Banking On It

With millions in savings, the city wants to fatten its bank account more.

With tens of millions of dollars deposited in numerous reserve accounts, is Tucson really in the financial straitjacket that City Hall claims? Politicians and staff members insist it is, and that in the next few years these reserve funds will shrink to dangerously low levels.

Last week, when he released his recommended budget for the fiscal year which begins on July 1, City Manager James Keene projected that Tucson's reserve accounts would total 40 percent less in 2004 than they did just three years earlier. That is happening, in part, so the city can avoid talk of tax increases, at least for the present.

Governmental reserves, much like personal savings accounts and often referred to as "rainy day" funds, are the last line of financial defense in case of an emergency or economic downturn. The city of Tucson has several of these accounts scattered throughout its financial structure: many restricted in use, some available for any situation.

In his proposed budget, Keene suggested not touching the $17 million in the city's general fund reserve account. He said "the continued use of general fund reserves for recurring expenses is not a prudent fiscal policy."

Vice Mayor Carol West agrees. She says when an emergency arises it can be costly to fix. While believing the city should have a larger general fund reserve, given its other current priorities, West is comfortable with Keene's suggestion to leave it alone for now. But, she adds nervously, "given the present [financial] situation, I will pray a lot."

City Budget Director Ned Zolman points out that the present reserve amount is about 5 percent of the total general fund budget of $386 million. But, he says, almost two years ago the City Council voted to annually increase that figure by 0.5 percent until it reached 7.5 percent. "That's not happening," he says of next year's budget. The higher percentage goal, Zolman indicates, would put Tucson more in line with what other communities have in their general fund reserve accounts.

Given the weakness in the local economy, Keene is not recommending, nor is the council likely to push for, increasing the amount in the next fiscal year. But Zolman believes it must be pursued someday.

"If we have a disaster or an economic shock, we could use the money," he says. In the meantime, the budget director says, "we've never been through such a mild recession and we're lucky that, due to belt tightening, we were able to work with a fall in revenues. But if the downturn had been worse, we could have used [a larger reserve account]."

While Keene's proposed budget suggested the city's general fund reserve remain at $17 million, he is suggesting taking money out of "rainy day" accounts for both environmental cleanup projects and transportation improvements.

The city fund set aside for environmental and solid waste mandates totaled more than $29 million at the end of June last year. During the current budget cycle, $6 million of that amount will be used, and in the next fiscal year city officials propose to spend another $5 million.

Some of these funds will pay for recycling bins needed to convert Tucson's solid waste effort into the long-anticipated "One-and-One" program, one garbage pickup and one recycling day each week. Other reserve account money will finance capital projects at Tucson's landfills.

West supports this draw down, but says, "We need to have money on hand to clean up our landfills. What we have isn't enough. I would like to see more." Acknowledging the current fiscal realities, the vice mayor indicates she will go along with Keene's recommendation.

In his budget message to the council, Keene also warns that continuing to deplete the solid waste reserve account without a means of replenishing it "is not a prudent fiscal policy." While he suggested a publicly and politically unpopular $6-a-month "environmental fee" last year to accomplish that objective, in his current budget recommendation the city manager shies away from this or most other possible tax increases.

The one city tax hike looming on the horizon, of course, is the proposed half-cent sales tax increase to be decided by the voters next month. If adopted, this measure would generate an additional $40 million a year for transportation, even though Tucson had almost $35 million in a reserve account for this purpose at the start of the current fiscal year.

But close to $10 million of that amount has now been spent, and Keene is recommending another $6 million be used in the upcoming budget for "street-related expenses." Thus, by the middle of next year, the city manager is projecting the transportation reserve account will be down to $18.5 million.

Should the council be asking voters to raise the sales tax for transportation when the city still has millions of dollars in a savings account for that same purpose? Carol West thinks so. "Eighteen million is not much when you consider the needs," she says. "We could get some of our unfunded transportation projects finished. We've got to get some of them done."