Thursday, May 22, 2008

May 22, 2008 City Finances: The Truth Is Out There Somewhere

What a difference a year makes in headlines and public statements!

March 2006: No property tax increase. City Administrator Jim Crumley doesn't anticipate an increase in city property taxes to fund day-to-day governmental operations "in the foreseeable future." Mayor Johnson: The on "firm financial footing."

June 2007: Budget finalized with the largest (40 cents) property tax increase in the history of the City of Morristown. 41% increase!

What happened?

Most people figured out two budget basics a long time ago---(1) you can't spend more than you take in and (2) massive debt is a killer.

Morristown and Hamblen County, however, are still coming to grips with these two budget basics and financial reality.

Both the City and County have been accumulating debt and have been making interest-only payments on large amounts of that debt. With interest-only payments, the debt principal doesn't go down and doesn't go away.

The City has about $70 Million of debt. If interest-only payments continue, some of that debt will still be around when the elementary school-age children of current taxpayers become taxpayers themselves. And the county debt, on which interest-only payments have been made for 7-8 years already, will still be around, too.

The financial basics have been around forever. The City has turned a blind eye for years to financial reality and is only now admitting that there is a problem, a "structural hole" of $430,000, in the City budget. And just what is a "structural hole"? Fancy-schmancy budgetese for "you are spending more than you take in."

City grade for Budgeting 101? D- And that's with a very generous curve!

1 comment:

Tim Nunan said...

Like politicians everywhere spending more than you take in is simple... just raise taxes. What the heck it's not their money.