The budget has received no citizen input. There is, for example, no Oro Valley Finance and Bond Committee to review the budget. There was no citizen input allowed at the April 2, 2014 council presentation or a subsequent budget study session held on April 9, 2014. It is, therefore, the job of each Council Member to represent the citizens.
This budget is being presented as 'balanced' or 'provides a surplus.' Yes. The budget is that. However, it is also a 14% increase over prior year, a fact that only LOVE has reported.
Why is a 14% increase problem? It is a problem because the increase is based on a robust set of increased revenue projections. The assumption is that the economy will be robust. The expectation is that construction fees will be robust.
We've been through the "boon-bust" cycle countless times. We know that: "What comes up, must go down." We also know that it is extraordinarily painful for the public sector to reduce spending. It is, after all, not their money. It is your money.
Oro Valley's method of budgeting does not challenge each expenditure. Rather, it adds an increase each year. It challenges only the increase, not the baseline spend. Thus, a budget once set becomes the baseline for the future. In essence, the 14% increase becomes a permanent cost to the citizens of Oro Valley.
It is the boom-bust cycle that requires fiscally responsible individuals, company's and public sector operations to build surpluses. Oro Valley calls these surpluses a "contingency fund." In Oro Valley, it is build from general fund revenues.
Most of our citizens are not aware of Oro Valley's "contingency fund". Oro Valley's councils have set a minimum 25% ratio between the operating fund expenditures and the contingency fund balance.
The contingency fund is a buffer for unexpected financial problems. It is also a means to set aside funds for specifically designated future projects. It is like an individual's savings account.
A contingency fund is also used to manage risk. In the public sector, there are two such risks. One, is the risk of a shortfall in revenues. The other is the risk of unexpected events. For example, it is often used for risk management when an exceptional risk that, though unlikely, would have disruptive or catastrophic consequences.
This proposed budget is yet another year in which there will be little addition to the "contingency fund."
Given the the history of the majority-4 on council, 2014-15 could be another year in which they raid the contingency for some "unforeseen reason." The majority-4, with the consent of some other council members, took funds from this fund over the years to:
- They authorized the use the of $2.1 million in contingency reserve funds to underground utility lines along Oracle and Tangerine roads in a three-project proposal brought forth by Tucson Electric Power. There was an ordinance that required “undergrounding” so it was an emergency.
- They authorized $500,000 to aquatic center upgrade project
- They raided the fund to build two multi-purpose fields in Naranja Park
Next week: Our take on the Oro Valley's most discretionary fund, the operating fund.