The Stories that Shaped 2009 No. 1: A Financial Roller Coaster

The year 2009 will be remembered as 12 months of ups and downs in Springfield city government.

Anyone returning to Springfield in recent months likely noticed several new faces at the highest levels of the city's elected government.

Mayor Jim O'Neal was elected in April replacing Tom Carlson, who decided against running for another mayoral term after more than two decades of council service - more than half of that time spent as mayor. Five of eight council members have served less than a year.

This year didn't bring an easy entry into city leadership for the newcomers, though.

The city's Police and Fire Pension Fund shortfall - to the tune of more than $200 million - and lackluster revenues from the city's general fund sales tax created the perfect storm in 2009, and the ramifications will have lasting impact on city finances.

Sales tax situation

The most pressing issue facing the city at the moment is declining sales tax performance.

After finishing fiscal 2009 down more than 3 percent from the previous year, revenue performance through half of fiscal 2010, which ends June 30, is even worse. Numbers for the city's 1-cent general revenue sales tax are down 9.8 percent compared to the first six months of fiscal 2009.

The city has taken a quarterly approach to addressing the problem, comparing revenues every three months to the yearly budget to see if cuts are necessary.

In September, City Manager Greg Burris presented council with a series of cuts to cover a $1 million shortfall through the first three months of the fiscal year. While a continuation of the city's yearlong hiring freeze saved about $400,000 in that quarter, the city also laid off four employees and enacted two mandatory furlough days to be taken before May 30 by all department heads and upper management.

"I think this is just about the most difficult thing that the leader of any organization has to do, when you talk about recommendations that affect people's lives this way," Burris said in the September meeting.

Through December, the city is down another $900,000. Two-thirds of that shortfall is made up through savings from the hiring freeze, but city officials are looking at options to cut another $300,000 from the annual budget.

Pension predicament

While sales tax numbers look bleak, city officials were able to pass a sales tax in 2009 dedicated to boosting the underfunded Police and Fire pension system - although it did take two tries.

The pension issues began well before 2009, but Burris announced upon his hiring in September 2008 that his first and most important goal would be making the plan solvent.

At that time, the plan was underfunded by $197 million, and that number has since surpassed the $200 million mark.

Burris and city staff quickly concluded that a sales tax would be needed, in combination with other steps, to solve the problem. Convincing citizens, however, was not so easy.

A 1-cent tax, which would have created an estimated $40 million a year for the fund before it sunset after five years, failed in February. That failure led to the creation of the citizen-run Police and Fire Pension Fund Task Force, tasked with finding alternative solutions to the issue.

The group came back with a series of suggestions, including increasing city contribution levels to 35 percent of payroll and putting new hires into the statewide Local Government Employees Retirement System.

The task force agreed that a sales tax also would be necessary, proposing a O-cent tax. That tax, which will create more than $20 million a year over five years, passed on the November ballot, earning 54 percent of the vote.

Along with the tax, council created a citizen tax oversight committee to watch the spending of the pension tax and other sales taxes.

"The people have entrusted us with $100 million, and they expect it to go to the right place and be managed by the right people," said Jerry Fenstermaker, chairman of the citizen-run Police and Fire Pension Task Force, during a November council meeting.

O'Neal told SBJ in May that the task force would be crucial to getting the issue solved.

"The enormity of that is just being realized in the last two years," he said.

"We have a little window of time here that we can use the wisdom of this task force to develop a solution based on all the options we have. But doing nothing is not an option."

The city also is selling off some of its excess real estate property to raise funds, with the fourth batch of properties put up for sale this month. Net proceeds from the sale will go into the funds used to purchase each property, but City Council intends to put any additional proceeds into the Police and Fire Pension Fund.[[In-content Ad]]