On May 5, the city of Killeen will put up two City Charter amendments for voter approval that proponents argue would streamline the city’s ability to manage its annual budget.
But one of those amendments — what will become Proposition 1 on the ballot — hit a roadblock Tuesday when three members of the council voted against calling the charter election due to the amendment’s wording.
They said letting city staff transfer money could open the door for the manipulation of finances by a future city manager and department heads.
A management audit of the city’s finances completed in August showed past city managements had a lack of financial controls that caused the improper transfer of money between bond accounts and the general fund and a lack of long-term planning, among other concerns.
What seems from the outside like a routine administrative change is part of an ongoing battle between three council members who do not want to defer financial authority to the city administration and four more who want to “let the city manager do his job,” as Councilman Juan Rivera put it Tuesday.
The city so far has expended no resources into educating the public on the purpose and effect of its two proposed amendments, but with three of seven council members likely to publicly oppose the first amendment, time is running out for the city to convince voters.
Here’s what we know about the controversial amendment that split the council and how it affects city taxpayers.
The first proposed amendment would alter the language in Section 71 of the City Charter, which governs final approval authority of financial transfers during a given fiscal year.
There are three forms of transfers that city administrators can make, depending on the construction of the city apparatus: interfund, interdepartmental and intradepartmental. The city financial administration is arranged like spokes on a wheel with specific funds largely kept apart from one another and governed by a municipal budget, or spending plan, passed each September.
Under the current charter language, the council maintains final approval authority for interfund and interdepartmental transfers while the city manager has final authority over the transfer of intradepartmental, or “line-item,” appropriations. This was approved as part of a 33-part charter amendment election in 2013.
In practice, City Manager Ron Olson brings “mid-year budget amendments” to the council that predict where the city needs to shift money as the budget progresses. The last time this happened — May 23 — the council approved $609,531 in interdepartmental transfers in the general fund, mostly for unexpected personnel expenditures.
The new amendment would allow the city manager to execute transfers between departments that previously had to wait on council approval. The council would maintain final approval of interfund transfers — which shuttle money between accounts like the general and solid waste funds.
The last time a significant interfund transfer occurred was in December 2016, when the council approved a $1.67 million transfer of unallocated reserve funds from solid waste to the general fund. The move, proposed by then-interim City Manager Dennis Baldwin, was undertaken to bump up the general fund’s reserves to avoid a credit downrating.
A critic of the move said it “was like shifting deck chairs on the Titanic.”
The council also annually approves “indirect cost allocations” in budgets, in which specific funds “pay back” services from another fund. For instance, if the city’s accounting department ran books for solid waste, the solid waste fund would “pay back” the general fund for that service. Those interfund transfers are effectively approved by the council when the budget is adopted in September.
The amendment would additionally give final line-item transfer authority to Director of Finance Jonathan Locke. Line-item appropriations, which denote specific expenditures within a department, are rarely reviewed by the council, even during the budget approval process.
Olson argues the first amendment would:
1) Make it easier for city staff to manage the budget in real time.
2) Help include department heads in the budget management process.
3) Unclutter City Council meetings with periodic budget amendments.
Olson said the council would still hold quarterly reviews of the budget’s progression, which are released to the public through monthly financial reports and Comprehensive Annual Finance Reports, or CAFRs, available online.
The loudest dissenter has been Councilman Gregory Johnson, who said Tuesday he did not want to forfeit “checks and balances” on city manager and department head authority.
Johnson and Rivera, in an unusual lapse of protocol, had a stare-down over the issue Tuesday after Johnson said he was being accused of trying to micromanage the city’s finances. Johnson said his only concern was effective oversight.
In an email Wednesday, Johnson said the charter election would be a talking point throughout election season, and he would not back down from publicly opposing it.
“This is a big issue and will be brought up at every political forum,” he said. “I refused to allow our city to take steps backwards. No single individual within our city government should have that kind of unchecked power.”
Johnson, whose at-large seat is up for election May 5, filed for re-election Friday.
Rivera, who has also filed for re-election, said Tuesday the city manager’s role is to effectively manage the budget and said the council should avoid tying Olson’s hands.
“We the City Council are not managers — but we get an opportunity to make sure we approve the budget,” he said.
Council members Shirley Fleming and Steve Harris, who joined Johnson in voting against the amendment election, said the move could eventually move the city back into financial trouble by taking control out of council’s hands.
“It’s because we’re given that free reign to former city managers that we are where we are now,” Harris said Tuesday. “It’s one of those things where if it’s not broken, don’t fix it.”
Former city officials had been blamed for failing to give council members sufficient financial information when presenting decisions to them, leading to uninformed oversight and a run of deficit budgeting and reserve fund drawdowns.
Fleming said she thought the issue had nothing to do with Olson’s leadership, but the possibility of malfeasance in the future.
“I trust Mr. Olson. It’s not about Mr. Olson, it’s about the position,” she said Thursday. “I feel like this is taking the power away from the council by even suggesting that we give the city manager that much power.”
A worst-case scenario for the type of authority granted under the amendment goes like this:
If an approved annual budget sliced away hundreds of thousands of dollars in police overtime by council direction, a city manager could arrange to shift funds toward that overtime budget while taking funds out of vital functions in other departments without any council approval.
In that scenario, the city manager and at least two department heads would have to be on board with the transfer and would have to avoid council notice during its quarterly budget reviews.
In a Facebook post Thursday, Johnson said the amendment would “allow the city manager to transfer millions of dollars between accounts without authorization of or notification to the governing body.”
That would only be true if the city administration could successfully hide the transfer of millions that the majority of council did not agree with. The council also has unilateral authority to hire and fire city managers, according to the charter, so the type of brazen shifting of money Johnson feared does have some level of accountability.
The council passed an unprecedented financial policy package in December that aimed to control the kind of short-term, unchecked decision making that hamstrung previous administrations. The policy, among other things, gives the council annual review of how the city manages its money and formalizes Olson’s approach to budget creation.
For the average taxpayer, the amendment would not alter property tax rates or service fees — but it does ask for a level of trust in the city administration that remains damaged after the budget crisis of 2016.
That’s when the public learned the city was some $8 million short of a proposed budget and had been overspending for years.
Olson, who has spent his first year in office working to right the ship and brought the first balanced budget to the council in years, said the amendment would make it easier for him to do his job and represented a drastic shift from the city’s past practices.
“The system we have right now apparently didn’t work,” Olson said Tuesday. “This system we have right now won’t solve those problems.”
Auditors, however, did not criticize a system that gave the council oversight; they faulted previous city management for failing to give council members the financial information to exercise oversight.
The other amendment that will go before voters in May has been seldom discussed and presents a more clear-cut budgeting change.
The amendment would alter the language of Section 73 of the charter, which governs the “lapse” of capital improvement project appropriations.
Under current charter language, a multiyear capital improvement project — such as multi-phase road construction — must “lapse” at the end of each fiscal year and then be re-budgeted the next fiscal year.
In practice, the city votes on a “carry over” ordinance each year that rebudgets the remaining costs of a capital improvement project into the next year budget. With the amendment, capital improvement projects would automatically be budgeted over multiple years, ending the “carry over” measures.
The two amendments will be placed on the May 5 municipal ballot.
For more information leading up to the election, go to kdhnews.com/centerforpolitics.