watchdog

Wednesday, April 23, 2008

April 23, 2008

UNPAID FOR PROMISES MADE BY POLITICIANS



I have finally gotten replies from the City of Memphis, the Shelby County Government and the MLGW concerning the unfunded liability for retiree health care and life insurance. The total unfunded liability is, "DRUM ROLL! ARE YOU SITTING DOWN"

$1.885 BILLION DOLLARS


POLITICAL DIVISION

UNFUNDED LIABILITY

NUMBER OF ACTIVE EMPLOYEES

RETIREES

City of Memphis

$823,000,000

6225

3235

MLGW

$709,000,000

2608

2493

Shelby County

$353,000,000

6669

1800

TOTAL

$1,885,000,000


When I looked at these numbers, I immediately noticed that the MLGW was the highes cost per retiree, the City of Memphis was next and Shelby County was the lowest. I am still studying the numbers and I do not have a full report from the City but I have attached the three reports for you, the readers, to study.

It seems to me, that in reading over the reports, we are being taken for a ride by the City and the MLGW. No surprise there. The County is apparently costing the taxpayers less per retiree. In looking at their plan, I did notice that the retirees' share of the cost depends on years of service at retirement (see page 24 of 39) whereas, at the City and the MLGW, the retriees' share of the cost stays the same regardless of the years of service. This is just another example of how the taxpayers are being taken to the cleaners by the City of Memphis and MLGW.

Any way you look at it, the obvious conclusion is that we are being left a huge future problem in funding these reckless promises made by the present and past politicians. We need to organize and plan for a solution to this problem. See the three reports which are attached.


Click here to see the Shelby County report on unfunded retiree health care promises

Click here to see how much the City of Memphis have promised their retirees in health care benefits but have not paid for

Click here to see the MLGW unfunded liability promises to their retirees


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Thursday, April 17, 2008

If the City of Memphis and Shelby County are looking for reasons for our financial crisis, they need to start with our two school systems. Our County school system is pretty good and their cost per student is lower than the Memphis City School system. Of course Mayor Herneton wants to combine the two systems which would require the County School System to spend more per student to lower their achievement level to the City system as state law requires that when you combine two system, you must bring the lower cost system up to the higher cost system. Stupid yes, but we are talking politicians here, not rocket scientists. The City School System and Mayor Herenton continue to block a separate school district for the better performing county school system.

However the most egregious problem and error is the ADA (Average Daily Attendance) split law between the City and the County. The law states that when the County builds a school in the County, they must give the City of Memphis School System the cost of the new school multiplied by the ADA split. The law, however, has a provision that allows the county to build the school with taxes collected outside the City of Memphis to avoid this disastrous payment to the Memphis City Schools (MCS). One school (Arlington High School) was built by this provision in the law and county taxpayers are paying 4 cents per year in property taxes for this school over and above their normal county property tax. Since, then the County Commission has refused to build further schools using this method in the law. The results are shown below. $539 million dollars in extra cost plus another $50 million starting this year. No wonder Mayor Wharton is looking to tax you more.

CAPITAL IMPROVEMENT BUDGET SCHOOL FUNDING

Funding bases on ADA (Average Daily Attendance)

FY

City

County

Total

1999

$57,300,000.00

$27,150,000.00

$84,450,000.00

2000

$95,296,146.00

$48,838,828.00

$144,134,974.00

2001

$57,300,000.00

$31,800,000.00

$89,100,000.00

2002

$57,300,000.00

$27,300,000.00

$84,600,000.00

2003

$57,300,000.00

$18,800,000.00

$76,100,000.00

2004

$57,300,000.00

$51,975,000.00

$109,275,000.00

2005

$57,300,000.00

$20,000,000.00

$77,300,000.00

2006

$57,300,000.00

$20,000,000.00

$77,300,000.00

2007

$43,000,000.00

$17,000,000.00

$60,000,000.00

Totals

$539,396,146.00

$262,863,828.00

$802,259,974.00

    

TOTAL PAID TO CITY OF MEMPHIS OVER AND ABOVE COST OF COUNTY SCHOOL CONSTRUCTION COSTS

$539,395,935.00

 
    

Funding based on Joint Agreement of 50/50 split of $100 million

FY

City

County

Total

2006

$0.00

$8,000,000.00

$8,000,000.00

2007

$0.00

$30,000,000.00

$30,000,000.00

    

Note: Final $12 million to County Schools paid in FY 2008. City School payment of $50 million to begin in FY2008


 

The reason for this financial crisis lies at the feet of the politicians and their refusal to make reasonable decisions that taxpayers have to make every day. It is time that taxpayers take back control of their government from the politicians by cutting off the tax faucet.

Tuesday, April 15, 2008

ON THIS TAX PAYMENT DAY, MAYOR HERENTON'S BUDGET NEEDS TO GO ON A DIET


 

Now that the citizens of Memphis have reelected Mayor Herenton, here comes the cost of that reelection, new taxes to pay for jobs for his bloated government. Look at the figures and facts.

