Too much KoolAid in the City budget?
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.