[RP TownTalk] Budget and Other Financial Issues

[Jonathan Ebbeler]

Mayor Archer -

It has been a week and you have not responded to any of my questions.  It is disrespectful to the office you hold when you refuse to answer, much less even acknowledge the points I brought up.

We live in a small town and this is not the level of constituent service any of us deserve.  I spent 5 years routinely engaging and answering the tough questions that you, as Mayor, should have fielded.  You have an obligation to the town and to constituents that have questions to provide answers since I am not longer there to do it.

Since receiving some of the information via a Maryland Public Information Act (other information is being currently withheld unless I prepay a minimum of $6200 for the many 'thousands' of emails I supposedly was not privy to as a sitting Councilman that would shed light on information the public has a right to under the law) I can provide some, but not all, of the answers for you.

Feel free to opine in if you wish to clarify any of the 'answers', I will take your silence as your agreement that my facts are correct.  I apologize in advance for taking liberties with using first-person in the 'answers,' but ignoring legitimate constituent questions has consequences.  The original post was here:

http://riverdale-park.org/pipermail/towntalk/2016-May/019752.html


My questions are as follows:

1)      Do you now view the Executive Order issued as unnecessary and have rescinded it?  Under what premise were you communicating that we were going to lose 400k in revenue based on your posts and communications when your budget does not reflect this reality?  Once you subtract off the 'bond proceeds' revenue item that was not realized our anticipated budget as of 6/30 is almost dead on the adopted FY budget.

ANSWER: Yes it was unnecessary and I will not publically disclose the real reasons why it was issued unless you pay the town an egregious amount of money for its disclosure under the MD Public Information Act.  Clearly, from my own budget I knew that we were not in the property tax revenue dire straits that I falsely used as a premise for its issuance.  You are correct in your assumptions since my budget presumes even more money will be collected in property taxes in FY17 despite the loss of the USDA building.  Ultimately it did not matter since in aggregate the town's share of property taxes have increased.

2)      You communicated that the USDA building will have a 'significant impact' to our budget yet the budget proposed has even higher anticipated revenues this year than last.  Do you now agree with my prior well-documented posts on the budget, taxes, and revenue which reflected that the Executive Order was an overreach?

ANSWER: Yes it was an overreach.  The Executive Order did not have a legitimate basis.  My budget clearly reflects that and my prior statements about the financial impact that one building has on our overall tax base are clearly unfounded as my budget reflects.

3)      Please clarify that the prior hiring freeze is no longer in effect and it is the town's intention based on your budget to hire a Finance Director in addition to a Town Manager/CFO to augment the staff we already have, HR/Finance Director and contracted CPA

ANSWER: Mostly true.  The hiring freeze for the administrative side of government has been lifted - we are not budgeting for Public Works or Safety additions.  We have a Job Request posted looking for a Finance Director.  In prior years we had a position filled for the HR/Finance Director at a cost of ~50k + Benefits (fully loaded cost of $70k).  We have since split the single role into two separate employees with a cost of $155k + Benefits (fully loaded cost to the town of $205k).  We still maintain our contracted CPA and are increasing the cost of the Town Administrator/Manager position by approximately $40-50k.  Please also note that the cost of that position alone has risen over 30% over the last couple of years in addition to the new $40-50k increase which leaves a fully burdened cost to the town of roughly another $200k.

4)      Please clarify 'Bond Proceeds' as a revenue item in FY16 for the public

ANSWER:  We balanced the budget by assuming we could increase our debt load and borrow against the revenue.  We should have called this 'Credit Card Cash Advance.'  This is not a true revenue source but we are required by law to at least on the books balance the budget.  We routinely get flagged by the auditors for violating GAAP (Generally Accepted Accounting Principles) for claiming revenue on debt-based items and they have to restate our books every year.

5)      You communicated to the RPBA this month that Economic Development money is available yet your budget clearly does not reflect this in the level of expenditures required for this FY or next.  Please clarify if you are going to act on the requested grants or not

ANSWER:  No action will be taken.  The budget clearly reflects that grant money assumed to be spent this year and next will be modest (in the neighborhood of $5k).  Businesses should not expect any substantial leasehold improvement assistance despite money being appropriated for that purpose in FY16 ending next month.  We did, however, spend most of monies to date in this budget category on attorney fees.

