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Down the drain

Tom Richards' peek into the cesspool of Monroe County's finances



If Monroe County's finances were your home's water system, you'd have called a plumber, too.

            By last summer, it was clear the county's finances were in the crapper. It was estimated that its 2002 budget would fall between $15 and $23 million in the hole, and the deficit for 2003 was predicted to be as high as $65 million.

            Republican County Executive Jack Doyle's proposed budget reflected just how dire the situation was --- at least, from a fiscal conservative's perspective. His plan called for slashing funding to social service agencies and cultural organizations that contract with the county, cutting 700 county jobs, and closing county parks on weekdays, among other austerity measures.

            Called the "Property Tax Stability Plan," Doyle's budget would not have raised the county property tax rate --- the take from which had not increased in over a decade --- to help close the budget gaps.

            In the uproar that followed, Democratic County Legislator Lynda Garner Goldstein drafted legislation calling for the creation of a Blue Ribbon Commission to independently analyze the county's fiscal crisis.

            "We must understand how a government blessed with $700 million in additional sales tax revenue [since the penny hike in the sales tax was enacted in the early 1990s]; $142.5 million in tobacco settlement dollars; recent fund balances as high as $58 million; and an economic expansion that dramatically reduced social service costs has nonetheless descended so rapidly into a fiscal quagmire," Goldstein's legislation read.

            In other words, something's leaking. Badly. And we need to locate the leaks and figure out what caused the pipes to burst in the first place.

            Doyle rejected Goldstein's proposal, but endorsed the idea of creating a similar commission with a more limited focus.

Enter Tom Richards, in this case, the plumber. The former head of Rochester Gas & Electric was one of Doyle's appointees to the Blue Ribbon Commission. He was also named its chair.

            Together with fellow members Kenneth Bell, regional president of HSBC Bank USA; Charles Plosser, Dean of the University of Rochester's Simon Graduate School of Business Administration; Ann Burr, former executive vice president of Time Warner Cable; and Domingo Garcia, president and CEO of the Ibero Investors Corp. (the Democrats' sole appointee), Richards produced a report hailed by Democrats and Republicans alike for its thoroughness and insight.

            The report's conclusion, in a nutshell: We're screwed.

            Although the report was completed before the legislature voted on the 2003 budget --- a vote that raised the property tax rate almost 2.5 percent, over Doyle's veto, to restore some funding cuts --- it nonetheless predicted that whatever budget county lawmakers enacted "will be precarious and at risk of not lasting through the year."

            The discrepancy between the county's revenues and expenses that's causing the massive deficits "is real, substantial, structural, and will not correct itself," the report concluded. "[T]he principle causes of the imbalance... will continue to drive deficits unless there are substantial changes" in the county's policies and those at other levels of government, states the report.

            In other words, this is a deep, permanent problem --- it ain't the recession and it ain't the economic effects of 9/11 that are causing our current crisis. Though the report stops short of spelling it out, this mess is the fault of our elected representatives, the ones who've made the policies that put us where we are today.

            After the report was released and applauded on both sides of the aisle, Richards' name began circulating as a possible candidate for County Executive. Doyle had decided not to run for another term, and members of both major parties eyed Richards as his replacement. Some Democrats seemed particularly interested in drafting him, and Richards fueled speculation that he was flirting with the notion, mostly by refusing to rule it out.

            Now that Democratic Mayor Bill Johnson has announced his candidacy, and the Republicans seem poised to dub County Clerk Maggie Brooks their contender, Richards has dropped out of the political spotlight. These days, he's concentrating on his work as chairman of the Greater Rochester Enterprise, a public-private partnership tasked with marketing Rochester to the outside world.

            But as voters prepare to pick the politician who'll lead Monroe County for the next four years, it's worth hearing what Richards has to say about the fiscal mess we're in and what it'll take to get out of it. Richards shared his thoughts on these topics in a recent interview with City, highlights of which follow.

So, we asked Richards, what can we do about this crisis?

            He began by saying, "I think we're in a crisis in the sense that this is a big problem, it's a large problem, [and] it's a problem that is in the structure of the budget.

            "I think it's very important that we not accept the fact that, 'Well, we're just in a recession because of 9/11, and that's the problem,'" he continues. "Some of this impact is that, but it's probably less than $5 million of the total. Now, $5 million is a lot of money, and that would be a strain, but it isn't causing this crunch."

            The terrorist attacks of 9/11 have had "an unintended consequence," he says, "and that is to provide a rationale for every public failure that's occurred since 9/11."

            Richards notes that the county's principle sources of revenue --- sales and property taxes --- remain relatively unaffected by short-term fluctuations in the economy. The state's finances, however, took a more substantial hit.

