The city of Columbia faces serious financial problems as its sales tax base, on which we rely for services, continues to deteriorate because of the shift from “brick and mortar” to online retail sales, which avoid city sales tax. As a result, the Columbia Police Department and its officers, along with other city departments, are struggling and need help.
Mayor Brian Treece and his closest political allies, however, continue to dampen the likelihood that anything meaningful can be done to address these critical issues. Why? My research suggests their actions might represent a cynical political ploy. If he runs for re-election in April, Treece will likely face hard questions about his unfulfilled promises to finance public safety based on his inaccurate claims about basic city budgeting.
In a move that could divert attention from his misstatements, and in the face of continuing revenue and budget shortfalls, Treece on February 19 suddenly called for an expensive and unusual “performance” audit by the Missouri State Auditor. Such an audit would cost the city $500,000 to $750,000 or more. His proposal, which is itself premised on false claims and faulty analysis, is based primarily on letters he received from the Columbia Police Officers’ Association (CPOA), Columbia Professional Firefighters (CPF) and Laborers’ International Union of North America, Local 773.
Treece made this unexpected proposal without prior Columbia City Council discussion and without seeking the analysis and recommendations of the full Financial Advisory and Audit Committee, whose mission it is to advise in such matters. Why would he ignore normal procedures and processes?
Each of the letters called on Treece personally to help initiate “an external and impartial audit” to “resolve any doubts that may exist regarding the city’s finances,” dispel “concerns circulating about the City’s budget and its management” and address a “lack of trust in the City to spend tax dollars appropriately.”
Treece has continued the push for a state audit as recently as the July 16 council meeting, and at his urging it will be discussed at the August 13 council work session. Treece also made clear that some of the letter writers wish to speak to the council at that time.
It’s important to understand that these three letter-writing groups along with another important player in this matter, local blogger Mike Martin, are among the mayor’s closest political allies and largest campaign contributors.
Contributions to Treece’s 2016 campaign for mayor came from these entities and/or their parent organizations as follow:
Columbia Police Officers’ Association parent organization gave $1,000.
Columbia Professional Firefighters’ parent organization gave $5,000.
Laborers International Union of North America, Local 773’s parent organization gave $1,500.
Mike Martin and his wife gave $2,500 — by far the largest contribution by a family.
Each of the groups publicly endorsed Treece for mayor in 2016 and worked for him in the campaign. Martin promoted each endorsement in his blog and provided glowing reviews of Treece.
When I initially saw the events of Feb. 19 unfold at the city council meeting, I was surprised. Why would our mayor rush a call for a massive, time-consuming, expensive and unusual state audit to “restore trust,” especially since it would direct precious dollars away from public safety needs, the primary focus of Treece’s run for mayor, and potentially delay for years other action needed address our problems?
The state auditor has indicated it could take several years to complete the broad audit the letter writers and Treece have called for.
Meanwhile, as far as I knew, the only real “cloud” over city finances had been created by blogger Martin’s ongoing but false claims about the existence of a clandestine “Swiss bank account” filled with more than $300 million of city funds that he says are “NOT restricted in any way, shape, or form” and “could pay for all the city’s police, fire and sewer needs with plenty of money left over.”
In columns on Aug. 15, 2017, and May 4, I attempted to present the facts of the “Swiss bank account.” City finance officials have explained it. Reporters have investigated it. The city is routinely audited by independent auditors. Martin’s claims are simply wrong. The funds he complains about ARE, indeed, restricted.
The so-called “Swiss bank account” (formally named the “Pooled Cash Account”) contains the city’s reserve and funds not needed immediately such as the $10 million set aside for airport expansion. The funds in the Pooled Cash Account are invested, properly and normally, to earn interest while they await use. This is long accepted “best practice” for cash management. The city finance department reports that about $3 million of the total is available for unrestricted, one-time expenditures. The fund is not, as Martin claims and others repeat, a clandestine slush fund.
