State of Tennessee’s Comptroller has questions about Metro’s budget. This is serious stuff!!

by Rod Williams - The Comptroller of the Treasury has written Metro a letter expressing, "fiscal concerns that need to be clarified or addressed." This is serious stuff.  When a city as large as Metro cannot pass a budget that conforms with the law, it is embarrassing. It tells me we need a new leadership team that can propose a balanced, fiscally sound, lawful budget. 

As metro was passing a budget this year, I saw issues that I thought were a problem. Apparently, The Comptroller thinks they are a problem also. In a July 1 post, I wrote, "Metro's reserve fund balances are being permitted to drop below recommended levels." I wrote that, Metro’s established policy is to maintain a fund balance equal to or greater than 5% for each of the six primary budgetary funds and pointed out that several of the funds would not meet that threshold under the mayor's proposed budget. I thought that was a problem.

The Comptroller tells Metro, "We request that Metro Council provide our office with a cash management policy. When adopting such policy, we encourage the Council to consider establishing minimum cash balances needed for Metro’s operating and debt service funds that are sufficient to meet unplanned fluctuations in revenue and expenditures."

More important than letting reserve funds fall below policy levels was my concern that the budget did not balance. The comptroller sees that as a problem. By law the projected expenditures cannot be greater than the projected revenues. When Mayor Briley proposed his budget he included on the revenue side, $34 million to be realized in upfront income from the privatization of Metro's parking meters. Facing widespread opposition to the proposal, Briley pulled the plug on the plan. In my June 4th post, "Parking meter privatization plan not dead! Not withdrawn- just "deferred,"' I wrote, "Since the upfront $34 million from the parking privatization deal was used to make up the revenue side of the current proposed budget, and since the mayor has stated he will not seek a tax increase, $34 million must be found somewhere or that much expenditure must be cut." Well, the revenue was not made up elsewhere nor were expenses cut.

In the letter from The Comptroller, he writes that he wants, "A summary that explains the impact of the sale of assets including property and parking rights on the fiscal year 2020 budget in addition to the actual status of these sales."

He tells the Metro Mayor and Council Members, "A balanced budget shall be maintained with no cash deficits and sufficient to pay operating and debt service costs"

The comptroller's letter has teeth. Each year Metro government must borrow money for operating expenses in anticipation of  revenue. This is normal. It is the way all local governments operate. This year Metro has requested to issue Tax Anticipation Notes in the amount of $220 million. The Comptroller must approve such request. It does approve the request, upon the comptroller's office receiving the information it request, which I have explained above.  The Comptroller gives Metro until September 20th to comply.

This most likely means the Council must amend the budget to address the two issues of the inadequate fund balances and the use of phantom revenue from the privatization of parking.  To do this, the city could raise taxes or make budget cuts. Although passed, the budget can be amended. It takes three readings to pass anything and September 20th is not far away. This is a crisis. If the Council does not act, It cannot sell TAN and will run out of money to operate.

For more on this issue, see link, link, link, and link.

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