Prop 1 would stabilize general fund, maintain services, city officials say
March 23, 2005 - By MIKE ANTHONY
Crestwood officials say voter approval of a general obligation bond issue would stabilize the city's general fund and allow the city to maintain its existing level of services to residents.
Some opponents, however, including Ward 3 Alderman Jerry Miguel, believe the bond issue must be defeated. Miguel recently told Ward 3 residents that he advocates placing "a no-bond tax issue to restore funds over time on the August ballot.''
Voters will consider the bond issue, called Proposition 1, in the April 5 election. A four-sevenths supermajority vote will be required to approve the bond issue, which would increase the city's property tax rate by roughly 30 cents for a 10-year period until the bonds are retired. The city's current property tax rate is 25 cents per $100 of assessed valuation.
Approval of the bond issue would authorize the city to issue up to $6 million in general obligation bonds, but City Administrator Don Greer believes the actual amount of bonds will be "far less'' than $6 million. Proceeds from the bond issue would be used to allow the city to retire its line of credit with Southwest Bank, establish reserves sufficient to meet the city's cash-flow needs and reconcile debts the general fund owes other city funds.
At Mayor Tom Fagan's request, aldermen were scheduled to discuss the bond issue Tuesday night — after the Call went to press — to determine an exact amount of bonds to be issued.
During a recent interview with the Call, Greer, Fagan and Director of Finance Diana Madrid discussed the bond issue and why it's the right initiative for the city.
"I don't think there's any question it's going to be far less than $6 million. Our bond counsel suggested that we come up with a number that is a not-to-exceed amount,'' Greer said. "I started off with a worst-case scenario when I put that together for the work session ... I applaud the board. What they're doing is very responsible. They're very, very responsible stewards of taxpayer money — no more (will be used) than absolutely necessary and for very specific purposes. That's what they're asking the voters to do is to let us recover. We've done a lot of work. We're on the right path ...''
Fagan said, "If it doesn't pass, services will be reduced.''
But some critics, noting the the city's general fund will operate in the black for the current fiscal year, have questioned why services would have to be cut if the bond issue is defeated.
"Fagan said, "Obviously the problem is with the general fund, the line of credit is there. The general fund owes the other tax funds money. We have had two years where ex-penses have remained constant, which is not going to continue. It just is not because health insurance goes up. Workers' comp insurance goes up. Salaries have not gone up, but you can't continue to keep the best employees if you don't give raises for a number of years.
"And even though the revenues will exceed the expenses, because of the problem the general fund has, in order to make a significant impact, you have to reduce the general fund expenses. And as we've talked about on numerous occasions, 80 percent of the general fund expenses are attributable salaries and benefits,'' Fagan said, noting that two-thirds of that 80 percent goes to police and fire protection.
"If you don't want to raise your taxes and you don't want the same level of services, then you vote against the bond issue,'' he continued. "It's not what Tom Fagan thinks the services should be. It's not that. It's not what Don Greer or Diana Madrid or the aldermen want, it's what the residents of this city want in terms of delivery of services. If they think we can reduce services and they're going to be satisfied with that, that's their prerogative. We serve at their will.''
Fagan compared the tax rates of nearby fire protection districts in comparison to the city's tax rate of 25 cents per $100. He noted that contracting with Affton would cost citizens four times as much as they currently pay and contracting with Mehlville would cost citizens five times as much as they now pay.
Greer said, "I think it's important to understand, especially in terms of public safety, if you're going to reduce the Fire Department, you're not talking one or two firefighters. You're talking changing the way you deliver the service. Today we respond with two fully equipped rescue pumpers. It's paramedics and medical equipment all on a pumper. We're able to do that. Changing the service means we respond with one. So you're looking at half a dozen or more firefighters.
"If you're talking about reducing the Police Department, you're not talking about one or two officers. We're talking about redesigning the districts so that you can reduce your staff for someone off of every squad. You're talking four or five or six police officers ...,'' he said, noting response times would increase.
"Today we have three districts. What we'll do is go to two districts. Well, that means there's one less person on each squad. Now you're looking at five people at least. It's going to be more time. The (number of) calls aren't going to go down. The demands won't go down ...,'' he said.
Though the city is in better financial shape today, the bond issue is needed to reconcile the debts the general fund owes some of the city's special tax funds, particularly the capital improvements fund, Fagan and Greer said.
Fagan said, "There's no doubt about it, the city is in better financial shape now than it was a couple of years ago, better, though, does not mean good. We have a problem in that even though our revenues for 2005 are expected to exceed our expenses, which is a very good thing, we have a problem with a line of credit that we owe money on ... We have the general fund, which owes our special tax fund dollars and as the state audit said (March 10), the state auditor doesn't typically care if special tax funds owe the general fund, but when vice versa is true, there's a problem.
"And not only just because of the state auditor, but that's good practice. We want to have these funds operating independently — and they are. But not only operating independently, but that they're all in the black,'' he added.
Greer said, "This administration is so much about credibility and credibility comes from special tax funds. If the mayor and the Board of Aldermen decide to take an initiative to the voters and they say: 'We are asking for your support to pass this for X,' then you know it's our responsibility to deliver X, not X/Y, not X2, not XX, but X. It's our responsibility to deliver what we told them we would because somewhere down the road we're going to ask them for something again and we want to have their trust. And that's what the special taxes are all about ...
"What it comes right down to is the general fund owes the capital-improvements fund some money. The capital-improvements fund, you know, is for streets. It's for debt service on the certificates of participation (issued for a new police facility). That's what we told the voters. That's what the voters approved. So if the general fund owes the capital-improvements fund a million dollars, then that million dollars ought to be in that special tax fund so it's being used the way it was intended to be used or what it was passed by the voters for. And to me, that part of it is that simple. That's the responsible thing to do,'' the city administrator said.
