It’s back to the basics in the Town of Pulaski.
That was the message from members of town council meeting last week in a work session that was dominated by discussion on the Fiscal Year 19 audit of the town’s finances.
In short, the state of the town’s finances aren’t good – at least not as good as council believed they were previously.
The town’s finances have been hit by a mixture of overspending, shortfalls in projected revenues, mistakes and an audit process that was disrupted when the town’s “pre-audit” consultant pulled out of the work, forcing the town to find a new consultant and getting them up to speed in a short time.
In the end, Robinson Farmer Cox Associates of Blacksburg completed the audit and reported to council in January. The news wasn’t all good, as the auditor reported the town’s unassigned fund balance as of June 30, 2019 stood at 8.32 percent compared to 15.34 percent a year earlier.
Mrs. Emily Viers, audit manager for the town’s audit, reminded council that it is recommended the town have two months of reserves set aside, which would be 16 percent to 17 percent for the town.
In the long discussion last week, Town Manager Shawn Utt provided a review of the audit, listing where the town fell short on revenue projections and where overspending and mistakes occurred.
Revenue shortfalls occurred in seven areas, according to Utt, including $100,000 in real estate tax collection and $41,500 in personal property taxes.
Revenue from motor vehicle decals was down $23,000 from what was projected. While cigarette tax revenue increased for the year, it was still $18,000 lower than projected.
Communication sales tax was $63,000 under projections, while court fines were down $18,000.
Total revenue shortfalls identified by Utt reached $314,500.
There were four areas where revenue was actually higher than was projected.
Machinery and tools tax revenue was $15,000 higher than projected. Business license revenues were $18,000 over projections, which Utt attributed to an improved economy. Bank stock fees (tax on deposits) was $26,000 higher than projections and meals tax revenue was $18,000 over projections.
Permits nearly doubled projections by $19,000.
Gatewood related revenues were $17,000 higher than projected.
Overspending to the tune of $311,000 was identified by Utt in eight different areas.
Some of the overspending was unavoidable. Like the $10,000 overspent at the Historic Train Station due to serious repairs to the electrical and HVAC systems.
Some overspending was due to mistakes. Utt blamed a $50,000 overage in the fire department budget on an “over-reliance on Excel spreadsheets with a bad formula in the health insurance column.”
Combining revenue shortfalls as identified by Utt to overspending for whatever reason, then factoring in revenue that came in higher than projections, and the impact on the budget is in the neighborhood of a half-million dollars.
Utt offered several steps to take to bring the current fiscal year budget into line including adjustments in revenue and personnel, as well as a hiring freeze.
The freeze, projected to save $238,000, would involve seven positions in police and public works with five of the seven having been vacant for the entire fiscal year.
Reaction by council to the town’s financial picture was swift and sharp.
Speaking directly to Utt, councilman Joseph Goodman said, “I think the obvious statement is, ‘You screwed up.’ But we all are partially responsible for that because we pushed so hard to get more aggressive on budgeting. We have to get back to the mentality of using conservative budgeting. It’s better to have more money at the end of the fiscal year than what we had anticipated. Budget surpluses can be reallocated for special projects the next fiscal year or they can go where they really should be which is reserves.”
“Coming into the next budget I would suggest that we make a concerted effort to go with more conservative numbers. But we need to figure out how some of these “oopses” happened so they don’t happen again, like $100,000 more in paving – that’s a new one – it happens. I know paving costs have been going up for everybody, but we need to be more conservative on these things moving forward,” Goodman added.
“We’re taking almost a 50 percent hit on reserves. That’s not acceptable,” he said.
Goodman added that the town had created “a lot of positions and it may be necessary now to back track on some of that, and remove some of the additional positions that have been created because we can’t keep paying for stuff with hopes and dreams. It doesn’t work.”
Councilman Jamie Radcliffe responded that he had said “two or three years ago if you have a budget, it runs year after year after year in the ballpark of the same amount, and we don’t do a tax increase, eventually your debts are going to outrun what you have taken in. We’ve got to live within our means. Losing those businesses, we can say it didn’t hurt us, yes, it is and it’s starting to show up.”
Ratcliffe said he did have a concern on Utt’s hiring freeze plan.
“I caution us on first responders. It doesn’t take but one incident and you’ll pay out more than you will if you hire them. Then we have public works. They’re getting beat down. So, I really don’t know how we’re going to freeze anything there.”
Town Engineer Bill Pedigo remarked, “we’re down eight employees” in public works.
“We’ve got to get in here and use some good common sense with this budget,” Radcliffe added. “You can do a hiring freeze, but on certain parts you’re going to have to work around it.”
“My biggest fear here is getting lost in the weeds because there’s so much here to discuss. I’d like to focus our energy on what we’re going to do as opposed to what we’ve done,” said councilman Brooks Dawson.
