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Council continues to move toward mid-year budget adjustment

Thursday, March 6, 2014 by Michael Kanin

City Manager Marc Ott and his budget staff expressed concern about the notion of another mid-year budget adjustment Tuesday even as City Council members moved forward with a process to consider such amendments.


As part of their regular Tuesday work session, Ott did his level best to steer Council members away from what he termed “not a good financial practice.”


Still, a majority of Council members approved the return in two weeks of an item that would bring forward projects they’ve targeted for the potential use of a $14 million FY2014 budget surplus. At that time they will also consider an idea pitched by Council Member Chris Riley to establish a firm budget policy with regard to mid-year budget adjustments.


“(It) is worrisome to me if we foreclose the opportunity to consider exceptional circumstances where there is a high priority item that really warrants consideration outside the regular budget cycle,” Riley said. “I think there should be a fairly high bar to make, as to what the risks are—what are the costs to putting it off until the budget cycle. In general, my sense is that bar would be somewhat higher for recurring items than for one-time items.”


Council Member Bill Spelman was the only vote against the plan. For Spelman, the lack of a comprehensive set of accompanying FY2015 budget figures – data that will not be available until April 24 – was too much.


However, Spelman did signal his support for what he termed the “Riley rule”—the formalized mid-year adjustment policy pitched by his colleague.


Mayor Lee Leffingwell has voiced reluctance to entertain another mid-year budget adjustment but he was in London on city business Tuesday.


Ott’s concerns come on the heels of action taken last year by Council members to spend $10 million on affordable housing initiatives – among other mid-year expenditures—in the wake of the failure of a set of 2012 affordable housing bonds. Ott noted the extraordinary circumstance behind that action, and suggested that the same environment is not in place this time around.


He placed his statement in the broader context of his three decades of experience in city management. “Usually, in my experience, a (mid-year budget adjustment) has been a function of things that occur subsequent to the adoption of the budget that, when they occur, don’t immediately require one to go back…and make some sort of budget amendment because it is understood that in the normal course of things, that is going to occur from time-to-time,” Ott told Council members.


“As those things accumulate, they gather them up,” he continued. “Then, to sort of clean up the budget, there’s some kind of a mid-year budget adjustment….We seem to be talking about it and using it a little bit differently in the sense of it almost feels like we approve a budget, our fiscal year starts Oct. 1…and now we’re going to take another bite at the apple.”


For his part, Council Member Mike Martinez was skeptical of staff concerns. “(Last year) we spent $10 million on affordable housing and then we got into the budget discussion in April and we were told ‘we’re in a difficult situation because you spent that $10 million,’” Martinez said. “Yet, last January 2013, we were told repeatedly that the expenditures of this fund have no effect on the tax rate moving forward. We got through the budget and…we were able to fund all of our priorities and reduce the tax rate.”


Martinez also echoed comments from Council Member Laura Morrison that reflected Council member concerns that they are not involved enough in the budget process. “We don’t have any other way to do it because we aren’t a part of the conversation that builds up to this critical needs list,” Martinez said.


The critical needs list is a department-identified selection of serious funding needs. It replaces the former, what staff characterizes as broader, list of departmental funding shortfalls that formerly accompanied each budget cycle until this fiscal year.


Meanwhile, Van Eenoo offered a new take on the $14 million surplus. He noted that, to keep up with city reserve policies, staff suggests Council members set aside $5 million of that figure for reserve funds. That would leave roughly $9 million, in surplus funds. Van Eenoo also recalled that staff will have one-time expenditure requests for new bulletproof vests and other such equipment. Typically that spending comes from the surplus.


With Tuesday’s Council action, four items – including the potential funding of a new kitchen at the Asian-American Resource Center, continued support of the Austin Technology Council, and planning for the South Shore Small Area Plan – will return for debate over their respective merits March 20. That discussion is expected to be met with fuller budget context – though, as Spelman pointed out, not the complete FY2015 budget picture.


Council members are also expected to vote on Riley’s mid-year policy proposal at that time.

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