Monday, May 28, 2012

Brunswick finances and the Iceberg theory of leadership

The Forecaster just ran a rather confused article discussing Brunswick’s budget circumstances, conflating spending increases with tax increases, amid other characterizations that are less than helpful to a clear grasp of reality.  We’ve made a note to contact their reporter and provide a bit of tutelage.

The article, aside from its narrative errors, made clear the nature of our dilemma.  In the face of long term budgetary crises, we find councilors expressing concerns over funding for sidewalks.  Like that’s the biggest problem we’ve got.  What about petunias in the Maine Street dividers; don’t they matter?  And wouldn’t an orchid garden on the town mall be a great community addition?

Given that it’s too late for speaking with the reporter to make any difference, we will do our best to explain things here, knowing full well that our efforts make no difference either.  Such is the nature of head banging.  But it feels better when we click on ‘publish.’

Sidewalks brought to mind deck chairs on a particular ocean liner.  We trust you know which one.  And we recalled the iceberg theory of leadership as a parallel concept, which evolved during the glorious if ill-fated Titanic era.

The theory holds that you can wait for an iceberg to come to you, or you can decide to move cautiously ahead while trying to thread your way through a hole in the iceberg, or you can declare “damn the iceberg, full speed ahead!” 

It also holds that unless you reverse course, you will hit the iceberg; it’s only a question of when, and how hard.  Or, as in the photo, if you thread your way through it, you’ll simply hit something bigger on the other side.

On the subject of leadership; we’ve always loved this quote:

Have you seen my people?  Which way did they go?  I must know; I am their leader!

Let’s talk about leadership in local budget and financial matters. The Town Council, at a minimum, should have called for a mid-year (1 January) forecast on revenue expectations for the rest of this fiscal year and the coming fiscal year. Based on the result, they should have established budget ceilings for municipal government and the School Department, to lead both organizations to live within their means.

They should have issued a directive to the Town Manager that he was not to submit a budget that exceeded a specific amount, or called for a property tax increase larger than X%.  They should also have issued a statement to the School Board that under no circumstances would a budget proposal calling for a tax increase larger than Y% be accepted and approved.

This should have resulted in a directive from the School Board to the School Department making it clear what budget boundaries would be.

Instead, we have the School Department backing the School Board into a corner, and the School Board backing the town into a corner, and the town backing the council into a corner.  And worst of all, the council backing taxpaying residents into a corner

Just what you would expect from leadership, right?  And every one of them says it’s not their problem…..”somebody else did it, and we didn’t see it coming.”

Here are the specifics, from the most recent proposed municipal budget, which you can find here.

Total Budget

Spending increases from a current year budget of $53,463,870 to proposed spending of $54,865,804. This is an increase of $1,401,934, which by itself, would normally call for a property tax increase between four and five percent.  These figures are budgets, not actuals, so the surpluses and reserves included are unknown.

Revenue sources shown, other than property taxes, decline $2.2 million on the school side, and increase $1.5 million on the municipal side, which means the town is dipping into piggy bank reserves big time.

Net result: what looked like a 12% or so property tax increase has been masked to look like a 6% property tax increase by making use of one time funding sources.   No matter; the spending baseline has been raised, and it will come back to haunt us very, very soon.

This is like using money from the kids’ piggy banks or your savings account to pay for groceries.  It’s the same irresponsibility the School Department showed by spending one-time ‘stimulus’ funds to cover current operating expenses, and even expand them.  Either they did it knowingly with a ‘damn the consequences’ attitude, or they simply didn’t know better; either way, we have a problem, Houston.

Town

Municipal expenditures are proposed to grow by $1,216,333, a 6.41% increase.  AOTBE (all other things being equal,) this would normally cause a 4% increase in property taxes.  Municipal revenues are dipping into reserves and using other stratagems to lower demand on property taxes by $257,583. Without getting down in the weeds, this sounds like roughly $1.5 million in piggy bank funds is being tapped for municipal purposes alone.

