POSTED ON JULY 10, 2013:
The Fiscal Cliff -- Again
Balancing the budget without more taxes
The City Council's decision to make changes to Mayor Bartlett's budget for the next fiscal year didn't come without warnings of caution from both Mike Kier, longtime finance director and chief financial officer for the city and Jim Twombly, city manager. True to form, the council ignored the advice of professional city managers just as they did when they ignored the requests from Police Chief Jordan and Fire Chief Driskell to let the public vote on a public safety initiative.
Most Tulsans hoped -- after the last dysfunctional city council members either resigned or were thrown out of office -- that forward thinking and cooperative management between the council and the mayor would be the dawn of a new day.
The good news is that the bickering between the two appears to be a thing of the past. The bad news is that the part-time, $18,000-a-year, no-experience-required council thinks it, and no one else, really knows what's right for the future of the city's financial health. To the council's way of thinking, no amount of government experience can replace the councilor's lack of experience. So now, by their actions, we have overloaded budgets in the future with unsustainable spending. Again.
To add insult to injury, when the mayor and his team point out the projected deficit for the next fiscal year some on the Council said "we can find the money, don't worry, be happy." Welcome to la la land.
No one ever said that common or fiscal sense ever got in the way of government decisions. Now we must stare down what could be a very looming problem by taking steps either to prevent or mitigate the crisis projected to occur. Unless we do so, we are going back to the bad old days of spending more than we take in.
There are at least three fiscal steps that the city should undertake. None involve a tax increase. Two of these three steps Mayor Bartlett had proposed to the previous council only to have them shot down because, as we all remember, that council believed no idea was going to be seen as a good idea.
The first step is to go back to the city being aggressive with the Oklahoma Tax Commission (OTC) and for the city to take the responsibility for collecting its own local sales taxes. From the past we have learned two things: the OTC is doing a lousy job of collecting sales taxes from Tulsa merchants, and the OTC charges the city way more than it could ever explain or justify for providing a lousy collection service. It has been estimated that between $4 and $6 million of sales taxes which shoppers put into cash registers is not being collected and remitted to the City of Tulsa by the OTC. Yet we pay the OTC nearly $2 million annually for collection services. The city tried this before through the courts. This time, it may have to go through the legislature. A private firm will collect more and charge less.
The second step is to bring back the revenue enhancement of collecting from insurance companies the reimbursable costs of fire runs. Almost without exception, every major insurance carrier in the state, whether it's for residential or commercial property, provide for fire service costs reimbursement. This can range from $500 to $5000 per fire service call. Since every fire run is an incidental part of the fire loss, collecting under a policy that has this provision and which the policy holder is already paying the premium to provide will not raise the rates on the homeowners. This was confirmed by the Oklahoma Insurance Commissioner and every other insurance professional that was consulted. If for example, the Tulsa Fire Department makes 800 runs per year to properties where the fire service cost reimbursement provision is part of the policy, the city could potentially stand to collect anywhere between $400,000 and $4,000,000.
All the TFD does is submit a fire run report as a claim to the insurance carrier, and they pay the claim to the city.
The third and final revenue enhancement goes back to the OTC. Currently, the OTC charges the city and the county 1 percent of what it collects each year. This past legislative session, House Bill 1875, a sales tax reform measure, was making headway through the legislative process until the clock ran out and the session adjourned. What HB 1875 would have done is cut the percentage which the city and county pay to the OTC from 1 percent to 0.5 percent. Had it passed, that would have been a windfall the city and county could desperately have uses for.
The bill is still alive for the next session. The city, county, Sheriffs' Association, the Oklahoma Municipal League, and the Association of Oklahoma County Commissioners need to band together to get this passed.
The unfortunate news for the citizens of Tulsa is that the council is short of having anyone with professional experience as a fiscal planner, CFO, or accountant, yet, it makes decisions on how to spend over $700 million of our money. The good news is that there are opportunities to make up for this attention deficit disorder by the mayor employing good business practices so the city can get aggressive in going after the money it is owed and stop paying for inferior services. Hopefully, these steps can fill the hole created by the council.
When you are in a hole, it's time to stop digging. Let's see if that happens.
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