The squeeze is on
When snow begins falling in Kansas City, Mo., this year, Larry Frevert will cross his fingers. “We’re [hoping] for a mild winter,” says Frevert, the city’s acting public works director. “We’ve seen a 15 percent reduction in our snow removal budget. The mayor and council are saying we’re not going to reduce snow removal services, so, if we have just a normal winter, we’ll be in the red there.”
Such is the state of balance in today’s balanced budgets. With the national economic downturn came a drop in sales tax and earnings tax revenue that is forcing local governments to make hefty financial cuts and hope for the best.
“It seems like it takes about 18 months or so for a city to start feeling the effect of [a recession],” Frevert says. “When a lot of the private industry was feeling the recession, we were still in pretty good shape. A lot of the private businesses are starting to see the end of the recession, and we’re just hitting the worst parts right now.”
Cities that made it through 2002 and 2003 by keeping a tight grip on spending or by distributing reserve funds are, in fiscal year 2004, reducing their budgets substantially. For public works departments, the crunch affects staffing, service levels and project priority.
Costly cutbacks
“The biggest item in most municipal budgets is personnel,” says Bruce Florquist, public works manager for Rawlins, Wyo. It should come as no surprise then, that, as budgets tighten, so do staff rosters.
A city of 9,000 residents, Rawlins spent down its reserves in the last two years and is cutting its budget for 2004. Florquist anticipates that his operating budget, which was approximately $5 million in 2003, could drop by as much as 12 percent. Already, the city has placed a moratorium on seasonal hires, and Florquist predicts that service reductions and layoffs will follow.
“A lot of cities are facing cutbacks in staff,” says Ann Daniels, director of technical services for the American Public Works Association, based in Kansas City. “That’s a dramatic problem because you still have the same amount of work to do. You can work smarter only to a certain extent, and then [you face the possibility] that services are going to suffer.”
The impact of staff reduction is evident in Kansas City, where, earlier this year, Frevert lost more than 10 percent of his workforce through an early retirement program. Offered citywide, the program allowed Kansas City to reduce its payroll by more than 400 people, saving the city millions of dollars. Sixty-nine of the retirees were public works employees.
“That has hurt us in a lot of areas,” Frevert says. “In particular, we lost 22 out of 66 construction inspectors and nine out of 11 supervisors in that area. That was at a time when we were beginning our construction season, and we’ve really been scrambling to find enough people to inspect the contract work that’s going on.”
In some cases, quality control is suffering, he says. “The projects have not been delayed, but the contractors are working with less supervision than they have in the past,” Frevert explains. “We’ve got some projects that we’re very concerned about because we feel like the contractors are not as attentive to them as perhaps they’d be if we had an inspector there more regularly.”
The consequences could take time to surface, he notes. “If a contractor skimps on quality or cheats on the specifications some, and we’re not there to catch it, it may not show up until you’re into the operation and maintenance of that improvement,” Frevert says. “You find that the improvement doesn’t function the way it should have.”
Purchases, projects on hold
Serving 460,000 residents, the Kansas City Public Works Department operates five divisions that handle administration, architectural services, infrastructure engineering, fleet maintenance and street maintenance/traffic engineering. The department’s operating budget for 2004 is approximately $37 million, down 8 percent from 2003; and its capital improvements budget is $84 million, down 3 percent from the previous year.
The cuts include an 85 percent reduction to the department’s equipment replacement budget. “We may be able to withstand that for a year or even two, but, if this is a continuing pattern, we’ll see a progressive deterioration of our equipment,” Frevert says.
With approximately 1,200 vehicles under its care, the department will be pressed to keep up with the maintenance needs of an aging fleet. The early retirement program that decimated the construction inspection staff also claimed the superintendent, the business agent and five technicians in the Motor Equipment Division. “It’s going to take us longer to get repairs and preventive maintenance completed,” Frevert says.
In addition to affecting fleet purchases and maintenance, the budget cuts in Kansas City will delay some of its capital improvements, including maintenance of bridges. “That budget was cut from $10 million to $6.5 million,” Frevert explains. “Some of our bridge replacement or rehab projects have been pushed back simply because we’re not going to have enough money to bid them this year.” Routine street maintenance, such as sign or guardrail replacement and rights-of-way stabilization, will be similarly affected.
The path to trouble
Frevert traces Kansas City’s budget woes to declining sales tax and earnings tax revenues, but other cities point to additional contributing factors. For example, Rawlins has suffered losses in sales tax revenue as well as cutbacks in state funding.
Situated along Interstate 80, leading to Yellowstone National Park, Rawlins entertains a substantial amount of tourist traffic, which is a major source of revenue for the city. Florquist notes that, in addition to tourism, local construction projects — including a new state penitentiary — have boosted the city’s sales tax proceeds in the last five years.
As tourism dropped, and as construction wrapped up, revenue declined. To make matters worse, for 2004, the Wyoming State Legislature reduced the amount of money it funneled to local governments, cutting Rawlins’ share by $1 million. “They balanced the state budget on the backs of the municipalities,” Florquist says.
