Reality check: The 2008 Galesburg city budget

analysis by Mike Kroll

Former Galesburg city manager Gary Goddard was always fond of saying that “budgets were merely plans measured in dollars.” That was Goddard's approach to budgeting during his long Galesburg tenure and that is the approach he instilled in the city council members who served during that time. Goddard took a “business-like” approach to municipal budgeting where operational and personnel costs were seen as something to minimize and there was a focus on highly visible projects that were easily identifiable by citizens and created monuments to the tenure of both Goddard himself and the city councils who served during that period.

Meanwhile, there were hidden costs to this approach. City services were quietly reduced and the costly but largely invisible maintenance of city infrastructure was neglected as the number of city staff was reduced. When an early retirement program was proposed as a cost-savings a significant number of city staff took advantage of the opportunity. Normally in such early retirement programs the cost savings reflects the lower employment costs of younger, less experienced replacement workers but in Galesburg's case many of those positions were never refilled to “maximize” the savings.

Throughout Goddard's time he preached savings through reduced personnel and claimed that use of new technology more than made up for the smaller number of city employees. This was true for many clerical jobs where computers could enable managers and professionals to accomplish tasks alone that once required the support of secretaries and clerks. But technology alone could not replace the loss of skilled personnel in the public works areas and many of those who retired came from public works and were not replaced. Computers can do many things but they don't fix streets and sewers or water mains where the lack of maintenance ultimately carries a cost too.

When Goddard retired at the end of 2006 and was replaced by Dane Bragg at the start of 2007 the new city manager inherited a budget mess and a city with decaying infrastructure, declining population and a city council ill-equipped to address these and other pressing issues. Bragg's first task was to rework the 2007 budget, a task that was made possible by Goddard's habit of squirreling away tax dollars for “rainy days” that Goddard must have defined as the the flood of ages. Bragg was able to properly address unmet pension and bond obligations largely through this “found” money after the city council refused to pass all the tax increases Goddard had requested.

The 2008 city budget process and the proposed budget itself is Bragg's first opportunity to demonstrate his philosophy of government and his view of the budget process. While the infrastructure crises in the water system leave few options it is more telling to examine the other choices Bragg has made in this budget. A close look at the proposed 2008 Galesburg city budget shows some key differences between Bragg and Goddard and will pose a huge challenge to the Galesburg city council. Bragg seems to recognize that a budget is measured in more than just dollars and that a true assessment of the success of a budget can only be made years later as a function of its longterm impact on the city.

Some of the changes proposed in the 2008 budget are a recognition that infrastructure does matter, that significant population decline (particularly the loss of middle-class families) is Galesburg's biggest crisis, and that quality of life issues are necessary precursors to economic development. Not only will more tax and fee dollars need to be raised in the coming years but they will need to be spent wisely rather than squirreled away. Galesburg's infrastructure problems go far beyond just the water system and include streets, sidewalks, storm sewers, poorly maintained parks and a piss-poor approach to customer service by many city staff as per city policy.

The Galesburg economy has been hit hard by job losses but we tend to forget that those job losses didn't begin with the closure of Maytag or Butler as both of those companies and others reduced local employment by thousands of jobs well before the Maytag closure announcement. The economic decline of Galesburg has been a longterm process in which the ultimate loss of Maytag and Butler were but highly visible milestones. The flight of middle-class families began years ago with the downsizing (and ultimate closure) of OMC and the Galesburg Mental Health Center and continues unabated today. To a very large extent this is why all of the area schools are in trouble including Galesburg District 205.

When there were lots of good-paying jobs available in this area local quality of life was frankly much less of an issue but that is no longer the case. While there is no indication that we can expect substantial growth in middle-class jobs in the near future Galesburg must find a way to preserve population. The local tax base is almost entirely dependent upon non-industrial sources today and for the foreseeable future. That means that the continuation of local services will depend almost entirely on taxes and fees paid by residents and those who can be attracted to shop in Galesburg. It is a given that whatever economic development success we do experience will not result in any direct property tax benefits as incentive-based economic development minimizes the tax burden on incoming corporations.

Addressing the multitude of problems facing Galesburg's aging and deteriorating water system is the universal first priority of the 2008 budget and that emphasis is likely to continue for a number of years. This will necessitate both the sale of bonds to finance tens of millions of dollars in repair and replacement of water system infrastructure and substantial fee increases to pay for both these bonds and continued operation and maintenance of the water system.

The city has undertaken a curious method of dividing these costs in the way water bills are calculated. Each water customer pays a bill that includes two component parts: a facilities charge and a consumption charge. As water rates are being adjusted the facilities charge is being identified as the portion of water revenues that will be earmarked to repay the bonds and maintain a future capital improvement fund while the consumption charge is designated to pay for operational costs.

I say this is curious because this approach places the bulk of the responsibility upon residential water users for the capital improvements of the water system rather than proportioning that cost to match water usage. Each water customer pays essentially the same facilities charge per billing cycle regardless of water usage so the greater one's water usage the less significant a portion of your bill is devoted to the systems capital improvement costs. This permits the city to raise water rates at a disproportionately higher rate on small users than large users by building more of the rate increase into the facilities charge than the consumption rate. In effect, the less water you use the higher your rate increase. While most homeowners will see a 15 percent water rate increase the effective rate increase for very large users is less than five percent!

There is no question that Galesburg must raise water rates and we must repair and commit to property maintain the water system but there is an obvious issue of fairness in the approach taken. This approach is necessitated by the incorporation an ill-advised five percent cap on annual water rate increases into the 2002 contract with Knoxville plus a commitment in each of the much earlier contracts with Abingdon (1989) and East Galesburg (1979) not to sell water to any other outside customers at a lower rate. The unwillingness of City officials to approach Knoxville officials and renegotiate this single aspect of the contract has essentially forced us into a rate structure that a number of city council members correctly see as inequitable yet fail to understand that it needn't be that way. The rate increases should be proportional to water usage and it is only fair that the same effective percentage increases apply to all water customers.

Beyond the water rate increase the 2008 Galesburg budget requires additional revenue to help fund necessary improvements in city parks and streets as well as revitalizing the downtown business district and restoring services at the Galesburg Public Library. Each of these appear to be necessary and reasonable expenses toward improving the local quality of life. Bragg also proposed reorganizing the city's various inspection departments and changing the way park and recreation services are overseen through the proposed creation of a new city commission to oversee parks and recreation.

Bragg wants to identify specific funding sources for parks and recreation and create a new funding source for capital park projects. The proposed 2008 budget includes $750,000 in new tax dollars to begin funding this park and recreation capital improvement fund. A 0.25 percent increase in the Galesburg sales tax was proposed to raise this money but was met with near universal disapproval by city council members. Alternative possibilities to raise this money include tripling the tax on telephone service from 2 percent to 6 percent or increasing property taxes.

There is no escaping the need for tax and fee increases if Galesburg is to begin addressing the many issues that confront it but there will be some necessarily hard decisions that must be made by the city council in the coming weeks. Lack of vision, poor financial planning and political gutlessness on the part of past city councils have landed Galesburg where we are today. It remains to be seen if this city council is equipped and prepared to make the necessary hard choices in the best long term interest of this community.

10/18/07