By D. Jefferson Bean / Staff and John Fredericks / Staff

What happens when you spend beyond your means? You either raid your savings, or run a deficit. The city of Roswell is apparently doing both.

When the Roswell City Council convened to discuss the FY 2011 budget on Monday, June 21, all appeared to be well on the surface: the budget looked balanced, as it must be by the city's charter, and the current 5.455 millage rate was not expected to increase.

As the session progressed, however, Mayor Jere Wood dropped a bombshell -- the city had balanced the budget by siphoning off its reserves.

No kidding.

While revenues dwindled from $62,341,152 in 2008 to $56,395,921 in 2010 -- a decrease of nearly $6 million, or 10 percent -- the city's operating expenditures actually rose in the last two years. If the trend continues, Wood cautioned, the city's reserves -- which fell from $26,420,785 in 2008 to an estimated $14,415,121 in 2010 -- would be depleted by 2015, leaving Roswell awash in red ink, with a ballooning deficit of $1,128,869.

Regardless, Roswell's city council unanimously dismissed Wood's warning, and passed a $56 million operating budget for 2011.

But it's smoke and mirrors. They raided the city's reserve fund cookie jar to the tune of $112,911, while voting to spend another $7 million on one-time capital improvement projects, further diminishing reserves. Council members Betty Price and Kent Igleheart, although voting in favor of the overall deficit budget, were the lone dissenters in the capital fund raid caper.

WOOD'S HAD ENOUGH

"For the last three years we have been balancing the budget by spending down reserves," Wood said. "Once we spend down reserves we have no choice, either cutting services or raising taxes. I believe we should cut expenses before raising taxes."

Wood's position was wholly consistent with a major campaign commitment he made during his December run-off election victory over former councilman David Tolleson. For the wily mayor, it’s a promise made and a promise kept.

Roswell's forecasted revenues for FY 2010-11 are $55.9 million, representing a three percent slide from the previous year. To compensate for the cash drop, and to bridge the gap, the veteran mayor's proposed budget called for the elimination of 10 jobs in the city's community development division, where the recessionary economy has triggered a significant reduction in their workload. Employee salaries and benefits make up nearly two-thirds of the city's overall operating budget.

"If we’re going to be serious about budget cutting, we’re going to have to cut salaries and benefits," Wood claimed. He drew a parallel to the new city of Sandy Springs. "They cut 22 jobs," Wood said. "They got it right. We got it wrong."

Councilman Kent Igleheart, a notorious fiscal conservative, voted against the mayor's downsizing plan. He says he doubts the capital reserve fund will ever come into play, because the city is banking on a new early retirement initiative (ERI). "Once the early retirements go into effect, we can completely re-organize the city's staff, which will ultimately result in a major cost savings," he proffered. Igleheart sees this year’s budget vote as a "process" rather than an event.

For now, the city’s millage rate will remain at its three-year level of 5.455. The total budget is $93 million.

COUNCIL TAKES WOOD TO THE SHED ON PART-TIMER

But Roswell's council would have none of it. At the urging of City Administrator Kay Love, they promptly restored seven of the 10 jobs in question, and attempted to compensate by axing one new deputy chief position in the municipality's fire department. However, that newly proposed job was already eliminated by an internal reorganization.

Wood said he should have proposed to cut 30 jobs in lieu of 10. "Then I may have gotten a better result for the city's taxpayers," he lamented.

The council's effort to reduce expenses was limited to capping the Roswell Bike Festival subsidy to $20,000, reducing the "special events" fund by $5,000, putting off the purchase of new video cameras in police cars, cutting city facilities maintenance budget and stalling vehicle replacement for city workers, and jettisoning the mayor's part-time assistant.

Getting in the Christmas spirit about six months early, the council added a few new goodies in their budget gift basket: a new citizen survey that comes complete with a consultant to analyze it, and a comprehensive study of the city's pension plan.

A frustrated Wood promptly adjured the council to provide a detailed annotation of the nearly two-dozen budget line items they decided to scrap or promote from his original proposed plan.

That request opened another Pandora's box. 

One of Wood's budget allocations the council harpooned happened to be the mayor's $15,000 part-time special events assistant, Jennie Bushey, who did the same job for five years for former New York City Mayor Rudy Giuliani. Seeing red, the veteran lawmaker demanded an explanation.

