Good Times, Bad Times

As the president of a local oil and gas firm, Dewey Bartlett Jr. has had plenty of experience steering his family-owned business through challenging economic times.

Now, he's trying to do the same thing for the city of Tulsa as its newly elected mayor.

During the campaign last fall, Bartlett often made a point of citing the similarities between the two jobs. And he insists that if Keener Oil & Gas, the company for which he serves as president, was in the same position as the city, he would have no doubts about its financial viability.

"I would not be worried, and I am not worried," he said. "If it was my company, it would probably be easier to get to the point where I'd like to be. But it's a government. There are procedures we need to go through, and we're going to do that. It just takes longer, a little more patience, and more people have to be involved in the decision."

Upon taking office in early December, Bartlett inherited a budget situation that seemed to present new challenges every day. Most of his attention in the first several weeks of his administration has been spent sorting out the city's options and planning cutbacks that correspond with the declining revenue figures the city has at its disposal.

The situation is made even more difficult to grasp by the complexity of the means by which the city's operations are funded. Some city staffers say the system is so complicated it's hard to grasp even for those who have worked in municipal government for years.

Bartlett said his experience as a member of the City Council from 1990 to 1994 gave him a good understanding of the system before he moved into the mayor's office, but he acknowledged that many of the specifics have changed during the last decade and a half.

Last week, the city's communications department produced a series of graphics that illustrate where the city's revenue sources come from and how they are spent. The city has two funds that it draws from--the general fund, which makes up 67 percent of the municipal budget, and the enterprise fund, which makes up the other 33 percent.

The general fund is perhaps the most complex. Its five revenue streams consist of taxes, licenses and permits, intergovernmental revenue, culture and recreation and miscellaneous revenue. The taxes revenue stream is by far the most significant, comprising 76 percent of the general fund. And while use, franchise, hotel/mote and ad valorem taxes are also included within that category, sales taxes make up the biggest portion of it at 76 percent.

That heavy reliance on sales tax for its financial well-being is what has gotten the city in its current predicament. During good times, when consumer spending is up, the city's sales tax take increases, helping it meet all its financial obligations. But when spending is down, sales tax receipts decline correspondingly, leaving the city in a bind.

And the current decline has been steep. Tulsa has experienced seven straight months of sales tax receipts that were less than the same period of a year earlier, the longest such period in the city's history.

More than two dozen departments draw money from the general fund. The two largest--the Tulsa Police Department and the Tulsa Fire Department--take up 57 percent of the general fund, and it is those departments that are facing the most severe cuts as Tulsa tries to bring its expenditures back in line with declining revenue. The remaining 43 percent is split among such departments as Public Works, Tulsa Transit, the Mayor's Office, the City Council, Parks and Recreation and the Planning Department, among others.

The city's other main fund, the enterprise fund, consists of fees raised from such city departments as water, refuse, storm water, emergency medical and sewer, along with the Tulsa Airport Authority. Public Works claims virtually all of that fund at 96 percent, while the remainder is split between information technology (2 percent) and social and economic development (2 percent).

The city also receives money for capital improvements from the third penny sales tax. Two cents from that tax goes to general fund, while the third cent is used only for capital improvement projects that are voted on.

Bartlett said some other revenue sources might be used only for specific purposes, as well, including property taxes, which are used to pay bond indebtedness and maintain the sinking fund, from which the city pays legal judgments that are rendered against it.

The mayor said he anticipated many of the problems he would face before taking office, but the continued decline in sales tax receipts caught him a little off guard, especially given the fact that the city's economy doesn't seem to have taken as much of a hit as many others around the country.

"The city itself, the city of Tulsa, is not in worse shape," he said. "It's constant. Our unemployment rate has increased some, but nowhere near the national level. And our city government is certainly not anywhere near in as poor shape as the state government is. The state government is really going to have a big problem this year, much worse than ours.

"Once we get a little bit of breathing room and make some decisions regarding our present budget problems, we'll immediately go into a mode of determining ways of making money, increasing revenues without raising taxes," he said "And I think we'll have a variety of ways to consider that."

Bartlett flatly ruled out the prospect of a tax or fee increase to address the budget shortfall.

