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Taxpayers — and City Hall leaders — need to pull way back on their recent spending sprees, fueled by large amounts of debt.
It’s scary out there.
Nationally, the evidence includes severely weakened credit markets, a decline in housing prices, renewed inflation and a beaten-down stock market.
Locally, the go-go times of former Mayor Kay Barnes and Co. are pretty much over. Look at two sobering financial indicators.
• The city’s general fund reserve — its rainy day fund for emergencies — has fallen to dangerously low levels.
• Two of the major bond-rating agencies have downgraded the financial outlook for Kansas City government.
Mayor Mark Funkhouser and the City Council must approve a lean and mean 2008-09 budget next week.
The prime goals: Cut employee positions at City Hall, cut other costs and cut out the fairy tales that the city can continue its recent rate of borrowing.
Council members must not merrily plow ahead and spend, spend, spend, even though that’s what City Manager Wayne Cauthen essentially proposed in his budget.
Consider the problems with the city’s reserve funds.
Kansas City has just $18.5 million in that pot of money, or only 4.5 percent of its general fund. The target is 8 percent.
But even the city’s low figure could be headed down in the coming days, as millions more in bills come due for unexpected tax increment financing obligations for private developers.
By comparison, Overland Park has general fund reserves of $74 million in its budget, four times those of Kansas City.
Olathe has more than $20 million.
And Lee’s Summit — with a general fund about the eighth of Kansas City’s size — has more than $13 million in its budgeted reserves.
Why is this important?
Out in Overland Park, City Manager John Nachbar says having the reserves will make it possible to spend more on capital improvements in the coming months.
In Lee’s Summit, Finance Director Conrad Lamb says the city’s healthy reserves came in handy recently when officials decided to spend more on better downtown streetscape improvements and to build a downtown parking garage.
Meanwhile, the recent decisions by the credit-rating agencies are extremely worrisome.
First, Fitch Ratings in January changed the city’s financial debt outlook from “stable” to “negative,” based on “a recent general fund operating deficit coupled with an economic slowdown….”
Then, Moody’s Investors Service downgraded its outlook to negative, partly because of the city’s meager fund balance.
Both Fitch and Moody’s noted that the city’s overall debt ratios are high, particularly because of city-backed debt for large downtown projects.
Why does this matter?
Kansas City officials plan to borrow hundreds of millions to fix the city’s sewers.
But if the city’s fiscal house isn’t in order in a few years, the city’s credit rating could be downgraded. Taxpayers then might have to pay millions extra in interest costs.
Sure, it’s tempting to ignore the budget woes. Elected officials have done that for years.
But that irresponsible attitude won’t pay the bills. Practical decisions to spend tax money wisely will.
That’s why Mayor Funkhouser and the City Council must take a leadership role in approving a reasonable budget next week.
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