  • In Fiscal Year FY) 2006 there were 5162 total actual employees.
  • In FY 2008 he showed 6225 employees, an increase of 1063.

The City finally responded to my open records request for a detailed list of these employees and that list is on this website and on (www.memphiswatchdog.org ) . It shows 5728 employees. Take a look at the attached list of jobs and salaries.

In addition to the salary list, I have attached the union contract between the City of Memphis and the American Federation of State, County and Municipal Employees. The benefits, over and above salaries, amount to about 45% of the salary and of course includes the huge unfunded healthcare retirement promises where the taxpayers are paying 70% of the premiums. Recently the City finally said that this unfunded liability amounts to $824 million dollars just for the City and not including the MLGW and the County.

Look on page 16 (holidays), page 17 (vacations), page 18 (sick leave) and page 20 (bonus days). This amounts to 14.4 weeks off per year or over ¼ of the year not working. What private company gives these kinds of benefits? This generosity at the expense of the taxpayers naturally requires more employees than would be required in a private business.

The City Council has the authority to tear this budget apart, carefully examine all the parts and put back together a leaner, meaner plan that cuts this fat to the bone. They should hire outside, independent people to do the job and not depend on information from the Administration.

The recent $700,000 efficiency study (see attached) states in several ways the foillowing.

The City's budget process does not result in a financial plan that aligns with long-term strategies and service expectations within the City. In contrast, the current budget methodology and development process is incremental in nature and does not tie budgetary allocations to service levels, outcome measures or program achievements.

In other words, they just take last years budget and add something to it and send it to the City Council and expect them to approve it, which is what the City Council has done in the past. Hopefully, the new City Council will be different as the current financial situation is insupportable.


 


 



Click here to see the union contract and benefits you are paying for

Click here to see the job descriptions and salaries of city employees

Wednesday, April 09, 2008

OH BY THE WAY HERE IS ANOTHER $823 MILLION DEBT THEY FORGOT TO TELL YOU ABOUT BEFORE THE ELECTION


On June 5, 2007 (before the October 2007 Mayoral election) I wrote the following open records request to the City of Memphis.

1) I want to inspect the records and documents that show the calculations that document the unfunded liability that the City of Memphis will have to finance to meet the GASB 43 and GASB 45 requirements. These records and documents should show the total unfunded liability and the amount over and above the normal pay as you go annual funding that is required to meet the future unfunded liability.

The City refused to answer the request until yesterday (April 8, 2008) and now I know why. The answer is in a presentation presented to the City Council on November 6, 2007 (after the election). In it you will find the following devastiting news of our unfunded liability for non-pension liability for post employment retiree health care benefits. It amounts to

$823 MILLION DOLLARS(see attached document)

This includes any non-pension, post –employment benefits provided to retirees (i.e. medical, dental, vision, hearing, and related benefits). (By the way, the MLGW and the County have similar problems)

The required annual contribution is $51.1 million whereas they have historically been contributing $20 million annually to cover retiree healthcare costs.

To get around this high cost to fully fund the unfunded liability, the plan is as follows.

  • They will set up an investment trust to pre-fund post employment benefits.
  • Future changes to the retiree health plan are likely.
  • Other consideration will include possible changes to plan benefits design and cost sharing. (Look out retiress, they will take it out of your hides)

For Fiscal Year 2008 they will contribute only $3 million rather than $31 million (the difference between the $51 million real cost to fund this unfunded liability and what they normailly contribute.

WHAT THIS REVEALS IS THAT POLITICIANS HAVE KNOWN ALL ALONG THAT THEY PROMISED MORE THAN THEY WERE WILIING TO PAY FOR AND THEY ARE GOING TO PUT IT OFF INTO THE FUTURE AFTER WHICH THEY WILL BE GONE AND HOPEFULLY RECEIVING THEIR PENSION AND BENEFITS CHECKS FROM A BANKRUPT CITY.

The presentation finishes with a quote from Standard & Poor's (12/01/04). "THE FUNDING OF THESE OBLIGATIONS IS OF AN INCREASING CREDIT CONCERN, EXACERBATED BY THE RAPID COST ACCELERATION IN MANY HEALTH-RELATED AREAS… CLOSE ATTENTION WILL BE PAID TO THE NEWLY QUANTIFIED OPEB UNFUNDED LIABILTIES, GIVEN THEIR EXPECTED MAGNITUDE, AND TO EMPLOYERS' STRATEGIES FOR MANAGING THEM."

THE POLITICIANS KNEW ALL ALONG THAT THEY WERE PROMISING MORE THAN THEY COULD DELIVER, BUT DID IT ANYWAY. NOW THEIR SOLUTIONS IS "PUT IT OFF INTO THE FUTURE" OR "TAKE IT OUT OF THE HIDES OF THE RETIREES".

