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Old February 12th, 2006, 11:57 PM   #1
Carolina Blue
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A tale of two cities’…fiscal health. Memphis vs. B’ham

Interesting article from today’s Memphis Commercial Appeal. Sounds like the Mayor of Memphis needs to work on making his “pimp hand” stronger. M.E.M.P.H.I.S. - Makin Easy Money Pimpin Ho’s In Style…as the young kids call it.

Memphis' high wire lacks net
Comparable towns face fund strain but Bluff City drained its reserves

By Jacinthia Jones
Contact
February 12, 2006

The mayor proposed cutting funds to schools to help balance the city's books.

Finance officials pulled $22 million from the city's reserves to pay for capital projects.

And the City Council agreed to transfer the assets of the local water utility to private hands for cash.

Sound like Memphis?

It's not.

The City of Birmingham, like Memphis, is wrestling with its share of financial challenges.

Court settlements, declining sales and occupational taxes and a forgiven loan to the school board have all strained the budget in the Magic City.

But there's one significant difference between the two cities: Birmingham still has plenty of money in the bank.

Cash-strapped cities from San Diego to Pittsburgh are tackling huge deficits exacerbated by declining revenues, cuts in state aid, unfunded federal mandates, underfunded pensions and skyrocketing health care costs.

It's a dire reality that Memphis Mayor Willie Herenton knows all too well. He has repeatedly declared that the City of Memphis is not alone in its financial straits, even while insisting the city's fiscal condition is a "short-term aberration."

But while Memphis has nearly drained its reserves to pay the bills, other cities have managed to hold on to their savings.

The Commercial Appeal reviewed the bond ratings and annual comprehensive financial reports of Memphis and 14 peer cities -- Atlanta; Baltimore; Birmingham; Charlotte, N.C.; Chattanooga; Dallas; Houston; Indianapolis; Jackson, Miss.; Jacksonville, Fla.; Knoxville; Louisville, Ky.; Nashville and St. Louis.

Virtually every city except Memphis maintains at least $20 million in reserves, though several have $60 million or more.

"Frankly, we've been surprised at the size of the reserves across the country," says Michael Pagano, a professor of public administration at the University of Illinois at Chicago and author of the annual National League of Cities study on city fiscal conditions.

Birmingham's "rainy day" fund stands at a healthy $74.2 million, despite officials pulling $22 million from its reserves to cover capital projects last year.

On top of that, the city maintains an $80 million balance in its Birmingham Fund, the trust account created from the proceeds of the sale of the city's water utility, Birmingham Water Works.

"This city is in good financial shape," reports Michael Johnson, Birmingham's director of finance.

Comparatively, Memphis has endured three years of operating deficits, nearly depleting the city's reserves to just $1.2 million.

Pagano speculates that as states have reduced their support to cities in recent years -- a move not unlike the cuts made by the federal government years before -- cities have started guarding their piggy banks more closely.

In the past, cities viewed their reserves as simply a way to cover emergencies or to make it through tough times without raising taxes, Pagano said.

"Now municipalities are using it to show rating agencies that they can maintain their fiscal houses."

By maintaining reserves, cities hope to retain high bond ratings, which determine how much taxpayers must spend to borrow money for city projects.

And with this new hands-off approach to reserve spending, many municipalities have turned to increasing fines and fees rather than raising taxes.

Baltimore, for instance, reduced its property tax rate by 2 cents last year by imposing new and increased taxes on cell phones, energy and real estate transfers.

Meanwhile, bond ratings reviewed by The Commercial Appeal place Memphis near the bottom of the peer cities again.

Charlotte and Indianapolis sit at the top with perfect AAA bond ratings by Fitch Ratings.

In the middle of the pack with AA+ ratings are Chattanooga, Nashville and Knoxville.

And lagging the bunch are Baltimore and Memphis, each with an A+ rating, and St. Louis with its bottom-of-the-list A- rating.

Desperate to stop the hemorrhaging in Memphis over the last few years, Herenton's new finance team commissioned a study of the same 14 peer cities to see how Memphis stacks up and, it is hoped, borrow some cost-saving ideas.

The report makes a number of comparisons regarding such things as the number of police stations and fire houses in each community to the number of schools and parks.

The survey indicates, for example, that Memphis has 55 fire stations -- more than Baltimore, Charlotte, Indianapolis and Nashville even though those cities have a similar number of households.

