Friday, May 26, 2006

May 26, 2006 Mr. Smith Was "Right"--Hamblen County Uses "Wrong" Numbers

Well, Mr. Smith was right.

In a previous blog entry (A Taxpayer Speaks...), I posted remarks made recently by Mr. Benny Smith to the Hamblen County Commission. Mr. Smith talked to Commission about the two sets of financial numbers or records that are kept and used by the County Mayor's Office.

A little bit of background information might help readers understand what Mr. Smith was talking about. Hamblen County has two sets of financial records: (1) the Mayor's computer records of yearly spending and (2) the audited end-of-year spending records.

At yesterday's budget committee meeting, it was time to find out for certain which set of financial numbers the Commission has been given.

Are we using the audited financial numbers (that the Mayor calls the county's "Financial Bible") or are we using the Mayor's uncorrected computer numbers in preparing our budget?

Why is it important to use the audited numbers? Because they are the most accurate spending records available---even the Mayor acknowledges this when he refers to the audit as the county's
"financial Bible."

When I took office in 2002, Commissioner Phillips, Commissioner Osborne, and I began to push for a more accurate budget process. As the basis of an improved budget process, we wanted to use the most accurate historical spending records available. We proposed and the Commission adopted audited-based budgeting.

With audited-based budgeting, Commission asked that our budget documents include a 5-year history of audited spending so that we could see how previous years' spending compared to the proposed spending plan in the current county budget.

To find out which records we have been given, I asked Finance Director Nicole Epps where the 2004 spending records in our budget book come from.

Evidently, she didn't understand what I was asking, so I asked: "Are the 2004 spending figures that we are looking at in our budget books from your computer records or from the 2004 audit?"

Nicole answered that the 2004 records that we have been given are from a Bridges Computer program. I guess that means we are doing Bridges-based budgeting instead of audited-based budgeting!

Using the computer records means that we are using unaudited and uncorrected numbers even though Commission adopted audited-based budgeting years ago for the purpose of having the most accurate available record of county spending in front of us during each budget cycle.

All the historical spending (02-03, 03-04, 04-05) that commission has been given comes from unaudited/uncorrected computer records even though audits for all three of those years were available on March 31.

This commission wanted and voted for more accuracy in the budgeting process by adopting audited-based budgeting, but we didn't get it.

It is unfortunate that the County Mayor and his Finance Department have snubbed the entire Commission.

Actually, it is more than unfortunate and it is more than a snub.

Taxpayers, too, deserve to know that the most accurate records available --audited records--are given to their commissioners and are used by the County Mayor and the Finance Department in the budget cycle.

This is just one of the reasons I spoke yesterday of the mess we are in after just three budget meetings.

Forgotten debt payments ($1 million), overstated revenue ($200,000+), insurance miscalculation ($110,000), money put into budgets (e.g. Cherokee Park) that shouldn't even be there ($15,000), money moved to a budget (Trustee) but never taken out of the budget (Assessor) that it came from.

And now---the admission that county commissioners have been given old, uncorrected, unaudited expense records to use in the budget process. It's a mess, and there is little or no accountability. Taxes, appraisals, and revenues go up and up and up, and politicians come up with plans to spend every penny of every increase and more. And if that isn't enough, the politicians borrow millions, spend it, and then just pay the interest only, happily passing the debt on to their children.

What happened to common sense and fiscal responsibility?

May 26, 2006 Moving Forward with Wrong Numbers (TPTS Part III)

The Perfect Tax Storm (TPTS Part III)

The budget process continues in Hamblen County, and wrong numbers are everywhere. It's a lot like a shell game, and it looks like the ones in charge of the shell game aren't even sure what's going on. Here's a number, now it's gone!

In the first two meetings, we had two errors totalling $1.2 million+.

1st: Expenditures of $1,000,000 were somehow "left off" our debt payments. Kind of like preparing a family budget and "leaving off" the mortgage or car payment--not a good idea.

2nd: Revenues of $200,000+ were listed in the highway budget, but that state aid money will not be received by the county according to Road Superintendent Barry Poole. Poole knew the facts and figures on the highway expenditures, but he said he had not been consulted during preparation of the highway revenues and so he was surprised to see that state aid money had been included. Kind of like preparing a family budget and counting on income that won't be received--not a good idea.