It’s important we clear the air about the facts about city finances. One only need read the responses by police officers secured through the CPOA and surveys by City Manager Mike Matthes to understand the urgent need to address pay and staffing to restore our police department to a place that provides officers with a satisfactory life. That isn’t the case, today. Meaningful change in that dire situation will only happen if there is a tax increase. But even the $750,000 that might be redirected to a dubious state audit would, for example, help purchase desperately needed replacement police cars.
Why does Treece, who has ready access to city financial information and professionals to tutor him as needed, keep pushing for an expensive, unusual state audit knowing full well that the city and our police department face a severe financial problem? Perhaps in the beginning, Treece believed Martin that there actually was an unused stash of cash that could fund the police? I’m convinced he knows the truth, now.
So why did Treece refuse to honestly answer KRFU host David Lile on May 7 when asked if the pooled cash account — the clandestine “Swiss bank account” — was as Martin describes it? The mayor should have told Lile the truth in no uncertain terms: “Martin is wrong. We have a serious financial problem.” Instead, he said, “I’m not going to make a decision on that yet.” Treece knows the truth, but he won’t acknowledge it. A likely explanation brings us back to election season diversion.
In a KBIA candidate interview that took place shortly before the April 5, 2016, municipal election, Treece confidently cited city finance figures that were wildly inaccurate and made campaign pledges based on that incorrect information, especially related to adding police officers.
The interview can still be listened to here.
An excerpt follows:
KBIA: “Speaking of more police and fire, there’s costs associated with that. I believe that generally the money for police comes from the general fund. Is there enough money there to significantly increase the police and fire forces?”
Treece: “I think there is on a rolling year basis; we can make those investments. The city has a billion-dollar budget, about half of that is dedicated funds on the water and light side … that leaves about 480 million dollars on the discretionary side. … What I want to do is earmark the growth in that budget. Right now, that growth is around 2.5 to 3 percent.” We should be “earmarking that growth to really make those investments incrementally in additional law enforcement officers.”
KBIA: “When we talk about that 2 to 3 percent growth a year, how many police or firefighters could that pay for?”
Treece: “Each police officer costs about $100,000 … so that 2 to 3 percent growth … is almost two and a half million dollars a year, so that’s about 25 police officers we could add. And if we are down 50, we may not get there in the first year, but I think in the first 3 years we can begin to make those improvements.”
The problem with Treece’s KBIA statements and campaign pledges is that they were grossly inaccurate and reveal he didn’t understand basic facts about city finances when he ran for mayor. But now he wants an expensive and unusual audit. Hmmm.
FACT: Treece attended the Jan. 23, 2016, council candidate orientation where presentation materials were provided to all candidates, present or not. Finance Director John Blattel covered city finance highlights using slides 27 through 37. Slide 30 said that the city budget for FY 2016 was $455 million — not $1 billion, as Treece claimed in his KBIA interview several weeks later. The same information can be found on page 56 of the FY2016 budget document which was/is available online to anyone. On the most basic question of city finances, the amount of the annual budget, Treece was wrong by $545 million, a factor of more than 2X.
FACT: Slide 31 of the candidate orientation presentation says the general fund budget (where almost all discretionary funds reside) for FY2016 was $85 million — not $480 million, as Treece claimed in the KBIA interview. The same information can be found on page 120 of the FY2016 budget document, which is/was available online to anyone. On yet another fundamental issue of city finance, Treece was wrong by $395 million, a factor of more than 5X.
FACT: Mayor Treece said it would be possible to hire as many as 50 new cops within 3 years without a tax increase. However, it could never have happened based on his erroneous understanding of city finances.
FACT: There were 165 sworn police officers budgeted in FY2016 and 173 in FY2018, an increase of 8 budgeted sworn police officer positions, four of which were grant funded, not 50.
Adding to the irony of this situation are comments Treece made during an interview with KOMU reporter Max Diekneite on March 30, 2016, a few days before the election. “Clearly I’m a fiscal conservative,” Treece said. “I mean, I’m the only candidate that wants to go through our budget line by line.” Obviously, he hadn’t looked at even the top lines of the budget before becoming mayor. As noted, he might have actually believed that Martin’s ideas about a readily-available stash of cash would take care of his pledges?
