Too much KoolAid in the City budget?

Nov 14, 2013

Editor:

In business, "drinking KoolAid" is a term used when an organization bases its spending plan on inflated revenue estimates. It has cost many a CEO or division manager his or her job and been responsible for the demise of a number of companies.

Mayor Earling's 2014 city budget has too much KoolAid in it. A projected 7 percent revenue increase is used to justify a 16 percent expense increase even though the revenues from 2012 to 2013 only increased 1.9 percent.

A simple "what if" can show what can go wrong in 2014.

What if the revenues only come in at 3.8 percent above 2013 estimates (this is double the 2012-2013 increase), and expenses are exactly on target?

The answer is that the general operations fund drops from $5,870,000 at the end of 2013 to $3,110,000 at the end of 2014.

Two questions come to mind – Is this overly pessimistic? Probably not.  Is this an acceptable outcome? I think not.

Finally, the mayor was apparently having trouble calculating exactly where this 7 percent revenue increase for 2014 was coming from, so a bit of accounting trickery was added in a revenue line item called "Anticipated Under Expenditures" of $722,000.

What this means is that if the budget is approved with this line item in it, all city departments are given budgets to operate to BUT we expect some of them to underspend their budgets.

If the city is counting on departments to underspend their budgets, it should identify where this is expected and reduce the budgets of those departments.

Otherwise, the mayor will get credit for operating to budget, but the revenues just did not come in as expected including the $722,000 of "Anticipated Under Expenditures."

I would ask that the City Council not drink the mayor's KoolAid without clearly understanding the implications in terms of substantial tax increases in future years to keep Edmonds solvent if projected revenue increases are less than expected.

Doug Swartz

Edmonds

Comments (2)
Posted by: steven d keeler | Nov 14, 2013 23:34

Hi Doug :

You must remember, the mayor and council are the folks that will spend about one million tax dollars on an unnecessary traffic circle, want to insure 'art' for city roads badly in need of repair, decry coal dust on rail tracks yet cannot demonstrate any presence, and spend unending hours on minutiae regarding their 'favorite' trees while the forest burns.

 

The above are the culprits and their follies, and they are the ones voted into office.  It is the entire city then, that has no fiscal responsibility and no desire to find a financial 'spine'.  Your letter speaks to logic, it is wasted on Edmonds.

Steven Keeler



Posted by: Jim Shelton | Nov 15, 2013 14:29

I have written quite a few times in this and other Edmonds media about how the city dug the hole that required aggressive belt-tightening the last few years. Prior to 2008, when the economy was artificially glorious, city expenditures were going up an average of 7% per year while inflation was about 3% and the 1% cap on property tax increases was firmly in place. Relying too heavily on increased revenues from sales and property taxes predicted because things were always getting better.

 

This year we've already seen the council amend the budget to spend more as soon as surplus predictions were made. I haven't had a chance to look at the budget proposal yet, but if Mr. Swartz' numbers are correct I think our city staff and council may be returning to that ill-conceived way of managing finances. It seems they just can't resist the temptation to spend it if they get it.  If they could just control themselves to save when the economy is good, they could tap that when the economy goes south again (and it will someday) and not have to take draconian measures to balance the budget.



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