See my posts of May 23 and May 24 for more detail on these two errors.

Then yesterday, it was announced at the beginning of the meeting that insurance expenditures.shown in the Hamblen County budget documents are wrong for just about every department---total of this error is about $100,000+.

Unlike the previous errors, the good thing about this error is that when the corrections are made, our planned 06-07 expenditures will be reduced by about $100,000. That reduction in expenses will reduce the amount of the projected 06-07 general fund deficit.

How did this error happen? The total cost of each employee's insurance premium (the portion paid by the county and the portion paid by the employee) was shown as a county expense. However, only the portion of the premium that is actually paid by the county is really a county expense.

There were numerous other errors discovered yesterday--some were corrected yesterday but others will require changes to budgets that have already been "approved" in prior meetings.

I stated at the start of the budget process that we needed to wait for better numbers and until after we had looked at all budgets before we started "approving" budgets.

With that in mind, I have been voting "no" on almost all budgets with an occasional "yes" on a very small budget or on a few budgets where expenditures are less than last year.

With the insurance error that affects almost all budgets and then other errors that were discovered midway through yesterday's budget review, it became clear that a simple "no" vote on all budgets is best.

Why? Because almost every budget will have at least one correction to be made to insurance costs and many of those same budgets have additional errors that will have to be corrected.

At this point, we just need to take in information, ask questions, and wait for the many adjustments to be made before even considering "approval" of budgets.

Wednesday, May 24, 2006

May 25, 2006 A Taxpayer Speaks to the Hamblen County Commission

At the May 18th meeting of the Hamblen County Commission, a gentleman addressed commission about the upcoming budget process.

Accountability is an important word for taxpayers everywhere, including Hamblen County.

Unfortunately, as this taxpayer points out, with two sets of accounting numbers, there can be no real accountability in Hamblen County---just confusion and chaos.

Here is the text of his handout:


I am here today to address the budget process that began May 16th. Before I make my comments I want to make it clear that the comments are my own and that I do not represent anyone other than myself as a taxpayer.

For the past several years you have been given two sets of figures for the budget process: the computer figures and the audited figures, complicating the process.

Mayor Purkey has stated that the audited figures are the county's Financial Bible. If that is true, then the computer figures should be adjusted to match the audited figures, enabling you to deal with one set of figures.

Last year this commission requested that the adjustments be made, but for some unexplained reason Mayor Purkey denied your request. This raises the question: Why does Mayor Purkey find it necessary to have two sets of figures?

We all know how hard it is to budget one set of figures. I can only imagine how difficult budgeting two sets of figures must be for you.

I urge each of you to think about this situation and think about the taxpayers. Stand up and demand what common sense told you was right last year. Insist that the adjustments made in the audit are made to the computer figures as well, providing one set of numbers for the budgeting process now and in the future.

Benny Smith

The two sets of numbers that the Mayor insists on keeping have been a source of continuing problems in trying to achieve real accountability in Hamblen County government.

There are ways to clean-up the books after the audit has been completed and still maintain the pre-audit records if that is the concern.

Mr. Smith's words and questions are clear and concise.

Why does County Mayor David Purkey insist on keeping two sets of numbers?

If the Mayor believes, as he has stated, that the audited spending records are the county's "financial Bible," then why are commissioners given computer spending records, instead, during the budget process?

May 24, 2006 The Perfect Tax Storm (Part II)

Budget Meeting of the Hamblen County Commission 5-23-06.

Several votes were taken yesterday to approve some of the department budgets for 06-07.

I moved that we take each budget under advisement--something we have done in the past--until we have looked at the entire budget.

I think it is a wise thing to do because you talk to the department head, but you wait to give final approval until the whole budget has been looked at and, most importantly, until better updated numbers are in front of you.

[We've already seen a $1 million dollar spending error on May 16 as reported in my post yesterday and a $200,000+ revenue error that was brought out yesterday. The $200,000+ revenue error was where the highway revenue budget showed the county receiving "state aid money" but, as Road Superintendent Barry Poole informed us, that money will not be coming in and should not have been put in as revenues.]