“Looking back on 2019 is its just unacceptable. Unacceptable to the taxpayers, should be unacceptable to everybody here, it should be unacceptable to our town manager. It’s not okay for us to make excuses as to why we were wrong by half a million dollars.”
“Take what we did in 2019 and do that two more years, and there is no CIP (capital improvements) budget. There will be no new police cars. You couldn’t buy them. There’d be no money. You’d actually be in the hole. It wouldn’t be you couldn’t buy new stuff and you’d be fine; you couldn’t buy new stuff and you still wouldn’t be fine.
“And we did that in one year. And we didn’t even figure out that we did it until after it was over with. And I’m pretty sure that the taxpayers of this community are paying some pretty good salaries to ensure that’s not possible,” Dawson said.
Moving forward, Dawson said council and staff must focus their energy “not about what we want to do or what would be nice or what would be fun and hold ourselves accountable for what we’re responsible for and that’s maintaining the core services of this town and being fiscally responsible as we do them.”
“This goes back to what Mr. (Vice Mayor Greg) East spoke about in regard to maybe sometimes work isn’t always necessarily the work that we need to do. Grants can lead us into the wrong direction and all of a sudden, we forgot we have core services and financial responsibility that we need to be paying attention to instead of this new bell and whistle we were able to do. Last year we debated and argued over whether or not we could create a new drug task force. It was argued on a very pointed level about – they’re sitting there telling you – the town manager is sitting there telling you that the money is there. Why would you not do something that was good for this community? And I said I don’t think the money is there. But we were led by the administration to say that we did have the money. Those kinds of things we can’t do moving forward. This council cannot be misled about what money we do have or what we don’t have. We can’t function as a town with other people’s money on hopes and dreams and what we’d like to do.
“I know it’s a tough conversation and no one likes it, but that’s what we’re here to do is to take our core responsibility and build out from there. And if the money is not there, it’s not there.”
Utt responded, “That was the goal of tonight to define that core responsibility and go from there.”
Goodman countered that the most important services are police, fire and public works.
“Everything after that you have to figure out does it fit in with what we have to do for the citizens. That’s where we start. Everything else we build out based on what’s appropriate.”
Ratcliffe asked, “Who is responsible for catching overspending in a department?”
Rebecca Leeper, Finance Director, responded that she does monthly reports.
“Each department head should be able to see their budget and they are responsible for maintaining their budget. There have been times I have seen things go over and usually I will address Shawn to make him aware and sometimes there’s things that couldn’t be helped. Like when we had that big piece of equipment a couple years ago – a generator – we had to spend that money. Yes, of course, it threw his budget over or when you have a lot of water breaks. I can go to Bill (Pedigo) and say you’re running over, and his response will be do you just not want me to fix the pipes?
“What we need to be doing is coming back and doing budget revisions to make sure we’re all on the same page,” said Utt.
“I agree with Mr. Dawson and Mr. Goodman, get back to core services,” said East. “But I would add one thing. We have an expense side and we have an income side. I don’t know that we’ve pursued the income side as aggressively as we can. And that would be through business recruitment. I feel like we’ve done a lot of things with a lot of good intentions. Right now, I think we’re bloated. At the end of the day recruiting new businesses is key. You’re either going to put the burden on your citizens or you’re going to recruit new businesses and grow the town.
“One thing we have not done well at all, and we’ve talked about it extensively, is recruit businesses. That’s where the rubber meets the road, is getting businesses inside the perimeter of the town of Pulaski. And helping those businesses to succeed. Thank goodness for David Hagan. Take a snapshot without him and his investment in our town.
“I feel strongly we should have a dozen other investors by now, maybe not of his (Hagan) caliber, but certainly it’s going to require a bunch of folks coming in and supporting that and us promoting that to grow that end of the budget.
“We can’t fall back to raising taxes especially when it feels like we’re bloated on the other side – on the expense side.
“Like Mr. Dawson and Mr. Goodman have said, get back to the basics, but we need a plan to actively recruit business. Galax obviously has had some success doing that and that’s where it all began,” East continued.
Goodman asked when town staff realized there was a problem. “So, at what point last fiscal year did ya’ll say, “oh s—!”
Utt responded, “Not soon enough.”
“Then why didn’t we hear about it then,” Goodman responded. “What concerns me the most is I had to wait until the auditor to tell me six months into the current budget and I would think that those numbers would have been available to staff.”
Councilman Lane Penn put an historical spin on the discussion.
“This is not the first time we’ve had good reserves disappear. We’ve always had reserves and this time is no different. They always disappear,” Penn said.
“The only time we add to reserve is because we sold something like Loving Field. Now, our backs are against the wall this time more than ever because now we don’t have anything else to sell. We have sold everything. Take it back to our first – I’ll call it – yard sale. We sold old police cars, backhoes that didn’t work and made a couple hundred thousand dollars.
