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Updated: Tuesday, 28 Feb 2012, 10:58 PM CST
Published : Monday, 27 Feb 2012, 6:55 PM CST
MOBILE, Ala. (WALA) - STATE OF THE CITY BUDGET
Barbara Malkove has served as the executive director of finance for the city of Mobile for 22 years.
She said the budget situation is the worst she's seen in her two decades on the job, and she said next year looks just as bad.
"We are preparing for the worst right now," said Malkove. "We've offered several sources of revenue that are not nearly as great, but we don't have a choice. We've got to go into it with a balanced budget."
Malkove supports reinstating a one-cent sales tax to fill the budget's $27 million gap.
Barbara Drummond with Mayor Sam Jones' office said other options, such as a business regression tax, storm water management fee, or garbage tax are not enough to fund the shortfall.
THE FIRST PENNY SALES TAX
Rewind to April 2010 and it was the same story, just a different day. The city was $14 million in the red and pushing for a penny sales tax.
"The option we think is most viable is the sales tax option, and we don't take any pride in presenting it. But we think it is necessary, based on state of economy and the way it is deteriorating," said Mayor Jones in April 2010.
Without the tax, Jones said layoffs and pay cuts for city workers would be next. However, the city council shot down the tax, igniting a firestorm between city workers and council members.
Deputy Police Chief Joseph Kennedy, a veteran officer, told city council members he'd worked for substandard pay for 33 years, and wasn't going to work for what he called 'sub-substandard' pay.
"Put the one-cent sales tax back on the table with a definite sunset clause, or put me on your layoff list," said Kennedy.
In the Spring of 2010, city council meetings were heated and tensions were high. City employees turned out in full force to protest proposed pay cuts and layoffs.
"Those of you here, if there is a pay cut and half of you get mad and want to go home, there are ten other people that would be happy to take your spot," said council member William Carroll during a meeting in 2010.
Ultimately, the penny sales tax won out, and in May of 2010 it was approved by a vote of 5 to 2.
Council members John Williams and then council member Connie Hudson voted against the tax.
The tax started in June of 2010 and ended in September of 2011. The mayor said it generated around $25 million, and for a while the city was back in the black.
FAST FORWARD TO 2012-2013 FISCAL YEAR
Fast forward, and the city's cash flow for the fiscal year 2012-2013 looks bleak.
"We are checking on trends to see if there are any improvements. But right now, we lost $11 million due to changes in revenue," said Malkove to council members in a recent meeting.
Malkove said the city has taken steps to cut back: it's reduced overtime, put a freeze on hiring, reduced training and travel, and slashed operating budgets.
"Training is important to my department, and we are paying for the training out of our own pocket," said Malkove.
She said the current budget reflects just over $1 million in cuts to the operating budgets for selected departments, not including police and fire.
A reduction of $15,000 was made in personnel board spending, and a reduction of $280,000 was made in spending on the youth center.
Malkove said the city's biggest expenses are personnel, healthcare costs, and the pension fund.
Since September, Malkove said departments are $4.3 million under budget in expenditures.
"We have gone through all the operating expenses. We're going to have to cut out all of the performance contracts, and I know how much they depend on them, but you can't really keep a performance contract when you are firing people," said Malkove.
Mayor Jones' office said performance contracts include the Mobile Area Chamber of Commerce, Distinguished Young Women, and Mobile Area Education Foundation. The total proposed is more than $2 million.
Malkove said each department is being asked to cut costs, again. She said her department, even with furloughs, would still have to terminate ten people.
"But I think if we do more cuts, we will have service loss that is more apparent," said Malkove.
SO, WHAT'S PLAN B?
Why hasn't the administration planned ahead for the looming $27 million deficit that was spotted two years ago, rather than continually holding out hope the city council would re-implement the sales tax?
Mayor Jones said the one-cent sales tax stopped the budget's bleeding, but it didn't heal its wound. He wanted it to last longer, 36 months rather than 18, but the city council changed his plan. He said he is planning ahead and thinking of the 2013 budget right now, rather than later.
Jones said a new penny tax is needed to prevent layoffs.
"What do you say to people who say you are just threatening with job loss, to get your sales tax back?" he asked. "We got 30 days to see where the situation is and we are not trying to scare people. Most of this is done at the expense of employees, and we are certainly not trying to do that."
But what will the city do? The mayor put a March 1, 2012 deadline on coming up with a solution, be it pink slips or a penny tax.
The mayor's new proposal for a penny sales tax has a sunset clause tied to the economy.
In a recent letter to council members , Jones wrote: "This time, rather than guess at when the economy would rebound, I recommend that we tie the sunset provision to a specific economic indicator. In this case, I think the sunset provision should be tied to when the unemployment level in Mobile drops to an acceptable level."
The mayor did not provide an example of an acceptable unemployment level.