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.