The Steamboat Pilot & Today: Rob Douglas: ‘We’re going to have to cut things’

Updated 07:36 a.m., October 10, 2008

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Rob Douglas

Rob Douglas’ column appears Fridays in the Steamboat Today.

— "We’re gonna have to cut things that people like to have. There’s not a service we provide that some special interest or some group of citizens values more than anything else we do. It’s going to be very difficult.”

— Interim City Manager Wendy DuBord.

Of all the words spoken at this week’s Steamboat Springs City Council meeting, none were more apropos than those spoken by Ms. DuBord in reaction to the council’s decision to balance the 2009 operating budget by slashing $1.9 million in spending instead of further depleting dangerously low reserves.

In fact, no matter where we live in Routt County, we’ll all have to do without things we “like” from government as our communities confront a difficult economy for the foreseeable future.

A year ago this week, the S&P 500 peaked at 1,565. Yesterday, it closed at 910. That’s a drop of 42 percent, with more than half of those losses coming in the past 10 trading days. The Dow Jones and NASDAQ have suffered similar losses. That equates to more than $7 trillion having been wiped out of Americans’ pension funds, retirement accounts and investment portfolios in the past year.

Most significantly for the Yampa Valley, the international crisis in financial markets — already impacting residential real estate — shows signs of infecting commercial real estate along with all other sectors of the economy as consumer spending nationally grinds to a halt. There can be little doubt that timely redevelopment of the Steamboat base area is now in jeopardy, and the glut of commercial square footage coming online across the city could result in empty store fronts.

And although it is correct to cast blame upon Wall Street and Washington — as was done in this space last week — the truth is we’re all to blame for the current fiscal fiasco.

Yesterday morning on CNBC, James Chanos, president of Kynikos Associates and one of the first to recognize Enron as a financial fraud, addressed the causes of the current crisis. He spoke about the “whole mindset of consuming more than you earn for years and years and years whether you’re a government, consumer or corporation.”

Mr. Chanos’ words ring as true here in Steamboat Springs as they do on Wall Street and in Washington.

For too many years, Steamboat has outspent revenue by providing free and heavily subsidized amenities citizens want instead of maintaining a balanced budget that provides what citizens need. And, as City Council President Loui Antonucci has been repeatedly warning, even if the city were to receive typical year-over-year gains of 3 to 4 percent in sales tax revenue, current spending levels still are unsustainable.

Fortunately, the City Council decided this week to end the profligate spending of the past and, in so doing, declared that all programs and services are on the chopping block. The council, recognizing that free and heavily subsidized city-provided amenities are jeopardizing the future ability of the city to fund essential services, will begin ranking by necessity every tax-funded service. Some services will be curtailed, some will be eliminated and, unfortunately, some city employees will see their jobs eliminated.

As the council works through this difficult period, there are a number of paths worth considering.

First, lead by example. Each member of the council should consider foregoing at least one month of their city salary — more if possible. If the council is going to ask others to sacrifice, they should, as well.

Second, while some city jobs may necessitate elimination, citywide furloughs should be enacted — an idea that council President Pro-tem Cari Hermacinski said the city is considering, according to a story on page 1 of today’s newspaper. If each city employee took two weeks of furlough in 2009, about $500,000 would be saved, along with many jobs.

Third, in times of difficulty, experienced hands on the tiller of government are called for. As such, the City Council should suspend the search for a new city manager and implore Ms. DuBord to accept the position for at least the next two years. Ms. DuBord has the skill set and institutional experience to lead the city staff through this difficult period.

Finally, those of us outside of government need to dig a little deeper and provide more for our neighbors who truly need a helping hand. Most of the human resource organizations that will receive fewer city tax dollars in 2009 also receive funds from our local United Way. If we each make an effort, we can ensure all our great local organizations still are fully funded.

To reach Rob Douglas, e-mail Rob.Douglas@Comcast.net

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Community comments

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Rob Douglas
October 10, 2008 at 5:42 a.m.
› Suggest removal

The first paragraph of this column is missing. It should read:

“We’re gonna have to cut things that people like to have. There’s not a service we provide that some special interest or some group of citizens values more than anything else we do. It’s going to be very difficult.” – Interim City Manager Wendy DuBord.

Fred Duckels
October 10, 2008 at 7:57 a.m.
› Suggest removal

I'm with you Rob, the city always looks for an outside messiah to run the city. I have advocated for years the hiring of local people to run things. Wendy probably is more qualified than any of the applicants that we might choose. Good employees like Wendy are usually not out looking for a job. I often come off as the town grouch, I am conservative and I certainly have not approved of a lot of government decisions, but I have seen this valley in tough times and all the extra money has certainly spoiled us. Social enginering seems to be in vogue, but the market will eventually sort this out.

JLM
October 10, 2008 at 10:19 a.m.
› Suggest removal

Budgets for any enterprise are dynamic. The idea that a budget has to be “cut” seems to imply that budgets only go up or stay the same. Sometimes, the facts, circumstances, economy require budgets to be scrutinized and fine tuned to balance with expectations and finances. This is a simple fact of life.

The City of SBS is not “cutting” anything they are simply “right sizing” the budget to reflect the realities of the facts, circumstances and economy.

Any manager has the responsibility to analyze the financial trends of the business they are running. How much is personnel expense as a percentage of revenue? How many staff persons in planning as compared to revenue? How much revenue per staff person in planning? What is the cost per rider subsidy of the bus system? These analytics allow the manager to ensure that the fundamental arithmetic relationships are consistent over a protracted period of time.

