ALTERNATIVES TO INCURRING ADDITIONAL DEBT

I submitted the following to the Oak Ridge City Council in an effort to explore alternative funding of the EPA mandated changes in our sewer system. Upon learning of an error, I’ve made a correction regarding ownership of the Chamber of Commerce building.

ALTERNATIVES TO INCURRING ADDITIONAL DEBT

–         As suggested by Trina Baughn 1/14/2013

$17,480,800

This represents the amount dedicated for projects scheduled to start before or during 2013. $6M is set aside for the Equalization Basins, one of which is intended for DOE use and may be paid for by DOE. Construction not projected to begin until 1/12/2014.

$14,810,000

This amount represents all of the debt incurred thus far for which the rate increases were attributed. However, $3.9M remains unused and $4M has been set aside for non-EPA work. If we opt instead to use ALL of the debt issued thus far, we would need to come up with $2,670,800 + $97,600 (issuance cost for existing debt) for projects beginning in 2014.

GOAL: Find $2,768,400 before 2014

SUGGESTIONS

ASSETS REVIEW/CONVERSION: Convert assets that are actually liabilities

1.       Attempt to Sell the Golf Course

Even if sold at significantly less than what we paid for it, we’d realize an immediate annual savings of $560,000 of debt service payments. The property would also immediately become a source of consistent revenue since it would convert from an exempt status to a fully taxable property.

2.       Sell the Chamber Land and Increase their Lease until the sale

The city owns the property and the chamber owns the building. Our records indicate that zero property tax has been paid on the property or the building for the last 12 years. If we sell the land, just as with the golf course, we reap the added benefit of a new source of taxable property. Furthermore, according to chamber president Parker Hardy, their lease with the city is roughly $600 per year. The city should immediately renegotiate to a rate that aligns with true market value and benefits the citizens as opposed to a special interest that is already subsidized with their tax dollars to the tune of a quarter million per year.

3.       Enlist the trustee and/or property assessor to identify other similar properties.

For example, the 1020 Commerce Park address which is owned by Tech 2020 shows their last property tax payment was made in 2001 in the amount of $11,614. They continue to occupy the building but there is no record of tax payment since 2001.

REDUCE/REALLOCATE VARIOUS BUDGETED ITEMS

 1.       Reduce and Reallocate from the Solid Waste Fund

In addition to the nearly $2 million per year spent for weekly back door/curbside trash pick up, the city spends $100,000 for annual spring household trash and brush collection to include disposal costs. What % of residents actually take advantage of these services? It appears that very few on the west end do given how late into the season the pickup occurs.  Can they not be converted to fee for service?

2.       Red Light Camera Funds

While I believe these funds should be used to replace the cameras with permanent solutions, they can be used to pay for just about anything. According to the most recent budget, the fund balance was projected to be $887,064 for 2013 with annual revenues of $435,000.

3.       Economic Diversification Fund

This fund pays out $1.4 million to various organizations in the name of “economic development.” If any budget category can be deemed non-essential, this would be it. Half of it funds the CVB & Chamber of Commerce. Also $296,000 of the revenues are derived from electric and water funds. None of these organizations can definitively demonstrate a return on investment and many appear to overlap one another in their efforts. A temporary suspension of funding for 2-3 years should reveal their true value.

4.       Disclose balances of all reserve accounts that are not currently designated for essential services.

For example, it was revealed during the November 2012 city council meeting that a slush fund for the Secret City Festival existed by which funding was provided up front and then repaid after the festival. Staff was asked by Councilwoman Smith to provide the details of this fund. Has that occurred? How much exists in that fund today?

5.       Across the board reduction of non-essential departments.

–          Community Development                       Annual budget is $709K

–          Rec & Parks                                        Annual budget is $2.9M

–          Library                                                  Annual budget is $1.4M

If each of these department budgets were reduced by 10%, the annual savings would be $500,900. Since we experience 5% turnover annually, a significant portion of these funds could be recouped through attrition.

TOTAL ALTERNATIVE FUNDING IDENTIFIED WITHIN THIS REPORT: >$4,382,964

THE QUESTION WE MUST ASK: ARE ANY OF THESE FUNDING SOURCES MORE IMPORTANT THAN THE HEALTH AND SAFETY OF THE PUBLIC’S WATER?