CITY ON THE BRINK: Intense concern, no consensus among elected Terre Haute officials

Terre Haute is spurting financial red ink like a nicked artery, but whether it needs a bandage or surgery to stem the bleeding depends on which member of the City Council you ask.

At one time or another, all have voiced concern about the city’s growing deficit cash balance, which sank to $8.9 million on June 30. But some on the council are far more worried than others, and their thoughts on what needs to happen to resolve it vary greatly.

The council has approved every budget Mayor Duke Bennett has proposed. Divisions grew more pronounced in recent years among members. Three of the nine — Todd Nation, John Mullican and Neil Garrison — voted against the budget last year.

Among the most vocal in his fret over finances is Nation, a Democrat representing District 4 since 2003. He has been openly critical of what he sees as Bennett’s failure to adequately respond to declining revenues.

“For years now, we’ve been spending more than we take in, and that’s getting us farther and farther into the hole,” he said.

“We started this year with a $5 million-plus deficit, and it looks like we’ll be closer to $7 million at end of this year.

“I think our financial position is bad and getting worse,” he said.

Nation believes the city hasn’t done enough to bring spending in line with revenues. “There are still a number of things we need to look at,” he said. “I know none of us want to have layoffs. I think that’s probably been the main thing that’s guided policy so far.”

At the same time, “I think our time of reckoning is here and we need to be making the tough decisions that have been put off for years now,” said Nation, who said he hopes employee layoffs aren’t necessary.

Council president John Mullican, a fellow Democrat first elected from District 6 in 2007, shares Nation’s concern. Mullican says he’s “really worried about the budget. I don’t see things lining up. ... Our cushion is definitely gone.”

The council approved a 2015 budget that included millions in revenue from Powerdyne as well as grant money from other sources — all of which never materialized. If the city proposes a 2016 budget similar to the past two years, it will be millions short, Mullican said.

He believes the onus is on the mayor to prepare and present a budget that addresses the city’s financial challenges. Mullican views the council’s role as that of “fiscal oversight.”

The council’s choices are limited — it can accept, reject or reduce the budget. If the council doesn’t approve the budget, it reverts to the prior year’s. The lingering question, though, is: “Will we have the money to pay the bills?”

“We’ve learned during last year’s budget cycle how difficult if not impossible it is for us to reduce the budget,” Mullican said. The council is not equipped to make reductions line-item by line-item. “We are a part-time council. We are not in City Hall 40 hours a week.”

Everything will have to be considered when it comes to financial fixes, including imposing a trash fee, Mullican said. “I will consider it, but right now, it is just a vague idea.” The mayor has suggested it as an option, but it has never gone before the council for a vote.

Mullican remains concerned about the impact to senior citizens on fixed incomes and whether that would be taken into account. “For me, personally, I need to be assured the city has done everything it can to really tighten its belt,” he said, before he would consider supporting a new fee.

Charging residents to have their trash hauled away is a revenue-generating idea that has been suggested for several years. Bennett was asked about it a year ago at a special meeting with the City Council, whose members wanted a better understanding of the depth of the city’s financial hole. The mayor said not now when the idea was brought up back then, but on March 11, he floated the idea again in a Tribune-Star interview.

“We have to go back and revisit the trash fee. Every city has a trash fee but us, pretty much, in the state,” the mayor said. “The general fund pays a $2.5 million per year [trash] contract. We are paying that bill with $9 million less coming in” annually to the city’s general fund from property tax collections as a result of state property tax caps approved by Indiana voters in 2010.

Bennett has stated that a fee of $9.25 per month to the city’s approximately 23,000 households would generate about $2.6 million. Instituting a trash fee, however, would require approval from the Terre Haute City Council.

The very next day, the mayor backed off the amount and backed down from proposing a trash fee anytime soon.

“That is a future opportunity for revenue,” Bennett said after the Tribune-Star published a front-page story with the headline: “Mayor eyes monthly trash fee to lessen deficit.”

“We will not bring anything to the council this year,” Bennett said. “We are going to continue to look at that and explore that.”

The fee would be raised over a number of years to reach $9.25 per month to the city’s approximately 23,000 households, he explained. “We could start at $5 or $5.25 and raise it 50 cents or 75 cents a year until you get there, so not a big burden on people, yet it would still help us. We are going to go back and review that and explore it. Nothing will happen on it this year,” Bennett said.

