Vallejo was pushed over the brink as the economy tanked and the downturn in the housing market produced a large drop in city revenues. At the same time Vallejo’s public safety expenses grew to 75% of the general fund and were largely locked in via collective bargaining agreements. There simply was not enough revenue to cover the mandated obligations.

“But the largest share of the blame in Vallejo has centered on public-safety salaries and benefits, which make up about 75 percent of the city’s general fund budget. (Governing.com article)“

For Vallejo, the tipping point was 75% of general fund revenues obligated to public safety. Where is Tucson and what will be Tucson’s tipping point? (Please note that in no way do I expect Tucson to be the next Vallejo. However, we need a financial tachometer so we know when we are getting close to the redline)

Public safety now represents 65% of Tucson’s general fund (police, fire, courts, public defender, City Attorney). If Proposition 200 were to pass, most of these costs would be mandated and grow over the next few years. In addition to public safety, are there any other expenses that the City is required to make each year? – Oh yes there are; quite a few!

Let’s have some ‘fun’ now and dive into the detail of the various financial reports from the city (make sure you have some extra strength Tylenol because these will definitely give you a migraine). What you find is that over 90% of general fund revenue would be mandated, pledged, or contractually obligated if Prop 200 passes. And this is before you fill a pothole, turn on the lights at City Hall, or mow the grass at Udall Park. …If 90% of your revenue is already spoken for this leaves very little money for other services…I think this is a problem…

Here are some other contractual obligations you find in the financial reports:

$400 million of outstanding General Obligation bonds and Certificates of Participation for Governmental Activities. Bond holders are kinda funny in that they expect the City to make annual debt service payments on time. (pg 53, ‘08 CAFR)

$28 million/year of annual lease obligations. (pg 55, ’08 CAFR)

$600+ million of underfunded pension and retirement obligations. The City has made promises to employees but has not set aside sufficient money to pay for these. The $600 million has to be paid off over time as these are contractual obligations to employees. (pg 63, ’08 CAFR)

$40+ million Structurally Imbalanced Budget. The City is running a deficit but has balanced its budget through spending their Rainy Day Fund, borrowing more money, and other one-time windfalls. The City Charter requires a balanced budget. (Budget Revenue Presentation 9/15/09)

$18 million deficit in the Self Insurance Fund. This has to be paid off before the City loses a big legal claim and has no money to pay for it. (pg 93, ’08 CAFR)

$22 million shortfall in Unreserved Fund Balance (Rainy Day Fund). This is critical in maintaining our credit rating and needs to be fixed ‘promptly’ according to Fitch (FY 2010 Adopted Budget)

Those are the easy ones to find, I suspect there are other contractual obligations. It just seems to me that Prop 200 pushes too close to the financial tachometer redline.

Let me to anticipate some comments from the Yes on Prop 200 folks. Yes, some of these contractual obligations are already in the public safety budgets. I believe they still add up to over 90% of revenue. Yes, I expect City revenues to increase somewhat as we claw our way out of the recession. Even if you factor in better revenues, I can still show you that almost 90% of revenues are spoken for before you even fix the first pothole.

Allow me to offer some free advice (yes, I know free advice is often worth what you pay for it)

Elect the people who share your priorities and who will make sound decisions. Do not try to micro-manage them – let them focus on the big priorities. Allow them some financial wiggle-room to navigate the economic cycles. If they do no perform, throw them out. Or, better yet, how about you run for office?

If your organization receives money from the city and you are not a core service, I suggest you start figuring out how to live without these funds.

If you receive below-market rent or subsidized services from the city and are not a core service, you may want to adjust your budget to pay fair market value. If you can’t pay market rent, please contact “Two Men and a Truck” to help with your move.

If you drive in the city, don’t expect the potholes to be filled any time soon. You should get to know your local tire dealer and alignment specialist – you will be seeing more of them. Ask if they have a ‘frequent flyer’ program. Provide them with liberal amounts of donuts so you receive priority service.

Expect your garbage fee to go up as Environmental Services is carrying a $58 million deficit, even though it is an Enterprise Fund and is supposed to break even every year. (pg 120, ’08 CAFR)

http://www.cnbc.com/id/23385758

http://www.governing.com/article/vallejos-fiscal-freefall

http://www.tucsonaz.gov/budget/docs/BudgetRevenuePresentation_Sept15.pdf

http://www.tucsonaz.gov/finance/CAFR08.pdf

Adopted Budget 2010:

http://www.tucsonaz.gov/budget/