It’s pretty clear that neither Martin nor Treece are the appropriate people to advise us about the need for a special and expensive performance audit.
You’ll recall that each of the letters from employee groups called on Treece personally in early February to help initiate “an external and impartial audit” to “resolve any doubts that may exist regarding the city’s finances,” dispel “concerns circulating about the City’s budget and its management” and to address a “lack of trust in the City to spend tax dollars appropriately.”
The “evidence” of the lack of public trust cited in those letters can help us understand the compelling or not so compelling nature of their case. I’ll discuss several of the main points contained in their letters.
A) THE SWISS BANK ACCOUNT: Both the CPOA and CPF letters allude to the “Swiss” account containing Martin’s misinformation as the basis for one of their major concerns. CPF’s letter is an exemplar, stating, “Media reports (i.e. Martin) state that the City has a Union Bank of Switzerland/Swiss Bank Corp. account that currently sits at $306,312,528 and that figure has steadily increased over the past ten years. Citizens feel there is no need for additional revenue until this figure is explained.”
FACT: As recounted earlier, Martin has long promoted the bogus and debunked claim that money in a clandestine “Swiss Bank Account” is “NOT restricted in any way, shape, or form” and, thus, “could pay for all the city’s police, fire and sewer needs with plenty of money left over.” The letters trade on this false claim.
NOTE: The CPOA has now offered to support a property tax increase during their recent contract negotiation. This seems to suggest that their prior concerns about the “Swiss Bank Account” as outlined in their letter have been satisfied. That would be welcome progress, if true.
B) THE FLAT BRANCH EXPANSION: Both CPOA and CPF letters cite deep concern caused by the city council’s purchase of the former McAdams property at 32 S. Providence Road. In mid-October 2016, the CPOA letter says, “the City Council voted to spend 1.1 Million dollars to purchase additional land for the ‘Flat Branch Park.’ It has been reported that the city used 1.1 Million dollars out of the General Revenue budget to make this park purchase, instead of using funds from the Parks Budget. This, too, has generated public concern over the city’s ability to be a good steward of the resources given it. At the City Council Candidate forum, hosted by the Columbia Board of Realtors on February 2, 2018, they (sic) was an outpouring of comments to the effect that ‘There is a trust Problem’ and ‘I was personally very hurt when you approved funds’ to expand Flat Branch Park ‘and did not use funds that were designated for parks.’ ”
FACT: Mayor Treece personally led the effort to purchase the Flat Branch Park expansion. Treece introduced the ordinance to purchase it — B723-16 — on Oct. 3, 2016. He was well aware that funds to pay for it were to come from “earnings on the capital improvement project fund” as described in an Oct. 6, 2016, staff report. Council minutes from Oct. 17, 2016, document that, “Mayor Treece stated he thought the acquisition of this property was a generational opportunity. He thought they would be foolish not to add that to the inventory of assets.” The ordinance passed unanimously.
If the letter-writers are, in fact, deeply concerned about the purchase of this property, they should direct their angst directly at their close political ally, Mayor Treece, rather than disingenuously seeking his help to conduct an expensive audit to “restore public trust” that, if such problem exists, Treece helped create.
NOTE: I agree with Mayor Treece on the long-term value of this purchase.
Only one council member expressed concerns about the use of capital improvements interest funds for the land purchase and pushed for parks department capital funds to be used instead. That council member was Ian Thomas, not Brian Treece.
C) THE FAILURE OF USE TAX: Both the CPOA and CPF letters identify the failure of a proposed use tax on Nov. 7, 2017, as evidence of the city’s loss of public trust. The CPF letter says, “It has been proven by various sources that citizens of the City of Columbia lack trust in the City to spend tax dollars appropriately. In recent years, citizens have voted against major tax initiatives proposed by the City including a 2014 Public Safety Tax and the 2017 Use Tax proposition.”