“We will probably open it back up next year during budget sessions and start the discussion again on this,” the mayor said. “The administration has got to come up with some solutions and the council for revenue. We don’t have a choice. Costs go up every year.”

In an August interview with the Tribune-Star, the mayor was again asked about the trash fee and why it has not been pursued. “The council didn’t want to do it,” Bennett said. “The votes weren’t there, so we didn’t present that in the form of legislation because the council didn’t support it. They made that clear at numerous public meetings.”

Asked if he will revisit the trash fee idea again, he said, “We have to. We have to look at it, in the future, not right now. We’ve got other things we’re focusing on.”

Several council members have expressed a willingness to consider imposing a trash pickup fee; however, many believe it must be in concert with reduced spending.

One such member is Neil Garrison, who has represented District 5 since 2008. He doesn’t think the city has done enough to bring expenditures in line with decreasing revenues.

In 2012, Umbaugh and Associates — one of the largest CPA firms in the Midwest, whose financial analysts advise units of government, including Terre Haute – outlined possible options for the city to raise revenues and cut costs.

“We’ve seen plans. ... A plan is nothing if it’s not implemented,” Garrison said.

He is leery of the city’s spending habits, including what might be done with revenue raised through new fees, such as for trash pickup. “There are a few of us who are wary of giving this mayor more money; he’s clearly been mismanaging what he has,” said Garrison, who also believes the mayor has misled the public about the city’s financial status and fund balances.

Garrison also emphasizes the council as a whole “has very limited options on what to do with a budget. We can approve it as is, make motions to reduce it or simply not approve it,” in which it becomes the prior year’s budget. “The majority of these budgets are mayoral-driven. My thoughts are the mayor needs to really lead this charge and in making our revenues match our expenditures.”

While he is not aware that the council has ever denied a budget, Garrison said “the majority of the council tends to follow what the mayor presents.”

Councilman Don Morris also is frustrated by the city’s failure to make adjustments to reduced revenues. “I don’t see where we’re saving or making an attempt to adjust the general fund, and that’s where the biggest deficit is, and that concerns me,” said Morris, an at-large Democrat who is completing his second term on the council.

He believes City Hall should have been better prepared for the impact of property tax caps. “We knew this was coming; it was inevitable,” he said. “Everyone was well aware.”

Morris does give the Bennett administration credit for slowing hiring and not filling vacant positions, but questioned efforts to cut costs and raise revenues. The city should have followed the county’s lead on salary freezes, he said.

He expects a trash hauling fee to come before the council next year. “I sure don’t want to do it,” he said, but added the mayor has failed to put forward any other viable options.

The mayor’s budgeting practices also concern Morris, who said he doesn’t want the city to get in the habit of using tax anticipation warrants — advances on the twice-annual property tax disbursements — to cover shortfalls. The city has used the proceeds from tax anticipation warrants to help meet cash flow needs since May, 2012.

“I just don’t think we’ve made some correct decisions,” Morris said.

Republican Councilman Bob All acknowledges there is a problem, but at the same time, he says city finances are always in a state of flux. “On any given day, we are close to being broke, then revenue comes in and we’re cash-flush,” All said.

He said that based on information he’s received from the city controller, “all of our bills are paid” except those received mid- to late-July or later. “We are keeping on top of things, somewhat.”

The city has been hurt by property tax caps. “You just cannot ignore that,” said All, the District 2 representative since 2012. His time on the council is winding down, though, after his loss to Earl Elliott in the May primary election. Elliott has served as the council’s financial consultant, but All is wary of that advice.

“I don’t think we’re as bad as some of the critics say we are,” All said. He contends that Elliott “is kind of painting a gloomier picture than I think is valid,” and doesn’t always factor in all the revenue the city expects to receive.

All says the mayor is “in a tough place,” but he staunchly supports Bennett and his efforts to deal with the city’s financial difficulties. “I think Duke, if he gets the chance, will get us through the problems we have. It won’t be next year, but within his next administration, you’ll see a positive turn financially.”

He believes what’s needed is a combination, in moderation, of spending cuts and revenue increases. “I think, financially, [Mayor Bennett] can get us out of this with the course that he’s been following, and maybe it needs to be fine-tuned a little,” All said.

As far as cuts, he believes city departments “are pretty barebones right now. I’d hate to cut fire and police protection; I don’t think the public would go for that, either.” All believes, though, that whatever remedies are chosen “won’t be popular or comfortable.”

