Is mayor’s outrage just politics?
To the Editor:
Mayor Shirley Franklin recently expressed outrage over her inference of criminality in Mary Norwood’s statement comparing Atlanta’s accounting practices to Enron’s. There is a word for criminality. Ms. Norwood is probably aware of it and could have chosen it.
Many things are implicit in invoking the name of Enron and, although criminality is certainly one of them, it is neither the only nor even the defining characteristic of the scandal surrounding Enron. Perhaps it is convenient to embrace this connotation for the sort of feigned outrage that has come to define contemporary political rhetoric, but it does little to shed light on the city’s financial troubles, or to differentiate the two currently leading mayoral candidates as both served on the equivalent of the city’s board of directors.
Enron executives are noteworthy not for the invention of accounting fraud, but rather for the innovations that they brought to it: shifting funds internally to hide losses, shifting liabilities to subsidiaries and partnerships to move them off of the balance sheet, and misrepresenting the timing of revenue. Each of these tricks has parallels in Mayor Franklin’s management of Atlanta’s finances.
The “accidental” borrowing of over $100 million from the Department of Watershed Management to pay the city’s operating expenses was an internal transfer of funds. It took place at a time when the public was reassured that the city’s finances were sound.
The city has shifted enormous liabilities to its subsidiaries and partners. These debts must be repaid with taxes and fees from Atlantans, but the public have been repeatedly reassured that the debts either do not exist or that they belong to someone else. An example is the use of tax allocation districts (TADs) to finance pet projects such as the Beltline, which runs through many areas that were already experiencing dense redevelopment. In the first year after the supporting TAD’s creation, property valuations grew by $300 million (55 percent) from reassessment and background growth. The redirected revenue from this growth (now over $12 million per year) has been publicly portrayed as the equivalent of found money rather than a substantial cost to be borne annually by taxpayers.
Property taxes are suffering in the current recession from a shortfall in the rate of collection, not obligation. The public has simply been told that revenues are down and that this is an unavoidable consequence of the recession. Uncollected taxes are secured by liens on the associated property and will be collected with interest in the future. How will this money be accounted for at that time? Will revenues for 2008-09 be restated? This money will probably be portrayed as “new” revenue generated by the managerial brilliance of whoever succeeds Mayor Franklin. Will the new administration base its expenditures on this unsustainable revenue?
From Mayor Franklin’s perspective, the city may have more in common with the management of Lehman than it does with Enron. The choice of the city’s corporate avatar is debatable, but changing it does not help Atlanta’s taxpayers.
Franklin owes taxpayers apology
To the editor:
A 41 percent city property tax increase and years of revelations regarding financial mismanagement and the taxpayers are yet to hear an apology from Mayor Shirley Franklin. Rather than apologize to the taxpayers, the Franklin Administration has entered into the mayoral campaign debate using taxpayer-funded employees to attack Council member (and mayoral candidate) Mary Norwood. I can only glean from this that the mayor does not like Norwood’s record of questioning the Franklin Administration, overriding the mayor’s vetoes and voting against the 41 percent tax increase. Arguably, the financial situation faced by the next mayor is worse than Mayor Franklin faced when transitioning from her predecessor (Mayor Campbell).
In review of the facts, Mayor Franklin repeatedly stated that the city was running a surplus for many years and the administration‘s financial accounting (supported by the external auditor) provided the basis for these statements. Clearly in retrospect the taxpayers were misled and Standard and Poor’s March 2009 report on the downgrading of Atlanta’s GO Bonds said it best: “Given that the city has posted operating deficits over the past four fiscal years, before the economic downturn, we do not expect economic recovery to translate directly into immediate financial recovery.” Simply put, the Franklin Administration spent more money than we had in the good times so that when the bad times came we were totally unprepared. After many questions by Norwood and other Council members, it was not until April 2008 that a City Auditor Report requested by City Council finally revealed the deficits (city ordinances require a balanced budget).
While the administration began to acknowledge the financial shortfalls in early 2008, it did not provide a detailed explanation as to how the overspending had been funded. Again, Norwood questioned the administration and ultimately co-sponsored Council legislation with Council member Ceasar Mitchell requiring an audit of the Watershed Department (overriding a Franklin veto). Just before the audit of Watershed was completed in April 2009, it was revealed that over $115 million of water and sewer funds had been transferred and appropriated to general-fund expenditures without City Council approval. The city charter and ordinances requiring a balanced budget, approval for transfers and appropriations from City Council and many others appear to have been shredded in this process.
In the private sector, if a company inflated revenue, enhanced the “balance sheets,” transferred large sums of money without Board approval, provided inaccurate information to the Board, circumvented the articles of incorporation or bylaws there would be significant personal ramifications to the CEO.
I believe Mayor Franklin owes the taxpayers an apology.