Rob Schilling on the Charlottesville Budget Process

Last week, after the Charlottesville City Council voted 4 to 1 to approve the new city budget, the lone dissenter, released an account of the reasons for his vote. No mainstream media reported Councilor Rob Schilling's full remarks, although the local television stations gave him some air time to put across his main points.

In the interests of robust debate about the budget process in my hometown, I publish Councilor Schilling's full statement:

Rob Schilling’s Comments on the Charlottesville Budget and
Necessary Areas of Improved Fiscal Management For Future Years
(April 12, 2004)

Easy Money
A review of Charlottesville’s budget history reveals a disturbing trend of budget growth, fueled by the “easy” money this city has obtained through rising assessments of real property.

In 1995, just 10 years ago, the city’s budget was roughly $58 million dollars. This year, City Council has approved a general fund budget of nearly $106 million dollars. The question many taxpayers are asking is “Why has our city’s budget increased 83% in just ten short years?”

Since our school and city populations have remained level or have slightly declined during this time, the answer appears to be: we’ve spent a good portion of this $48 million dollar increase of taxpayer’s money because it has fallen into the laps of councils, past and present, through the benefit of rising assessments. Simply put, as a locality, we have spent the money because it was there and in doing so, we have burdened our residents with excessive and compounded “hidden” tax increases.

Had past and present councils encountered assessments that more closely mirrored inflation, I believe our budget this year would be significantly lower than $105 million. A review of recent history shows that councils operating prior to the recent assessment “boom”, for the most part, lived within the means dictated to them by slower-paced assessment increases.

No council has raised the tax rate over the past 20 years, but most have accepted, and spent, the windfalls received from skyrocketing assessments. Politically, it is much more difficult to raise taxes directly than to hide behind the cloak of increasing assessments.

This Year
In December of 2004, four members of City Council voted to ask the City Manager to bring us a budget with a $1.09, or at best, a $1.07 tax rate. I did not support that vote because a status-quo tax rate was not respectful of the taxpayer; I had discussed at that same meeting that, at minimum, a four-cent property tax reduction was required. At some undetermined point, and without another vote of council, the City Manager decided to compose a budget that called for a $1.05 tax rate. Although I do not understand or support a government process wherein the City Manager autonomously disregards the council’s voted upon guidelines, I do support the resulting $1.05 tax rate because it is a step in the right direction. But we must do more to mitigate the crushing burden borne by Charlottesville taxpayers.

The Future
More than one high-level City Hall staffer has said, off the record, that Charlottesville cannot continue on its present fiscal path. I concur. And, I believe we are on the road to reversion if we do not dramatically change our budgeting process. The budget manager’s own projections show a cumulative $15-to-$25 million deficit in five years. How can we possibly close that gap without drastically increasing citizens’ already high per capita tax burden?

Since being elected to Council, I have called for prioritization in the city budget process—a process wherein Council clearly separates our wants from our needs. Prioritization is a time-honored budgeting strategy practiced in both the private and public sectors, however; this council is not utilizing it. My ongoing call to systematically prioritize expenditures has fallen on seemingly deaf ears apparently because it requires Councilors to publicly say “no” to friends and political allies seeking government money. Granted, prioritization of funds is not an easy task, but it is necessary for the fiscal survival of our city.

The city’s budgeting process also must be changed in other important ways. In our current form of government, it is critical to realize that the City Manager, as the author of the budget, holds the knowledge and the expertise to control spending. This is evidenced by our current budget, wherein after receiving direction by council, the Manager was able to bring the budget in at more that $5 million below his initial projections. This is in contrast to last year, when council made a half-hearted, last minute attempt to trim the City Manager’s proposed budget by $1 or $2 million—an effort which justifiably failed.

As I have said every year since I was elected, I call on City Council to direct the City Manager, in advance, to bring forth a budget with any desired reductions in growth. Curtailing growth on the front end has proven to be the only method that is effective in enabling council to moderate government spending.

