Wednesday, March 15, 2006

The Herenton Timeline

A commenter named "JT" over at Thaddeus' blog was kind enough to lay out the timeline of fiscal mismanagement by the Herenton administration the past three years. This is longish, and doesn't include some political events that influenced the events listed. (Like the closed door meeting with City Councillor Janet Hooks over approving Joe Lee as President of MLG&W, and her subsequent resignation a few months later to take a political appointment with the Herenton administration.)

Anyway, here we go:

April 15, 2003: Mayor presents FY 2004 budget to Council. During his presentation he makes the following statements:

“Memphis has sustained stable financial growth despite the current downturn in the national economy, the state’s current revenue crisis and the rising county debt.”

“We propose no tax increase for FY 2004.”“Our operating budget includes the use of $4.5 million of general fund reserves.”

“Memphis continues to hold a AA bond credit rating from all the major New York rating agencies.”

“I am truly proud of our fiscal accomplishments and want to thank the Director of Joseph Lee and his outstanding staff for the work they do.”

“Despite today’s dismal economic climate, I am optimistic that our long-term fiscal outlook remains bright.”

* June 2003: Council adopts budget without a tax increase.

* August 15, 2003: Joseph Lee sends out e-mail to a few people in City hall advising them that a website, is spreading gross/misleading lies about the financial situation of the City of Memphis and MLGW.

* October 2003: Mayor is reelected to a fourth term in office.

* October 24, 2003: Memo from Charles Williamson, Deputy Finance Director to Joseph Lee, Finance Director: Williamson tells Lee that FY2004 first quarter revenues were down $15.1 million.

*October 2003: Council gives Mayor a raise. One council member states that Council is giving the Mayor a raise for managing the City’s finances effectively.

* January 6, 2004: Mayor comes to Council with requests for appointments and reappointments of his division directors. The nominees that were not approved by the Council: Darrell Eldred (General Services), Inetta Rogers (Human Resources), Roland McElrath (Finance), and Jerry Crawford (Fire). The Council delayed for 4 weeks the monition of Joseph Lee as MLG&W president and requested Mayor to conduct a national candidate search.

* April 2004: Joseph Lee withdraws his name from consideration for the MLG&W presidency.

* April 13, 2004: Mayor Herenton presents FY 2005 budget to Council, stating that budget is balanced and would not require a tax increase, and would also provide for new police officers, pay raises for City employees and many new investments and expenditures. Receives standing ovation from Council and audience.

Quotes from Mayor on April 13:
“Today our City government is healthier financially with a general fund reserve of $61 million. 453 million of this amount is undesignated reserve. Ladies and gentleman, from $3.5 million to 61 million during our tenure—we’ve raised those reserves.”

“It is a balanced budget that requires no tax increase. And it uses only $2 million of our reserves. More importantly, this budget provides hope and optimism that our best days are ahead of us.”

“We have a very sound AA bond rated credit. I am more proud to say that we’ve had only one property tax increase during the past eleven years. More importantly, we are continuing our efforts to and upgrade our credit rating thanks to the leadership of Joseph Lee, our exemplary Finance Division Director.”

* April 19, 2004: Joseph Lee says to the O&M Budget Committee: “And so, this would be a good time just to remind Council that we’ve got a balanced budget before you that does not require a tax increase and we think that is adequate to fund operations for the fiscal year 2005.”

* May 4, 2004: Concerned that the MLGW Presidency salary will hinder the ability to find a national candidate, administration asks Council to approve a salary increase for MLGW president. Council approves a salary “not to exceed” $230,000. At the time he was fired, Herman Morris made $184,059 in this position.

* May 25, 2004: Joseph Lee says to the O&M Budget Committee during wrap-up: “We currently have a $53 million reserve. We planned to use $3.5 million of that reserve this fiscal year. We plan to use an additional $3 million because of additional costs incurred by the windstorm. And we also anticipate using $2 million of the reserves budgeted for FY2005. That will take our reserves to approximately $44 million.”

