. accountant ($77,735) and analyst ($118,118) to work on the city budget (p.209).  Retiree employee benefits up 6% (p.125). Active city employee benefits up by almost 10%.  Personnel Dept. appropriations would rise by over 6% (p.23). Employee salaries up by 18% in 1 Planning Dept. division (p.219).   Inexplicable is why Omaha is spending almost $3 million more for its interlocal agreement with the Elkhorn Rural Fire District, though many other interlocal agreement costs drop next fiscal year (p.117).  There exists an unnecessary appropriation for a Parks Dept. public awareness program and a big hike in salaries for Parks administration employees (p.133).  Also, a large jump in employee salaries in the housing and community development section of the Planning Dept. (p.131).  Public Works household chemical disposal costs would rise by 7% (p.141).  The chief of police and his staff would gain huge pay hikes promised them by the mayor (p.137). Appropriations for the police chief office rise by 51%, by $4.48 million (p.230), though no additional employees. Specialty pay ($6 million) and payouts for accrued sick and vacation time ($757,512) should end (p.239).  Human Resources personnel administration employee salaries would rise by 54%, with no additional employees (p.178), employment section salaries up by 32% (p. 178). Pension, overtime, and longevity pay continue to rise rapidly in many departments, in the police dept. by 24% and 48% in the latter 2 categories (p.242).  In the Fire Division, overtime pay in the proposed budget would cost $202,500, longevity pay $609,405, specialty pay $1.2 million, holiday pay $1.5 million, vacation and sick leave payoff $1 million, and comp time payoff $1 million (p. 262). Employee salary hikes for firefighters responding to fires rise by 17% FY 2011-12 (p.259).   Parks Dept. overtime costs would rise to $82,000, up from $5,000 the previous fiscal year (p.289).  Employee compensation in the Convention Bureau would rise by 9% (p.292); wage increases alone are about 10% higher (p.304). Employee compensation in Other Budgetary Accounts would rise by 24% (p.410). Too many individual depts. have their own information technology teams, whereas DOT Comm. should provide these services (p. 294).  Health care coverage will cost $5 million more, an 11.7% hike, yet the mayor refuses to bargain for higher employee premiums or shop for cheaper policies. The Finance Dept. estimates that employee health care eventually will consume 50% of the general fund budget, unless tough negotiations occur with city unions.[1]   Mayoral cuts are phantoms.  He authorized the police division to trim 9 employees, to 780.  That is the present number of officers, so no one would suffer a layoff.  The 2 city debt service funds are bleeding more in expenditures than revenues taken in (pp. 47-48). Total debt service appropriations have climbed by 10% (p. 125).  Mayoral spending in this budget is much too great considering the unstable revenue stream and recessive economy. Moody’s warns that Omaha faces the downgrading of its bond rating!

 BOND BONDAGE.  Bonded indebtedness total is up 9% to $948 million (p.17), yet the mayor wants to issue more bonds to fund the sewer separation project.  Per capita general obligation bonded debt from city bonds totals $1,245.82, the highest in recent history.  Another reason to curtail excessive spending.

 PRIVATIZE.  The household hazardous waste facility managed by the city annually hemorrhages dollars (p.45), and  golf and tennis operations show a negative cash balance/losses respectively, so privatize all these operations (pp.74-75). Page 97 of this budget declares that compost operations revenue, marina revenue, golf revenue, tennis revenue, City Wide Sports revenue, parking facilities revenue, convention center hotel revenue, and Lewis and Clark Landing revenue funds will operate as enterprise funds with the objective of being or becoming self-supporting, yet such is not the case.  The 8 city parking garages and 7 surface parking lots are losing money and have negative cash balances, so privatize all (p.76).  The city now has 39 additional employees listed for FY 2011-12 (p.153), another incentive to privatize.  Privatize compost operations, its cost up by 4%, and household chemical disposal, costs up by 7%. Privatize sludge disposal, saving a percentage of the proposed $313,212 expenditure (p. 376).  Privatize public works street maintenance, which rises by 11% FY 2011-12, and major street resurfacing, which rises by 111%! (p.306). The latter saves a percentage of $1.2 million.  Privatize street cleaning and street snow and ice removal (p.320).  Public Works hired 2 new employees for street cleaning, jobs previously done by private contractors (p.323).  The mayor should reverse this policy and encourage privatization in this dept. (p.325).  Privatize curb and sidewalk improvement work, saving a percentage of the $500,000 FY 2011-12 expenditure (p.331).  Anticipated FY 2012 expenditures for the 3 city marinas far outpace revenues, so privatize them (p.72). Similarly, expenditures now outpace revenues at Lewis & Clark Landing, another venue begging privatization (p. 73). The Omaha Convention Hotel Fund is hemorrhaging tax dollars each year with a dropping cash balance, yet the city continues to spend money on expanding this losing proposition, so stem losses by selling the hotel (pp. 78-79).

