PB: SDM’s Budget Report – Phony Shrinkage Edition

by SDM

SDM really hates listening to budget meetings. The one common element in every city is that municipal budgeting is complex and only a few people really know what is going on. Palmetto Bay’s final budget hearing followed the pattern last night.

Occasionally, something interesting happens. Witness the following excerpts started by a question from David Singer of Recall Palmetto Bay. Singer was trying to confirm that the village was depleting its reserves by somewhere between one and three million dollars [SDM snarky comments in brackets]:

 42:38 – Mayor Stanczyk: I’m sorry. You’re group puts information out there that is not accurate and I think saying between 1 and 3 million dollars would be very far afield from being accurate and truthful. [Remember this statement, please, dear readers.] I think we are down below…we are at $900,000 and change and there are changes yet to be made that may lower it because as history has shown us changes are made in the budget as we go through the hearing…

[Singer amends his question, specifically asking how much the reserve will be depleted in total at the end of the year.]

44:16 – Village Manager Ron Williams: If you’re talking operating, the number’s nine something, if you’re talking all capital, Mr. Chen has it there… [Wouldn't it be nice if the manager could give the public a straight answer rather than having to constantly measure his words so as not to embarrass the Mayor?]

44:24 – Finance Director Desmond Chin: The total removed from reserves is $2.27 million. [i.e., between one and three million dollars - not so far afield after all, eh, Mme. Mayor?]

45:25 – Councilman Tendrich: What we’ve done, we’re spending money. Instead of going out and borrowing and reducing the reserves, we are just taking money from the reserves and spending it. [These are his words verbatim. SDM is at a loss...we expect more from you Mr. Tendrich. You may be our last hope.] If this village will have at the end of this year, $9 million in reserves, I think that is a pretty strong dollar amount for a village our size. [True, but why is $9 million the right number? We need you in this game, Howard. Your opponents are nipping at your heels.]

[Singer interrupts Tendrich. Now it gets good.]

46:02 – Mayor Stanczyk: I think Mr. Singer, you have to be careful in terms of talking over people. [Now ain't this rich? The queen of interrupting, correcting, patronizing and pontificating is now lecturing. SDM is getting a second wind.]

Singer: I apologize.

Stanczyk continues [Pardon SDM for breaking this up, but she just runs on and on...]: Let the councilman respond to you because there is a response. And what you are addressing are issues that, while it was your personal checking account that you were taking out of reserves and you were taking out of your savings account that is one discussion. [SDM is reminded of the bit from an old Steve Martin album. Martin suggested talking "wrong" around little kids who are learning to talk. He imagined that a kid would raise his hand in first grade and say,"Excuse me, teacher, may I mambo dogface to the banana patch?"] 

This is municipal money and there is a thing called best practices. And best practices says that we spend the money that we have on the people who’ve paid their taxes. [SDM always wondered what that fella "best practices" was talking about. Thanks for clearing it up.]

And right now our budget since 2009 has shrunk from 15.3 million to 12. 7. That’s 17% shrinkage that we’ve lived with because of falling ad valorem. [SDM looked up the 2009 Comprehensive Annual Financial Report. According to that document (p. 5), total revenues in 2009 were $18.1 million, which was down from $19.9 million in 2008. According to the proposed budget, the village expects revenues to total $17.9 million in FY 12-13 (see p. 39, Summary of Funds)(Careful downloading it, it's 8.8 MB). This why SDM hates budget discussions - it never seems like we are comparing apples to apples. Nevertheless, it looks to SDM's untrained eye that revenues only changed slightly over the period the Mayor referenced.]

But let me remind you that having an overly healthy reserve while it’s certainly looks fine on paper – and you can call it fiscally irresponsible as you may – it is not responsible to build a super-healthy reserve and continue to save the money that people pay taxes for services. That is the purpose of municipal taxes, to provide services. [No need to shoot a fish in a barrel - the nonsensicality (is this a word?) of your eloquent Mayor's statement is self-evident.]

SDM knows its readers are serious, intelligent people. Can you spot the political flaw in the point the Mayor is attempting to make?

The flaw is that the current council is spending money raised in previous years to pay for current services. Now why would any current council member ever vote to raise sufficient taxes to support a healthy reserve if doing so means that such a vote is merely relieving political pressure on a future council? Unless the reserve is tied to some philosophical baseline, then it is merely a pot of money to be raided by future spenders.

Mayor Stanczyk noted that the City of Miami has only $500,000 in reserves (SDM isn’t fact checking that one, sorry). SDM supposes her point is that Palmetto Bay’s reserve is “super-healthy” (a bad thing apparently) by comparison. What the Mayor may not understand is that she is making SDM’s point precisely: the City of Miami’s politicians won’t vote today to impose taxes so that some future commission can avoid a tough call.

Last night, Palmetto Bay took the first step in a new journey. Will the destination be the Palmetto Bay of two years ago, the one with a healthy $11.5 million reserve? Or, will the destination be like the City of Miami, the one with the village bouncing from one fiscal and political crisis to the next?

SDM Says: The election on November 6th may give us the answer.

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