Does Portsmouth’s proposed budget add up? Council members, mayoral candidates have doubts.

April 04--PORTSMOUTH

Some mayoral candidates and council members are questioning the viability of City Manager Lydia Pettis Patton's budget proposal for fiscal year 2016-2017, but so far she has declined to clarify its details.

Pettis Patton proposed a $652 million budget last Tuesday that included no tax or fee increases and closed a $4 million to $6 million budget gap. The city would rely in part on an additional $1 million in real estate tax revenue from increased property values, $6 million from the general fund balance and a $14.8 million reduction in capital improvements to balance the budget.

The $6 million taken from the general fund would pay for capital projects and one-time $1,000 bonuses for most full-time city staff.

Pettis Patton and Chief Financial Officer Alice Kelly would not respond to about two dozen questions about sewer and water projects that would have to be delayed, frozen positions, cuts to the health insurance and risk management funds, or to the sustainability of the budget.

Acting Deputy City Manager LaVoris Pace said in response to The Virginian-Pilot's questions that the newspaper had been given a copy of the proposed budget and a PowerPoint presentation.

"As is standard with municipal government, the city manager's presentation and distribution of budgetary information provides transparency to the citizens of Portsmouth," Pace said.

RELATED -- Questions left unanswered about Portsmouth's budget proposal

Councilwoman Elizabeth Psimas said the council, the public and the media should get answers to all of their questions.

"There shouldn't be anything about the budget that is hidden," she said. "Questions should be answered; they should be clear."

Mayoral candidates John Rowe, the previous city manager, local pastor Barry Randall and businessman Shannon Glover had their own questions about the budget. Mayor Kenny Wright, who is running for re-election, did not return a call on Friday.

"Based on a very, very quick analysis of the budget proposal," Rowe said, "it appears that the city's budget team balanced the budget by using some aggressive real estate tax revenue estimates that may fall short by the end of the budget year and by reducing the amount of the appropriation for two of the city's self-insurance programs."

The budget proposal projects an increase in real estate tax revenue of $1.8 million in the next fiscal year. City Assessor Janey Culpepper had said in March that based on the first three quarters of this year, the city could anticipate at least an additional $1 million in property tax revenue next year. Factoring in the fourth quarter, that figure would likely be higher.

Rowe also questioned why the city would reduce funding for the city's health insurance fund by $4 million when health care costs are rising. Rowe used numbers from fiscal year 2014-2015 for comparison because spending for 2015-2016 is not available. According to global consulting company Mercer, health care costs are projected to rise 4.3 percent -- after employers make changes to their plans -- in 2016. If employers don't make changes to their plans, that cost rises 6.3 percent.

He said that means the city must either cut benefits -- essentially balancing the budget "on the backs of employees" -- or the city might come up short at the end of the year and have to dip into its fund balance to cover health insurance claims.

"If you are self insured, you have to cover the claim, so it's an artificial way of balancing the budget by making it appear that you are going to spend less," Rowe said.

Councilman Danny Meeks said he thought that the manager did the best she could given the constraints she faced but that with all the lost institutional knowledge, the city will likely find that it didn't budget enough money.

"I just think the budget serves a political role for the mayor's re-election," Meeks said.

The city's risk management fund, which covers legal fees and workers' compensation claims, would be cut by $2.7 million, according to the budget proposal. Again, Rowe said, the city will have to dip into its fund balance if claims go above what the budget projects.

Randall said with legal fees incurred from police officer-involved shootings and the need to defend in court fines against council members who speak publicly, the city should not be skimping on its risk management fund.

The cuts to the health insurance and risk management funds alone equal nearly 10 cents on the tax rate. One cent on the tax rate is equal to $690,000, according to city documents.

Randall said he also had concerns about the city cutting about $10 million from the city's sewer system projects.

"When it rains here, it floods very quickly here in our city, so I don't understand why they would postpone or push back what is necessary for our sewer system," he said.

One of the three sewer projects that were cut involved work to prevent a mixture of untreated sewage, groundwater and storm water from overflowing pipes and manholes, a public health risk. The city is under a consent order with other Hampton Roads localities, the Hampton Roads Sanitation District and the Virginia Department of Environmental Quality to reduce sanitary sewer overflows.

Not funding the project puts the city at risk of not complying with the order and could cause the city to spend more in the long run as costs increase, Rowe said.

Glover said the city cannot afford to "continue to put off funding for these projects without putting our infrastructure and community at risk."

Wright said on the WHRV radio program "HearSay With Cathy Lewis" last weekthat deferring some maintenance is "pretty standard" and that the council would take a "deeper dive" before approving the city manager's budget proposal.

Moody said he hated seeing the city defer projects because they will likely cost more in the future. But at the same time, he said, citizens couldn't afford tax increases with property values increasing.

The problem is that revenues haven't kept pace with the cost of operating the city, Moody said.

It's also unclear whether the proposed budget calls for the city to leave roughly 70 positions vacant. The council froze those positions, which included about 40 public safety positions, this fiscal year to save about $1.6 million. Psimas and Moody said they weren't sure how the frozen positions figured into the budget proposal.

Randall said he assumes the police positions are still frozen, which he sees as a mistake.

"We need every available cop to be working -- to be solving crime, to be working cases," he said.

Randall also took issue with the city manager's refusal to answer questions about the budget.

"They need to tell the media outlets so they can do their due diligence and get to the bottom of it and help decipher it for the public," he said. "We have a secret system of government taking place in the city of Portsmouth."

Glover said leadership needs to share information. "They are spending our money; we need to see where it is going."

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