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Glover's Shreveport budget papers over looming problems

Bossier City should take Shreveport’s cue and release its executive budget online prior to legislative consideration. Then again, if the news is as bad financially as it is for Shreveport that might discourage it.

The unambiguous message from Mayor Cedric Glover’s budget was Shreveport is ailing financially, encumbered by mistakes made in the past by some still with positions of power and authority in the city. Glover himself must shoulder some of the blame despite not being a city official from 1995 to 2006, as he often was point man in the Legislature for his predecessor Keith Hightower’s decisions, aided and abetted by some current members on the City Council, who have caused this condition.

Reading between the lines (which is what this space is all about) of the commentary provided by Glover in the document, one finds the indicators of the deterioration:

  • The budget is smaller in recognition of revenues failing to meet expectations in some areas, and some higher costs than previously budgeted. Most dangerously, in order to compensate for trend some reserve funds were drawn to low points, and Glover admits replenishing may be difficult unless a bonus like leasing of mineral rights of city property comes through. (As this column went to press, Shreveport had not yet leased anything while the environment for that is becoming increasingly difficult.)
  • Speaking of falling revenues, at several junctures when fee increases are noted they are followed by statements saying despite the increases, revenues hardly changed. Ever heard of the real-world Laffer Curve? Applying a derivation of it to fees, past a certain point government increasing fees raises scarcely the total revenue from them, because too many people no longer avail themselves enough of the service because they are priced out of the market.
  • So, Glover’s plan is to make selective fee hikes in various compulsory areas where the purpose of the hike has nothing to do the activity it is associated with. For example, Glover proposes a $10 “fuel surcharge” on traffic tickets. What on Earth does fuel consumption have to do with writing a ticket? Maybe if it’s a serious offense it costs a little in gas to transport somebody to the city jail, and it may take a little extra to speed up and pull over an offender, but that’s about it.
  • While the city may get a break on fuel costs compared to last year, one big reason this may be the case is an economic slowdown which, given the city’s economic base is overweighed in big-ticket manufacturers and leisure activities (gambling), sales tax revenues may not even hit this past year’s levels much less the increase forecasted.
  • The bet on gambling and on swiping convention center business is paying off poorly. Revenues from gambling get pumped into the Riverfront Development Fund which shows no growth, and indirectly from the Downtown Entertainment District Fund which also should get convention-goers’ business. It was cut 11 percent.
  • The convention center and city-owned hotel are massive drains on the citizenry. The hotel needed over a half a million dollars worth of subsidy to service its debt; whistling into the wind of the projected economic slowdown, Glover predicts no subsidy will be needed in 2009 with interest expenses going down by almost this much. But interest payments are scheduled to go back up again to the 2008 level in 2010 and steadily increase. Further, almost $1.9 million of subsidies will go to the white elephant convention center with no reduction in sight.
  • That $1.89 million will come from the Riverfront Development Fund that is dependent upon the economy-sensitive gambling industry. In recognition of economic realities, Glover is cutting the slush fund appropriations to local nongovernmental organizations by 77 percent, leaving more than half of that remaining funding in the hands of three groups, the overly-dependent Multi-cultural Center of the South (same $200,000) and Shreveport Regional Arts Council (cut of $415,000 to $125,000), and the floundering Independence Bowl (cut of $10,000 to $90,000).
  • Finally, debt service as an item is budgeted at a large 19.2 percent of the total spending – which understates its actual cost since not all debt-paying projects are included in that fund. The interest and principle on paying off things like the convention center and hotel are sapping the lifeblood of the city.

    While Glover’s comments attempt to put on a brave front, realistically this budget itself is an exercise in optimism; the city is likelier to end up with an even bleaker revenue picture. Shreveport now is reaping the financial consequences of what it sowed from the monuments that Hightower, with Glover’s blessing, built.
  • 1 comment:

    Anonymous said...

    A very good article Professor Sadow. I see Shreveport possibly heading toward the financial situation that was experienced during the mid and late 1980s when the local economy was experiencing high unemployment and plummeting sales tax revenue.The main thing that I expect from Mayor Glover is that he be honest with the public about the City's financial situation and eliminate the unnecessary and highly political slush fund projects (there are many that the City throws tax dollars at)to keep essential services going (e.g., police/fire protection, sanitation, water & sewerage).