Manipulation Analysis

Is the City of DeKalb postponing action on its consultants’ recommendations for political or other selfish reasons?

When the financial consultants known as Executive Partners, Inc. (EPI) first came to town in 2009, the City of DeKalb made a big deal of them. DeKalb needed to show it was doing something about its financial mess, and at that point it seemed reasonable to blame the economy instead of city administrators.

Officials implemented some of the EPI recommendations and proudly showcased the accomplishments.

This time around is very different so far. I will describe the differences and share guesses about what motivates them.

The Bad News
The consultants came back in the spring for a follow-up evaluation. I attended the final meeting in early June and therefore in person heard them say DeKalb would plunge into another financial crisis within five years if it failed to “drastically change its operating model” and start thinking strategically instead of tactically.

Good thing I was there, as I haven’t seen this blunt assertion reported anywhere — not even in the official meeting minutes.

Any credible public revelation that DeKalb is spending money today that it needs for tomorrow is of course embarrassing because DeKalb has had four years to get a handle on its structural budget issues using the original EPI blueprint.

But if you were to assume city officials have taken quick action on the latest dire warnings, you’d be wrong. In fact, it’s like the EPI people never came here. Videos of the April and June meetings are missing from the city’s website, and the final report has not been posted as is routine for financial documents. Additionally, the version of the report provided the public for the final meeting with the consultants contains substantial redaction.

While you might suggest that action has been postponed until the hiring of a new city manager, this does not explain the suppression of information.

I’ve come to believe it’s because top officials have decided to protect an agenda that depends upon painting a rosier financial picture than what reality provides.

The Budget Guy
DeKalb pretending its finances are in tip-top shape when they’re not? We’ve been here before. The city kept the lid on serious financial problems through the 2009 municipal election but by early 2010 had to admit to a $5 million hole in the FY2011 budget.

Rudy Espiritu is the common denominator when it comes to prominent city administrators then and now. When the recession hit, he was the assistant city manager, the budget guy and a poster child for “grow or die,” aka the inability to adapt to the new reality of reduced revenues. From 2007-2010, Espiritu consistently over-projected revenues to a shocking degree.

What’s more, while I’ve been warning about DeKalb’s current hiring spree for a while, I finally realized while brushing up on EPI’s 2009 recommendations that a similar cycle of heavy hiring occurred between June 2006 and June 2007 when 25.5 full-time equivalent (FTEs) employees were added to payroll.

It took a reduction in force of nearly three dozen employees and borrowing more than $1 million in order to right the municipal ship in 2010. I firmly believe a large portion of the suffering and expense might have been avoided had city staff come clean earlier about our desperate situation, but they waited until no other choice was left.

Bottom line, we seem to be entering the same cycle of mistakes, manipulation, and delays for selfish reasons.

FY2013 Budget News
Financial director Laura Pisarcik does the budget projections now. She’s conservative about it, which is just right in these times of “flat-lined” revenues. On Monday, she will report that revenues have exceeded budget estimates by 1.83%.

This is good news, and even better news is that there will be a budget surplus of nearly $500,000 for FY2013, which ended June 30.

The surplus is real. However, it is important to note that most of the revenue increases and surpluses do not arise from natural growth. For example, $757,000 of General Fund revenues for FY2013 came in the form of transfers from the city’s two TIF districts, which are not permanent. Almost all of this money will go away in a few short years as the districts reach the ends of their statutory lifespans. Then what?

Here’s the Hypothesis
If you read the council meeting agendas, you’ve seen that the city council has lately held a lot of executive sessions to discuss labor negotiations. AFSCME’s contract with the city expires at the end of this year, and the FOP’s already did, back in June.

The IAFF and management staff got nice raises, so council will want to create a harmonious atmosphere of equity.

Some of us do understand that we’ve already reached an unsustainable situation because we’re covering increases in fixed expenses with variable and temporary revenues.

However, a budget with a $500,000 surplus can — and possibly will — be presented in council chambers as organic growth sufficient to support new hires, projects and programs.

Specifically, I predict officials will use the surplus to justify recommendation and approval of generous raises in the remaining labor contracts this year, and will furthermore herald now-interim city manager Rudy Espiritu as a financial genius who should inherit the city manager’s position for good.

Suppression of the findings of our financial consultants is entirely consistent with such an agenda.

If I’m right, the question is whether our city council will continue to go along with it.