Today & Tomorrow
October 28, 2009 12:36 PM
I knew it was coming. The argument would go something like, "Mr. Mayor, you can find $16 million in your budget for the Edgewater Hotel, but you can't find the money to (fill in the blank)." So, if I knew this was coming, why did I do it anyway?
It starts with the different ways that we need to think strategically about capital versus operating budgets. Every year I submit two budgets to the City Council. The first is the long-term borrowing package, called the capital budget, and the second is the annual operating budget.
The capital budget contains streets, buildings, park improvements, buses, anything that we expect to last ten years or more. The capital budget is about long-term investments, and so it's less dependent on the fiscal situation of the moment. We pay back the borrowing over ten years, so the 2010 capital budget actually has no impact on the 2010 operating budget because we don't start paying back money borrowed in 2010 until the next year.
The operating budget is what we will spend on the day-to-day operations of the city. Over 75% of our levy-supported operating budget is the salaries and benefits that we pay to our 2,700 employees. But because the operating budget is based on revenues and expenditures for that year alone, it is much more dependent on the current economic climate than the capital budget.
So, that's how we get to what appears to be a paradox. I'm hitting the gas in the capital budget, funding things like stepped up street repair, a new Central Library and the Edgewater while I'm paring back on the operating budget, trimming things like large item pickup and asking our unions for no pay increase over the next couple of years.
It makes sense when you think about it. Now's the time to build because construction bids, and interest rates may never be lower and people need the jobs. It's also the time to build because, with property values stagnant, we need to expand our tax base more than ever. The Edgewater project will produce about $1.5 million in new tax revenues each year which can be used for all kinds of services the city, county and school district provide. And the $16 million in a tax incremental financing loan will be paid back in full to the city over the course of around seven years.
So, the operating budget is about today while the capital budget is about tomorrow. My goal in the operating budget was to get through another hard year with as little disruption as possible while my goal in the capital budget was to build the property values and create the jobs that will push us toward recovery.