            "Not to compliment the state on the way they manage their finances, but it is a different situation," Richards says. "To be fair to the State of New York, 9/11 did hurt them with respect to their revenues."

            Here Richards adds an aside, and a warning that's particularly pertinent to the upcoming debates voters can expect during the county executive campaign.

            "This issue of finances is complicated, but it's not hard," he says. "This is just a matter of hard work. It's basically adding and subtracting, there isn't even a lot of division in here. But it's complicated, and so people tire of it and get bogged down.

            "The problem with that is it makes it ripe for demagoguery, because people are looking for some kind of an easy solution, which is why I'm harping on this 'it's not the economy' issue. It's not that the economy didn't have an impact, but if we allow that to be the simple solution, we'll miss the point. A lot of what people do in response to this... they aren't plans for dealing with it, they're slogans."

            The sloganeering approach to county finances often centers on the issue of raising or cutting property taxes. The property, or real estate, tax, "has become a major focus of this issue," Richards says, "and I think that's, to a very large extent, a red herring."

            Richards points out that before the recent rate increase, the county had frozen the property tax levy --- the total amount of tax the county collects --- over the same period that property values rose. As a result, the property tax rate had actually decreased over the years.

            "I think that's a mistake," Richards says. Because property values and the cost of local government rise in large part due to inflation, it makes sense to adjust the property tax rate accordingly.

            Even without the much-bemoaned "unfunded mandates" the state imposes on the county, "You're still going to have increased costs, unless you continue to reduce the cost of government all through this period of time.

            "Having said that, that isn't going to produce enough money to fix the problem, and we have very little flexibility in raising taxes," Richards says. Our taxes are already exceptionally high, he says, and any increase must be part of a plan to reduce expenses, as well.

            "People have to take a position on how they're going to deal with [the budget crisis], and when I say a position, I don't mean a slogan," says Richards. "Saying, 'I won't raise property taxes' is not a plan.

            "By the way," he adds, "neither is 'I will raise property taxes.'"

Among the solutions the Blue Ribbon Commission came up with was a recommendation that the county prepare long-term, multi-year budget plans. Richards acknowledges that some people feel such planning is useless because the future is unpredictable.

            "My answer to that is, 'That's when you need a plan. If nothing was going to change, you don't need a plan.'"

            "Go to Eastman Kodak and tell them, 'I can't do a multi-year plan because there's too much uncertainty,'" he continues. "What are they gonna say to you? 'I'll show you uncertainty, pal.' It's just not credible in this environment." By doing a multi-year plan, "you maximize the options. If we'd started working on this in 1998, we'd have more options."

            Bill Smith, the Republican majority leader in the county legislature, is among those who reject the notion of multi-year planning. "In the business world, a lot of companies do five-year plans, and I don't know if anybody's ever seen a five-year plan ever that has actually resembled what was predicted five years before," Smith says. "It's too far out. I think that goes double with government, with the fluctuation in the tax base and the changes at state policy level when it comes to funding and distribution of funds, over which local government has no control whatsoever. To a large extent, it's like trying to do five-year planning for what the weather's going to be like."

            But Smith also objects to long-term planning for political reasons. He notes that instituting multi-year planning is one of the recommendations the minority caucus has formally submitted this year. And he says he thinks the Democrats' "real interest" in the recommendation is to use it against Republicans in future years, when the projections are inevitably --- as Smith predicts --- found to be inaccurate.

            That's just the kind of partisan suspicion Richards says must also be overcome.

            Since the county's financial crisis is large and structural, Richards says "we need a new, different kind of consensus within government to [fix] it." To reach that consensus, he says, there has to be trust, and to have trust between the parties, there must be open, honest sharing of financial information. Democrats have complained for years about what they say is a lack of just that kind of openness on the part of the Republican administration.

            Withholding information also "narrows the range of debate," Richards says. If people are informed, "they don't say foolish things." Sharing information is "almost as important as what you do, because it builds the foundation on which you can begin to make progress," he says.

            That openness should also be extended to non-profits that work with the county under contract --- particularly because, Richards says, they're going to have to accept further funding cuts if the ongoing crisis is to be eased.

            "I happen to personally feel that we have a very capable not-for-profit community in this town," Richards says. "It's one of our assets. So we ought to get these guys in the tent here, working on this problem with us, so that the county can say, by sharing the information, 'Look, this is all the money I've got. So how are we gonna deal with this?'"

            In this respect, the funding cuts to contracted agencies that Doyle proposed last summer were poorly executed, Richards says. "One of the problems with the cuts... was that we didn't give them any rationale," he says. "Cutting across the board is not a rationale --- it's administrative ease, but it isn't a rationale. So what was the value judgment? If you can't demonstrate that and articulate it, people are suspicious of what happens."

