A Closer Look at Mariemont Finances

“Lipstick on a Pig?”

To put “lipstick on a pig” is a rhetorical expression, used to convey the message that making superficial or cosmetic changes is a futile attempt to disguise the true nature of a product” – Wikipedia

When I first read the latest “Mayor’s Bulletin” (Jan. 2014), responding to my editorial article in the Eastern Hills Journal on the financial status of the Village, the “lipstick on a pig” phrase came to mind. The numbers and information presented in the bulletin certainly make the financial picture look rosy and solid to the untrained eye. But let’s look a little closer at what’s been presented, or better, what has not been presented.

The article touts the ending 2013 General Fund reserves increased $44,000 over 2012. Back in July 2013, the Village Clerk was projecting 2013 and 2014 to be deficit years but the mayor announced in a budget meeting a future estate tax receipt of $318,000 which would offset the deficit. The actual estate tax numbers for the 2013 were $246,195 in the General Fund and $146,334 in the Permanent Improvement Fund, or $392,529 total. If not for these estate tax infusions, the General Fund would have again incurred deficit spending as the Clerk projected, in the amount of $201,826 and the reserves would have been $1,114,278 at the end of 2013 instead of the stated $1,360,473 (an 18.1% difference). But left unsaid, based on current spending trends, is what will the General Fund reserve look like at the end of 2014, 2015 and 2016? No comments are made or numbers presented in the article about the future outlook and financial projections now that the estate tax is gone. Just the ending figures for 2013 are shown, a point in time, not a trend or forecast.

The Permanent Improvement Fund was highlighted in the article as a financial strength of the Village. Without the estate tax infusion of 2013, this fund would have been $569,119 rather than the $715,453 shown (a 20.5% difference). What is left unsaid is this fund can be used only for capital improvements and not for services such as police, fire and general operations. It’s the operating costs that are paid by the General Fund that is the major problem, not capital improvements. Although this fund is portrayed as being strong, left unstated are the payments for the new fire truck and the effect these will have on the amount of reserves. The remaining cost of the fire truck purchase alone is about $260,000 a year in 2014 and 2015 against a levy that brought in average revenue of $350,000 the last two years. That leaves about $90,000 a year available for all other capital improvements and equipment. (The article states the fund is used for “street improvements, trees, swimming pool, tennis courts, Municipal Building, etc.“)  These categories have averaged about $350,000 in expenditures over the last four years. And council just supported a $248,000 street improvement project for 2014, on top of paying the next installment payment for the fire truck. Are we going to defer street repairs, our tree program, our pool or our parks to pay for the new fire truck or will the $715,000 reserve at the end of 2013 just steadily drop in the next several years? Difficult decisions are ahead.

The article states “Always Looking Toward the Future.”  With 2013 being the last time estate taxes will be received, there is still a looming shortfall in General Fund revenues. Many of the new sources identified in the article have already been included in the 2013 revenue (one or two Greiwe condo buildings and the earnings taxes on those residents and 100 Kellogg’s employees). The article also identifies the Waldorf School as an additional revenue source for real estate taxes but the school is a non-profit tax-exempt institution. Without estate taxes or additional revenue streams, the General Fund reserve is going to start dropping unless spending is cut or taxes raised.

The article next identifies “Steps Taken to Reduce Expenses.” It speaks to actions taken but not to the results of those actions. It states that over the past several years, staff was reduced from 25 full-time employees to 20. However, in the July 8, 2013 Budget Meeting Minutes the number was stated as 18. One would expect wage and benefit costs would have decreased significantly with a 20% reduction in staff. But Village Annual Financial Statements show Wage & Benefit costs in the General Fund jumped from $2,252,970 in 2012 to $2,466,767 in 2013, a 9.5% increase. Even if one looks at the last three years, the reduction in staff still resulted in an increase of 12.2%.

The article further states three additional full-time firefighter positions were eliminated and the police chief and fire chief positions were consolidated as a step taken to reduce expenses, saving $200,000. A review of firefighter wages and benefits shows General Fund expenses dropped $112,042 between 2009 and 2013 and the Paramedic Fund expenses for wage and benefits dropped $59,024 for a total of $171,066. Consolidating the police and fire chief position apparently saved only $28,934. The fire chief was paid significantly more, so where did the additional savings claimed by the mayor go?

The next cost saving identified was elimination of Village employee annual incentive bonuses. The amount of money “saved” by the elimination was not identified. Incidentally, these “bonuses” were intended to reward employees for outstanding performance and not as automatic annual payouts. Despite this elimination, wage and benefit costs still continued to increase, as identified above.

In conclusion, the “Mayor’s Bulletin” article states: “As anyone can see by the ending balance on the Treasurer’s report above, the steps we have taken have been and will continue to be effective in combating the cuts made by the State.”

Really? Please pass the lipstick!

Mike Lemon
Former Mayor and Councilman

For more about Mariemont Finances by Mike Lemon, visit this post