However, the review lacks detailed information pertaining to the fiscal health of the other cities.

Robert Lipscomb, chief financial officer for Memphis, says the peer city analysis by the Memphis and Shelby County Office of Planning and Development was meant to show how Memphis stacks up to other cities in terms of its capital projects.

"What's driving our costs are the facilities to a certain extent," Lipscomb said. "We've got way too many schools and parks and libraries and fire stations and community centers.

"We've just got too much stuff relative to our population, our square miles and our ability to pay. If we can agree that Memphis has too many facilities then the next step is to merge or consolidate."

Link:
http://www.commercialappeal.com/mca/...461054,00.html
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Old February 13th, 2006, 02:58 AM   #2
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WE'RE IN THE BANK!!! BLING-BLING!!!

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Old February 13th, 2006, 05:57 AM   #3
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These two cities will each be a terminus for I-22, which should be completed in a few years.
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Old February 14th, 2006, 04:55 PM   #4
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I find it hard to believe Birmingham has that much money, seeing how they always carry on about certain administrations being in dire straits. Oh well, that's the beauty of a 9% sales tax .
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Old February 14th, 2006, 07:00 PM   #5
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I don't like the idea of Memphis and Shelby County merging or consolidating anything. Such as schools, police, etc. Its not fair to the suburbs, and I don't blame them for privatizing their libraries (not that that has anything to do with this topic). I think we need a new mayor and kick old "King Willie" out and get this city and its financial troubles back on track. (I wouldn't be surprised if half those reserves were in King Willie's back pocket!)


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Old February 14th, 2006, 08:09 PM   #6
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It's not fair to the suburbs?! You do know that if Memphis didn't exist, the precious burbs wouldn't either?
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Old February 14th, 2006, 09:14 PM   #7
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A consolidation of municipal and county governments will only serve to benefit the city financially in the long run. A city with numerous autonomous communities at its perimeter will only serve to work against prosperity due to the fact that every community doesn't really want to have anything to do with each other, especially concerning the main city, which may have fallen victim to urban blight and defacto segregation (socioeconomically, as well as racially). It's counterproductive; lots of corporations analyze these things when they decide to relocate their headquarters or build a major manufacturing facility somewhere-they are looking for areas that will exhibit a synergistic sense of cohesiveness. It could attract more sports teams.
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Old February 15th, 2006, 02:26 AM   #8
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Quote:
Originally Posted by DallasTexan
It's not fair to the suburbs?! You do know that if Memphis didn't exist, the precious burbs wouldn't either?
seriously. **** the burbs.

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Old February 15th, 2006, 06:41 PM   #9
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Don't get me wrong, I want whats best for the City of Memphis, but isn't there a better way than consolidation or whatever it is. I know the suburbs wouldn't be there if it weren't for the city but does any of this consolidation help them grow?


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PS I'm only 15 so I don't know much about some of these political issues.
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Old February 16th, 2006, 12:04 AM   #10
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Actually, yes. Nashville, Indianapolis, and Jacksonville have ALL benefited from consolidation.
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Old February 16th, 2006, 05:21 AM   #11
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Quote:
Originally Posted by Cody02
Don't get me wrong, I want whats best for the City of Memphis, but isn't there a better way than consolidation or whatever it is. I know the suburbs wouldn't be there if it weren't for the city but does any of this consolidation help them grow?


~Cody02~


PS I'm only 15 so I don't know much about some of these political issues.
Consolidation helps foster better regional cooperation, which is what metropolitan areas will need to improve upon if they are to survive and thrive.
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Old February 18th, 2006, 11:28 PM   #12
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Quote:
Originally Posted by B'ham Bound
Actually, yes. Nashville, Indianapolis, and Jacksonville have ALL benefited from consolidation.
I think there are more positives than negatives.

But one negative is that I think it brings on more flight from the consolidated county which, by some people, is just viewed as part of the evil innercity.

Even when a county is not consolidated, both the city and suburban residents are still part of the county government, even though they have their own separate city governments.

So, that may strike some balance.

Shelby County, TN (Memphis) has still enjoyed a good deal of growth (826,000 in 1990 to 907,000 in 2004). If Memphis and Shelby had merged, I think many would have fled the county altogether.
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Old February 19th, 2006, 12:49 AM   #13
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You're right... Unfortunately there will be those who are against any form of cooperation or consolidation of regional government for no other reason than they fear/hate/loathe the city. It's quite sad actually.
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