Chumney position on capital projects

This recent press release from Carol Chumney's office makes a couple of very important points about the Capital Improvements Program (CIP) budget:

• First, that the CIP budget has gotten out of control, enough so to impact the Memphis credit rating.
• Second, that the City is making investments in projects that will be hard to stop later and will end up costing 5 times what they appear.

A good example is the Beale Street Landing. We can't afford this project right now, but the Council (contrary to appearances) is actually letting the RDC plow right ahead, using "reprogrammed" dollars. Next year, who will have the political guts to stop it after we've already invested $12 million?

CHUMNEY CALLS FOR COUNCIL TO CUT BUDGET-BUSTING CAPITAL PROJECTS IN FAVOR OF NEIGHBORHOOD IMPROVEMENTS

May 16, 2005 FOR MORE INFO CONTACT
Carol Chumney at 486-6891(cell) or 576-6786 (office)

Councilwoman Carol Chumney says that inaction by the Council this year may impact substantially on whether some neighborhoods get improvements needed over the next five years. On Wednesday, May 18, the Council’s CIP budget Committee will conclude its work on the city’s capital improvements budget. In the Council CIP budget committee last week, Chumney moved to delete the Beale Street Landing and the 911 Operations Facility projects entirely, which have a total price tag for the city of 18.9 million dollars and 22 million dollars respectively. Both motions failed for lack of a second. She also voted against the MATA regional light rail project which will ultimately cost the city taxpayers over 70 million dollars.

While some of the Council did vote to cut the 261 million of FY2006 new capital projects proposed to 150 million, Chumney states that more need to be cut due to the additional 225 million in “reprogrammed” projects [projects approved, but not begun in the last fiscal year] which are carried over into FY 2006. “If the Council proceeds with some of the big-ticket capital improvement projects, then many of the public works projects deferred this year, may be delayed again in future years in order to comply with the city’s debt policy for those fiscal years”, according to Chumney.

In January, Councilwoman Chumney first brought to the public’s attention the Fitch Ratings report [issued Oct. 18, 2004] downgrading Memphis’ bond rating from AA to AA- . This report noted that “The city’s direct and overlapping tax-supported debt levels have risen in recent years to a level Fitch considers above average.” (pg. 2). It further states, “Fitch’s analysis indicates that, if the fiscal years 2005-2009 CIP were carried out as stated, not all debt limits [in the city’s debt management policy] would be met.” (pg. 3). The downgrade by Fitch was based, in part, on the fact that “rising city debt service and the possible need to appropriate funds for sports authority debt service will further strain resources.” (pg. 4).

In February, the Mayor announced lay-offs and budget cuts and asked for ideas from the Council. Chumney’s letter dated February 25, 2005, recommended, among other things, that capital spending projects be cut for the upcoming fiscal year. Yet, the administration in April proposed a Capital Improvement Budget for FY 2006 that has 225 million in “reprogrammed” projects and 261 million in new projects for FY 2006. This totals 486 million in projects, well beyond the city’s debt policy target of 150 million per year.

Chumney notes that the Mayor’s Beale Street Landing proposal has 12 million in reprogrammed bond dollars for reauthorization in FY2006 because the Riverfront Development Corp. did not use the funds last year. While the Council has delayed the additional 6 million proposed in new capital dollars to FY 2007, it did not delay the use of the 12 million reprogrammed dollars. Chumney believes that once this money is spent, it will be hard for the Council to then later justify stopping the project in the middle.

Likewise, MATA requests 2.9 million in city reprogrammed bond dollars for the light rail plan between downtown and the airport, but no new capital dollars for FY 2006. If the reprogrammed amount is reauthorized this year, then the public will chip in 70 million dollars over the next five years. Chumney says that “the failure of the Council to act now on these two projects alone, will ultimately result in over 88 million dollars in capital expenditures that will not be available for public works and other neighborhood improvements over the next five years”.

The proposed 911 Operations Facility, while paid in part by fees, will still leave the city paying for the furnitures, fixtures and technology for a 22 million dollar price tag. This is in addition to a 4 million dollar new Emergency Management Operations Center in the budget for FY 2007. While Chumney supports building the EMA Center, she questions whether the city really needs both facilities, and at this cost?

Councilwoman Chumney points out that these new projects are being approved, while the ultimate fate of the Pyramid and Mud Island are still uncertain. She further points to the needed future expenditures for basic maintenance of the Cook Convention Center, upgrades for the Liberty Bowl, and to keep the hippo exhibit at the Memphis Zoo. And, it has yet to be determined how the fairgrounds property will be reused. Chumney says that “once again, the city is investing huge sums of money in new projects, while neglecting and abandoning facilities already built. Our schools are falling apart, our neighborhoods are neglected, but there is money to build several big new projects. And, we still don’t know if the repayment of the Fed Ex Forum bonds will need city support in upcoming years, as Fitch indicates”.

In short, Councilwoman Chumney states that simply cutting the proposed new capital projects for FY 2006 without regard to the reprogrammed projects, or applying the debt policy to each of the next five fiscal years will not fully address the concerns identified in Fitch’s bond rating report. Chumney “calls upon the Council, in the absence of leadership from the administration, to take action now to cut both reprogrammed and new capital projects to amounts within the city’s debt policy level. Once the capital budget is under control, in future years the Council can revisit the citizen’s ability to fund light rail, the riverfront plans, and the expensive 911 center. We must prioritize now, or there will be only limited choices in the future”.