"Bond issue or no bond issue, does the general fund owe the capital-improvements fund $1,148,762? The general fund has a debt right now of $1.5 million. Does that go away if the bond issue doesn't pass? No, I am enormously concerned with regard to the debt the general fund has to the capital-improvements fund ...,'' Greer said.
"If the bond issue passes and the right thing to do is to pay that debt off. If the bond issue doesn't pass, it's still the right thing to do, to pay that debt off. Now how long can you take to do that? It doesn't mean you have to do it tomorrow. But the board has to decide, how long is it appropriate to do that? If they want to pay off that $1.2 million in three years, that's $400,000 a year. Where am I going to get $400,000 a year? I've got to tell you, I don't have it because not only do I have to come up with $400,000 a year over the next three years, but I've still got this line of credit that I've got to have,'' he said. "At some point in time, I've got to overcome that line of credit to be able to put money in the bank for the non-expendable trust fund.''
Besides the $1,148,762 million the general fund owes the capital-improvements fund, the general fund owes non-major funds $168,444, the sewer lateral fund $96,522 and the non-expendable trust fund $90,132, according to the city's financial report and independent annual audit conducted by Brown Smith Wallace for the fiscal year ending June 30, 2004.
The money the general fund owes the capital-improvements fund and other funds resulted from the city's past practice of "blending'' available cash from all city funds, a practice Greer said he wanted discontinued shortly after he was named city administrator. It wasn't until Jan. 1, 2004, that the city was able to untangle the financial mess of past blending and establish separate bank accounts for each of the city's funds.
Discontinuing the blending has resulted in the need for the line of credit to meet the city's cash-flow needs, Greer said, adding, "That really is what causes the line of credit and the increase in the line of credit is that we're managing the funds independently now. So that's how they avoided having a line of credit before ... trying to balance all of that debt.''
Some critics of the bond issue have contended that be-cause the interest rate on the line of credit is less than the interest rate that the city would pay on the bonds, the city should continue to use the line of credit.
But Greer noted that at some point, the line of credit becomes long-term debt and under the state Constitution, long-term debt only can be approved by voters. The question remains, however, at what point would the line of credit be considered long-term debt.
"That's a nebulous question,'' Greer said, noting city officials are taking a pro-active approach in an effort to "do the right thing. We're telling the voters that we need to create some debt and here's why and we're asking for their support to do it. Isn't that the way the system's supposed to work?''
Madrid noted, "And what the board has done is create a long-term plan to correct this. They've put a sunset on it.''
Another point of contention by critics is that the bond issue does not generate revenue and that a tax-rate to generate revenue is needed — not the bond issue.
For example, at the March 7 Ward 3 town-hall meeting, Miguel defended his abstention, saying, "I had real doubts when this came to the board. I told the board on Jan. 11 I could not support this issue unless it were in conjunction with paying off the bonds on the police building. I wasn't absolutely positive of my position when I abstained from voting.
"In the time since then, I've come to the conclusion that the right thing to do is to defeat the tax proposal, fully examine all city expenditures, re-examine and stop or at least reduce the police building retrofit and pay down part of our long-term debt instead of increasing it."
Instead, he said, "... Let's put a no-bond tax issue to re-store funds over time on the August ballot.''
"But that's not what the intent of this is,'' Greer counters. "The intent from day one — from day one — has been to fix what's got to be fixed. We have made cuts in our operating expenses ... The board in the many work sessions, several work sessions that led up to their decision, did not want to tackle both ends of this problem in one initiative because it's just too confusing. The board discussed this. The board chose to fix the problem and you fix the problem as responsibly as you can. You identify what it takes to get that done. You say how it's going to be done. You put a sunset on it so it's not a forever kind of a thing. Let's fix this. Let's continue to operate in this efficient manner in which we're doing.
"Let's take a look at what the diversification of our revenue really means and what's the best way to approach that because no matter what we do in terms of revenue, it's going to have to be approved by the voters. Is that a tax increase, a property-tax increase? Is that merchant license fees? What is that? Is that an adjustment of our utility (tax) rates?'' he asked.
"... I think that the majority of people on the Board of Aldermen, the majority of the Board of Aldermen are positive, forward, future-thinking people who take their responsibilities very seriously and work very hard to move us forward,'' Greer said. "They discussed ad nauseum the concepts that we were talking about and elected to fix the problem. This needs to be fixed. That's what the bond issue is all about. It's not a future revenue. It's not intended to be the end-all ... This is not the end of the road. This fixes us. That's what the board chose to do. Not to get greedy and hungry and confusing, but to fix where we are. They've done such good work to get us to the point that we can operate. We're not finished, but we're operating. This is the first year it looks like our revenues are going to be greater than our expenses. That's great. That's big news, especially when you think of the escalating expense position that we had for so many years and that's all in a world where our revenues are declining because it's so much sales tax. So that's an endorsement of how hard these people have been working.
"But we're not going to be able to recover. The GO bonds give us the ability to recover so that we can take advantage of the hard work that's been done and continue to operate very efficiently. And that's the difference be-tween borrowing money to fix it and borrowing too much money so it just sits in the bank.
"It's not appropriate to pay interest on money that just sits in the bank and earns interest. That seems kind of silly. But you've got to identify the right amount of money ... That's a decision the board has to make ... It's going to depend on what the board decides, the board — not one or two aldermen — the board,'' he said.