Mayor Taylor 2009 Budget Memo

Date:

July 31, 2009

To:

Steve Taylor, Common Council President Aldermen

From:

Tom Taylor Mayor

RE:

2009 Budget Forecasts

Common Council President Taylor you requested from me that I explain in everyday terms the steps that I as the Mayor and the Finance Committee have undertaken to assist in reducing a potential 2009 financial shortfall of some $2,491,000. I believe the information in this memo clearly and simply explains the steps that have been taken by the Mayor and his cabinet officers to reduce a projected budget shortfall. As you may have read the State of Wisconsin, the City of Milwaukee, Milwaukee County and almost every municipality in Wisconsin and throughout the nation are experiencing huge budget shortfalls. The State, the County and the City of Milwaukee are or have proposed reduced work weeks or furloughs for their employees and some of these initiatives have been or continue to be in litigation or arbitration. As you are aware, those voting for last year’s City budget recommended budget cuts and staffing reductions. Because of the actions I recommended and the Finance Committee supported, the City of Franklin is not faced with the same enormous financial problems that others are facing today. We as a City continue to provide a very high level of service and yet are able to say that the City of Franklin enjoys one of the lowest if not the lowest tax rate in Milwaukee County. We along with the rest of the people on planet Earth are still hoping that the financial mess created by the wizards of Wall Street will work its way out but it is still too early to tell. To be fiscally prudent I have called for a hiring freeze and a budget reduction plan. In addition I have asked the departments of the City to internally start the process of looking at budget reductions of 5%, 10% and 15% should the need arise to take more drastic actions. I have also looked at reducing the seasonal workforce but after taking a tour of the projects that seasonal workers are engaged in I am reluctant to do so at this time. Many of the seasonal workers are working on long term road projects that if left unattended may result in future costs to the City that could total in the millions of dollars. I believe we need to perform minimum maintenance of these roads by seasonal employees and in turn it could extend the life of these roads for additional years.

I have also looked at potentially getting out of the construction work performed by DPW workers and the work performed in the maintenance of City vehicles by City employees but the evidence strongly suggests that this would not be wise and may lead to increased costs and substantial vehicle turnover. If the Common Council decides to contract out work currently performed by City employees then I would suggest that a full and complete independent study be conducted prior to simply committing to privatization of public employee jobs. I hope this memo helps to address many of your concerns as well as the Council members and the public. Taking dramatic steps to totally contract out existing public employee jobs within the City without an in-depth study is the quickest route to chaos and it could prove to be dangerous to the health and welfare of the citizens of Franklin. On July 27th, the Finance Committee reviewed 2009 Budget Adjustments, and the 2009 Six-Month Financial Report, a Mayoral memo on a hiring freeze, a 2010 Budget Forecast, and the 2010 Budget Forecast document. The purpose of this memo is to point out actions taken by the executive branch of the City of Franklin that contribute toward addressing the City’s current financial situation as presented in those documents. For your information, the document that best highlights the impact of the actions that are explained in this memo is the 2010 Budget Forecast Document. That memo identifies a potential 2009 shortfall of $2,491,000. Over 92% of that, however, can be addressed by the items discussed within the document. 4% Expenditure Reduction and Hiring Freeze: I have informed operating departments that they are expected to reduce total expenditures to 4% below budgeted levels and, in June, I imposed a hiring freeze. As such, savings from vacant positions this year, including the projected impact of the hiring freeze, are estimated to be $392.401. $300,000 in anticipated non-personal services savings were also noted in the forecast addendum. Additionally, if the entire 4% reduction is realized, a further $300,000 savings could be realized. Street Improvement Fund: Earlier this year the Common Council and all of it’s members approved the use of an additional $700,000 to accelerate road projects from 2010 and 2011 to take advantage of favorable pricing. This effectively added $700,000 to the projected shortage. Further review of the fund and additional information available has led us to recommend, through the Finance Committee, reversing this action. This does result in delaying two projects to 2011 that had most recently been considered for 2010. This action reduces the reported potential shortage by $700,000. Group Health Rate Change: The recent good experience in the Self Insurance Fund has resulted in a strong fund balance. As such, effective July 1, 2009, the decision was made to roll back the monthly charging rates to the 2008 charging level. This results in an estimated savings of $43,896 for 2009, further reducing the reported potential shortage, and will also lead to approximately $194,270 savings in the 2010 budget. Salaries and Wages: The executive branch proposed a three-year plan of adjustments to the wages and benefits of non-represented employees which was adopted by the Common Council. Assuming a similar or equivalent pattern is ultimately extended to all employees through union contract settlements, as was done in the Forecast Addendum, the shortage for this year will be reduced by approximately $239,060 and next year’s

projected deficit will be reduced by as much as $532,736. I will continue to monitor labor negotiation progress. If these savings cannot be achieved through negotiated settlements, the City will have to take other personnel actions to generate the nearly $770,000 in necessary savings. OPEB Funding: The City has acted very fiscally responsible in establishing and following a phased-in funding plan to meet our OPEB liabilities identified through GASB 45. $619,000 of the current projected potential shortage for 2009 is related to these costs. Currently the OPEB actuarial report is being updated. Market conditions and other factors may lead to a noticeable reduction in this liability. Following receipt of these revised numbers, staff will re-evaluate the OPEB funding plan to determine if an amended implementation schedule should be developed that reflects the current economic conditions. In the meantime transfers to the Trust will not be made to retain the flexibility needed to evaluate our current funding policy. Although the City absolutely cannot ignore its OPEB liability, rescheduling the implementation plan may be a short-term option provided the near and long term requirements are still addressed in a fiscally responsible manner. Fire Department: In light of the anticipated $330,000 shortage in ambulance fee revenues, I have directed the Fire Chief to return to a minimum staffing level of 10, instead of 11. This action significantly reduces overtime costs. Additionally, we have moved forward with a contract to provide transport services to Wheaton Franciscan. These actions are reflected in the revenue and expenditure projections provided to the Finance Committee. Additionally, I have also directed that the Fire Chief bring forward for your consideration certain other revenue/fee options that require Common Council consideration. Summary: Combined, these proactive steps by the executive branch and Common Council will reduce the reported potential 2009 deficit from $2.4 million to $196,643, plus whatever expense is determined by the Common Council as necessary relative to OPEB liabilities. The City’s aggressive actions in the 2009 budget, for example imposing certain layoffs, has put us in the position of being able to manage the potential shortage for this year. Nonetheless, the City will need to continue to closely monitor other items that could still influence the 2009 budget, particularly labor negotiations and revenue levels. While I have heard that some wish to make cuts, contract out jobs and layoff employees, I have yet to hear which programs and services the Council as a whole is willing to reduce or eliminate. As I sit here, I have not received any interest by any entity that is interested in bidding on current work performed by the Public Works Department. I can proudly say that I fought against the spending of millions of Franklin tax dollars for an ultimate road program for 76th Street and I did not cave on spending Franklin funds for an interchange that is not located in Franklin. I am in favor of cooperation but I do not nor will I support programs and projects that do not benefit the people of Franklin or could be perceived as collusion. I did not wait until the Worldwide Financial Crisis to take actions that protect Franklin taxpayers but rather I fought to keep tax rates low and I even provided a tax promise at a time when others were advocating for tax increases.

It is my hope that this memo helps you and your colleagues to understand that the Mayor and his staff as well as your fellow Finance Committee members take the budget seriously. We will continue to take measures that will help to keep the City of Franklin’s Tax Rate one of the lowest in Milwaukee County. If you have any questions or concerns regarding the information contained in this memo, please feel free to contact me.