But reasoning was at a premium.

Councilman Jerry Orlans, the acknowledged "back room" ringleader of the "spend now, I'll worry about it later" movement, maintained there was a "general consensus" on council that the mayoral assistant’s work could be handled by other staffers, like mayoral administrative assistant Robyn Kenner, or through "volunteers."

"The special events that are put on are not strictly for the city, and everyone thought they should be handled by your campaign or volunteers," Orlans said. "There’s a concern that this person is engaged in political activities."

Wood, a lawyer by trade, was prepared for the salvo, and wasted no time in upping the ante. The 13-year defacto city CEO summoned his assistant, Bushey, to the podium, like calling a witness to the stand in a civil trial. He asked her to chronicle her work for the city since February. A partial list of her work performed included the U.S. Census and holiday event planning.

Then Wood called up Kenner, who said she could not take on Bushey's responsibilities within her 40-hour workweek.

But council members were unfazed. They cut her loose like so much worn tether, 6-0.

Several members said Wood did not effectively lobby for Bushey. But Wood disputed that notion, and claimed that he called three council members on the matter. He said Councilman Rich Dippolito never returned his call.

"It's interesting that the city council could only manage to find one part-time employee to cut amongst the city's 616 employees, the one that happens to support my office," Wood said. "Council offered no legitimate reason for this one cut."

WOOD VOWS BUDGET VETO, SAYS CITY WILL GO BROKE IN 2015

On Thursday, Wood vowed to veto the budget, exercising his last resort mayoral power for only the third time in his over three-term tenure as the city's leader.

"On July 12th, at the next City Council meeting, I am going to veto the Roswell Fiscal Year 2011 Budget approved by the Council last Monday night," Wood said, flatly.

"For the first time in memory -- 44 years counting my term and Mayor [Pug] Mabry’s term -- the City Council has voted to spend more to run Roswell’s government than we expect to receive. Including the cost to maintain our roads, the deficit for FY 2011 will exceed $1.9 million. At the current rate, the Council will have spent all of our available reserves above policy by 2012. After that they will either have to raise taxes or make drastic cuts in the City budget," Wood calculated. 

Wood maintained that he is vetoing the FY 2011 budget "so that citizens of Roswell will have notice and the opportunity to object to the City Council spending more than we expect to receive. The budget I proposed, the budget unanimously approved by the Council at the first reading, and the budget the public expected, was balanced," the mayor reiterated.

"I am vetoing the budget so that the Council will consider cutting expenses, rather than spending more than we receive. Since 2008, as City revenues have fallen by $6.4 million, [while] the Council has increased the number of City employees by two.

"I am vetoing the budget so that the citizens of Roswell will remember that I oppose deficit spending."

After the July 12 mayoral veto, the city council can over-ride Wood's budget nix by carrying four of six votes in their next council meeting. Although that scenario seems likely, intense public pressure could turn the tide in the mayor's favor.

UP CLOSE AND PERSONAL- Q&A WITH JERE WOOD

In light of Wood's revelation, The Beacon requested and was granted the following interview.

Q: What effect do you expect Roswell's apparent financial problems to have on its bond rating?

Wood: Short term -- none. But we can't continue to run at a deficit without negatively impacting our bond rating.

Q:  There was some argument and speculation over the state of the city's reserves during last year's city elections. Do you have any comment?

Wood: That's always mathematical, so I don't recall the argument about the state of reserves. There's argument about where we're going with it, but the state of reserves has never been in question. 

Q: When did you conclude that the figures were an actual problem rather than a mere projection?

Wood:  It's easy to predict things -- once they've occurred. Last year, we were all hoping we'd see the economy turn around. We were in a dip, and we saw it as lasting one, two, or maybe three years. My "crystal ball" tells me that we're not going to see a return to a strong economy for many years, though. Last year, I was hoping for it to get better. This year, I'm not expecting it to get better for some time. Last year, we talked about a "rainy day" fund. But this is not a rainy day -- it's a long-term drought. And I didn't have a sudden epiphany; last year, during the budget cycle, I was optimistic. This year, I'm realistic. 

Q:  Alpharetta has a fund strictly reserved for emergencies. Does Roswell have one?