I have another solution. Get rid of the irresponsible politicians at the next election and cut off the tax increases that are sure to come by the means of a citizenn petition charter change requiring voter approval before any tax increases. Cutting off the money is the only way to get their attention.



Click here to read about the $823 million in extra promises city Hall forgot to tell you about

Friday, April 04, 2008

IN 1997, THE CENTER CITY REVENUE FINANCE CORPORATION (CCRFC) GAVE A BLANKET 15 YEAR EXTENSION OF PILOTS (PAYMENTS IN LIEU OF TAXES) TO 61 DOWNTOWN PROPERTIES

I have recently been investigating PILOTS given by the Memphis and Shelby County Industrial Development Board and the Center City Revenue Finance Corporation (CCRFC). I recently reported on some properties granted pilots by the Industrial Development Board of Memphis and Shelby County.

Then I went to the Center City Commission and read through some of their files. Whether you agree or disagree with the purpose and actions of the Center City Commission, we are fortunate to have Jeff Sanford running the organization. He is a person of the highest integrity and his files are completely open to the public as are the actions of the various boards.

What I found was that a lot of properties are paying very low taxes and for a very long period of time. Then I found that before Jeff Sanford took over in June 1998 (Ed Armentrout was the previous President), the board of the CCRFC gave 61 downtown properties a blanket 15 year extension on what was already a lengthy tax exclusion. The purpose of the extension was to divert the tax funds that would normally be coming into the city and the County at the termination date of the original pilot, and use those tax funds to finance new Downtown public projects, mostly parking garages. I have attached a sheet explaining the extension program. Also I have attached a spreadsheet showing the 61 properties involved.

Whether you agree with this program or not, it is important that you understand it and recognize that it will be a long time until we see if the promised golden tax eggs for a revived downtown ever gets laid or if it is just a program to help those downtown property owners on the backs of the residential taxpayers in Memphis and Shelby County.


Click here to see the 61 downtown properties that got a 15 year PILOT extension

Click here to see the rules for the 15 year extensions and how the money is to be used to build downtown garages rather than go to the budget

Wednesday, April 02, 2008

SOME SUGGESTIONS FOR CUTS IN SPENDING FOR SHELBY COUNTY AS THEY PREPARE TO RAISE PROPERTY TAXES

Mayor Wharton and the County Commission are looking for ways to raise more money on the backs of overburdened residential tax payers. They claim that there are no places that they can cut. Bare boned they call the budget proposal. This is April Fools Day but this is no joke.

I will be the first to admit that the County is better than the City of Memphis in their transparency and their willingness to admit that we are in an unsustainable financial situation. However the City School System and the County are largely responsible for the huge county debt.

SHELBY COUNTY BONDED DEBT OUTSTANDING TOTAL FOR EACH YEAR 

YEAR 

Total bonded debt for school purposes 

Total general obligation bonded debt, not for school purposes

Total bonded debt for Shelby County 

1998 

374,695,201 

513,298,731 

887,993,932 

1999 

462,652,365 

570,419,996 

1,033,072,361 

2000 

452,521,665 

544,385,696 

996,907,361 

2001 

582,727,876 

523,964,486 

1,106,692,362

2002 

622,958,087 

597,214,274 

1,220,172,361 

2003 

689,737,629 

627,359,732 

1,317,097,361 

2004 

913,093,850 

667,904,373 

1,581,998,223 

2005 

881,448,367 

655,741,606 

1,537,189,972 

2006 

1,052,751,140 

664,012,691 

1,716,763,831 

2007 

1,155,445,388 

626,558,892 

1,782,004,280


 

Look at the debt from 1998 to 2007 for school purposes, an increase of $780 million. Why has this happened when there has been no appreciable school population increase? When they build a county school for say $10 million, they raise $40 million and give $30 million to the City Schools. They do not need to do this as by law they can finance the $10 million dollar school with the county tax payers outside the City limits paying for the new school. They did this once on the Arlington High School. But now the County Commission will not allow this as they want to give the extra money to the City Schools. Humbug.

Then look at the roll up costs of city and county employees. Those employees with longer years of service can get up to 13 weeks per year of time off due to vacations, sick days, personnel days, holidays and bonus days that means that they can be off work 25% of the year. Obviously this means that more people must be employed to get the work done. Very few in the private sector have such benefits. We need to take a hard look at our government and see if we can tighten belts beyond what politicians say is possible.

We need to look down the road at consolidation and have an independent study done (not connected to any political group or politician) and determine if consolidation (like Metro Davidson) would really save a lot of money. I contacted Metro Davidson and got great cooperation from them with a prompt response to my questions. (Such a difference in my dealing with the City of Memphis). I found the following information.

Total full time public employment for Metro Davidson is 9500 employees with an additional 1250 part time employees.

As near as I can tell Memphis has 6225 and Shelby County has 6802 for total of 13027. Our population is somewhat larger than Metro Davidson but similar government functions should not account for a 37% higher employment total.

We need to know if consolidation would be financially beneficial as we are headed in a downward spiral with the pending tax increases.