by Joe Sullivan
When the city adopted its budget for the current fiscal year, the purse strings were so taut that funds for street paving got cut by more than half. The $1 million that remained can't begin to sustain Mayor Victor Ashe's oft-ballyhooed tradition of re-paving 40 miles of streets each year.
Yet during the four months since the $195 million budget was adopted in June, City Council has approved some $12 million in additional outlays at the mayor's behest. If, as expected, Council goes along with his recommended grant for spiffing up the façade of the downtown post office at a special meeting next Monday, that will add another $500,000 to the total.
The list of budget boosters approved since June includes:
 Up to $8 million for public space and facade improvements on Market Square, on which work is due to begin next week.
A $2.8 million appropriation to the Knox County Development Corp. that's intended to cover incentive payments to Plasti-Line and Brunswick Boat Group for relocating their corporate headquarters to downtown Knoxville. These payments need to be made by the Knoxville Community Development Corp. (KCDC) for legal reasons.
$820,000 in funding for the Knoxville Tourism and Sports Development Corp. that was created via merger of the Convention and Visitors Bureau and the Sports Corp. in an attempt to spur bookings for the city's new convention center in particular and tourism in general.
A $579,000 addition to the $2 million that was originally budgeted for Victor Ashe Park that's being developed in Northwest Knoxville.
These budgetary additions raise a bunch of questions:
Where is the city getting the money to fund all these new commitments when it purportedly couldn't afford to sustain its long-standing street-paving program?
Why weren't these outlays spelled out in the city's budget to begin with along with their ramifications for taxpayers?
If the city can afford $13 million in unbudgeted new spending, why can't it restore the street-paving program?
We sought out the city's estimable finance director Randy Vineyard for answers to these questions, and he addressed them one by one.
The $8 million in Market Square improvements will be funded primarily from the proceeds of a prospective city bond issue that will also cover Victor Ashe Park and $2 million in budgeted improvements to Caswell Park. Partial year interest expense on this debt can be absorbed within the city's compartmentalized debt service budget, and debt service costs are scheduled to go down in subsequent years while dedicated revenues should tend to grow. As for why the $8 million wasn't included in the budget to begin with, Vineyard says, "The project was still subject to approval by KCDC (Knoxville's Community Development Corp.), and we didn't want to contribute to false expectations by speculating on that outcome. We've had enough that's gone on in the past by way of big announcements that haven't materialized."
Most of the $5 million for the other projects will be drawn from the city's fund balance—sometimes referred to as its rainy day fund. This balance, representing uncommitted funds, grew from $21 million to $27 million during the course of the previous fiscal year. The increase was due primarily to travel and hiring freezes and other spending constraints imposed out of fear that the state Legislature would cut revenues shared with municipalities because of the state's fiscal crisis. When no such cuts materialized, the fund balance increase could be more readily spent in other ways.
Vineyard claims the $579,000 increase for Victor Ashe Park and the $820,000 in start-up funding for the new Tourism and Sports entity were either unanticipated or unquantified at the time the city's budget was adopted. The higher cost of the park resulted from a court decision setting a higher value on the property, and the new entity wasn't formed until July. Vineyard acknowledges, however, that the $2.8 million commitment to the Development Corp. for corporate relocation incentives had been made prior to budget time.
The case for a $500,000 grant to the post office's owner and developer Sam Furrow only arose of late, and historic preservation isn't what it's really all about. While city officials can't come right out and say so, the real purpose is to enable Furrow to offer lease terms acceptable to the state Supreme Court without taking a loss on the deal. Getting the Supreme Court relocated to the post office is a prerequisite to acquiring the court site for a new convention headquarters hotel, and the move can only take place under very stringent, state-set terms. Even if the Austin-based Landmark Organization goes forward with its elaborate plans for consolidating and refurbishing the Holiday Inn and adjacent state office building as a convention hotel, a new hotel on the court site would still be needed in the future. Conversion of the state office building into hotel suites will only add about 120 rooms, and that's not nearly enough for the convention center to attract the larger gatherings needed for its success.
As for why the $1.3 million cut in street paving funds hasn't been restored, Vineyard insists it's inappropriate to draw upon fund balance for this purpose. Only one-time expenditures—not recurring ones such as street paving—can be paid for with money from a non-recurring source such as fund balance, he explains. Moreover, Vineyard claims that "there's a little bit of fatigue on paving right now due to dissatisfaction spilling over from TDOT's excesses."
I find Vineyard's explanations mostly satisfactory, and the projects on which the additional money is being spent are all worthy. Still, I believe there's room for a higher standard of "Truth in Budgeting" on the city's part in the future.
October 31, 2002 Vol. 12, No. 44
© 2002 Metro Pulse
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