BTW, the library gets a 10% funding increase.  Never mess with the bookies.  We’re thinking of giving them holy of holy status.  But what about the sidewalks, Councilor Tucker?

Schools

Spending is essentially flat, increasing by less that $200,000.  But because of the decline in enrollment driven revenues, the school budget calls for a $2.369 million increase in property tax support, or 14% more than the current year.  This alone would generate a nearly 8% increase in the property tax rate.

So to make a long story short, what would have been a 12% increase in property taxes is coming in at a 6% increase because municipal government is effectively throwing $1.5 million into the school revenue stream.

Bottom Line

Just how long do you think this denial and cover up can last?  How long are you willing to give road repair funds to the teachers in the way of automatic pre-programmed salary increases?  And how long are you willing to ignore reality - that we are on a path to economic failure and chaos that can’t be avoided? 

Potholes?  Potholes are just the town version of deferred school maintenance, which now is in the range of $40 plus million!

Capital Improvement Plan

The budget document itself has $2.5 million in capital spending for vehicle replacement, road paving, and other things, including, apparently, $480,000 for Bike Pedestrian Bridge replacement.  Personally, we have no idea what this is about, but we’re sure it’s a vital component of our community, and that replacing it is a top priority of someone.  By comparison, it makes the $100,000 increase in library support funds look downright frugal.

Future Outlook

The future outlook is grim, dear readers.  Nothing but icebergs ahead.  The five year capital improvement program can be found here.  In it, you’ll see capital spending plans of nearly $20 million in the coming year, and nearly $44 million over the next 5 years.  That includes the new Police Station, a new Fire Station, $9 million in school renovations, and $5.7 million for a fitness center.  We can’t wait to see what that’s going to be.  We’re afraid our heart is almost at its swelling limit for community pride.

If we read the CIP correctly, the tax rate impact in the year after next will be about 10% to cover debt service plus operating expenses for the new projects alone.

Add this to the masking of a 4 to 5% increase this year.  A town baseline for next year that is 4% higher than this year, statements by the School Department that they already know they have a $1.8 million problem next year and a $1.4 million problem the year after (10% property tax increase right there!) and a wish list a mile long for staffing, preschools, summer schools, contract salary increases, mental health care providers, counselors, on premise teacher car wash facilities and the like, and you’ve got more icebergs than you can count looming ahead.

Think we’re pulling your nose?  Go here and look at slides 15 thru 26, and tell us how we can be excellent in our schools if we have all these unfilled and unmet needs?  Huh, huh, huh?  C’mon, Jane, let’s hear it!

You can easily construct a scenario that says we’re heading for a 25-35% property tax rate increase in the next few years.  As a matter of course, we should be demanding that our leaders immediately construct that scenario, so we can decide where best to put our deck chairs for the heavy seas we’re entering.  And doing so would permit them to slam your loyal correspondent and prove him wrong.  We can’t wait for the abuse.

You ‘common good’ and ‘community pride’ devotees should be ecstatic over the outlook, and no doubt our real estate agents can’t wait to show how great Brunswick is by pointing out that taxes are going up by 30% or so.  School excellence, town excellence; are we leaving anything out?

And those imagine and invest advocates are going to get their way, more than they ever dreamed.  And they won’t know what hit them, we’re sure.

Tuck this in your holiday reading stack; it should brighten your summer measurably.

And we haven’t even told you the most interesting news yet.  Your community pride and respect for our leaders is about to reach new (you fill in the blank).

Stay tuned, readers.  We’re about to break an exclusive that will prove that things are far worse than you might have thought, and even far worse than we thought.  We will show that the Brunswick School establishment is ‘meeting or exceeding expectations’ in at least one rating area.

We’ll leave you with this candid photo we took the other day; it shows our local ‘government watchdog’ media outlet on the prowl for the facts, just the facts, ma’am.

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