“Our expenses will exceed revenue, our reserves will be depleted or worse, we’ll have substantial negative cash flow, and we’ll be faced with further reductions in services and/or painful HR decisions,” Bach said in an email sent from his personal account.
The subject line of the Aug. 10 email was: “Update to Steve Bach’s Friends.”
Here is the full text of the email:
Ladies and Gentlemen,
This is to share with you an early personal observation of great importance to our City.
If over the next few years our sales and use tax collections do not grow substantially based on a resurging economy and/or we do not reign (sic) in our expenses for general City government (police, fire, planning, engineering, city attorney, city clerk, finance, budget, human resources, other general staff), our expenses will exceed revenue, our reserves will be depleted or worse we’ll have substantial negative cash flow, and we’ll be faced with further reductions in services and/or painful HR decisions.
The City budgeting process focuses on a plan for one year. Using this very near term horizon means that the City usually arrives at a solution for next year, one year at a time. What we must do going forward is to look at the longer term – the risks and opportunities before us – and shape our operating plan to be fiscally sustainable while delivering consistent, quality core functions and retaining valued employees. In other words, we must change the culture of City government, transform it to be smarter and leaner, all with a proactive, customer-focused orientation.
Below is a link to three current forecasts for our general City government revenue and expenses (excluding enterprises such as CSU, MHS, the Airport) over the next eight years if our current revenue and expense trends continue. The first forecast is by City staff, the second by Kurt Kofford, CPA, and the third by The City Committee. The forecasts are similar with this message: Our expenses will soon exceed our revenue.
These forecasts assume no increase in personnel or additional services in the future, do not take into account the $50+/- million per year we must spend over the next 20 years on deferred infrastructure replacements, increased cost of defined benefit (guaranteed) pensions if the retirement plans’ projection of 8% annual growth in their assets proves wrong or a range of external downside influences impact our finances (e.g., the Federal government downsizing of military budgets here or a next recession in perhaps 2014 or sooner).
We all want our City to be successful. That depends greatly on responsible fiscal leadership by our elected leaders. Now is the time for us to move to priorities-based budgeting and over the horizon planning to help achieve our full potential as a community. Please pass along this email to your colleagues and friends, and invite them to send me their email addresses for a direct copy of future emails. I’ll be in touch with you again soon.