“Next thing we sold was the timber off the mountain. For three or four hundred thousand dollars. That money disappeared. We sold Hogan’s Dam for about three-quarters of a million dollars. We’ve already spent the James Hardie money. Every time we talk about budget, every council member has spent some of that money.
“What are we going to do now? We don’t have anything left to sell. What are we going to do?
“I can take you back 20 years. We have never had reserves based on a revenue windfall. We take in a dollar, we spend a dollar. We’re never going to have any money. It doesn’t work that way,” Penn said.
Goodman said he believes the town needs a million dollars, considering the overspending and revenue shortfalls, plus the need to begin paying for a new emergency services complex the town has been putting off for years.
“It’s going to require some extreme belt tightening,” he said.
“The citizens have been pretty blunt with us when it comes to conversation about a potential tax increase. The answer is quite frankly, ‘Hell no!’ They are still recovering from the increase that was approved for the middle school, so there is only so much that we can do – so much wiggle room to make it work. We’re out of wiggle room, we’ve exhausted that.
“Let’s make sure we understand what we’re going to do this year,” Dawson said, asking what positions are involved in the hiring freeze.
Utt said one is in police, one in the garage, one in streets, two in water and sewer and four in general properties.
Police Chief Gary Roache interjected he may have a resignation from someone on his staff the next day.
“The hiring freeze is another way of saying we’re eliminating those positions until we can afford to pay for them this year,” Dawson said.
“Is everyone comfortable with that? Are those the right seven positions? I’m pretty sure that if Shawn saw a solution that didn’t involve positions then he wouldn’t have offered that up as his only solution to balance the budget. I’m almost certain if there was money somewhere else, he would have found it first. That’s just his nature. And I mean that as a compliment.
“So that’s where we are. There’s nothing about 2021 that’s going to change that circumstance. Unfortunately, every department in this town and every organization that has partnered with this town are caught up in that same rule of us figuring out what are the core services. What are we going to make sure we can pay for and cover. There is a dollar amount and we don’t expect to spend more than that. That’s the most dollars we can have to be financially responsible. Our budget last year was $10 million (general fund). With that said, in order for us to do the things that we have to do, our financial responsibilities, we can only spend $9.5 million. That $9.5 million is all you got. This is what our expected conservative revenues are, and we know we’ll bring in this much and if we bring in more, great, we’ll dance about that later. In order for us to do the things we’ve got to do to move the town forward, is spend $9.5 million then we’ve got to put together a budget in which we spend $9.5 million.
“It doesn’t matter how much we love any department in this town. Not going to say one because I’m not picking on one, it’s just that the bottom number is the bottom number.
“That will get us what we need to accomplish what we’re supposed to be doing,” Dawson said.
Radcliffe repeated, “We’ve got to be careful with first responders. I don’t even want to discuss it. What I’ve found in budgeting is our public works is always the red-headed stepchild. No matter how many people are sitting in these offices here, they always go after them – the $21,000 a year man. I’m not going to stand for that either. They’re already eight short, they work very hard, but they’re always the ones who take that beating. We’ll cut out the parades, we’ll cut out everything. But they can’t afford anymore.”
“I completely agree with that,” Dawson said. “In my mind there are six departments in this town. Police, fire, public works can’t do anything with them. Pretty sure we’ve got to have a town manager. Finance department and community development. That’s our six departments. A half million has to come from somewhere. And those are the only groups we’ve got. I’m telling you that conversation sucks. But that’s all we got, there isn’t some other department over there that someone doesn’t find important.”
“We do need to be very careful about public works. I was by a local restaurant and they had a sign on the door, ‘open four hours because we only have one employee.’ Heaven forbid we end up there. You’re talking about the economy the way it is and you’re talking about a transient group of folks working at these needed jobs we have in public works, if they disappear, we’re in a world of hurt. So, we have to be very careful about what those seven positions are. We cannot afford to not have the folks who make our town operate and work – we can’t afford not to have them. We can’t hang a sign on the door that we’re only working four hours a day. That definitely needs to be kept in mind,” East said.
Roache noted a special consideration in the police department.
“One other consideration here, if we hold a freeze until June 30 that means we don’t get the summer police academy, we’ll have to go to winter academy. Which is January 2021. If we put someone in the academy in January they won’t be on the street until September 2021,” he told council.
As for the new budget for Fiscal Year 21 council will begin work on next week, Utt said the budget he’s been working on is $9.4-$9.5 million in the general fund.
“I’m going to issue a challenge. Last year the revenues were $9.22. Why don’t you shoot for $9.2 million? Extreme belt tightening. You’re going to need to come to us with positions you’re going to recommend for removal. Our goal is those positions won’t come from these three core departments,” Goodman said.
“The whole world is going through some of this same struggle,” Dawson noted. “In my opinion nothing should be off the table.”
Dawson called for staff to look at restructuring to be more efficient.
“We’ve got no choice.”
By MIKE WILLIAMS, The Patriot