It is important to recognize that there are many services that the City must provide, and many services which the city chooses to provide. Over the years, I have asked us to provide better services for less money. It can be done, but it requires a new way of thinking. We took a first step this year by turning over commercial trash pickup to the private sector. In doing so, we saved city taxpayers about $300,000 dollars. I call on the City Council and City Manager to thoughtfully consider any and all cost-cutting ideas, no matter the source, and to continue to seek innovative and efficient methods of service delivery, so that we can provide better service for less money.

Aside from Council’s seeming inability to exercise fiscal discipline, one of the greatest “drivers” of our skyrocketing budget has been the explosive growth of city government. In his March 7 “white paper,” Councilor Lynch states that: “The City has increased the number of employees by about 11 percent since 1997.” While some would argue that the increase is closer to 20 percent, the point is that maintaining more employees costs the city a great deal of additional money, both in the short run for increased salaries, benefits and insurance, and in the long run for increased retirement and health costs. (The City Manager’s proposed budget acknowledges this fact by recommending that 14 city government positions be eliminated.) The councilor then goes on to say that we should expect our employees to become more efficient, as private sector employees have.

Yes, as I have said— many times—in order to maintain long-term viability, the city must look for ways to increase efficiencies. I’m bothered that we spent nearly two entire budget work sessions on budget items totaling less than $100,000 dollars, while we spent no dedicated time in reviewing individual department budgets, the very place where the vast majority of taxpayer dollars are spent. In future years, I call upon the council to make an annual zero-based review of each department. We could do this either internally or externally. In one scenario, councilors will conduct work sessions in order to interview each department head, learn of the specific initiatives that they propose, and have the opportunity to question proposed projects, staffing and expenditures. This process will help to ensure that each city department justifies its expenditures as thoroughly as the City Council reviews the disposition of the so-called “council reserve,” and as thoroughly as the Agency Budget Review Team scrutinizes the proposed contributions of taxpayer dollars to the various private agencies that request money each year.

If this internal review process does not yield substantive results after two years of greater council involvement, then I suggest that the city hire an independent auditor to perform a comprehensive, top-down audit of city finances and department expenditures. I believe that the council and the community would be quite surprised at what information such an audit might reveal. And perhaps, that’s why no one has recommended this approach.

Finally, we must live by the rules we set for ourselves. While the City Manager does not directly acknowledge that he primarily uses the Council budget guidelines, which he solicits, as the principal basis for his budget-making decisions, the council, who sets such guidelines by an annual vote, should ourselves insist that the City Manager use the guidelines we set. In addition, if we as a council decide to stray from our approved guidelines, we should publicly vote on the matter, and if change is desired, at least the public will be informed as to the process. As it stands, City Council violated at least two adopted budget guidelines this year, without any acknowledgement or public discussion of having done so. These seemingly secretive and back-door actions, harm the council’s credibility in our stated intent to provide “open and transparent government.” In addition, when non-public decisions are made, many members of the public (and at least one City Councilor) wonder: who actually is making policy in Charlottesville?

Conclusions
In closing, I’d like to thank our new councilors, Mayor Brown and Councilor Hamilton, for their openness in evaluation of the existing system of budgeting, and for their willingness to make some necessary changes in this year’s budget process. I look forward to working with them in the months ahead to implement the proposals I’ve outlined in this document and at several public meetings of council.

I encourage those who personally wish to pay higher taxes to please do so. This is your choice. Friends of Charlottesville, a program I helped to establish, will gladly accept any excess tax dollars you wish to give to the city for general or specific causes. The city looks forward to your donations.

The budget process, while improving, is still fundamentally flawed, which is why I will not be voting in support of the overall budget, although I will be voting to approve the reduced real estate tax rate.

I’d like to encourage the many taxpayers with whom I spoke during this season: from Mrs. Amiss of Watson Street to Ms. Levering of Grove Avenue, and all of the others. Your voices are important; keep speaking out.

It is no coincidence that since my election, in 2002, we’ve seen a six-cent decrease in the tax rate. While this is not enough, it is more than has been seen in the prior twenty years, and probably much longer. Working together, across party lines, this is what we have accomplished.

Change is often slow to arrive, and almost always is incremental, but it will come. The economic survival of our city, as we know it, is a worthy cause, and I join with you in carrying forward the banner of fiscal responsibility.