Auburn’s Hail Mary budget of phantom numbers

The City of Auburn didn’t pass its budget for FY2013 last week as planned. With one council member absent, nobody seconded a motion to raise the town’s water rates, which is a key part of the budget. The budget itself was tabled after that motion died.
This week, the council will meet again to discuss its budget. One hopes the city’s leaders take a reality check before they make any decisions. The current version of Auburn’s budget is awash in hopeful thinking. It has budgeted revenues that don’t really exist and may not exist and it has not yet faced up to its main spending problems. This budget is little more than a Hail Mary, wishful thinking for divine intervention than a look at reality.

There are three main issues in the Auburn budget that need resolution:

1. Higher water rates. In the proposed budget, the city moved around $191,000 of its expenses out of its General Fund and into its Water Fund. In the past, the city has absorbed the cost of its water department management within its General Fund and at the end of the year, transferred money internally between the two funds to cover that cost.
This year, the city has budgeted for that expense, in part to move that cost out of the General Fund. But the Water Fund doesn’t have enough revenue to pay for those expenses directly, so the city is proposing to raise water rates to generate additional revenue to directly cover that cost. In addition, Auburn has an additional $63,000 in debt payments to cover next year that it didn’t have this year.
But in addition to finding new revenue to cover those costs, the Barrow County Water Authority is discussing a massive rate hike on the water it wholesales to its city users. If that happens, the county rate hike on top of any Auburn rate hikes would hit water consumers in Auburn with a double-whammy. That makes politicians nervous.

2. Phantom revenues. Some Auburn leaders have become enamored with the idea of the town attracting “affordable housing.” Translated, that means housing for lower income families and senior citizens. A private developer can get tax credits for developing these kinds of housing projects and TBG Residential of Atlanta has proposed to build an “affordable housing” apartment complex in Auburn. To help TBG get that tax break, Auburn created a city bus system known as A.N.T.
But city officials have not been realistic about the cost or revenues of that bus system. The city is projecting far more income than the system will ever generate. Its bus system budget is rooted in wishful thinking, not reality. Few people have ridden the bus system since it was created in June and it will never even come close to breaking even. Its budget is all make-believe that anticipates phantom funds.
So why would Auburn leaders create a bus system they know will lose the city thousands of dollars? Because they’re gambling that in the long run, the city will make those funds up if the apartment complex does get built. For the FY2013 budget, the city has budgeted over $100,000 in projected new permit income based on the belief that the apartment complex will be built during the year. In the longer term, the city is counting on the apartment complex to raise additional property taxes and water use revenues, more than enough to make up for the expenses of its silly bus system.
So from that standpoint, city officials don’t mind wasting a few thousand dollars now on a money-losing bus system to get what they hope will be a source of new revenue for the future.
The problem is, there is no guarantee that the apartment complex will be built in FY2013, if ever. The projected $100,000 from permits is based on that supposition, but what happens if the project gets delayed or canceled? In the current budget, that projected permit income is more phantom revenues based on what “might” happen.
It’s a big gamble. If the city is wrong and the apartment project is delayed, then the town’s entire budget will take a major hit and additional budget cost cutting will have to happen.

3. Police expenses. The biggest problem that Auburn officials continue to avoid discussing is the cost of the town’s police department. The APD accounts for half — 50 percent — of all of Auburn’s General Fund expenses. It is the elephant in the room that Auburn leaders are loath to talk about.
But anytime a small town police department consumes half of the town’s spending, a financial disaster looms. It is simply not a sustainable financial model for any small town to devote half of its financial resources to a police department.
Auburn leaders won’t discuss that, however, because all the “sky is falling” voices complain. Every time this newspaper has written about Auburn’s financial problems and the cost of its police department, we get emotional e-mails and blog comments — oh my god, you can’t cut the police spending! Gangs will take over! My family’s safety will be endangered! How dare you even discuss cutting police spending! You can’t put a price tag on my safety!
Well, yes they can. That’s what governments are supposed to do, allocate limited resources. All government spending has a price tag; to suggest otherwise isn’t reality.
But despite that kind of inane emotional rhetoric, the fear-mongering about crime increasing if the PD budget is cut simply isn’t true. A lot of towns in North Georgia have learned the hard way and made cuts in their police departments. Hoschton abolished its police department because it couldn’t afford it. Arcade cuts its massive department down to just a handful of officers. Pendergrass cut its large PD down to a couple of people. And guess what: None of those communities was hit with a crime wave when they cut the costs of their police departments. The sky didn’t fall, although some people had claimed it would.
Auburn leaders did make some budget cuts in the FY2013 budget, including a very small cut to the police department. But until Auburn leaders get the cost of that department down to a smaller share of its total spending, the APD will continue to pull down the city’s finances and eventually create financial turmoil.

For the last four years, Auburn has spent more money each year than it has taken in; the town has been living off of its reserves. This newspaper wrote about that situation several times, yet few people believed us. One e-mail we got said we had just “made numbers up” and that the city was in great financial shape.

But it’s not. Like a lot of small towns, Auburn is bleeding financially because of the recession. It has used up a major part of its reserves over the last four years rather than making some smaller cutbacks all along. Now those reserves have dwindled and hard choices will have to be made to avoid a financial disaster in the next 24 months.

So what should Auburn officials do now?

---Budget for the real numbers from the city transit system. It’s going to lose around $30,000-$35,000 next year. Get rid of the make-believe phantom revenues numbers and budget for that loss.

--Don’t budget for an additional $100,000 in permits now. If the TBG project does happen, that’s great. But don’t plan the city’s budget based on such a “maybe.”

--Raise water rates even more than proposed. The additional water debt payments, in addition to the absorbing of overhead costs, require that the city generate an additional $260,000. Go ahead and raise water rates to cover that. It has to be paid for. If the county water authority raises its wholesale rates, that’s bad, but Auburn has no control over that decision.

--Make a choice: Either cut back the city police department by around 10 percent ($150,000), or hike the city’s property tax rate to raise an additional $150,000. If that is not done, the city will finish FY2013 in the red if the TBG project doesn’t happen. If the TBG project does happen and the city gets a windfall of permit income, then that money could be used to pay for capital projects that need to be done, but that have been cut from the current budget.

In short, plan for the worst and hope for the best. By doing that, the city won’t wreck its financial future by counting on phantom money it doesn’t have.

Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.