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  • City Auditor Burroughs Warns City Management's 3-Yr. Deficit Reduction Strategy Includes "Significant Degree Of Optimism" (Our Translation: Continued Red Ink If Optimistic Assumptions Don't Pan Out)
  • Burroughs Strongly Supports The Plan...But Warns Of Possible Serious Problems And Urges Council To Proceed Immediately And Maintain Focus; We Post Transcript

    (March 25, 2003) -- City Auditor Gary Burroughs has publicly warned that a city management 3-year plan to halt a ballooning, multi-million dollar City Hall deficit (spending exceeding revenue) includes a "significant degree of optimism"...inviting the inference that the widely-praised plan (endorsed by the Council tonight) might still leave red ink if those optimistic assumptions don't pan out.

    Speaking extemporaneously at the March 25 Council meeting, Mr. Burroughs again strongly endorsed the plan...and stressed the need for the Council to implement it promptly, treat it with seriousness and maintain focus.

    We consider his statement so significant that we reproduce it below before posting other details of the agenda item.

    [Summary of other details: The Council voted (8-0, Webb absent) to endorse city management's plan with three modifications suggested by Councilmembers Lowenthal/Baker/Richardson/Lerch. Mayor O'Neill, Vice Mayor Colonna and Councilman Carroll criticized the March 24 Lowenthal/Baker/Richardson/Lerch memo proposing their modifications, portraying it as a last minute, concerted maneuver. Baker, Richardson & Lerch said their proposal was the Council's first real opportunity for serious discussion...and insisted the Council receive opportunities in the future to debate, not rubberstamp, proposals.]

    A transcript of Mr. Burroughs' statement follows. It is unofficial, prepared by us.

    City Auditor Gary Burroughs

    I have several comments I'd like to make tonight. First off, two things. One, Mr. Len Wood [Council retained budget consultant] I think is in this room tonight and I want to comment him publicly. I think his contract was well worth it. His contribution was meaningful to our city and he made a positive contribution not only to the efforts of my office but I think also this city and members of this City Council.

    And I think while he did say some of the same things that we said, or that [Acting City Manager] Mr. Miller and I said, but he also said some things that were different, and some things that we need to learn and I think there's more we can learn from him. So I just want to get on the record that I support that we've had Len Wood as part of this process.

    The second thing is that this is a process that's gone on now, and Mr. Miller's said so, from Sept. 23 I think was the date he used, and it is today March 25, and I think we can all add and subtract and that is six months.

    This is six months that we have known that we have had a significant, serious conflict with our budget. We spent $30 million, in fact in a report that I made a week ago, I said that over the last five years we have taken $85 million out of one time revenue items or dipping into reserves to balance the budgets for 1999 to the year 2003, and $30 million of that $85 we took just in 2003.

    And so we had a $30 million problem in 2003. We now have a $90 million shortfall going forward counting the PERS [Public Employee Retirement System] issue, and I would suggest to you that there is a significant degree of optimism included in this document [3-year budget plan.]

    We have not included, as I look at the PERS statements today and the interest earnings and the rate of returns in the stock market, and for us to believe that we're going to get by with $38 million in our PERS costs when we were paying $45 million seven years ago, my sense is that it's highly likely that we will spend more than $38 million.

    I would also say that there are assumptions included in this plan, which you have already discussed, that say that we must have voter approval. And some of you are in favor of that, and some of you are not, and it will depend upon whether we actually achieve that voter approval.

    Some of the items included in this plan require further negotiation with members of the union, and not only the police and fire, but the machinists' union, so there are a lot of "ifs" left in this budget.

    And so if I had one thing to say, and that is maybe I as the City Auditor wasn't strong enough last week. We need to get on with this program. It is six months since we got started. The [Mayor's] Budget Advisory Committee met for four months. I went to about 120 hours of their meetings. We have had meetings and meetings and meetings, and it is time to get moving forward.

    I sensed I guess from the memo from four Councilmembers [Lowenthal, Baker, Richardson, Lerch] which I received...yesterday morning from Mr. Miller actually...My first reaction to it was maybe we're getting ready to go in another direction.

    You know here we've had all these meetings and six months of activity, and I think I've met with each one of the Councilmembers privately, some of you in groups. There have been Council meetings and Budget Advisory Committee meetings and I'm like a horse in a racetrack that's in the gate and I think we need to get on with this process.

    Even of the $90 million that we intend to deal with on a go-forward basis, 50% of that $90 million is pushed out to the years '05 and '06, so we're not even dealing with it in '04. I am hopeful that somewhere in this process, that it is somewhat hopeful that maybe we could accelerate or become a little bit more aggressive in getting to some of these savings quicker, not later. So I am anxious to get started.

    Compensation, reduction of benefits, those items are included in Mr. Miller's plan. I think it includes a reduction of 487 people and it includes salary savings somehow, in the form of reductions in pay or people paying pension costs or people paying other work included costs, of $23.4 million. I hope we make no mistake about this. That's going to happen. That has to happen for us to get on with this process.

    In Gerry's [Ass't City Mgr. Miller's] plan, there's some terminology which says...if we for all of our employees, if we have some reduction in compensation that it would impact the city's ability to attain and attract employees and that it will put the city at a competitive disadvantage.

    Well I will suggest to you in strong words if I can, that if we face the "B" word [bankruptcy] that that too will impact the city's ability retain and attract employees and it too will put the city at a competitive disadvantage. And I just don't want us to go there.

    And I am just really hopeful tonight that the seriousness of this issue is placed upon you.

    And I'm encouraged, by the way, because as I hear each of you talk, I hear you endorse the City Manager's plan. And I just would encourage you to do that. I want you to get it done tonight. And let's get on with the process at hand of achieving the savings that are in here.

    And I would also hope that we do one more thing. And I hope that somebody brings back as quickly as we can the issue of this Budget Oversight Committee...[T]hat is a Committee that I think does need to be established and its membership can be decided later, but I hope we get to that sooner and not later.

    I would encourage you to act now, act immediately, and have focus. I'm a little concerned that we pass this tonight and then it loses its focus, it's no longer going to be center stage and in the number one spotlight for a little while until the Budget Advisory Committees are all coming back and you're having those sessions, which is when you act on all of this plan.

    But I am just hopeful that we act on this as soon as we can, because I have some very serious concerns about our bond ratings, about our cash flow and our cash balances, and our ability to not fall into this problem called, I mean I think our problems could just be more serious than what we're represented them to be here.

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