6)      Please clarify the actual surpluses (rainy day funds) the town has is anticipated to have as of the start of FY17

Worksheets: https://www.dropbox.com/s/xroimgxrttbm2t5/FY17BUDGET_NOSALARY.pdf?dl=0

ANSWER:  As CFO of the town I should have clear and immediate access to this information.  I believe the numbers you previously arrived at were correct because as the budget worksheet reflects on Page 121 I did not back out the $912,118 from the balance we ended with on 6/30/15 ($2,616,418). It should have been listed in the FY16 Appropriated Fund Balance line that currently shows $0.  This budget worksheet clearly shows that as of 3/31/16 we have already expensed the $912,118 so the real math should have been: 2,616,418 - 187,339 - 912,118 for a revised Projected General Fund Balance as of 6/30/16 of $1,516,961.  Subtracting out the 3 months of reserves we keep on hand for revenue shocks of $1,508,944 leaves an Available General Fund Balance of just $8,017 not the $920,135 we claimed for this budget exercise.  We needed $348,000 to balance our budget, however, which would not be available if the budget worksheet reflected only 8k not 920k so we left off the prior year's deficit spending to artificially increase monies available to spend.

7)      Please clarify when the town is anticipated to stop balancing budgets on structural deficits (in what FY)

ANSWER:  Hopefully when the Cafritz project starts returning a positive cash flow.  Best guess on that is 2-4 years out before the tax revenue outweighs the expense.

8)      Prior statements that the Cafritz/Whole Foods project would self-finance and the town would not be subjected to paying for it via property taxes seem no longer to be valid.  Please confirm or clarify this assumption/statement.

ANSWER:  The statement is no longer valid.  I realize it is what the town was told but the priority of creating a professional administrative staff is greater than worrying about promises made a few years ago.

9)      Please clarify what is left in the Debt Service Fund Reserve since a portion is being used as structural deficit spending to avoid raising the tax rate (taxes already increased because assessments increased townwide).

ANSWER:  This is unknown at this time.

10)   It was stated in several public meetings that this would be an austere budget.  Once the budgets are normalized to remove surpluses and 'bond proceeds' the budget actually increases over last year which shouldn't be surprising since revenue increased 160k.  Do you stand by your prior statements that it is really austere?

ANSWER:  No, of course not.  Anyone that can do math can realize that we artificially pumped the budget up by using up our surplus and balanced our budget on phantom revenue like 'bond proceeds.'  Town operations haven't been decreased and we in fact are adding additional costs to the administrative side of government.

11)   Generally speaking, your emails indicate a lack of familiarity with our accounting system.  Do you, as the town's CFO, spot audit and/or validate the town's financial reporting personally?  On what frequency do you generate management or other ad hoc reporting that is available via Quickbooks delivered reports?

ANSWER:  Never.  I have delegated all responsibilities to other people and despite being CFO of the town depend on others for all aspects of financial accountability.  This, hopefully, will not be an issue going forward since I have abdicated these responsibilities and assigned them to the new Town Manager thanks to the Charter change vote in May.  Any financial messes the town becomes aware of will no longer be my responsibility even if my administration was the cause of them.

12)   On our Retiree/OPEB 100% unfunded liability what plan does the town have to address this ticking time bomb?

ANSWER:  None.  We have adopted a PayGo (pay as you go) model to address any current and future liabilities.  As you indicated the liability will grow exponentially over the next 10-15 years but hopefully the town can pay for it.  The town has two choices, raise taxes substantially or terminate the plan; each has their own set of issues.

13)   Based on your budget projections, as CFO of the town, when will the town stop its deficit spending and/or what FY is there a potential tax rate increase due to surplus exhaustion

ANSWER:  Unknown but we are out of money currently other than our rainy day fund.  We continue to balance current budgets with bad accounting so performing budget projections are sketchy at best.

14)   At what level of financial shock would the town be forced to raise taxes (i.e. lawsuit, tax revenue shortages, additional Cafritz/TIF Bond expenditures)

ANSWER:  We are basically there now.  We had to borrow money from our reserves so as to not have to raise the tax rate this year.

15)   What consequences was CM Thompson referring to regarding the inability to withdraw the Council/Manager legislation and why were they not discussed or disclosed publically well in advance of a vote for public scrutiny and comment?

ANSWER:  This will not be answered and we will refuse to produce documentation that reveals that information unless a requester pre-pays the town thousands of dollars in advance of the production of the documentation.

16)   What financial auditing/process improvement steps or practices did you as CFO put into place, if any, to address the town being flagged for material misstatements during our audit

ANSWER:  None other than publically claiming we had a clean audit with no warnings or flags, although this was not true.


JWE

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