Instead of taking the budgets under advisement, a majority of commissioners voted to approve each department's spending budget one after the other in a piecemeal fashion. What will it all add up to in the end--when you put the pieces together? Another deficit budget.

That's where the Perfect Tax Storm is swirling big time. The Perfect Tax Storm is what happens when you keep spending more than you take in and you keep approving deficit budgets. That's what Hamblen County has been doing for the past several years.

If the revenue and expenditure figures do not change a lot in the next few weeks and if we keep approving all the spending that is in front of us, then we will be looking at a deficit general fund budget for 06-07. We will have slowly approved spending more than we expect to take in.

And that would be a deficit budget before there is any talk at all about pay raises or the school budget!

It's full steam ahead to approve all the spending increases and then saddle the taxpayers with higher tax rates this year on top of last year's higher property appraisals--the old double whammy right in the pocketbook.

The engineer and his crew are on board, and the taxpayers are going to be taken for a real ride this year!

Tuesday, May 23, 2006

May 23, 2006 The Perfect Tax Storm (Part I)

Two budget meetings are behind us, and we are headed toward The Perfect (Tax) Storm.

When last year's deficit budgets were passed, the path toward a financial train wreck was begun. This year it appears to be full steam ahead.

Who will pay for the wreck? The taxpayers.

If you thought the 15-cent property tax increase in 02-03 was bad, the 21-cent increase in 03-04 was bad, and the re-appraisal of 05-06 that increased your tax bill was bad, you haven't seen anything yet.

Our first budget meeting on May 16 got us off to an odd start as we looked at the county debt budget for next year. About midway through the discussion, I pointed out that there was a $1,000,000 error (yes, that's one million dollars) in the debt payment budget we had just been given for the 06-07 budget year.

The budget we had been given showed that our debt payments would be a little over $1,300,000 in 06-07. I asked Finance Director Nicole Epps to check her figures and see if debt payments would actually be closer to $2,300,000.

Nicole looked back through debt information, did some calculations, and then told us that, yes, one debt payment (line-item) was "off" by $130,000 and, yes, another debt payment (line-item) was "off" by $870,000, and, yes, the total general debt payments would be $2,300,000 (instead of the $1,300,000 we had been given).

We got the corrected debt payment budget at our May 23 meeting. What a rude awakening there would have been down the road if we had approved the debt budget with the $1,000,000 error!

We also discussed the overall county debt. The total debt is about $46 million in principal alone (not including yearly interest charges that have to be paid). And that $46 million county debt figure does not include any of the huge M-H hospital debt that is kept in a separate debt fund.

In discussing the county debt, I asked whether the county had just been paying interest only on the four big $10 million dollar bond issues. Joe Ayers of Cumberland Securities answered "yes."

What this means is that over the past 6-7 years, we have added $40 million worth of debt but we have yet to pay a dime toward the principal of that debt. We are currently scheduled to start paying down this $40 million bond debt in 2009.

With a car payment, you pay mostly interest at the start, but you at least pay off some of the principal, too, each month. Same thing with most mortgages. The county, however, has been paying interest only on $10m, $20m, $30m, and now $40 million worth of bond issues.

And, sadly, that's just one part of the tragedy called The Perfect Tax Storm.

Friday, May 19, 2006

May 19, 2006 Asking the City to Notify the County when Utility Construction is Starting

I was very pleased during yesterday's Hamblen County Commission meeting to sponsor a resolution that passed unanimously requesting that the City of Morristown notify Hamblen County Government and affected county residents before utility construction begins along county roads.

A county resident called me several months back when the city came through and tore up his driveway and yard while laying a sewer line along a county road. He then came to the full commission to express his concern with how the utility construction was handled.

Although work has been done to repair the damage to his property, this gentleman's primary concern was that he was not notified in advance about what was going to happen.

Hopefully, with passage of yesterday's resolution, the City will take time to let county officials and county residents know what is planned before the trucks and equipment come through, tearing up driveways and taking county residents by surprise.

The resolution will be sent to the City with a request for a response.

I fully expect and hope that the City will be happy to co-operate in giving advance notice of utility construction to affected residents.

After all, providing advance notice wouldn't take much effort, but it would certainly go a long way toward helping these types of projects proceed more smoothly.