"The simple fact that we're in a recession is obviously shown to us by declining sales tax receipts," he said. "This is certainly not the time to raise taxes or fees--certainly raise taxes. I think that would just exacerbate the problem and make it much worse. It also would give somebody a reason to move out of Tulsa or not consider living in Tulsa."

The cutbacks the mayor is planning to help balance the budget have cuts across every department and a variety of programs.

"In the Public Works Department, for a couple of decades, maybe longer, we have paid for the school crossing guards at all the public schools in the city of Tulsa," Bartlett said. "Now, that's about a million dollars a year. That is going to unfortunately come to an end at the end of this school year. We simply can't afford it. That's a priority decision that we've made.

"In saying that, we recognize the Tulsa Public Schools system is having a very difficult time, as well," he continued. "So what we need to do is to collectively help each other work something out. I think that regarding the city of Tulsa, we can hopefully assist in finding volunteers, possibly even by using our volunteer police officers and encouraging the county sheriff's department to do the same thing. We all certainly need to encourage parents and the PTA at each school to consider helping. When we had plenty of money, that was not a problem. But now it is."

Bartlett said he expects to see the decline in sales tax receipts flatten out by summer, though he acknowledged hearing that a long-range economic forecast recently presented to the state Legislature indicated that 2011 would be a worse year for Oklahoma than 2010.

"That was not good to hear," he said. "I don't agree with that. I think 2011's going to be better. I think 2010 will be kind of a slowdown, a flattening out, and I expect a slight improvement toward the end of the year. The energy industry is pretty well a part of the Tulsa economy, and the pricing of oil and natural gas has improved somewhat in this past year and the beginning of this year. We're seeing a positive change in the number of drilling rigs that are operating in Oklahoma ... and that's always a sign of what that industry is thinking of itself."

The oil and gas industry could have a direct impact on one of those money-making opportunities Bartlett alluded to earlier. The City Council recently adopted an ordinance allowing drilling in the city of Tulsa for the first time since 1906, a change that Bartlett and other supporters believe will generate some additional revenue for the city.

The mayor has another change in mind that he believes could result in a minor windfall for the city. He pointed to the city's reliance on the state Tax Commission to collect its sales tax, a service for which the city pays the state a 1 percent commission.

"We think that we can do a better job," Bartlett said. "We will do an evaluation of that concept soon. And if that's the case, then we'll do it ourselves. That should save money, and I think because we'll be overseeing that collection ourselves, we'll be probably more aggressive to make sure people are paying their taxes."

Bartlett said as far as he is aware, the Tax Commission has not done a significant audit of retail taxpayers in Tulsa--nor is it doing much to make sure those who are not paying their sales taxes to the city are being identified and held accountable.

"To me, we can do a better job of overseeing that by doing it in-house or by possibly using some outside third party, a private enterprise that would do that for us," he said. "There are other ways of doing that than by relying on the state of Oklahoma to do it. I'd be floored if we couldn't do that better. We've also talked about doing that collectively with the people of Tulsa County, because they also receive sales tax money. If we do that collectively, we could share the costs and save both of us money."

As an illustration of how much money that change could save the city, Bartlett pointed to the sales tax receipts for January, which totaled $17 million. The 1 percent commission that was paid to the state to collect those funds comes to $170,000. Throughout the course of the year, that savings would be well into seven figures.

As for the possibility of making any major changes to the way the city generates money, particularly in regard to its reliance on the sales tax, Bartlett said that discussion is a long way off.

"What would worry me is, let's say for example the voters agree to a change and we started funding our government primarily through property taxes," he said. "That would mean that we would give up one or two or even three cents of our sales tax. If we're no longer collecting that sales tax, somebody else--another government entity or somebody else--they might decide to take that one cent themselves. So the effect upon the citizen would not be good. Their taxes would have an increase. I don't want to put us in a position to where we're giving something up that somebody else would take."

The mayor encouraged Tulsans to remember that the present financial situation is temporary--and that the city isn't alone in experiencing economic pain.

"Our future is very positive, it's very good," he said. "The economy that we're all presently experiencing is not just in Tulsa. Other suburban cities around us, Oklahoma City and the state of Oklahoma are having this same experience.

"What the administration is doing, we'll be positioning ourselves to take advantage of the time in the relatively near future when the economy turns around. We'll be positioned to take advantage of those new opportunities, new employments, new business ideas that materialize. We will be the envy of the plains, so to speak. We're doing well."