The Budget and the Magic Bean Bag
by Kirk Stapp
“The budget is a mythical bean bag. Congress (or a Town Council) votes mythical beans into it, and then they try to reach in and pull out real beans.” Will Rogers
The new Town Council will be presented a balanced budget with 31 Budget Policy Decisions (BPDs) to decide over the next several weeks. BPDs allow Council to move monies from one department to another, shift monies to reserves, or increase the number of magic beans in the Town’s bean bag (increase revenue projections). Councilmembers also have some campaign promises to keep.
Council candidates emphatically committed (and the Town Manager recommends) that all Measure 86 A dollars be allocated to the Destination Marketing Organization (DMO). The problem: the word “all” could have two meanings. Does “all” mean the $325,000 in air service subsidy, the $147,000 funding for local organizations and $45,000 for October/November air subsidy be funded from Measure 86 A dollars (Total; $517,000) or from reductions in service levels in other Town departments?
Another campaign pledge was to fully staff the reconstituted Parks and Rec. Department. The cost to the general fund is another $377,000, but since there is no excess general fund moneys available, the Council will have to reduce service levels in another department.
John Eastman has publicly pledged that he wants Council to give the Measure U Committee funding before the Utility User Tax is available June 2011. If Council votes to give these dollars (approx $328,000 currently programmed to fund Parks, Rec and Trails) to the U Committee, then service levels in Parks, Rec and Trails (PRT) or another department will need to be reduced. Note: the $328,000 is one time money to maintain PRT for 2010-11, a source of real beans will have to be found for 2011-12.
Speaking of one-time-funds, $577,000 will be available from the Town’s bond trust. The budget recommends the use of $288,500 of these funds for “one time planning efforts” which is disingenuous, because all planning efforts are one time. Next year there will be other “vital planning efforts” which will need to be funded, such as district plans (approximate cost for all district plans $3,000,000 plus). Perhaps, it is time to send the General Plan back to the Planning Commission and ask for a General Plan without district plans.
One of the holes in the Town’s bean bag is staff’s salaries and benefits. With the Council’s settlement with Town staff, the Town has eliminated two furlough days (cost increase to Town approx. $1,000,000) in exchange for the staff foregoing 4.5% in COLA at a saving to the Town of $500,000. Viewed over three years (without considering health benefits): year one, approximate net cost to the Town $500,000; year two, the net on-going cost to the Town $500,000; year three a 4.5% COLA increase, net cost to the Town an additional $500,000.
Before anyone shouts: off with their heads or cut staff a $1,000,000, he or she might want to do a Google search, “Colorado Springs Service Cuts” (residents are encouraged to bring their own lawnmowers to local parks, 8,000 to 10,000 streetlights will be shut off, the $20 million Parks budget was cut $17 million, police helicopters are for sale on the internet, etc.). Mammoth’s budget is far from Colorado Springs’ budget crisis, but cutting staff means cutting service levels and programs.
As a side note: Council might want to stop shooting the messenger. Brad Koehn, the Town’s Finance Director, “over the past two years” has “refined” the budget at COUNCIL’S direction “to better use the Town’s Vision and Strategic Initiatives as the guiding principles for budget decisions.” Brad is the messenger, not the decider. And with all due respect to Council, the budget ignores strategic decisions.
The Council’s strategic decision to adopt its Community Benefits and Incentive Zoning (CBIZ) policy, apply it to Old Mammoth Place, and trade away $6.5 million in DIF, Affordable Housing and Art fees for community benefits, isn’t one of the 2010-11 budget’s policy decisions, nor is how the funding of $6.5 million in exempted fees even discussed. The mythical financial analysis that additional TOT (at 60% occupancy) and sales taxes will become available to backfill the Town’s loss infrastructure fees begs the question: what’s the Town’s net gain? Certainly, the developer has gained: additional build heights, additional density, exempted fees, and community benefits (public plaza, commercial and convention space, etc) which enhance his project’s value more than they benefit the community. CBIZ also strategically creates a hierarchy of community benefits which subordinates trails, parks and storm drains.
Another strategic decision which is conspicuously missing form the 2010-11 policy decisions is the $90 million dollar reduction of Development Impact Fees (DIF). According to the Town’s “Workplan Priorities” schedule, Council won’t discuss the $90 million backfill financial plan until June 2011, a strategic decision.
The “backfill financial plan” is called the “Community Investment Strategy.” The preliminary strategy outline identifies grants as one of the backfill funding sources for the $90 million reduction in DIF.
Budget Policy Decision #23, “Environmental Review for the Parks and Recreation Master Plan,” is a $40,000 request to apply for funding though the Measure R’s competitive process. In other words, Town staff is asking permission to supplant Town revenue sources with Measure R funds.
The strategic decision to supplant Town funds with Measure R funds was also approved with the adoption of CBIZ. John Wentworth wrote to the Town Council, in respect to the Snowcreek DA on June 5: “It should also be noted … Measure R funding cannot be used to supplant other funding sources, so it cannot replace DIF.” CBIZ trades DIF for community benefits which strategically reneges, compromises, violates the Measure R ordinances.
Finally, the Snowcreek Development Agreement (DA) which will be approved on June 16, before the new council is seated, has huge, “strategic” budget consequences. The Snowcreek DA proposes a $10,000,000 greater community benefit and then reduces its Affordable Housing fees from $18 million to $8 million for a net community benefit of zero. Add to this the fact that the $10 million greater community benefit is paid on a pro rata amount per unit built and not subject to COLA, the Town’s greater community benefits is further reduced. The Snowcreek DIF is also not subject to COLA, and the DA exempts DIF for non-residential and commercial uses. The strategic subsidy to the developer is another long-term leak in the Town’s bean bag.
Here’s an idea, rather than Council hiring another financial consultant and his magic bean machine, why not have Brad Koehn provide a brief net present value analysis of the Snowcreek DA for both the Town and Mammoth Lakes Housing without all the magic TOT, sales and property tax beans.