Disappointment and Fear

Note: The following was posted before publication of the September 12 article,"Aldermen look to the future of city's finances." I have subsequently written a letter to the editor expressing support for the near-unanimous sentiment of the aldermen and the constructive tone of the article itself.
-JW 9/12/2007


This commentary is written with a combination of disappointment and fear. Disappointment for the unproductive finger pointing that is consuming the once-proud pages of the Rutland Herald, and to a lesser degree the attention of our good citizens; and fear that this effort will serve no purpose but to further distract our leaders from the challenges now before them. It has been my fervent hope that our city leaders would be given an opportunity to tackle our problems and put them behind us. We cannot meet the challenges of the future if we remain mired in the past. Before now I have chosen not to respond to attacks on my reputation and my record in the belief that the people of Rutland have not contracted amnesia and are not so easily fooled. I have refrained from responding in the hope that the Herald will return to reporting news and give the mayor, aldermen and treasurer the space they need to do their work. But my hopes have been shattered by the most recent reporting.

So let me start by responding to the expose’ published on Sunday, August 25th. The page one story, “Audits Show Fiscal Woes Dogged City for 20 Years,” is so riddled with errors and misstatements that a thorough correction would probably take as much space as the story itself. For the sake of brevity and clarity I will get right to the point.

At no time between 1987 and 2003 did the City of Rutland General Fund end any year in a deficit. The table printed with the article, and the article itself indicates that this happened in 11 out of these 16 years. This is not correct. Audited financial statements clearly show that the General Fund Balance in each of these years was a positive number. As mayor, I was responsible for the financial condition of the city between 1987 and 1998, and for budgets between 1988 and 1999. At the beginning of 1987, the General Fund Balance was $371,634. At the end of 1999 the General Fund Balance was $656,650. During my tenure the city never ran a deficit, and we never ‘borrowed’ from future years. Period.

The premise of the article is that the deficits plaguing the city extend back to my administration. But even the numbers published in the article prove this wrong. Take the General Fund for example. According to the table published August 25th, the cumulative ‘surpluses’ and ‘deficits’ between 1987 and 1999 total up to a positive $285,016, the same amount by which the General Fund Balance actually grew. This means that during my administration the General Fund improved by this amount.

Now add up the deficits between 2000 and 2005. The total is a negative $929,672. So, according to the numbers published in the article itself, the city’s General Fund improved by $285,016 through my twelve years, but lost nearly $930,000 over the next six.

Let’s turn to the Water, Sewer and Parking Meter Funds. Unlike the General Fund, which is managed year-to-year to maintain a small positive balance, these other funds are “enterprise funds.” These funds carry annual surpluses and deficits from year to year in the form of retained earnings.

The article ignores this. It does not present the starting balance, the ending balance or the reasons for changes. It does not separate the period before 1999 from that afterward. And the table includes an $850,000 payment from the Parking Meter Fund for the Multi Modal Transit Center, which was paid for through a revenue bond approved by city voters. This payment is lumped in with the regular day-to-day costs of operations and non-bond revenues, indicating in 1999 a $794,483 loss, when in fact the 1999 operations ended with a $55,517 gain.

Here is what the audits actually report. The total retained earnings of the Water, Sewer and Parking Meter funds in 1987 was $4,352,093. The total retained earnings of these funds in 1999 was $3,212,988. If we correct for the transit center, the 1999 retained earnings were $4,062,988. In between the city constructed a new water filtration plant and built a major upgrade to the wastewater treatment plant, and some of those costs were paid out of these reserves. Both projects increased the value of the city’s assets and increased debt in the form of bonds. That is why we raised water and sewer rates in 1991, 1992, 1993, and 1996 and increased the number of metered parking spaces. And that is why the combined Water, Sewer and Parking Meter Funds never dipped below $3 million in retained earnings between 1987 and 1999.

Now let’s look at 2000 through 2006. The total Water, Sewer and Parking Meter Funds' retained earnings started at $3,212,988. But by 2006 the retained earnings stood at a negative $1,043,542. That is a total loss of $4,256,530 over seven years.

The Rutland Herald article contains criticism of the operation of the treasurer’s office over the past 20 years. The Herald wants the reader to believe that inefficient or outdated operations are the source of multi-million dollar deficits. The operational problems were real, but deficits are not caused by outdated record keeping. Deficits come from spending more money than you have.

The audits flag operational problems but they also certify that the published financial statements present fairly, in all material respects, the financial position of the City of Rutland. Those financial statements document the irrefutable fact that the city’s financial position remained solid between 1987 and 1999. The record is public, and notwithstanding relentless efforts to rewrite history, it is clear that the city’s deficits began after 1999.

The table below replicates the General Fund numbers published in the Herald. The table has been expanded to include the General Fund balances, which are critical for an accurate presentation. Negative numbers – losses – are shown in brackets ( ). The published columns showing the Water, Sewer and Parking Meter Funds were so confusing and inaccurate replicating them here serves no purpose.





NOTE: Audits show larger deficits in 2004 and 2005 due to changes in accounting methods.