* May 25, 2004: Council learns administration did not include $3 million in the budget ($1.7 million is operating deficits at Cook Convention Center, Pyramid & Coliseum). The $3 million will be taken from the reserves. (Referred to in quote above by Joseph Lee)

* May 27, 2004: Council learns from local media that Moody’s Investor Services has downgraded the City’s credit rating for sewer bonds 3 notches, from Aa2 to A2; this is the 3rd major Wall Street firm to downgrade the City’s rating in May. Fitch reasons for downgrading: “The downgrade of the City’s sanitary sewerage system revenue bonds is due to a dramatic decline in debt service coverage in the last two fiscal years to level well below the City’s, and Fitch’s, expectations.” (from Fitch’s report)

* June 1, 2004: Council adopts the budget without any tax increase.

* June 1, 2004: Mayor sends Joseph Lee a letter asking him to reconsider applying for the MLGW President’s position. Mayor states that he wants the opportunity to interview Lee. During committee hearings and council meeting that day, several council members publicly call for Lee to reapply.

* June 14, 2004: Council confirms Joseph Lee as MLGW president in a 7 – 5 vote.

* September 7, 2004: Mayor announces that urgent “austerity measures” were needed and that he has taken an additional $20 million from the rainy day fund and tax increases are needed.

* September 21, 2004: In a letter to the Council, Mayor asks Council to consider his proposal to transfer either partial or total responsibility for funding the City School System to Shelby County.

* October 2004: Bond rating of City is downgraded by Fitch from AA to AA-. Standard & Poor’s does not downgrade our rating, but does give us a negative outlook in our GO debt.

* December 7, 2004: Mayor presents City reorganization plan to the Council. Plan calls for establishing 2 new positions: Deputy CAO of Operations and Deputy CAO of Planning & Economic Development. He also requests the integration of 4 city divisions with MLGW: Auditing, Legal, Information Services & Human Resources.

* December 21, 2004: Mayor informs Council that the City is $28 million in the hole. He tells the Council he will ask for a 45 – 48 cent tax increase for FY2006, which begins July 1, 2005. He also tells Council that he will ask for early retirement from employees and freezes. Layoffs are imminent. Mayor says: “We can’t cut our way out of this dilemma.”

* February 18, 2005: CAO Keith McGee announces the City will layoff 2,100 employees and cut services drastically.

* March 8, 2005: Mayor tells Council we face a large revenue shortfall for FY2005. Outlines plans of administration to cut services. We must cut $6 million in April, May and June alone. Mayor says: “It is clear to this mayor that in order to provide citizens with the kind of City I want and they deserve, it will require a 54 cent increase in property tax.”

* April 19, 2005: Mayor presents FY2006 budget to Council and requests a 54 cent tax increase.
Quotes from Mayor:

“Here in Memphis, and I want to make this emphatically clear, we do not have a management problem, we have a revenue problem. Not an expenditure charge, a revenue charge.”

“I would like to issue a special appeal to the citizens of Memphis……Ask not what your city can do for you but what you can do for your city.”

“But I want to tell you this: at the end of the day, we need more revenue if we are going to preserve and promote a city that we all can be proud of.”

* April 19, 2005: Council denies Mayor’s request to merge 4 City divisions with MLGW.

* May 2005: During CIP hearings, Council learns the City has nearly tripled its debt in a decade and is now at the $1 billion mark in debt.

* June 7, 2005: Mayor requests $650,000 for an efficiency study. He hopes this study will find $40 - $50 million in savings for the City. Herenton City expense and revenues could be more than $200 million out of whack by 2011.

* June 7, 2005: Council approves FY2006 budget with a 27 cent tax increase and increase to Solid Waste fees.

* August 3, 2005: Administration again requests funds for an efficiency study. Mayor says that he knows what the study will say. This time the request is for $500,000 and they promise it will save $50 million over 5 years.

* August 16, 2005: Administration tells Council the City has a $10.3 million deficit for FY2005, which ended June 30, 2005. This is the City’s 3rd consecutive budget shortfall. Keith McGee: “We will manage the process.” Hiring freeze is enacted.

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