By John Schaffner

The City of Atlanta has paid a total of $2.5 million to the IRS in unpaid taxes, penalties and interest related to late monthly payments last year to the city’s pension funds.

The city was notified Sept. 14 of the due amount and, based on legal advice about the pension payment, paid the full IRS levy bill on Sept. 23 even though the city has filed an appeal.

The penalties and interest were imposed because the city was a few days to a week late on some of its monthly pension payments.

City Finance Department workers also incorrectly put $894,000 in the police pension fund instead of the General Fund pension account, according to Chief Financial Officer Jim Glass

The city intends to seek a full refund. The city sent a letter Sept. 21 requesting a refund of $894,000.

Glass said he is considering disciplinary action against the workers responsible for making the payments. Glass confirmed that the monthly payments were late. He also said issues with computer software installed at the end of 2007 caused some reporting problems.

Although the announcement of the problems said the city is requesting an abatement of the penalties, it does not explain why the city administration believes that is in order.

Atlanta city leaders largely blame the city’s money troubles on the recession, with revenues now at $2.6 million below budget projections since July.

But many also agree another problem is the amount of money the city is investing in employee pensions. Atlanta spent about $100 million — 17.5 percent of its general fund budget — on pensions during the 12 months that ended June 30. The City Council approved pension increases in 2001 and 2005, in part to make up for years of underfunding the plans.

That problem has come up repeatedly during recent public forums involving candidates running for mayor in the Nov. 3 election.

Atlanta CFO Glass expressed deep concern about promises being made by some mayoral candidates at campaign outings.

Crime is the top concern for many voters and three of the leading candidates say they will hire more police officers. Glass said such changes will require more revenue, which the city doesn’t have, or deep cuts to other city departments.

“It’s hard for me to understand where those cuts would go,” Glass said at a news conference Sept. 22 where he and Mayor Shirley Franklin gave a financial update.

The mayor has made cuts to virtually every city department and laid off several hundred employees since May 2008 to offset major drops in revenue, which Franklin has blamed on the recession. The mayor said that Atlanta is on the “slow end” of an economic recovery.

Councilwoman and mayoral candidate Mary Norwood used the phrase “Enron-type accounting” at a recent debate to describe what’s going on inside City Hall, which drew the ire of Franklin. Franklin responded that Norwood’s statement suggested criminal activity within the finance department.

Norwood later apologized for using the phrase, but stood by her criticism of past accounting practices in city government.

Glass wrote a four-page letter dated Sept. 18 to the City Council that outlined his concerns.

“Any proposal to increase the public safety budget — no matter how well-intentioned — ignores certain fundamental realities,” wrote Glass, who plans to leave office at the end of the year. “The city is revenue-constrained and we will continue to face challenges absent any new sources of revenue in the future.”

All four leading candidates — Norwood, City Council President Lisa Borders, former state Sen. Kasim Reed and attorney Jesse Spikes — deny they are making unrealistic promises.