May 19, 2006 Eminent domain--News-Sentinel Letter

Eminent domain. The author of a Letter to the Editor in the May 19th Knoxville News-Sentinel hits the nail on the head. See my previous posts of May 10 and May 17 for background information.
Eminent domain bill won't protect owners

Dear Editor:

According to an Associated Press article of April 28, the 104th General Assembly has prepared two versions of a bill to protect the public from eminent domain abuse.

Here is what the story says. One provision of the Tennessee legislation would require that the local government wishing to buy property or invoke eminent domain would certify the public purpose and necessity for seizing the property.

It went on to say that the government may sell or lease the seized property to a government entity or a private person.

Where is the public use when the property is sold to a private person?

What in this legislation will prevent abuse of eminent domain?

This legislation does not protect us - it is a rubber stamp of the of the recent U.S. Supreme Court ruling that allowed the city of New London, Conn., to take a lower tax revenue producing property and convert it to a commercial high tax revenue producing property.

I have been watching politics for some time now and suspect that we have magicians for legislators; they distract with one hand and pick our pockets with the other.


Wednesday, May 17, 2006

May 17, 2006 Eminent Domain--Tennessean Editorial

In my post of May 10, I discussed loopholes in the current eminent domain legislation under consideration in Tennessee.

In a recent guest editorial in the Nashville Tennessean, there is more discussion about loopholes and the potential for government abuse in using the power of eminent domain to take one person's private property and transfer it to another person for private use instead of public use.

The loopholes in the current bill, rather than curbing potential abuse, could end up permitting abuse of the government's right to take private property under the guise of addressing "blight."

The current push for new legislation in TN was prompted by government action in New London, CT. In New London, the government declared what appeared to be an average neighborhood of houses as "blighted."

Using its power of eminent domain, the government took several houses from their owners and then transferred the property to a developer who would put the land to a "better" use that would generate more tax revenue.

As the guest editorial points out, "blight" is the key word. One definition of blight is "dilapidated, decaying, in a state of deterioration."

A blighted area, where houses or buildings are falling down or pose health hazards to the neighborhood, certainly deserves attention by the government if the owners fail to take necessary action.

In New London, however, the government "took" allegedly blighted property from its owners and then transferred the property to someone else (a private developer) .

As the editorial points out, there are ways to address blight through ordinances and laws that do not involve taking someone's property away.

Tuesday, May 16, 2006

May 16, 2006 Term Limits and Politics

George Korda recently had an interesting article in the Knox News-Sentinel about the term limits referendum that Knox County passed overwhelmingly in 1994.

The referendum term-limited all county officials except judges .

Some people at the time (incumbents?) thought that term limits might be unconstitutional.

Knox County State Sen. Bud Gilbert requested the state attorney general’s opinion on the matter.

The attorney general opined that term limits in the Knox County Charter conflicted with the state constitution.

Term limits in Knox were just forgotten. No one did anything after the attorney general's opinion came out.

Korda comments that "opinions" from the attorney general are interesting pieces of legal "literature." If you agree with them, they are like granite-- wonderful bits of sound, hard, legal reasoning.

If you disagree with them, then they are just another lawyer’s judgment.

Regardless of whether you agree or disagree, attorney general's opinion do not have the force of law.

Only if someone takes the issue to court, then and only then do you find out the "law."

Fast forward to the opposite end of the state.

Shelby County, like Knox, had also approved term limits many years ago. Recently, Shelby County officials decided that they wanted to get this term limits thing straightened out once and for all.

To get this ironed out, Shelby County didn't ask for an AG's opinion. They took the issue to court. The case went all the way to the Tennessee Supreme Court where term limits in Shelby County were upheld.

The effect of the Tennessee Supreme Court ruling then spilled over into Knox County since Knox voters had also approved term limits in 1994.

Poor Knox County, the May 2nd election ballots had already been prepared. The names of the term-limited commissioners could not be taken off. Oodles of write-in candidates showed up ready to take the place of term-limited commissioners.

Korda provides an interesting discussion about the opposition to term limits from many career politicians and from many of the powerful people who want contracts, rezonings, approval for pet projects, etc.

