(Memphis) Memphis City Council members decided to delay a decision on approving a plan from city administration that would bring the city in compliance with State Comptroller Justin Wilson.
“There’s a short-term plan, undertaking a risk assessment that gets started right away. We’ve retained outside caps to come in and get that done,” said Mayor A C Wharton.
The plan is in response to concerns by Wilson that started in January.
Wilson said in a letter he first notified the city of his concerns about negative fund balances and interfund loans in February.
Mayor Wharton and city finance director Brian Collins worked on a plan that Wilson approved to bring the city in compliance and deals with Wilson’s concerns.
“Deals with issues of pensions and post-employment benefits, falling revenues and increasing debt service is the big one. We are either going to have to cut expenses in the long-term or increase revenues,” said Wharton.
Memphis City Council members were not thrilled with the news Tuesday.
Many of them had not heard of the issues with the State until the weekend.
“In 2010, the Mayor refinanced. He basically borrowed money to cover operating expenses. Frankly I was against it then. I’m glad the comptroller has pointed it out because what we said 3 years ago against that refinancing plan fell on deaf ears,” said Councilman and Budget Committee Chairman Jim Strickland.
“But I’m still very much against it. Borrowing money to pay operating expenses and pushing the payments out to future generations,” said Strickland.
If the city does not comply they will no longer be able to borrow.
At issue right now, the Mayor’s budget includes refinancing bonds to give the city an additional $10 million in operating expenses.
State Comptroller Wilson wrote in his letter to the Mayor and Council members that the borrowing was a “scoop and toss” transaction that will move current principal to later years.
This is the last time the State said they will approve such refunding.
“There is very little that we can do. Obviously in the near term it would be very difficult to justify reducing below the equalized rate which is rally status quo as far as overall revenues. We’re going to have to continue to look for cuts but we don’t feel like we can just cut our way out of this. It’s got to be a balanced approach,” said CAO George Little.
What was clear from the letter is that the city faces some huge financial hurdles.
“We can’t keep losing population and loosing tax base. The way to increase tax payers into the city is more tax payers. If you just raise taxes you’re just going to run people off. Either we cut services drastically or raise taxes drastically. Neither one is acceptable,” said Strickland.
“The whole outlook has to change because the idea of differing debt is now off the table,” said Wharton.