Mayor Duke Bennett told the Terre Haute City Council on Tuesday there is “nothing that’s really painful” in a still-developing plan to balance the city’s 2017 budget.
The plan being prepared by financial consultants H.J. Umbaugh and Associates of Indianapolis will rely largely on fund reallocation, though there may also be a “borrowing component,” Bennett said.
As about 50 people looked on, including several city employees, the mayor and council discussed for the first time publicly a state mandate to reduce general fund spending by $7.9 million and total spending by $9.2 million.
The discussion followed separate meetings earlier in the day that members of the administration and council had with representatives of state oversight agencies to determine if the city’s plan was on track and get answers to council leaders’ questions.
“We had a great meeting,” Bennett said of the administration’s session with officials from the Indiana Department of Local Government Finance and State Board of Tax Commissioners. “We were very comforted in knowing that every step that we have in there are things that they will accept when we send our appropriations in.”
But council President Karrum Nasser, D-3rd, had a different account of the meeting he and councilman Earl Elliott, R-2nd, had with state officials.
“When we asked about the plan, they told us that it’s really not up to them to say that that’s a good plan or not,” Nasser said. “It’s basically up to us as a city council/legislative-fiscal policy to determine if that’s a reasonable plan.”
Bennett said the budget balancing act is “all on paper,” repeating a phrase he has used from the start to describe cuts stemming from what he described as a one-year anomaly in state rules for preparing municipal budgets. Cities were required this year to take property tax caps into account on the expense side of the ledger.
City officials said they learned after the fact they could have simply entered zeroes in the spending plan and avoided the state’s budget cut order and resulting turmoil. “We sent the forms in following the rules to a T and were penalized for it,” Bennett said. An Umbaugh representative will unveil the administration’s plan to comply with the state order at a special council meeting set for Sept. 7 as part of a five-year financial plan.
Bennett noted the city will still reduce its longstanding budget deficit this year and said a local income tax increase before the Vigo County Council would help make more rapid progress in deficit reduction in future years.
Following last year’s imposition of a trash collection fee, a sewer rate increase and an increase in payments in lieu of taxes from the wastewater utility, Bennett said a public safety income tax is the only new revenue his administration is counting on for the next three years.
Elliott, finance committee chairman, said he is “much less concerned” about a potential penalty if the city overspends its budget after learning from state officials that the penalty is “incredibly flexible.”
That flexibility, and word that the penalty is rarely enforced, makes it clear, he said, why the Bennett administration did not share the council’s level of concern about the matter.
Elliott has identified nine city funds with current surpluses totaling nearly $9.4 million that could be tapped to shore up other funds that account for the $9.2 million in deficits. While tensions among council members seem to have eased, and the city appears on track to comply with the state-ordered cut, Nasser seized the opportunity to grill Bennett about what the mayor knew and when he knew it.
Bennett said he learned of the state’s order in February but did not know the size of the required cut until May.
“Is it normal for you to have three or four months to go by before you receive that?” Nasser asked.
“Yeah. Absolutely,” Bennett replied. “That’s not my job. I don’t do that. Financial consultants and the controller deal with that and they were dealing with that.”
Nasser said he requested future budget adjustment notices from the state also be sent to the chief deputy city clerk to be forwarded to the council.