Fiscal Discipline and the Public Trust

This is going to be quite long, but recently a resident posed a couple questions that I thought would be good to address.  I'm paraphrasing, but the questions went something like this:

1. Why didn't I suggest any cuts to the budget during the first 3 years of my term?
2. Wasn't the idea of a parcel tax mine in the first place? 
3. If so, why the change of opinion from supporting it to being against it?

A bit of history first.  Like many local governments, Clayton operates on a fiscal year that ends June 30.  I began my term in December of 2018 and have served on the Budget/Audit Committee each of the four years I’ve been in office.  For the year ended 6.30.2018, there was a surplus of approximately $181K of which $100K was set aside in a pension rate stabilization fund at my recommendation, a small amount was used for safety equipment, and the remainder placed in the general fund.  We seemed to be in good shape as we also had historical surpluses.  For the year ended 6.30.2019 there was a surplus of approximately $80K.  For the year ended 6.30.2020, there was a surplus of approximately $400K, however $113K of that was due to unrealized gains on investments so a more realistic surplus was $290K.  For the year ended 6.30.2021, the budget called for a surplus of less than $1K, however at the mid year we estimated an actual surplus of approximately $43K due to increased sales tax revenues, however the actual year end surplus was approximately $140K.

During this same time period, we had quite a bit of turnover in the role of City Manager and Finance Director.  One of the questions that was asked of all candidates for the City Manager role was their ability to produce a 5 or 10 year financial projection – this is something the city had never had before and given the volatility in our financials and overall uncertainty, we thought it prudent to incorporate a 5 year forecast as part of our financial processes.  Because of the turnover though, the first iteration of the 5 year forecast was not provided to the Council until June 2021.  That’s a lot of info to address the first question, but it was asked why I didn’t propose cuts prior, it is because in prior years we had surpluses, and only in June 2021 did we actually have a forecast to operate from.  Nothing nefarious – just taking the best course of action with the information available at the time.

After reviewing the forecast, I knew that this was something that needed to be addressed as what the forecast showed was unsustainable.  I pulled together some preliminary information from our budgets, some wage data, and our forecasts and wrote a post describing the situation.  My hope was this would start a conversation – I was engaged in a thread on Nextdoor discussing it, and began speaking with residents about what challenges we faced.

The post I wrote was titled, “Question: Raise Taxes, Reduce Services, or Both”.  To the extent that the claim is a parcel tax was my idea, then reducing services or both were also my idea.  But this would not be accurate in the context of the post that I made.  Instead, it was intended to start a discussion – among the Council, among staff, and among residents.  It was a question presented to be discussed.  Part of evaluating the best course of action is to talk through all viable options.   All city staff and the Council had this information, but no one else was willing to start the discussion.  I knew even raising the idea of a tax could illicit quite a negative reaction, but I’m not a politician (well, technically I am but I don’t think of it that way).  I want what’s best for our city and if there is a problem like there currently is with our financial position, the first thing we need to do is talk about it, understand the scope of the problem, and try to find potential solutions.

I did not control the agenda though, only the Mayor does that, and it wasn’t until late September 2021 that we actually discussed this issue again, and even then it was only to say that we were interested in having that discussion, and that we needed to outline overall timing if any solution were to include increased taxes.  I had requested that staff prepare a timeline should the Council wish to pursue a tax measure – I knew this process took quite a bit of time and if that was an option that was on the table, we should at least understand the requirements.  This was part of gathering accurate information to help inform any potential decision.

The next time we would talk about this would be in February 2022.  So rather than use the nearly 8 months of time since I raised the issue to discuss potential solutions and engage in outreach with our residents - the city took no meaningful action to address the financial challenges it faced.  During that same time, the city began spending.  Spending on consultants, spending on discretionary items, and spending on things that didn’t align with what I thought our priorities should be. 

In addition, when our financial position was getting discussed more widely, the information that was publicized was misleading.  Instead of a minimum level of funding increases needed for critical items ($110K and $180K in 2023 and 2024, respectively), what was published in the Pioneer (Feb 20, 2022 issue) reflected additional wishlist items that ballooned the alleged deficit to $670K and $810K in 2023 and 2024.  Presenting information in this manner was troubling.  Every dollar spent by the city is from the taxpayer and we should be extremely circumspect in how those resources are used.  Inflating what the actual need was in order to bolster the idea that increasing taxes was the only way to solve the financial challenges was misleading.

If we had taken the time from when I raised the issue to now to have serious discussion about cost savings, efficiencies, and other ways to reduce our overall expenditures, by the time we got to this point, one of two things would have happened – either we would have found a sufficient amount of savings so as to balance our budget, or we would be able to demonstrate that we had done everything possible to do so and there was no alternative other than to raise revenue.  Either way we would have been able to make the argument that we had done our due diligence.

I made this point clearly as I voted against discretionary spending again and again– it makes the argument in favor of raising revenue much weaker and difficult to support if the city can’t demonstrate it’s doing everything in its power to reduce expenses.  What this showed me is that leadership does not demonstrate a sufficient level of fiscal discipline necessary to gain the public trust.  I will not go to the taxpayer and ask them to tighten their belts unless and until the city has demonstrated that it has done the same, first.  I introduced the idea of a potential tax measure to start discussion about ways to address our fiscal challenges.  After extensive discussion and observation of the actions of the city, I am convinced that raising taxes is not an appropriate course of action.