FACT: The use tax proposition failed by a vote of 4,273 "no" votes versus 4,142 "yes" votes, a difference of 131 votes. Of considerable import, Treece failed to form a campaign committee to promote the issue but took the time after its narrow loss to blame others, saying, “he was surprised the Columbia Chamber of Commerce didn’t take a more aggressive posture” on behalf of its members and small business owners. Every mayor for decades has formed campaign committees to promote important ballot issues for taxes and bond issues. City employees can’t mount an advocacy campaign. They can only provide information. The city’s fact sheet estimated that had a use tax been in place during the previous 10 years, Columbia would have received about $900,000 each year.
According to the budget officer in Boonville, the use tax that city adopted in 2016 has generated $200,000 this year in proceeds. Boonville’s population is 8,300. At nearly 120,000, Columbia’s is 14 times as large. Not that it is indicative of what a use tax in Columbia might yield, but 14 times $200,000 equals $2.8 million. If the use tax had passed, Columbia might have been on the receiving end of somewhere between $900,000 and $2,800,000 a year in new revenue. That could have gone a long way toward addressing public safety needs.
The letter-writers should consider urging Treece to form a campaign committee next time. They also might want to actively support it. As little as was known about the use tax proposition, it is miraculous it failed by only 131 votes. I suspect a solid campaign, led by our mayor, would result in a winner for Columbia. That would be a better thing to work on than an expensive audit to “restore” confidence in city leadership.
By the way, Martin urged his readers to vote no on the use tax proposal. “This Tuesday, the ‘usual suspects’ are at it again,” he wrote. “Vote No, Prop 1, Tax Hike.” Of course, he believes hundreds of millions of dollars in discretionary cash are stashed in a Swiss bank account and could pay for all of our needs.
D) THE 2014 PUBLIC SAFETY TAX PROPOSAL: Before we talk about the 2014 public safety tax proposal, let’s talk about the 2013 public safety tax proposal. On Aug. 5, 2013 former Mayor Bob McDavid proposed a 20-cent property tax whose proceeds would be dedicated to the police department. McDavid said the tax would raise about $3.5 million a year and allow the city to hire 35 new officers. The ballot item would have appeared on the November 2013 election. On Aug. 14, 2013, McDavid withdrew his proposal after CPOA Executive Director Dale Roberts said the tax was unnecessary. “In overtime, the department is spending enough money to roughly cover 17 full-time officers with benefits,” Roberts claimed. He also said, according to KBIA, the city’s public safety budget should see about a $2 million increase as a result of a shift in the funding for Boone County Joint Communications “and that is enough to easily fund 20 new full-time police officers.” Add the 17 positions that overtime would cover, KBIA continued, and “Roberts says Columbia could afford almost 40 new police officers — without the proposed tax.”
FACT: Roberts was wrong about the overtime money. He apparently didn’t check his assumptions and calculations before he single-handedly killed McDavid’s willingness to lead the effort to help the police department. Roberts appears to have based his claims on a report outlining how many overtime hours were worked rather than how many dollars were being spent on overtime. Actual budgeted overtime for FY14 was $591,000 while Roberts appears to have assumed it was closer to $1.7 million (assuming, as is normal, that each officer costs $100,000 per year). Furthermore, all police departments must have overtime budgets to address detectives who are often unable to break away from a case and to staff special community events like, in our case, football games, Roots and Blues, Fire in the Sky, Art in the Park, Show-Me Games, Homecoming, etc. There are also inevitable times when officers get late calls and have no choice but to complete the associated work, which often results in overtime. It appears Roberts didn’t factor in the ongoing need for an overtime budget.
FACT: Roberts was also wrong about the available joint communications money. The funding transition to a dedicated sales tax saved the city about $1.9 million annually. But a previous ongoing operating deficit in the police budget of about $1.3 million annually needed to be closed. Consequently, the actual amount available to public safety after Boone County took over joint communications was $571,074, not the $2 million Roberts assumed. Those funds were, in fact, used to add three police positions and five firefighter positions. That’s a far cry from 35 new officers McDavid had tried to secure with no support from CPOA or its executive director.