Wood: Absolutely. By policy -- and this was a policy I established -- we have three months of reserves set aside. That's twelve to fourteen million dollars. We had about forty million dollars three years ago. We've spent that down to about twelve million dollars. After this year, we'll be down to about six million dollars, and at the rate we're going, we've got one more year.  By policy, we still have a strong reserve -- but it isn't going to last very long. We started with a very strong reserve, but this is the third year running that we've been spending it down at a pretty fast clip. My concern is not that we've been spending it down, but that we're spending it on operating costs. If you invest your savings, it's just that -- an investment. But if you consume them, they're gone. I support investing our savings rather than leaving them in the bank. What I don't support is using them for operating expenses. We're using them to pay for maintenance, to pay for things we need to be doing. We're not covering our current costs with current revenues. We're covering them with savings. That's not sustainable. We're spending more now than we're taking in, and that's what's eating us alive. I've been telling the council, "Now's the time to reinvest our capital, because costs are low."

Here's the big picture: revenue has fallen from $62.3 million to $55.9 million, and expenses have been exceeding revenues for the last three years. Every year, for example, we spend around two million dollars to fix our roads. The accountants say it's a capital expenditure, but if you have to do it every year, I don't consider it a capital expenditure; it's just maintenance. These recurring expenses have been higher than our revenues for the last three years. To make up for this, we've drawn down capital reserves by $12.5 million. At this rate -- and I said four years here, assuming that we have no more capital expenditures -- if we have any more capital expenditures, it's two years [until our reserves run out]; this year and next.

Here's a simple principle: If your revenues fall by, say, ten percent, you have to cut your expenditures by ten percent. Sixty percent of our expenses come from salaries and benefits. Therefore, if you're going to have a ten percent cut, you have to take some of that out of salaries and benefits.

To have a sustainable budget, we either have to cut expenses or raise revenues, and raising revenues means raising taxes. Borrowing money does not mean raising revenues; it means going into debt.   

  
Q:  Are there alternative sources of revenue, aside from tax increases?

Wood: You can call it whatever you want, but it still ends up being a tax or a fee. I don’t believe in government going into business to make a profit, because it never does. Government is not good at business.

Q: Given the city’s financial situation, it seems that a couple of members of the council have “pre-2010 mentalities.” As mayor, what can you do?

Wood: (Laughs) I wouldn’t say “a couple.”  As mayor, you can bring it to the public’s attention, you can bring it to the council’s attention, and you can propose cuts. My biggest mistake was that I didn’t propose enough cuts. Here’s the reality of the situation: most people only pay attention to one thing in the budget -- property taxes. If property taxes don’t increase -- they don’t care. You were at the meeting -- the only people who showed up were city employees. We didn’t raise taxes, so the public didn’t get upset. The employees were upset because we were cutting salaries, so they were the special interest group that leaned on the council. The council didn’t want to upset anyone, so they responded to pressure; and the pressure was from the employees, not from the public. Because they didn’t want to upset anybody, they didn’t -- and they didn’t think about next year. That’s my perception, at any rate.

I’m looking a few years down the road. I see a deficit coming, and I’m trying to avoid it.

Q: That brings us to the next question. At present, how would you rate the city’s prospects of weathering the storm?

Wood: Oh, we’re going to weather the storm. We’re in good shape. The question isn’t “Are we going to weather the storm?” The question is “Are we making wise decisions with your money, and are we going to have to raise your taxes down the road?” The budget problem becomes greater when you don’t address it. I want to address the deficit and lower our expenses this year. 

Q: To what extent do you think the failure to make meaningful cuts reduces to the average citizen wanting services he/she doesn’t want to pay for?

Wood: I don’t think it’s a matter of citizens wanting services. We didn’t get any pressure from the citizens. We got pressure from employees wanting to keep their jobs. We haven’t cut services. What did I try to cut? I cut the Community Development Department, which is there to handle development. Development is down by seventy percent, so my budget was a “baby step.” My mistake was not taking a bigger one. I was trying to take a gradual approach, but apparently, that’s not going to work.

I want to make it very clear that I do not support a deficit budget. That’s why I’ll veto it. I want to send a clear message to the council that this is not what we should be doing.