The shortfall is exacerbated by factors such as increasing employee benefits costs, he adds. “One of the reasons we’ve got budget problems is health insurance costs,” Florquist says. “We expect our premiums for the city to double this year. That’s a big chunk [of the budget], and that’s going to hurt. There’s going to have to be some adjustments [to the health plan].”
Rawlins is able to stem some of its losses through the use of enterprise funds. For fiscal year 2004, the city is raising or restructuring fees for its water, wastewater and landfill operations, all of which fall within the Public Works Department’s domain.
Dedicated to growth
Public works agencies that rely heavily on general funds are likely to be hit the hardest during a financial crunch, Daniels says. “The ones we see that are the most dramatically impacted are those that operate totally out of general fund revenues,” she notes. “If they’re an enterprise fund, or if they have a dedicated tax or levy that supports public works, they’re in good shape.”
That is the case in Port St. Lucie, Fla., where the Public Works Department receives 75 percent of its funding from a stormwater utility fee and 25 percent from a road and bridge tax. “The road and bridge tax is a gasoline tax, and that has been down somewhat, but [my budget] is holding steady,” says Larry Thacker, public works director and emergency management coordinator for the city.
Serving more than 102,000 residents, the Port St. Lucie Public Works Department has a 2003 budget of $13 million. With 88 employees, the department is responsible primarily for the city’s streets and stormwater drainage systems.
Thacker attributes Port St. Lucie’s fiscal health to growth, which reached full speed five years ago. “When I came here in 1989, the population was somewhere around 40,000,” he says. “Now, we have more than 500 people moving here a month, and we’re building more than 425 new homes per month.”
Situated on the Atlantic coast, north of West Palm Beach, Port St. Lucie began its climb in the 1980s, when developers set out to transform the city into a retirement community. In anticipation of that first wave of growth, the city planned an aggressive utility program that would eliminate the existing septic system.
In 1996, the city began installing water and sewer systems. In addition to improving utility service for residents, the project attracted new business and younger residents, launching a chain reaction of growth. “Our median age here is 36,” Thacker says. “It’s no longer a retirement community.”
Even with unemployment at 7 percent in St. Lucie County, Thacker sees no slowdown. “It’s crazy here,” he says. “We’ve got major construction going on, and we’re maybe 40 percent built out. The city [area is approximately] 90 square miles, and we keep annexing outside of the city, so I anticipate that, within a couple of years, we’ll be at least 100 square miles. It’s very difficult to keep up with all the growth.”
For the Public Works Department, the difficulty lies in accommodating increasing traffic. “The traffic is horrendous; it’s bumper to bumper,” Thacker explains. “Our major roads, and even the arteries leading to those, have to be widened. We’re taking two-lane roads and developing them into four-lane systems. And we’re in the process of buying up homes to develop a corridor from U.S. Highway 1 into the Ronald Reagan Turnpike and Interstate 95. Some [smaller projects] that I’d like to get done are not funded — [not because of revenue loss] but simply because we’ve got all these major road projects in place.”
No quick fixes
Few cities can claim the good fortune that Port St. Lucie enjoys, and, as officials struggle to cut budgets, they are mindful of the possibility that services will suffer. “Most agencies will try not to cut services to people,” Daniels says. “But, when you cut staff, services may slip just because you don’t have enough people to get it all done.”
In Kansas City, savings rather than personnel were the catalyst for a cut in street sweeping. “Not long ago, we swept major streets 18 times, residential streets seven times and downtown streets 80 times during a year,” Frevert says. “We’re keeping the downtown sweeping at the same level, but this year’s budget provides for five sweepings of arterial and residential streets.” The reduction will save the department $300,000 in 2004.
According to Daniels, cities often are tempted to preserve services at the expense of maintenance. “The first thing to go [during a budget crunch] is public works-related items,” she says. “Particularly, you see them cutting back on maintenance and repairs, which is exactly the wrong thing to do.
“If you make a band-aid repair on a pothole, you’re spending the same overhead costs to get people out there, and you may make that repair four or five times before you get to the point where you’re able to do the right fix,” she explains. “If you add up the costs for each time you go out, you spend more money with it than you would if you were doing it right the first time.”
Just as there is no quick fix for the economic downturn, there will be no immediate recovery. “I anticipate that, in recovering, we’re 18 to 24 months behind the general economy. It takes that long for all the taxes to come in and for changes to start being felt,” Frevert says.
“It always takes a while to get built back up from a downturn,” Daniels says. “You’re spending extra time with staffing and training, and then you’re behind on everything else.”
Eager for an upswing, local governments nonetheless are prepared for the long haul. “If there’s one good thing about the American psyche, it’s [the belief] that things will always get better,” Daniels says. “Cities have their rainy day funds that they’ve put away. And, while those funds won’t cover a lot of big, new projects, local governments can survive.
“People in city governments have been through this time after time,” Daniels notes. “We’ll come out of it again, and we’ll pick up the pieces and move on.”
Beth Wade is a freelance writer living in St. Simons Island, Ga.