Richards says it's time to "get serious" about two thorny issues: unfunded mandates from the state and consolidation of local government services.

            The system by which the state creates and funds social service programs like Medicaid "is broken, badly," he says. State lawmakers "create programs for which people do not have a clear understanding of what they're going to cost; they have imposed burdens on local governments that are, in many respects, beyond their capacity to pay."

            Richards is a laid-back, affable guy, but on this topic, his bitterness is palpable. Members of our local delegation "turn us into beggars," he says, forcing us to rely on them to fund relatively minor projects, like Little League ballparks. Instead, he says, "When we go to these meetings with these guys, we [should] say, 'I don't want a Little League ball field. If we didn't have this damn deficit, we'd pay for our own Little League ball field. What we want you to do is come up with some solutions.'"

            Reform will be a long time coming, and "we're gonna get roughed up in the process," Richards says, "but we've gotta hold these people accountable for this."

            In terms of consolidation, Richards thinks "the whole debate has gotten off base. We've debated it in extremes. I don't think extremes make any sense, and I'm not even sure there's a case for extremes."

            Rather than consider a combined city-county metro government or school system, or the elimination of town governments, Richards says we should continue to examine ways local governments and school districts can cooperate on a smaller scale.

            And he thinks previously reticent people will warm up to increased consolidation for one big reason: they'll have little choice.

            "If we're locked into all these things --- growing deficits, same source of revenue, unwilling to change --- then what you're saying to your citizens is, 'I'm going to raise your taxes every damn year, from here as far as I can see, four, five, six, maybe more [years].' Then I think you can get people to say, 'Well, actually, let's discuss this.'"

            "That's the good side of this [crisis]," Richards says. "There's nothing for clarifying your thinking like running out of money... There's some sense here that we'll be forced into this [consolidation] process, and in the long run, it will be good for us, because we are simply in a position where we have to deal with it."

            Of course, in order for this to happen, politicians would have to come clean about the county's present and future finances, and Richards doubts that'll happen anytime soon.

            "My fear is that we won't [deal with the budget crisis]," he says, "because this is an election year, this is a tough issue, this is a dangerous thing we have to deal with, and coming clean with the magnitude of the issue and what's required is tough to articulate in a politically acceptable way.

            "We just had a great example in this state of how to handle it --- with Pataki," he says, facetiously: "We didn't have a deficit, everything's fine, everything's fine, everything's fine; the election occurs and we have the biggest deficit since the beginning of time. And it was attributed to 9/11 and the recession, which were at that point two years old. Apparently, we didn't get the word out."

Meanwhile, in the county legislature, it's business as usual. Democratic county legislators have submitted several referrals based on the Blue Ribbon Commission's recommendations. They call for the administration to study whether the county can save money on office space it rents or owns; institute a multi-year budget plan; and produce a report on projected property values, and tax revenue from those properties, if the tax rate is kept flat through 2008.

            "I think the Democrats in the county legislature are treating the Blue Ribbon Commission report like the breakfast buffet at Denny's: picking and choosing what you want and leaving aside the rest," says Majority Leader Smith. "That is a package, and the most important components of it do not have to do with any of the things that the Democrats have brought up. They have to do with the big issues that are driving it" --- issues like unfunded mandates.

            "We chose the [commission recommendations] that we thought the legislature could accomplish if we chose to, that don't require decision-making by anyone except ourselves," says Aldersley. She says all the Dems' initiatives were referred to the administration, but with no deadline for a response.

            "It's usually a courtesy to say we'll be back in a couple cycles with some kind of report," she says. "We had considerable debate about just getting a timeline on the referrals. We did end up with an agreement that the administration would be giving us a date at some future time."

            When it comes to providing the services necessary to "maintain a prosperous and enlightened community, there's a balance that has to be struck," Aldersley says. "And I don't think that any attempt is even being made to strike that balance. I get the feeling that everybody's sort of thrown up their hands. It's a train wreck, so let's all run screaming."

            Honey, grab the plunger!

            "I'm not looking for a miracle here, I'm not looking for an epiphany," says Richards. "But hey, what's your plan? You've got a $60 million deficit, you've got a real problem getting the state to take off your burden --- the timing ain't good; they're in the tank, too --- and the economy is slow and there's some systemic problems in that. What's the plan folks?

            "It doesn't have to be just like this," he concludes, referring to the report. "What we're trying to do here is give somebody something specific that they can pound on, so they're not just wandering around. I'm sure there are other ways to do it, and I'm sure we can't get all the way in the timeframe Tom Richards would like to get us all the way.

            "But I think we're in a different situation here, and I think we ought to insist on it. We have nobody to blame for the government we've got but us. If we don't like the government we've got and we don't think they're doing the right job, then we should put it to 'em."

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