Atlanta in ‘a fight for our survival’

If Atlanta City Hall was a hospital, one might say Mayor Shirley Franklin and her staff have spent the past few months in triage mode.

City revenues have dropped by $14 million since 2007, which is partially responsible for service cuts — such as closing a fire station and nearly two-dozen recreation centers — and layoffs of several hundred employees.

Last Thursday, the mayor unveiled a proposed budget to operate the city between July 1 and June 30, 2010. But city officials, civic leaders and some of the folks who hope to become mayor in January say City Hall needs a long-term diagnosis for Atlanta’s future financial health.

“We are fighting for our survival,” City Council President Lisa Borders, a mayoral candidate, said during a council retreat Friday.

Property taxes represent the largest chunk of the city’s revenue — 28 percent — but that’s lower than other similarly-sized cities. By contrast, more than 60 percent of Charlotte’s revenues last fiscal year came from property taxes.

The mayor’s budget proposes raising taxes in June, never a popular idea among homeowners who get to vote in November for a new mayor and council.

One major problem is employee pensions. Nearly one-fifth of Franklin’s $541 million proposed budget is devoted to pensions. The city’s annual contribution to its three pension plans has nearly tripled from $36.6 million in 2003 to its current level of $100.3 million.

“They’ve got to look for ways to get away from this structural imbalance,” said business leader Bill Clement, a member of the Atlanta Committee for Progress, a group of prominent business and civic leaders that typically meets monthly with the mayor to discuss city issues.

After years of underfunding the pension plans, the City Council earlier this decade approved several changes to its pension contributions, which has resulted in higher annual obligations. The mayor’s staff has proposed reamortizing its pension payments over the next 30 years, which they say will save the city about $19 million for the coming budget year, which starts July 1.

Clement, chief executive officer of Atlanta Life Financial Group, said the city should consider a defined contribution pension plan or something akin to a 401(k) plan for all of its employees, which many analysts say yields greater returns than the traditional defined benefit plan, which most city workers are under.

Chief Financial Officer Jim Glass said Georgia case law shows it’s difficult to shift government employees from one plan to another.

Currently, the city has few major revenue options. Twenty percent of its money comes from sales taxes. Fees from the city’s hotel and motel tax is down and so is revenue from building and licensing fees.

The city’s lack of revenue options generated a long-standing Atlanta beef, which came up during the council retreat, that the state won’t allow it to impose a commuter tax on folks who work in Atlanta, use its services during the day and return to the suburbs at night.

“We are always going to be behind and we are always going to be looking for a gimmick,” said Councilman C.T. Martin, who has pushed for such a tax.

“The state hasn’t demonstrated any appetite to do more than they’ve done,” said Councilman Jim Maddox. “I think we need to move forward… and deal with what we have.”

Jeff Humphries, an economist at the University of Georgia, told council members at the retreat that the city should seek opportunities to help create more jobs as a strategy to improve its financial health.

“The jobs are more important because they create the demand for housing,” said Humphries, director of the university’s Selig Center for Economic Growth.

Housing means more residents, which adds to the city’s tax coffers.

One current solution the city is considering is raising property taxes next month. City officials often note that about one-half of the property taxes that homeowners pay goes to the Atlanta school system, while one-quarter of the money goes to City Hall.

That is little comfort to groups like the Fulton County Taxpayers Foundation, which is vocally opposed to any tax increase. The organization has pushed the city to consider “managed competition” or outsourcing city services that can be at the same level or better for less money.

Franklin has been cautious in outsourcing services. She noted to reporters Thursday that the city is still smarting from its failed effort in 2003 to outsource its water and sewer system operations to a private company, United Water.

“We’ve decided to take little bites at the apple,” the mayor said in regard to outsourcing.

Franklin has vowed to stabilize the city’s finances and leave it a rainy day fund before her term expires at the end of the year.

Martin, who has often clashed with the mayor on a host of issues, said the council and Franklin must work together to show they have a good grasp on its finances before the budget is adopted. The danger, he said, is endangering the city’s long-term financial well-being.