If the Columbus Consolidated Government does not implement significant administrative changes, it will be forced to make spending cuts that would require layoffs or dipping deeply into its reserves, imperiling its bond rating and likely costing taxpayers more to finance future bond issues, Mayor Teresa Tomlinson told Columbus Councilors in a memo last week.
The memo, obtained through the Georgia Open Records Act, outlines administrative changes that could help the city avoid dropping below the 60 days of reserve threshold that bond rating firms use as a benchmark. It also contains an attached memo from Davenport & Co., the city's financial advisers, outlining the potential costs of a lowered bond rating.
"As you are aware, we are on course to dip below a 60-day General Fund Reserve balance level in Fiscal Year 2015 if we do not adopt significant administrative cost saving proposals," Tomlinson wrote to councilors.
The memo was to set the stage for a called council work session Tuesday at 9 a.m. at the City Services Center. Decisions made at the meeting will be crucial to the city's immediate future, Tomlinson said.
"Tuesday will be a day when we begin discussions on possible solutions to save us from employee layoffs and furloughs and reductions in city services," she said. "And it can be done while having no impact on jobs and services. It's a big day."
In the memo, Tomlinson reminded councilors that her administration has proposed almost 11 days worth of cost savings over the last three years, but councilors have not approved them because of their potential impact on city services, employees and "other stakeholders."
She then listed several proposals that have either been introduced to council or will be soon.
Decisions the memo says councilors must make are:
Whether the city will absorb nearly $2 million in increased medical insurance costs by passing them on to city departments; by dipping into the fund balance; or by sharing the cost with city employees. This would save the city $2 million, Tomlinson said.
Whether the city will change the way it conducts its workers compensation system, which Tomlinson says has cost taxpayers millions over the years in avoidable expense.
The savings are harder to determine, but Tomlinson said her administration expects it would save "hundreds of thousands of dollars a year."
Whether the city will continue paying pension benefits on non-base pay compensation, such as overtime pay, holiday pay and educational supplements. This would save $1.56 million, Tomlinson said.
Whether the city will continue to allow paying of "gap time" that results in CCG paying double time (salary plus hourly pay) to certain employees. This would save $1 million.
In all, Tomlinson said, the changes would save the city about $5 million a year, which works out to between 11 and 12 days of General Fund Reserves.
"Not one of these decisions will be easy," Tomlinson wrote.
"Each will be controversial. But, please know the effect of not making them will be real jobs and citizen services impact in FY2015."
Tomlinson referred councilors to an attached memo from Davenport & Co., which predicted that if the city's bond rating drops, it will make future bond issues more expensive.
If the city's rating dropped even one notch, from its present Aa1 to Aa2, a proposed $40 million bond issue would cost an additional $600,000 in debt service over 20 years, the memo stated.
If the rating were to drop two notches, to Aa3, the debt service impact would rise to over $1.4 million, it said.
Councilor Judy Thomas said the memo was only a collection of ideas the mayor had brought before council in the past and hadn't been able to sell.
"There's nothing new in it," she said. "This is what she's been saying for some time."
Thomas said councilors are aware of the potential consequences of dipping below 60 days of reserve, but there are other factors that consequences must be weighed against. And so far, she said, the mayor hasn't sold council on the necessity for change.
"The health care and the workers comp issues she mentions again in this memo," Thomas said. "At this point the administration has not convinced six members of council that they're right, that those things need to be changed.
"We can always look at our programs and our offerings, not only to our employees, to private citizens, and test them to see if they are still effective. I don't have a problem looking at these things. But I don't think at this point we need to make some of the changes that have been suggested."
Councilor Mike Baker, a certified public accountant, is more receptive of some of the administration's proposals including health care, paying pension benefits on overtime pay and paying gap time.
"Obviously we're going to have to look at all of them," Baker said. "I agree that overtime should not be included in eligible compensation. And gap time, I'm in favor of taking a hard look at both the gap time and overtime and making some adjustments on those."
He is less receptive of the changing workers compensation carriers from the Association County Commissioners of Georgia to a private firm, AmeriSys.
"The workers comp is a different issue," Baker said. "It's a little more complicated, and I don't think we're there yet."
Baker and Councilor Bruce Huff's opposition to that proposal has raised conflict of interest questions because of their positions on ACCG boards. Baker is on the ACCG's workers compensation board specifically.
Baker explained that his position on the workers compensation board has offered him insight into the issue that he otherwise might not have.
"I'm far from an expert, but I have a basic understanding of the program, and what they are proposing doesn't mesh with my understanding of the program," Baker said.
"Now, is that conflict of interest, or is that information I disagree with because of what I've learned through the program?"
Regarding raising employee health insurance premiums to help absorb a $2 million budget shortfall is an issue on which he disagrees with some of his council colleagues.
"All families struggle with their household income being eroded by health care costs," Baker said.
"But that's just the world we live in. The increases I've seen (in the mayor's proposal) are reasonable and modest. Even though nobody wants to pay more, I understand that."