As he puts it, "the political arena is a little like the stock market." Investors in stocks value stability. "People in and around government like stability as well, but for different reasons."

With the right connection to the right people, says Korda, "much is done with a wink, nod, request or plea." People who want a special favor from the government want the right people in place.

With term limits in Knox County, there's a scramble on to form new friendships, find out who's related to whom, and get connected to the new commissioners who may take office in September.

Is it over? Maybe. Maybe not. Some of the long-time incumbents are still fighting to keep their offices by challenging the entire Knox County Charter. Other incumbents are saying that term limits only apply to county commissioners.

One thing is certain. The courts are going to be busy. With early voting starting in July, a full and quick determination of the names to include on the general election ballot is needed to avoid the primary mess.

Wednesday, May 10, 2006

May 10, 2006 Eminent Domain in TN General Assembly

Joe Powell has some information and comments about a proposal under consideration in the Tennessee Legislature to address eminent domain abuse. Click here for Joe's blog and look at the last of his May 9 posts.

Instead of eliminating the possible abuse of eminent domain and preventing a Kelo-like situation in Tennessee, Tennessee's state senators and representatives appear to be giving consideration to legalizing the abuse (as long as the price is right)!

Joe quotes from the bill where it states that land acquired by the government through eminent domain may be sold, leased, or transferred to another government or to a private individual as long as a fair price is received.

Can't you just imagine developers with clout ($$$)---who want a choice piece of real estate but who can't strike a deal with the pesky private owner of the property---calling up and lobbying government officials (at private parties and meetings, of course) in order to get the government to step in and take the property and then sell it to the developer?

It looks like the government may become a real estate acquisition middleman. If the rich and powerful can't work out a private sale, then let the government "take" the property and sell it to you!

The Tennessee legislature seems to be saying that abuse of the power of eminent domain (taking one person's private property and then transferring it to another private person) is not really abuse at all---as long as the government gets a good price in the process.

That's really thinking outside the box---way outside.

Tuesday, May 09, 2006

May 9, 2006 Open and fair selection

In April and May committee meetings, I suggested that Hamblen County use RFP's (Requests for Proposals) in securing the services of architects and engineers.

Using RFP's for these services is permitted by state law. Also permitted is the current process which has been to select someone and execute a contract with him or her without asking for information or reviewing the qualifications of other firms.

What is an RFP? A Request for Proposals means that the county would ask all interested architectural and engineering firms to submit information about their company when a county building is built or renovated.

In a basic RFP, each architect or engineer would list the firm's name, personnel and their qualifications/ experience, years in business, projects completed, insurance information, and, optionally, the proposed fee for services.

The county would then consider the various proposals, interview selected firms, and choose the best qualified.

It's all a rather straight-forward process that is used by many counties, school boards, and other government groups. Each government adapts the basic features of an RFP to its particular project requirements.

I brought two RFP's to yesterday's Construction Oversight Committee (one had been used by the City of Morristown), and we discussed them.

I asked for comments and changes that commissioners might think were needed to come up with a basic architectural/engineering RFP for Hamblen County.

Taking the input and comments from commissioners, I will prepare a general RFP format for consideration at the May Commission meeting.

The Commission, of course, will always have the option of requesting more detailed information from interested architects and engineers for large and/or very complex projects.

In the final analysis, the issue is not about the questions on an RFP. The questions can change and be adapted for each project.

The issue is whether the county will use an open RFP process that asks and allows qualified architects and engineers to submit their proposals and qualifications for full and fair consideration by the county.

Friday, May 05, 2006

May 5, 2006 Committee Meetings on Monday, May 8

Hamblen County Commission will have its Committee meetings on Monday, May 8.
3:00 pm Finance
3:30 pm Construction Oversight
4:00 pm Facilities Maintenance
4:30 pm Public Services
5:00 pm Strategic Planning

Wednesday, May 03, 2006

May 3 Hamblen County Has a New Sheriff

May 2 has come and gone.

The big race, the one that created the most interest in Hamblen County, was the race for Sheriff.

The incumbent, Sheriff Otto Purkey, faced challenger Esco Jarnagin in the Republican Primary.

Esco Jarnagin won by nearly 400 votes.

Hamblen County will have a new Sheriff on September 1, 2006.