By Roger McCredie-In Shakespeare’s MacBeth, the ghost of the freshly murdered Banquo appears seated at the dinner table. He is visible only to MacBeth, who had him killed and who freaks out and runs off all the guests before they even get dessert. The scene gave rise to the phrase “the ghost at the feast,” meaning something disturbing and unresolved that lurks beneath a hunky-dory exterior.
The ghost looming over Asheville’s upcoming municipal elections is the apparently elusive answer to the question: how stable is Asheville’s economy?
It’s fine, says mayoral candidate Esther Manheimer, and those who say otherwise are, to put it kindly, misinformed. Manheimer is the current vice mayor and presently serves as chairman of city council’s finance committee.
It’s not fine, says her opponent, John Miall, a former 30-year employee of the City of Asheville who is now a financial consultant to major health care corporations. Miall insists that the city chronically lives beyond its means, with city taxpayers now footing the bill for that habit.
And all the average Ashevillian seems to know for sure is that property taxes have been raised from 42 to 46 cents per $100 of property tax valuation. The revenue is to go primarily towards belated infrastructure repairs and also to a “wish list” of projects designed to attract new business investment. Also included is a provision for funding the highly controversial expansion of the Asheville Art Museum.
The penny dropped on April 3, when city officials called a town hall meeting at U.S. Cellular Center to receive public input on a looming financial crisis. The city, officials said, was standing on the brink of a projected two-year shortfall of just under six million dollars. Lauren Bradley, who was then the city’s Director of Finance, laid most of the blame for the situation at the feet of the North Carolina General Assembly. “All of our efforts [to cut expenses] would have made for a balanced budget had it not been for legislation in Raleigh,” Bradley said. Chief culprit among legislative measures that would affect Asheville’s cash flow, Bradley said, was the proposed transfer, without compensation, of the city’s water authority to the county’s Metropolitan Sewerage District. The city has since filed a lawsuit in Wake County Superior Court to prevent the takeover, but the case is not expected to be ruled on until February or March of 2014.
At any rate, what attendees took away from the April meeting was that the city was faced with either making drastic cuts to city services and amenities or raising taxes. In June, just prior to the close of the fiscal year and adoption of a new budget, the city, without a public hearing, passed the tax increase. Later that month, Bradley, whose title had been changed to Executive Director of Finance and Strategic Planning with a concomitant raise in pay, resigned her position and went to work as Chief Financial Officer at Manheimer’s law firm.
Last week the Tribune examined documents it had obtained which showed the state treasurer’s office had cited the city twice – in 2010 and again in 2011 – for “material weaknesses” in reporting its financial activity. The city was also reprimanded for failure to file its financial report in a timely manner, a problem that was also of concern to its CPA firm, Dixon Hughes PLLC. The city filed its 2012 report on time and, according to Deputy Finance Director Eric Hardy, has since made multiple changes to internal reporting to ensure that the problem stays rectified.
The Tribune also reported last week that the city’s Fund Balance Available (FBA) had plummeted from a robust $30.8 million in 2006 – 76% above the state average – to $11.2 million, 49% below average, by 2012. Asked to comment on this trend as city council’s finance chairman, Manheimer replied that the questions were “appropriately public records requests” and handed the question over to the city manager’s office for response. Hardy, to whom the question was handed off, explained that the city had “drawn down available reserves” instead of taking the undesirable step of raising taxes, and that the FBA had “rebounded” to its “policy target” of 15% of projected annual expenditures. He did not comment as to what extent this rebound could have alleviated the necessity for a tax increase.
Hardy’s summation, which was forwarded by city public information officer Dawa Hitch, contained, as attachments, reports from Moody’s Investment Service, which showed a municipal bond rating of Aa-1 for the city of Asheville, and from Standard and Poor’s, the other major rating service, which assigned Asheville a bond rating of AA. Both designations are classified as “excellent” in terms of safety of potential investment.
“We look at four main factors [in determining bond ratings] – economic strength, financial strength, operating flexibility and debt management,” a representative in Moody’s New York office told the Tribune in a phone interview. “As a bond investment, Asheville has several things going for it: it’s an economic hub, it was some major employers and low overall unemployment. From our standpoint, if there’s a deficit we don’t care what the city does to address it as long as it does something. We don’t care whether the city cuts services or raises taxes or both, as long as the hole is plugged.
“We realize the residents might not agree with that, but that’s not our problem; we don’t work in that end of things,” he said.
In the same vein, Manheimer took the Tribune to task for saying “that the city was six million under budget, which is not correct … I’m concerned that your underlying assumptions may not be correct [either],” she said.
“Let’s see,” said Miall. “The $6 million deficit is there in black and white in their own council minutes. It was in fact their reason for the tax increase. So if [the Tribune’s] ‘underlying assumption’ is wrong, so is theirs.”
Manheimer pointed out that the deficit “was a potential forecasted at the town hall, yes, but not true of the final budget [after passage of the tax increase].”
Miall noted both the S&P and Moody’s ratings, as well as the FBA uptick, saying “Not bad for a ‘down’ economy … but it only goes to prove what I have said until I’m blue in the face: Asheville doesn’t have a revenue problem, it has a spending problem.”