Since the Watergate days of Richard Nixon, the press has loved using the phrase "What did he know, and when did he know it?" as a way of putting a tight noose around the neck of a public official to hold him or her accountable for their actions. Two issues in the mayor race have seen this phase brought back in use.
The Taylor campaign used it to corner the Bartlett campaign on the green waste garbage issue. We have heard a great deal about that over the past several weeks. Another area has now surfaced in the campaign. Bartlett ads corner Taylor on her management of the fiscal crisis the city faced in 2009, and why she decided not to run for reelection during some of Tulsa's darkest days. What did she know about the seriousness of the fiscal crisis, and when did she know that Tulsa was headed for, as some have suggested, bankruptcy?
From the support for the Bartlett campaign coming from Congressman Jim Bridenstine to the announcement by Bill Christiansen that he will not endorse Bartlett, a debate is underway on whether the city was on the brink of bankruptcy when Kathy Taylor left office in 2009. It appears some are using the word "bankruptcy" in its true and legal sense of the word, and others are using it as a term where one is spending more money than they're taking in and, therefore, cannot meet their financial obligations and duties.
A city can declare bankruptcy under Chapter 9 of the Bankruptcy Code. As we have seen over the past several years, many cities throughout the country have been forced to file bankruptcy. The announcement this year that Detroit had to do it is just the latest causality. Some have stated that they did not believe that cities in Oklahoma were allowed to file bankruptcy under Oklahoma law. Yet in February of 2007, the town of Moffett -- near Sallisaw -- did file a Chapter 9 in the Eastern District of Oklahoma.
This occurred after the Attorney General's office shut down a local speed trap which was the cash cow for the town. Without the speed trap, the town of Moffett could not repay the town's nearly $200,000 debt and, therefore, had to file a Chapter 9 bankruptcy.
The city government in Tulsa has two fiscal limitations that make it extremely vulnerable to bankruptcy or, at the very least, a very unstable financial base.
The first is that almost 80 percent of the nearly 4,000 city employees belong to one public employee union or another. How a city like Tulsa, which prides itself as a private sector-built town, ended up with a "unionized" government is hard to understand.
When nearly all of the labor force and labor costs are tied to a collective bargaining agreement, there's little unilateral room for the mayor, as the CEO of the city, to control costs. Balancing the budget without violating the fair labor standards act, or any number of labor laws, or terms of the contracts becomes a daunting task.
The second feature that makes Tulsa so vulnerable is the almost complete dependence on sales tax to operate city government and deliver basic government services. The predictability of sales tax revenues is impossible to estimate when a national recession sweeps across the country, or even a particular industry suffers an overnight collapse like we have seen over the past decade. Think about the difficulty in setting and sticking to a 12-month budget built around a stream of revenue you can neither control nor predict.
Reasons for a city to consider bankruptcy as an option vary. In many cases, it's due to the city's inability to meet or satisfy its employee pension obligations. It could be as a result of a large lawsuit judgment. Or, as occurred in a town in Arkansas, a large company closed and laid off its workers, causing sales tax revenues to drop dramatically. This single event created a situation where the town could not afford to operate.
The city of Tulsa's government is the perfect receipt for a fiscal collapse. Whether it's called bankruptcy or not, you have almost 80 percent of the cost of running the government locked down through collective bargaining agreements. The city then has to satisfy these "fixed costs" on the backs of a very undependable and unstable source of revenue.
In 2009 and 2010, the city of Tulsa was headed toward not being able to satisfy its obligations. Some, like Bill Christiansen, said the city council balanced the budget every month. Sure they did. But how? And how long was it going to go on until someone stepped in and made the difficult decisions that had to be made?
During the period of time to which Christiansen refers, the budget was "balanced" by taking money from the city's reserve fund to make up for shortfalls each month. They also made small spending cuts here and there, but none that came close to stopping the bleeding. It was akin to you and me raiding our savings account or 401k each month because we are spending more than we are making.
For about five months, the Christiansen council and the Taylor administration used this mixed approach of cutting spending around the edges (turning off highway lights, grounding helicopters, furloughs, etc.) and dipping into the reserve fund hoping that would stave off effects the recession was having on local government.
In a five-month period of time in 2009, the city council took $11 million of the $13 million in the reserve fund to cover their over spending. Did they balance the budget each month? Yes. Did they do it in a responsible way? No. Did they have enough money in the reserve fund to keep covering the over-spending for the remaining six months of the fiscal year? No. The reserve fund would have been gone in about a month, leaving five months hanging out there with no identifiable funding source.
That's when bankruptcy would have had to be considered, unless something drastic was done. Taylor would have been forced to get serious about cutting spending. That's what was done in early 2010 under Mayor Bartlett, in a well thought-out plan to save the city from further fiscal collapse. So, the question is: When did Mayor Taylor know what was facing Tulsa's next mayor in early 2010?
What did she know and when did she know it?
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