FACT: In 2014 Mayor McDavid decided to try again to help the police department He got a 30-cent property tax put on the ballot and established a campaign committee to work for its approval. The proposition was intended to fund 30-40 new police officers and 15 new firefighters. However, when campaign chair, Karen Taylor, sought a contribution from CPOA, Roberts wrote to her saying, “At this time, I cannot guarantee CPOA’s vocal support for the tax proposition much less financial support.” Two days later Roberts issued a news release in support of the tax proposal and explained officers had been upset with the results of the annual meet-and-confer process with city officials and were at first unwilling to support the proposed tax. If Roberts and the CPOA had really cared about the ballot issue, they would have been hard at work helping Taylor, McDavid and the other citizens working to help them.
FACT: The property tax proposal failed on the August 2014 ballot by 10,424 Yes (40.19%), 15,516 No (59.81%). Draw your own conclusion as to who and/or what is responsible for the two failures. Whatever your conclusion, I think it’s clear we need to work more collaboratively to solve our public safety problem.
E) THE CITIZEN SURVEY: Both the CPOA and CPF letter raise findings from the 2017 citizen survey by the ETC Institute to suggest, as the CPF letter says, “…that there is a severe distrust of the City’s use of taxpayer funds.” Their example for reaching this conclusion is that the survey “showed that only 36% of citizens stated they would be ‘very likely’ to support another tax.”
FACT: Question 32 of the survey asked for “Likelihood of Supporting a New Permanent Property Tax to Fund 30 Additional Police Officers and 15 Additional Fire Fighters.” The responses were as follows: 36 percent Very Likely; 22 percent Somewhat Likely; 8 percent Neutral; 13 percent Not Likely; 22 percent Not At All Likely. The normal way to present these findings would be to report that 58 percent are Very Likely or Somewhat Likely to support the tax in question. A 58 percent positive response is viewed in political/research circles as very encouraging and indicates a good shot at success. CPF chose to cast the numbers in a negative light. I must conclude they did that because they thought it strengthened their case for a state audit.
I am not convinced the letters make a compelling case. I’m also not convinced the letter writers, Martin or Treece are the people we taxpayers should turn to for advice on how Columbia should best conduct oversight of operations and finances.
There is nothing wrong with adding performance auditing to our oversight mix, but there are many flavors with different costs to consider carefully. For example, beefing up our internal auditing function and allowing the Council to share oversight with the City Manager is a valid option. There is also nothing wrong with not doing anything different than we do, today. Either way, we should go about it properly. I urge the city council to pass a resolution instructing the Columbia Finance Advisory and Audit Committee (FAAC) to study the idea of performance auditing and develop options and estimated costs for the council to consider. The FAAC chairperson pointed out at the August 6th council meeting that the FAAC now has very experienced and knowledgeable members serving who meet monthly. They have not been utilized.
We do not have a financial emergency that a place like Callaway County is experiencing related to likely embezzlement in its collector’s office. That kind of situation demands the immediate help of the state auditor. Our city has been run well over the years, and there’s solid evidence to support that opinion. There is no emergency greater than our accelerating revenue shortfall and the potentially painful service reductions we face.
The overwhelming support, more than 81 percent, for the water bond proposal Tuesday night is evidence voters trust well-conceived proposals from their elected officials.
We can take our time to decide if adding performance auditing is right for us and, if so, in what form and at what cost. Let the full Columbia Finance Advisory and Audit Committee do its rightful job and report back to the council after the April elections. Then there will be little doubt as to the propriety and politically-free nature of whatever decision the council makes. That’s not the case today.
My hope is we can clear the decks and focus on finding appropriate funding for our police officers and other important city functions. Our beloved community faces serious challenges. The truth matters.
Chip Cooper is a Certified Economic Development Finance Professional, worked as a portfolio manager in the venture capital industry for more than decade and was the Executive Director of the Missouri Innovation Center for 14 years. Organizations in which he shared management responsibility have been the subject of scores of routine audits throughout his career.