The City of Statham is in financial trouble. For the fourth year in a row, the town’s General Fund was in the red last year, according to the recently released audit for FY2012.
How bad is it?
Consider that if the town hadn’t done an internal transfer of $63,000 from its waste fund, Statham’s General Fund would have had almost no reserves at the end of June 2012.
For most of us, that would be the equivalent of being bankrupt. But for a town, there is no such thing. Towns can raise taxes and levy fees to meet their obligations; a town simply can’t go out of business. (Which makes all the talk about a town’s assets and liabilities meaningless — who would buy the assets of a town?)
Back in October in this space, we said Statham’s problem wasn’t its tax rate, which it had just raised by 11 percent. The problem in Statham, we argued, was that town leaders were simply spending more than they should.
A look at the past four years proves we are right. In FY2009, Statham took in $1.066 million and spent $1.097 million leaving it in the red by $31,000. But at the time, the town had $500,000 in reserves.
So what did Statham do? Although its revenues continued to be flat because of the recession, it increased its spending from $1.097 million in 2009 to $1.4 million last year.
In 2010, the town was in the red by $47,500; in 2011, it was in the red by $184,200; and last year, it was in the red by $174,300. Since 2009, Statham has just about completely eaten up all of its reserves because every year it has been spending more than it has taken in.
But it gets worse.
Starting in 2011, Statham also began losing money in its water and waste funds. Last year, the town lost $105,300 in its water fund and $27,200 in its waste fund. While both accounts do have some reserves, they aren’t very deep and certainly aren’t enough to keep the town’s General Fund afloat. Eventually, those funds will also be gone too.
The bottom line is this: Although Statham’s income has been down, it continues to increase spending. Now the town faces a financial crisis of its own making because its leaders have not been disciplined in how they spend taxpayer money.
This isn’t too unusual for many small towns. Just down the road in Auburn, that town has also been bleeding red ink for the last four years. Now it, too, is facing a financial crisis.
When the recession hit, many town leaders didn’t react. They kept spending money they didn’t have and eating away at reserves. But eventually, those reserves will run out and these small towns find themselves in a financial hole.
That’s what has happened in both Statham and Auburn. Yes, the economy hurt their revenues, but that’s not the real problem. The underlying problem is that town leaders have been afraid to make the difficult decisions necessary to balance their budgets. They don’t want to cut any spending and have in fact, been increasing spending.
For an example of that, look at Statham’s current FY2013 budget, which only has six months left. Despite all of the red ink in recent years, Statham leaders adopted a budget last year that was overly optimistic in revenues and understates spending. Unless the town does some drastic cutting soon, it will again be in the red later this year and may have to borrow money to stay afloat.
What’s really infuriating about this isn’t just the fact that town leaders don’t seem to understand what’s happening, but also the town’s own auditor isn’t being blunt with the city council. At last week’s Statham meeting, auditor Herbert Briscoe said this to the council: “There is not really any way to cut spending. The city really needs to worry about increasing small businesses.”
Briscoe does audits for a lot of small towns and has seen this kind of thing many times. His inane comments were designed not as financial advice for town leaders, but rather as a psychological salve to make Statham officials not feel so guilty about their overspending habits. Briscoe should instead be waving a red flag to the Statham City Council and urging them to take action to stem the flow of red ink, not giving them cover for their bad habits.
Of course Statham can cut spending is Briscoe is flat wrong to tell the council otherwise. That was very poor advice coming from someone who is supposed to be an independent auditor of the town’s finances. Briscoe’s job isn’t to make a town’s leaders feel good, it’s to represent the public and make sure officials are being good stewards of public funds.
So how can Statham get its budget under control?
The same way Auburn and a lot of other small towns should: Cut the enormous spending of their police departments. Spending for small town police agencies has gotten out of control and is eating up the lion’s share of local government expenses in a lot of communities.
Consider this: In Statham last year, the town spent $494,500 on police, not including capital outlay. That was a whopping 46 percent of the town’s total General Fund income.
No small town can survive that kind of police department spending. Ask Arcade. Ask Hoschton. Ask Pendergrass. Ask Baldwin.
Of course Statham should have a police department, but not one that is killing the town’s budget. That department doesn’t have to be as big as it is. The same is true for Auburn. There is no reason for small towns to have large police departments they can’t afford.
Here’s the reality: Statham, like all small towns, has limited resources. Town leaders have to allocate those resources effectively and decide what the priorities will be year to year. A town gets into trouble when its leaders diddle around and don’t make those hard choices.
That’s why Statham has been in the red for the past four years; its city council hasn’t had the guts to make the difficult spending choices necessary to balance its budget in an era of flat revenues. Instead, Statham leaders keep spending, and spending and spending.
Statham’s problem isn’t a lack of income — the problem is a lack of courage by its leaders to slow the spending.
Mike Buffington is co-publisher of the Barrow Journal. He can be reached at firstname.lastname@example.org.