Norm Loudermilk, D-3rd, another lame duck on the council, described the state of city finances as: “The boat isn’t sinking, but the boat has a leak.”

A city fire department arson investigator, Loudermilk will no longer serve on the council after this year; he was not able to run again because of conflict-of-interest legislation passed a few years ago.

The city has done a lot to reduce expenses, he said, and has far fewer employees.

“We are cutting back,” said Loudermilk, first elected in 1995. “I don’t think the city council, department heads or mayor have made mistakes in spending. I don’t think we’re spending on things we shouldn’t be ... or overspending. Some of our department heads are the most frugal I’ve seen in my almost 30 years of government work.”

Loudermilk poses the question, does the city continue to provide good police and fire protection and maintain street, park and other services, “or just stop everything so we can feel warm and fuzzy about having no deficit?”

He notes an important distinction between city and county budget oversight. “It is the mayor’s budget,” he said, and the mayor determines where, and how, money is spent. The council can vote in favor of, or against, the budget as well as reduce it, but “we don’t have commanding oversight over the budget.”

The city does need to look at options to increase revenue, which could include continued personnel reductions through attrition, a trash fee or payment in lieu of taxes for nonprofits that benefit from city services, Loudermilk suggested. He also broached looking at health insurance spousal carve-outs, something the county has done, but he acknowledged collective bargaining agreements may not allow action on that until new contracts are negotiated.

“Anything we can do to raise revenue, we have to look at,” he said.

Loudermilk went to the city attorney a month ago and asked that a trash fee ordinance be prepared, not because he wants to pass one, but because “the city council can’t discuss it unless it’s on the agenda,” he said. No one wants to increase fees because “they are worried they will get beat in the election, but sometimes you have to do what is right for the community because you have to have things done.”

One option Loudermilk won’t support would be budget cuts affecting public safety. “I can’t support efforts to cut public safety in our community. I think it’s ludicrous. Crime is not getting better,” he said.

If cuts need to be made, he favors bringing in department heads during budget hearings and having them identify where those cuts should occur.

In retrospect, Loudermilk believes more should have been done years ago, when officials realized a property tax cap storm loomed. “We should have looked at things like user fees and reducing public works projects, so we could have saved some of that revenue from when the tsunami hit,” he said. “Now, the city’s back is against the wall” and city leaders will have to “make some tough decisions.”

Fellow council member Amy Auler favors better fiscal management — watch spending and only shell out what is necessary, she says. Auler, the District 1 council representative since 2012, favors “getting some of the fat out of the budget” by cutting unnecessary expenses.

With her prior experience working in the Harrison Township assessor’s office, Auler knew Terre Haute would notice the impact of property tax caps. “I could see all this coming and knew this was going to hurt us,” she said. Her father, Larry, formerly served on the city council and is a retired firefighter.

While Auler said the council is working with administrators to figure out what should be done and studying the proposed 2016 budget, she draws the line at added expenses for residents — such as a trash hauling fee. She said she couldn’t support putting the extra costs on single parents, retired people or someone living paycheck-to-paycheck. “I’m not one for adding anything else to the taxpayers,” she said.

City creditors and vendors are feeling the strain, though, which concerns Democratic at-large Councilman Jim Chalos, who believes they should be paid on time. As the city’s financial struggle has worsened, many have waited months to be paid.

“Obviously, we want to start getting our creditors paid. That’s number one,” Chalos said. Similar to Loudermilk, Chalos is not seeking re-election because of a state law that says he can’t keep his job on the city fire department and also serve on the city council. He has served since 2004.

While Chalos said the city “could have done better” responding to property tax caps and revenue losses, he said it was difficult for him to offer any more analysis until he could review the proposed 2016 budget, to see what plans the city has to balance the budget.

Councilman George Azar, D-at large, has seen his share of budget ups and downs. First elected in 1999, Azar is straightforward in his assessment: The city has to prioritize needs over wants.

“You don’t use money on what people want, you only use money on things people need,” he said, drawing a distinction between spending money for essential services, such as public safety, and buying new equipment.

Azar thinks he’ll get buy-in from the city administration on spending only for essentials. “I believe they’ll agree to that, to be honest.”

He also puts the onus on the council, saying it should look at every possible area to cut when considering the 2016 budget. “I definitely think we’re going to have to be very creative when we do the 2016 budget,” Azar said.