What is a “Balanced Budget?”

A “balanced budget” is one in which revenues are equal to expenditures. That’s the definition in any accounting textbook in the world.

The single most important thing you can do right now as a citizen of Scottsdale, Arizona is to take a ten-minute break and watch the video of remarks of soon-to-be-former Scottsdale City Treasurer David Smith at Tuesday’s City Council meeting.

We are in some serious financial trouble folks. To paraphrase Mr. Smith, we have “legally balanced” our budget in accordance with a state law that allows us to spend savings (unreserved funds) to cover expenses that aren’t supported by tax revenue. And this isn’t first time we’ve done this.

The first time it came to my attention was last year. As far as I know, I was at that time the only member of the public to object to this deviation from sound fiscal practice (and legally-adopted, enumerated city financial policies). In response to my concerns, Mayor Jim Lane called me “goofy.” This from someone who was supposedly a CPA, and campaigned on a promise to bring a “businesslike approach to city government.” Clearly, Lane should know better.

This is going to increase our debt. By my calculations and Smith’s balance sheet, it looks like we will wind up almost $8 million in deficit at the end of FY2014 ($9.6-1.8 million). So about the same as our structured deficit this year (which Lane also denied). That’s a violation of Scottsdale Financial Policy Number 4.

That, and the departure from good practice could (according to Smith; but I’ve said it before) negatively affect our bond rating. Thus it could cost us more to borrow money in the future.

Even if our ratings don’t erode, the $200 million+ in borrowing the Mayor intends to put on the ballot this fall will push us up to $1.5 BILLION in debt. And we already spend an amount equal to 1/3 of our operating budget to service our current debt.

Smith’s presentation [link to video] begins at about 0:45:00. If you just can’t stomach the spreadsheet (a very small one) or the pie charts (there are only two), you can skip to Smith’s summary at about 0:58:00.

Smith says explicitly that while the budget is “legally balanced,” it is “not sustainable.” References to spending “one-time monies” or “savings” to cover “ongoing expenses” are quite eye opening. The Capital Improvement Projects Fund (maintenance for public works like roads, etc.) is in an “overdraft position.”

Mayor Lane’s self-serving lecture in response to Smith’s presentation is sickening, especially his criticism of bolstering public safety funding, while simultaneously ignoring his own crony capitalist subsidies for golf, polo matches, and cultural welfare.

City Treasurer David Smith’s resignation.

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9 Comments

  1. John with Korte supporting City Staff’s desires to control the agenda, spending is going to skyrocket. Option 2 on the bond language, opening the “conversation” on light rail, etc.

  2. It appears, as you say John, that Mayor Lane has forgotten all of his basic training in accounting principles. But, then again, what else is new with this and the other council members excepting Phillips & Littlefield.

  3. I attended that meeting. I took the packets displayed at the back of the Kiva, the same ones that the Council gets to study before each Council meeting. Those packets that they only have about four days to study and ask staff questions.

    They are huge, but full of information that leads to MORE QUESTIONS.

    It baffles me that elected officials do not understand the two or three things that our fore fathers deemed necessary for all levels of government to do: Provide for the common defense – at the local level that is “Public Safety”. In fact you cannot incorporate at a city without doing that. I the early days that might have been a sheriff and a volunteer posse. In this day and age of sophisticated crime and criminals, mobility, high tech tools we need well educated and highly trained public safety officers – Fire and Police.

    Several things fall under the second guideline – government is to do the business of the people that the people cannot do for themselves. Few among us can get out there and pave the roads, lay water lines or sewer lines, install traffic lights, or inspect and approve plans for construction (though this last one gives me serious pause)………..DOING THE BUSINESS OF THE PEOPLE THAT THE PEOPLE CANNOT DO THEMSELVES!!!!!!!

    Art, music, sport, entertainment, recreation are important to the fabric of all communities………..but the public tax dollars need to used first fort public safety and public facilities like water treatment, sewers, roadways, air ports, traffic and transportation.

    Way too much of the tax dollar is being given to organizations and events that at best we should be providing as a one time gift, or grant. The funds dealt out for golf (and I like golf, don’t play, but followed my dad around the Thunderbird’s Golf Tournament at the Phoenix County Club and the Arizona Country Club for 13 years and when he could no longer walk a course I drove his golf cart), now we are being asked to support construction of upgrades to private courses, too. Then we have Polo asking for funds, and getting them, though attendance at these events is restricted due to affordability.

    Concerts and art events have asked for operating funds. They used to be charitable fund raising events most times underwritten by businesses in the community.

    They might be worthy of a one time donation from city coffers, but not to the extent we have taken things over the last few years.

    Public safety, Fire and Police should not have to rely on one time donations from the unreserved funds, to deal with staffing costs.

    This Council approved the Downtown Plan, the Downtown Infill Incentive District, the explosion of bars in a square mile area of the Downtown and the creation of high density housing within the same area. It just happened according to staff.

    Developers knew what they were doing. Council, the Planning Commission and planning staff did not take the time to look at the patterns falling out from 2006 to the present.

    Well, you can’t have that kind of development with the increased height and density, keep the neighborhood and people safe, without increasing the number of well educated and highly trained people to staff those facilities and work with the people.

    WE have had TWO years to set together a plan to fund these public safety programs and we tell them today we will give you a one time increase to your budgets and you need to come back with a plan to fix the shortages.

    Our interim City Manager has failed miserably in dealing with the Budget issues, going along with partisan political stance of the Mayor.

    It took many residents coming from many walks of life, many economic levels, putting the City of Scottsdale before their personal political desires, to build the sound foundation that allowed Scottsdale to grow. We need to get back to that focus and philosophy today.

  4. This City is out of Control – Jim Lane and his Council people are out of control –

    Thank goodness we have Littlefield and Philips on the “people’s side” but they cannot do it alone –
    More people need to get involved but it may be too late!!

  5. John, thanks for keeping us informed. You are not “goofy.” Nor are you the city’s “foil” as noted in a recent Scottsdale Republic article. You probably are the city administration’s gadfly, which is good. The essence of a healthy republic may be found in the civic activist’s ability to compel public dialogue on issues of importance. This is a service you provide. The mayor, council, and administration are acting according to what they believe to be the best interests of the city. They are good people. But, they are also politicians who need to be reminded that actions have consequences. You are doing so with your intelligent dissent on the use of unreserved funds.

  6. I voted against this budget not only because it is unsustainable but because it funds fluff while NOT funding pressing public safety needs. Smart fiscal management means budgeting your top priorities first (to make sure they get funded) and your least important spending last. The citizens of Scottsdale have made it clear that public safety is city government’s top priority yet our staff and my fellow Councilmembers left pressing public safety needs such as staffing a Downtown firehouse and solving our problems with recruiting and retaining police officers and dispatchers until the END of the budgeting process. So, these pressing needs did NOT get funded. Scottsdale citizens should be outraged about this budget and how it was created.

  7. The “TRICKY” balanced(unsustainable) budget practice pointed out by Smith is intended for use only as a crisis measure. No crisis exists so we are being led into ddeep indebtedness to satisfy the whims of Jim Lane and his council supporters.
    The answer is obvious: Vote Lane out of office at the next election.
    Charles Poston

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