Former Saratoga Springs Public Safety Commissioner Lew Benton has done a major public service in analyzing Finance Commissioner Minita Sanghvi's proposed 2024 city budget. I sent Lew's commentary to Mike Sharp, who was the Deputy under Finance Commissioner Michele Madigan. He offers some additional insights.
Based on their analyses, there appear to be very serious problems both with the projected expenditures the city will have to pay and with the projected income, which appears to be overly optimistic.
Most troubling and adding to the credibility of their concerns was Sanghvi's decision to suddenly initiate major changes in her budget at the very last minute following the electoral defeat of Mayor Ron Kim. She now proposes to defund the second City Attorney and transfer the money along with the authority for Risk and Safety from the Mayor's office to the Accounts Department. Why weren't any of these changes in her original budget or the amended budget that followed the budget workshops? It appears that the changes were prompted not by thoughtful deliberations but by some sort of deal involving Kim and Accounts Commission Dillon Moran after the election. This kind of backroom dealing can only prompt skepticism about how Sanghvi determines the best way to spend taxpayer money.
A Budget That the Public Cannot Understand
As Lew documents, his efforts to analyze Sanghvi's budget were made difficult by her decision to scrap the format the Finance Department normally uses and instead publish one that is extremely hard to read. Why Sanghvi diverged from the standard format is unclear, but the result is that it is hard to ferret out what the city will be spending money on and how much the anticipated income will be.
Lew documents the problems with the format Sanghvi used.
No Answers
I sent Lew's analysis to Sanghvi and asked if she would respond to the concerns he raised. Consistent with her past practice, Sanghvi didn't acknowledge the email, let alone respond to it. As you will see in reading Lew's piece, it is rigorous and thoughtful. Lew's credentials are impeccable. He served this city as its Commissioner of Public Safety, and his career was as a planner. He raises truly disturbing concerns about the budget that deserved a thoughtful response.
I asked Mike Sharp for his thoughts on Lew's piece. Mike was the Deputy under Finance Commissioner Michele Madigan. His remarks appear following Lew's piece.
Lew's Analysis
[Here is his comparison of the standard format used for budgets and what Sanghvi has done.]
[Here is Lew's full analysis]
Mike Sharp's Observations In His Response To Lew's Piece
I very much agree, Lew, and I always enjoy your commentary on city finances. My comments were less a critique and more of my playing devil's advocate to get ahead of any potential response made by the commissioners or her supporters. Perhaps there is a real reason certain revenue items are pushed so aggressively (I doubt it), but based on what has been made available, many of them seem aspirational more than based on facts/trends, which sets the budget up for trouble before the fiscal year even begins. Your point about the formatting change is a big one that I don't think enough people will appreciate, but I don't see any rationale for the change that isn't anti-transparency or bad governance. Cynically, I would assume she's received pressure from other Council members to make an already confusing budget document even less useful to outsiders.
Thanks again for your piece, and I hope you both have a great weekend,
Mike
From: Mike Sharp <masharp@gmail.com>
Date: November 17, 2023 at 9:59:10 AM EST
To: John Kaufmann <john.kaufmann21@gmail.com>
Subject: Re: Essay on Proposed Amended City Budget
Hi John,
Thanks for sending. In going over what Lou sent, I agree 100% with his point that removing the subtotal by subdepartment is an anti-transparency measure. The output from MUNIS is already hard to understand for most people, and by removing the department subtotals, lines become meaningless. "Professional services" is a great example of that, as the Mayor's Office has 18 different Professional Service lines with over $740k of projected 2023 spending. Other than knowing it's in the Mayor's Office, the public has almost no idea what a not-insignificant part of the budget is being spent on.
For his section on revenues, I agree they look to be pushing some line items beyond what appears to be realistic, though there are a few caveats:
- For some revenue items, the City doesn't receive our inflows in a timely manner. This makes saying, "How can they budget X when we've only received Y year-to-date?" a tricky thing to say, as it's entirely possible Finance could receive a check or wire that represents multiple months of previously earned revenue. I believe Occupancy Tax and Mortgage Tax might be such line items, but I've been out of it long enough that I don't remember exactly which revenues we get monthly and which ones lag. You would hope the Commissioner would highlight things like this in her presentation.
- Sales tax is taking a massive leap from 2023, going for a budgeted amount of $17.5M to $19.5M, or up over 11%. Finance gets information monthly about this, so maybe this is really what the trend is showing, but again, a leap like this in such a critical revenue line warrants more explanation in my opinion. I'd also note that while the city gets sales tax money monthly, it is based on a formula (rather than actual sales) that is corrected for actual sales later. More than once I saw that correction negatively impact the city in a big way. My hope is that they aren't making their estimate purely on the monthly figures, as those aren't final. Have there been any sales tax presentations? I believe we tried to do them at least once a year when I was around.
- Assuming $250k for a brand new revenue stream like Cannabis and short-term rentals does seem aggressive, though perhaps there is a reason they've assumed such a number based on guidance from the state or county? Years ago, getting any money out of short-term rentals was hard as we needed the County to approve items, and they were seemingly unwilling to do so. Has that changed, or has the city found another way to generate revenue out of short-term rentals? Relatedly, will this new revenue stream have an offsetting expense related to enforcement, such as more code inspectors or whoever else is responsible in ensuring all short-term rentals are accounted for?
- Lew's Overtime points are very good, and that's a few hundred thousand dollars that should certainly be explained. Are there new hires or a change in policy that should lessen this expected expense?
Aside from this, it's very telling that in all of this, I don't think there's any discussion around revisiting the 30+ hires that this Council made in 2022-2023, as noted in the Comp Budget presentation. Were all of these necessary? Are there any non-union hires that can be revisited? Adding personnel puts an enormous strain not only on the current budget but also on future budgets as staff contractual receive increases in pay (whether the City revenue goes up or not) and as benefits costs generally go up. Certain departments have been understaffed for some time, but 30+ is massive, and I really think the public is entitled to better understand what a need compared to what is a want (I will never get over her hiring an admin for herself, now making $57k I believe, despite also budgeting a budget director and deputy).
Feel free to send my email to Lew, and if he wants to chat over email about anything, I'd be happy to do so.
Thanks,
Mike
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