How do you know when you have too many folks on the staff? When the analytics show you the parametric comparisons have begun to drift ever higher. It's really pretty simple stuff and should be done routinely by the department heads.

Managers have to eliminate, delay, consolidate and reduce – programs, expenditures, additional staffing and expenses.

The City of SBS can do this very, very easily. To reduce expenditures by 10-15% is not even really cutting out the fat. Nobody is really going to feel the pinch. It's the difference between going to the Yacht Club v McDonald's. Nobody is going to starve and everybody can survive without white linen and silver for a bit of time.

In two years this will all be a memory.

Then, they should make a real worst case budget with a 30% reduction – that would begin to touch a bit of muscle and sinew. Put it in a file and keep it for reference. That's called contingency planning.

Everything is going to be OK. We are Americans and we can do anything.

Steamboat_Residential
October 10, 2008 at 11:33 a.m.
› Suggest removal

If by City Employees taking two weeks without pay equals $500,000.00…
Could that same amount be equaled if City Council gave up their City Salary and all City Benefits in 2009?

Gee there's 1 million of the budget cut right there.

After all, the City Council members all have full time fully paid and benefited positions with others or even their own companies. I doubt they rely on their City Salaries and Benefits to make it through each month.

ybul
October 10, 2008 at 11:54 a.m.
› Suggest removal

The job ahead is going to require vision as not only is the budget going to need to be cut. In addition vision as to how to retain more of the money that is brought into this valley. By retaining that money you will invariably increase revenues as that money recirculates through the economy.

The fortunate part for Steamboat Springs is a diverse resource base. Though, this is also creating a situation where looking towards property taxes to fill the revenue gap will fall short as the perceived reliability in home values decline probably faster than sales taxes would. A model built on debt is an unsustainable one.

When looking historically to how the middle class arose and a more sustainable vision, is through small business owners working in their community to create wealth by adding value to a product. Not this ponsi scheme that Wall Street created and help to foster through tax loopholes encouraging people to take on debt to own a house, and then to invest in the stock market to save for their retirements tax free. Social engineering at its finest.

Putting ones head in the sand and saying we need to cut every service, is the way to control costs. Though you will have a downward spiral which requires further reductions. Striving to encourage business' which create wealth, as opposed to extracting wealth, will build an economy that will weather any storm, and lead to a more equitable society. Not one where wealth is concentrated into a few peoples hands via government social engineering (as with any well intentioned program, the unintended consequences will cause more problems than were sought to be eliminated).

Helmsman
October 10, 2008 at 2:40 p.m.
› Suggest removal

What “dangerously low reserves”? Maybe Rob should do a little homework before passing himself off as a crack economist. Start with reading the 2007 City audit, Rob, where you'll find that the City had (as of 12/31/07) a smidgen less than $10 million in undesignated reserves. That's between 34% (p.3) and 40% (p.11) of an entire year's General Fund expenditures. There are many, many cities in Colorado that would be thrilled to have that level of reserves. The sole intention of reserves is to augment a budget during tough times. Last time I looked at the DOW, tough times were here.

JLM
October 10, 2008 at 4:40 p.m.
› Suggest removal

The City Council refusing their salary and benefits for 12 months in return for

1. a 10% across the board pay cut for the staff; or,

2. the staff coming to work one hour early with no pay for a year

would be a great first step. Everybody needs some skin in the game.

LTFO
October 10, 2008 at 7:18 p.m.
› Suggest removal

The so called volunteer golf committee that get golf passes for themselves and their family's plus city paid for lunch every two weeks. It adds up to a lot.

phdraper
October 10, 2008 at 9:28 p.m.
› Suggest removal

I agree with Fred on Wendy. We discount the local folks cause they aren't from somewhere else. She can do the job better than anyone we haven't met yet….

Try asking nicely.

Our community needs strong leadership on every front. Government needs to constrict to be in balence with the revenue stream.

Fred, i think of you more as our community conscience. I don't always agree with you, but you are always right on.

I appreciate your willingness to get out there and be a leader.

teleflypicker
October 11, 2008 at 9:33 a.m.
› Suggest removal

“Could that same amount be equaled if City Council gave up their City Salary and all City Benefits in 2009?”

The answer to that is no. It would take roughly 6 years of council salary and benefits to equal 500K.

But more importantly, why would you propose something like that? The elected people responsible for the mess we are in were mostly voted out by large margins in the last election. Alan Lanning deserves a fair amount of blame as well since the growth of staff by 40 people happened under his leadership.

Being on council is not easy. It is certainly thankless. Getting paid a token amount for doing it should not be a problem.

Helmsman, reserves have many other functions that continuing business as usual when things get tight. Additionally, we do not yet know what tight is or how long it will last. We are not actually in tough times yet. Tax receipts for the year are up. We are simply preparing for expected tough times on the horizon; a responsible thing to do.

The city does waste a lot of money. The waste is in extra staff, poor cost controls, the intertia of how we have been doing things, programs of dubious benefit and expensive programs that do not benefit enough people to justify the public carrying the proportion of expense that it does. If some of those things can be fixed and we can get through this year without using reserves we should certainly do so.

ybul
October 11, 2008 at 8:04 p.m.
› Suggest removal

The thing about a reserve is that it is there for those occasions when you are caught by surprise. If I remember correctly the forecast for the budget is for a very mild decline in income.

Given the turmoil within the markets, building projects being cancelled, I think that the current projected budget revenues might still be high. As such one should look at cutting back any fat that can be, and hope that the reserves grow. As there is a high probability that the current revenues will decline (even more than forecast). Also, moving to a property tax may not solve the problem as real estate values may/will see declines.