Killeen City Manager Ron Olson gave the City Council an ominous message at its workshop Tuesday: The city’s finances are good for now, but don’t get too comfortable.
“To me, it’s pretty clear that we’re stable enough,” Olson said. “I am not confident at all about the long term.”
Olson’s statement came during discussion on a budget amendment that would fund two new positions with the city — deputy marshal and grants coordinator in the finance department.
Those positions would require multiyear funding, and Olson, who started with the city Feb. 6, asked the council to defer making decisions of that kind before he had time to evaluate the need and funding mechanisms for the jobs.
“Before you make this decision, I’d appreciate the time to dig in and make a lasting determination,” Olson said.
Will the council listen? If it chooses to fund the two positions at its regular meeting Tuesday, the council will be tying one of the multiyear positions to fuel cost savings — an unpredictable funding source freed up in the 2017 budget by whiz accounting.
The discussion on the positions points to a divide among council members and city staff on the best way to tackle the city’s financial situation in the short and long term. On the same night the council argued over funding the positions, it reached a split consensus to not pursue charging developers impact fees to fund the city’s crumbling infrastructure.
The council also has not held its second budget priority session that was promised in January. That session could provide city staff with a guideline for where and when money should be spent.
The council is also currently tripping over a resident-mandated forensic audit of the city’s finances that long has been in the works but has recently lost steam with some council members. The results of that audit could provide greater financial controls that would make the up-and-down budget projections of the past six years a thing of the past.
Council members are also working within a tight window with the May 6 district election right around the corner and a competitive field of candidates for each race.
Can the council overcome its divide and make tough financial decisions? Tuesday’s meeting could provide a clue.
Long-term financial decisions have been the bugaboo of this council since its inception — particularly when tax increases and new fees seem to put council members in a cold sweat.
Finance Director Jonathan Locke told the council Tuesday a new deputy marshal position would be funded by fuel cost savings. Those savings would be derived from aligning fuel projections with the Texas average for fuel prices rather than the national average as the city had previously done, Locke said.
Some of the council bought that explanation — but two council members and Olson were skeptical.
“I don’t think the projected fuel savings are a stable funding source for either position,” said Councilman Gregory Johnson. “Every week it seems as though there are new funding requests that come before this body. This City Council and staff worked very hard to get the city back in the black, and I fear we are slowing creeping back into the red by continuing to spend on unbudgeted items and continuing to amend the budget.”
In reality, a fuel cost saving is only a cut to what is projected in the budget. The savings don’t provide any new revenue, but take a portion of funds earmarked for fuel purchases and move it to personnel hiring. What happens if actual fuel prices outpace projections? Locke did not provide an answer.
Councilman Richard “Dick” Young said he was skeptical of fuel prices and vendor transaction rebates, which would be used to fund the grants coordinator position, as serious resources.
“Both of these funding sources don’t appear to be stable funding sources for the future,” Young said.
Moves that the city has used to balance the fiscal year 2017 and fiscal year 2018 budgets include but are not limited to:
A one-time transfer of $1.67 million from the city’s solid waste fund to the general fund.
The dissolution of a Fleet Replacement Program that drew funds from operating and enterprise funds and was widely lambasted by council members.
Fuel cost savings.
One-time sales of city property.
Redirecting credit card processing fees for online utility payments from enterprise funds to the general fund.
All of these moves, while skilled accounting tricks, do not bring new revenue into city coffers and do not significantly cut city expenditures.
Johnson addressed that lack of deep expenditure cuts Tuesday, saying he would not support resolutions to levy revenue from raised taxes or new fees if the City Council won’t tackle its bloated spending.
“If the city finds itself back in the same poor financial position as we did during this last budget season, I will oppose any new property tax or utility rate increases,” Johnson said. “The city has a spending problem, not a revenue problem.”
The City Council was scheduled to hold its second budget priority meeting in February, but the date has yet to be set.
The first budget priority meeting Jan. 7 allowed the council to set its top priorities for funding in the 2018 budget and allow city staff a chance to determine the cost. Those costs would then be taken back to the council and final priorities would be set.
The top priorities by category:
For infrastructure, the council ranked maintenance of infrastructure as the top priority.
For public safety, the council ranked purchasing marked and unmarked police vehicles as the top priority.
For unfunded needs, the council ranked adjusting parking fees at Skylark Airport and renovating the Bob Gilmore Senior Center as the top priorities.
For communication, the council ranked citywide technology enterprise licensing as the top priority.
For studies, the council ranked the drainage utility and staff compensation studies as the top priorities.
For possible revenue sources, the council ranked property tax revenue and increased utility fees as the top priorities.
For other concerns, the council ranked a potential November bond issue as the top priority.
With those priorities set, the council will be given a cost and reset its priorities if necessary.
Young likened the process to kids in a candy store: Council members were allowed to roam the aisles and pick the things they wanted, but the difficult decisions would really be made when the council saw the bill.
Some of those priorities on the list — infrastructure in particular — will require a massive influx of money, and the council can’t seem to decide how to accomplish that.
The options to pay for infrastructure investments include raising property taxes, levying impact fees or transportation utility fees, or issuing debt.
The council reached a 4-to-3 consensus Tuesday to stop the implementation process of developer impact fees to combat $17 million in city infrastructure demands. That decision is part of a concerted effort by the council to avoid adding new fees or taxes for residents and businesses in the community.
The council also reached a resounding 6-to-1 vote in August to not pursue a transportation utility fee. The monthly fee would have been added to residents’ water bills and be used to maintain roadways.
Some council members also loudly refused to raise property taxes, but the noose is beginning to tighten if Mayor Jose Segarra’s prediction Tuesday of a more than $20 million leap in infrastructure demands over the next two years comes to fruition.
So how will the council get the money to realize its wishes? That decision could ultimately fall on the next City Council.
The May 6 City Council election could sweep in a number of nonincumbents with their own priorities on what expenditures should be in the budget.
This council has dragged its feet so far to set budget priorities, but could set a plan in motion over the next two months to better prepare new council members for the heat of the budget season.
Part of that involves conducting the second budget priority session and providing Olson with direction on where to allocate funds.
The council is playing a waiting game as Olson learns the ropes in the city, conducts his own evaluations of staff and functions, and plays out his first-100-day plan he began Feb. 6.
During his time as city manager in Corpus Christi from 2011 to 2016, Olson undertook a major restructuring of the city administration and made wide-ranging cuts to city employee numbers and city departments.
Olson indicated in an interview Feb. 8 that all of those moves could still be in play in the near future.
Major expenditure cuts of that kind could free money for many of the priorities the City Council has asked for and ease the burden of trickling revenue into the city’s operating fund.
Editor's Note: A previous version of this story was corrected to list one of the considered city positions as deputy marshal with the municipal court.
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