 POSITIVE ELEMENTS.  The upcoming fiscal year cash reserve stands at $4 million (p.31), 25% higher than last fiscal year.  The budget raises the cash reserve fund by $750,000, a necessary requirement to reserve sufficient funds to pay for future mayoral reckless spending.  (pp.31,425).  The budget also plans for online access to obtain permits and envisions other online services in future.  The city is attempting to whittle the number of health care plans to one. 

 NTF SUGGESTED BUDGET CUTS:

• Eliminate the mayoral economic growth and capital program.  Savings: $68,671. p.157.
• Eliminate community service programs.  Savings: $1.8 million.  pp. 125,148.
• End longevity pay for all city employees, which spikes their salaries.  Savings: millions.
• Bargain down overtime pay, which rises by 24% in the Fire Division.  Savings: millions.  p.264. 
• Many city departments are purchasing new office equipment and furniture, which the city could purchase at auction or used.  Savings: millions.
• Privatize mechanical and plumbing code enforcement in the Planning Dept., where costs are rapidly rising.  p. 225.
• End the community relations division of the Human Relations Dept.  Savings: $10,000+.  p. 185.
• Eliminate the Fire Facilities Management for facility support.  Savings: $2.6 million.  p.248.
• Privatize the firefighter health and fitness program, costs which rose 18%.  Savings: thousands.  p.251.
• End Fire Dept. hydrant parties, health fairs, explorer programs, tours, play safe kits, and Read Across America activities.  Savings: thousands.  p. 252.
• Lower the number of battalion fire chiefs, the number which has risen from 27 to 30.  Savings: millions.
• Seek reimbursement for emergency fire services, rescues, and hazardous materials handling provided other governmental jurisdictions.  Savings: thousands.  p.260. 
• Eliminate the Parks Dept. public awareness program.  Savings: $108,470.  p.266.
• End the Parks tennis operations.  Savings: $260,000.  p. 272.
• Privatize Parks Dept. ground maintenance and repairs, including handling weeds and littering, tree trimming, and forestry services.  Savings: thousands.  pp.279-81.
• Get rid of public art in the parks.  Savings: thousands. (p.270). 
• Eliminate the adult sports leagues, which continually lose thousands. p. 80.
• Enlarge the number of offenders working in public works programs and force graffiti offenders to remove their vandalism.  Savings: thousands.  p.321. 
• Mandate that the Convention & Tourism Bureau calculate how many people from outside Omaha city limits avail themselves of each venue publicized and promoted by this bureau, activities subsidized by city expenditures.  p.292. 
• Eliminate the retail services activity of this bureau; allow private business to manage this activity.  Savings: % of $187,689.  p. 298.
• Eliminate the partner advertising relations division of this bureau; allow private enterprises to advertise themselves.  Savings: $103,310.  p. 301.
• Eliminate the community relations division of this bureau, which outreaches to the community.  Savings: $52,431 estimate.  p. 302.
• Eliminate the Women Against Violence program.  Savings: $50,000. p. 412.
• Eliminate the downtown celebration of lights expenditure.  Savings: $15,000. p. 412.
• Eliminate the contribution to the NE Humane Society.  Savings: $700,000.  p. 412.
• Eliminate funding for Omaha By Design, as we have city planners.  Savings: $50,000.  p.412.
• Defund homeless day services, which private charities can provide.  Savings: $100,000.  p.412.
• Eliminate funding for a Neighborhood Center.  Savings: $10,000.  p.412.
• Defund the Building Bright Futures truancy program, as the city is not an educational entity.  Savings: $365,000.  p. 412.
• The budget would grant MECA $85,000 to cover losses in operations of the Civic Auditorium.  Better to sell this venue or demolish it for area redevelopment.  p. 416.
• Cut the number of organizations to which the city pays annual membership dues, $104,500 in FY 2011-12.  p.418.
• If the city council delays or votes NO on a proposed fire union contract, the city can save more money on wage adjustments and pensions for firefighters, potentially saving thousands.  p. 422.
• Contract with a private company to more aggressively collect library fines and fees, as the library fines and fees fund shows a negative balance (p. 37).

 TAKE ACTION NOW.  This budget assumes total expenditures exceeding revenues for both 2011 and 2012 (pp.23-24), despite tax hikes 2 yrs. straight, thus it requires additional serious budget cuts.  Attend the public budget hearing at 7 PM, Tuesday, Aug. 9, at the City Council chambers, 1819 Farnam Street.  Sign up there to speak, advocating budget cuts, or support NTF speakers from the audience.   Wear one of our “Mayor $uttle, $top the $pending” stickers.  Please attend our rally, prior to the council meeting, on the north plaza at City Hall.  The council will vote on the budget on August 23. 

 Research, analysis, and documentation for this issue paper done by Nebraska Taxpayers for Freedom, with express prior permission granted for its use by other groups in the Tax Freedom Network.  8-11.  C