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Spending, not revenue, problem causes Bossier deficit

One part of the cacophony emanating from Bossier City’s budget meltdown is the assertion by its Finance Director Joe Buffington that the city got into its predicament of having a $6.5 million hole in a $50.3 million operating budget because it didn’t tax its citizenry enough. Let’s see just how valid this is.

Buffington had complained shortly after the news had been “revealed” (making a very unlikely assumption that Buffington had not known about it for months) that Bossier Citiy's consistent refusal to roll forward property tax millages over the past few cycles had created this hole. When assessments of property values occur every four years, rates automatically change to compensate for the change in value; governing authorities have the option to vote to not make the adjustment, thereby increasing property taxes for payers and increasing the amount of property tax revenue coming into a jurisdiction.

“It's the same hole perpetuated for the last two years by rolling back taxes and spending down the fund balance," Buffington said. "The administration just finally put the pieces of the puzzle together.” Since then, Buffington has been muzzled by Mayor Lo Walker, who has stated he will not raise taxes to deal with the situation. The entire city administration refuses to make comments on any aspect of the budget.

Bossier City’s 2008 Comprehensive Annual Financial Report gives plenty of data to show where the real problem lies. First, it’s worth noting that the city’s property tax rate, in comparative perspective to the other four Louisiana municipalities of roughly equivalent size, is neither high nor low. Currently at 21.69 mills having fallen from 26.38 in 1999, it is in between the present rates of Monroe at 27.75, Kenner at 23.93, Alexandria of 20.23, and Lake Charles at 16.09. None of these, even the least fiscally imprudent of these cities, Monroe, are reporting budgetary difficulties close to those encountered by Bossier City.

Also notable is that the property tax take of the city has grown faster than its rise in assessed value. Since 1999, despite failures to roll forward, property tax revenues for the city have grown from about $6.761 million annually to $10.461 million, a 60 percent increase. In fact, increases in sales taxes proportionally have been almost identical although in the past couple of years they have flattened, which would be expected as the country entered economic recession, while property tax increased collections have continued without stop. Utility taxes have grown even more, almost doubling. These are expected for a city whose population has increased an estimated 10 percent since then, and even accounting for inflation exceed that population growth.

So, property tax proceeds have held their own despite not rolling forward rates, especially in the past couple of years (they tend to be much more stable sources of revenues). The problem has come on the spending side, in operating expense terms particularly in the area of public safety where there has been a vast expansion over the past decade. Bossier City was employing in 2008 461 police and fire personnel having a population of 62,384, up from 381 for a population of 56,466 in 2000, a 21 percent increase. Compare this to Lake Charles’ 71,061 population with 384 such employees, and Kenner’s 65,202 people served by 364 such workers.

This is why Walker has said he would eliminate 80 jobs in the public safety area, because it was that area that was overstaffed relatively, which only would set the city back to its 2000 level and still have it, on a per capita basis, exceed the levels of these other two cities (data for Monroe and Alexandria were not available). But this really isn’t the main part of the gap between revenues and expenditures.

That comes from the enormous amount of debt the city has taken on since 2007, tripling it from about $104 million in 2006 to $317 million in 2008. (Of the other four cities, they range from $58 million to $168 million or so in debt.) This has come not only to pay for sins of the present – such as the Cyber Innovation Center boondoggle – but from those of the past – for roads and infrastructure projects and the like that could have been paid for by hoarded cash but instead squandered on a parking garage gift to a private developer and the arena. In those two years, per capita debt of Bossier City soared from $1,735 to $4,891 – more than 50 percent higher than Shreveport’s.

This now requires debt repayment approaching $25 million a year for at least the next 15 years (it was close to $14 million in 2008), when the total revenues for the city (including not just the operating budget for general government) were about $90.753 million in 2008. This means potentially that the problem, sucking already a fifth of total revenues in 2008, could be much worse in 2010, which is why Walker is taking drastic – and apparently permanent – moves now.

Finally, note that even if the 4.69 mills had been rolled forward, in today’s terms it would have raised only about $2.3 million, barely a third of the deficit. That’s assuming there would be as much assessed valuation, because having higher property taxes would have stunted what growth the city would have had.

In the final analysis, Bossier City does not have a revenue problem. Its growth in those areas has been more than sufficient, vindicating a strategy designed to encourage growth by keeping taxes at a reasonable level. But Bossier City has had a spending problem for well over a decade that needlessly inflated its debt by over a third on unneeded projects, and that’s why the chickens are coming home to roost. Suggestions that Bossier City’s property owners don’t pay enough in taxes are just an exercise of a bureaucrat invalidly shifting blame to cover for government spending gone wild.

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