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Shedding buildings only way to stop Bossier catastrophe

It’s agreed that Bossier City’s elected officials have squandered a bounty that could have made it a very publicly safe, low-tax haven that would have produced an impressive economic growth machine. Now that they have put the city into a bind, appropriate to ongoing 2010 budget deliberations we must ask, what should they do to get it out?

To answer this, it’s instructive to review what they should not do. To begin, no competent solution can be derived unless all concerned recognize that the city has not a revenue problem, but a spending problem. As noted previously, Bossier City’s property tax rate is set at a level comparable to other cities of similar size in Louisiana so there’s no need to jack that up. Even had rates been rolled forward to compensate for past reassessments, the extra revenue would only have compensated for about a third of the shortfall that emerged during the 2009 budget year.

Four years ago, city politicians pulled off a shell game in compensating for deficits in areas that had nothing to do with water and sewerage by increasing those fees. Earlier this year, they floated the idea of another increase, this time one that would actually have to do with water and sewerage to help pay for upgrades in the system, but public backlash shot that down. This deficit appears set to continue, in part caused by the last increase because officials stupidly ignored basic economics and didn’t realize per user usage would decrease because it now was more expensive per unit. Worse, the city charter mandates after two years in a row of losses that a schedule be produced presumably eliminating the deficit which could allow the money-hungry Council to raise rates again, independently of the budget crisis.

However, acting now could forestall both of these problems, because they are intertwined to a certain degree if we understand what unnecessary expenses have caused the crisis. Essentially, two things have done so, a large public safety contingent and massive debt for a city its size. The latter has developed as a result of elected officials’ voracious appetite for entirely unnecessary but publicity-grabbing capital expenditures: the money-losing CenturyTel Center, the parking garage gift to developers at the Louisiana Boardwalk, and the city’s share (about a third of its cost) of the high-tech office building known as the Cyber Innovation Center being the principal offenders.

The parking garage poses a special problem it is essentially worthless without the Boardwalk having an operator. But the other two stand independently. Together, the city’s 2008 Comprehensive Accounting and Financial Report shows those two account for about $37 million of the nearly $171 million (together, the two cost the city $91.5 million) in non-utility related debt. The city also drained $25 million in cash from its Riverboat Capital Projects Fund to finance the CIC. Assuming the city can sell the Center and its stake in the building to recover 75 percent of its original costs – the Center doesn’t lose much and the building is new – their debts can be retired as well as all other general government issues except the recent $100 million of revenue bonds. This could result in a savings of around $5 million annually.

Another avenue of savings can come from privatization of the city’s water and sewerage function. Generally, privatization of these functions is estimated to provide from 10-25 percent savings, or assuming the lowest figure on Bossier City’s roughly $21 million in revenues from this function, at least another $2 million or more can be saved annually. Back out these gains, and the $6.5 million 2008 deficit disappears. If the city as part of this can negotiate an up-front bonus as many jurisdictions have, debt in the enterprise area can be retired to produce even more savings.

Of course, these can’t be done in time to save the 2010 budget year and the city would have to act fast to get them done for 2011. So, several interim strategies need to be pursued, beginning with the other area of overspending, public safety. Laying off roughly 40 police officers still would keep the city in line in officers per capita with the other similarly-sized Louisiana cities, saving around $2 million a year. (The number of firemen should be maintained in order for the city to hold onto its Class 1 fire rating, as any significant layoffs here would threaten downgrading of that likely meaning higher premiums for property owners.) Along these lines, a recent proposal by a pair of council members could be adjusted to make all job retentions in the fire department area.

Other savings at the margins, such as reducing managerial and elected officials’ salaries (most city employees are better paid than their Shreveport counterparts who manage a city three times the size of theirs), the vehicle fleet size, and (regrettably) eating into fund reserves could for one year make up the difference, buying time to complete these asset sales and privatization that could slash outstanding debt by a third.

Because the debt bomb staring down the city is truly monstrous. One reason 2009’s budget presented a big problem was an additional $10 million in debt service requirements over 2008 (now 20 percent of all noncapital expenditures), and it increases by a couple of million more in 2010 and stays at that level for almost a decade. Plus, the recent water intake pipe break may heap on another $21 million in costs, no doubt to be financed by debt. Unless Bossier City begins to responsibly fiscally manage itself and unwinds the best it can from its mistakes of the past, without asset sales and privatization the city will be in a perpetual budget crisis for years to come that will force reduced services and/or higher taxes and fees.


Anonymous said...

I think all Bossier's financial problems can be laid directly at the feet of Lo Walker. From my previous dealings with him, I think he's either senile or a typical power grabbing politician...I assume he's a democrat of the tax and spend variety.
First order of business is get a new mayor. Then start on the remaining elected officials.

Anonymous said...

For someone who has never attended a city council meeting or workshop I find it difficult to take anything you take seriously. For your information the paking garage is in the city's hands.

Jeff Sadow said...

>For someone who has never attended a city council meeting or workshop I find it difficult to take anything you take seriously. For your information the paking garage is in the city's hands.

The arrogance of the first sentence is stupendous. So you are arguing that unless somebody attends at least infrequently he has no credibility? As if access to numerous other resources, including council minutes, city financial reports, etc. can contribute nothing to the debate? The implication of such an inane attitude is that almost all of the citizenry are excluded from democratic policy-making, leaving it in the hands of those wealthy enough, privileged enough, or bored enough to be able to attend council meetings in person, scheduled at a time when most everybody else has some other kinds of responsibilities they must fulfill. (Personally, if you would financially support me or volunteer to take over in a reliable and competent fashion my responsibilities, or could get the Council to meet at a more amenable time, I'd be glad to show up at them.)

By contrast, your second sentence is intriguing. Nowhere in any of the many doucments I have read about city finances have I found anything to suggest that the city retains title to this mistake. If the city wants that known, it has done a remarkable job of hiding that fact. I will make inquiries to verify your claim.