Editor’s Note: This is the first of a three-part examination of the budgeting process underway in the City of Truth or Consequences. In addition to contending with a $1.6 million deficit in the fiscal year 2021-2022 draft budget, new city manager Bruce Swingle informed the city commissioners that they must play a lead role in identifying departmental spending priorities and cuts and devising a plan within two years to end the practice of balancing the budget with transfers from utility fees.
The city commission’s budget deliberations began at an all-day public session on Wednesday, May 5 at which department heads presented their budget requests. The session addressed both known needs and bombshell revelations, including the news that the electric department does not have the resources to immediately replace a non-functioning transformer, raising the possibility of local brownouts this summer. The city subsequently announced that even repair parts could not be obtained and installed until June 15 and asked citizens to conserve energy.
Bruce Swingle righted much of what is wrong with the governance of Truth or Consequences on his third day as city manager. Facing the need for massive cuts that had already become evident to him after 48 hours on the job, Swingle insisted, with utmost diplomacy, that it was the commission’s job to make the “policy decisions” that would determine what was to be cut, while his was to “execute policy.”
“The budget is the most important policy decision you make throughout the year,” Swingle told the city commissioners, hitting the ball firmly into their court.
Last year, former City Manager Morris Madrid made all department budget decisions, which the city commission rubber-stamped without question.
The fiscal year 2021-2022 budget session on May 5 lasted all day, as department head after department head came to the microphone in the commission chambers to state the case for line-item requests. The city commissioners asked questions and decided if the item and/or the amount requested were to be reduced, eliminated or remain intact.
Frances Luna, who was appointed to fill a vacancy on the commission after the passage of the budget for this fiscal year, was, by far, the most engaged of the five commissioners. The others offered little direction, seemingly content to let Luna provide the leadership Swingle had requested.
Swingle started the budget session by praising staff. “I’m overwhelmingly impressed with the directors” with whom he had met with the day before. It soon became apparent from these discussions, he said, that the “budget started with a $1.6 million deficit.”
Together, he and staff had slashed about 10 percent from each department’s proposed budget, identifying cuts that didn’t encroach on the commission’s policy-making authority. Any new positions proposed by a department director were eliminated, Swingle said.
However, additional cuts would be necessary. As the May 5 session proceeded, the list of unbudgeted but needed expenditures grew. Items that were not included in the draft budget, but that will have to be paid in the upcoming fiscal year, which begins July 1 and ends June 30, 2022, included these bombshell revelations:
• The electric department has to make a “very costly” purchase, Swingle said. Later in the session, Electric Department Director Bo Easley announced that a new transformer with an estimated cost of $1 million is urgently needed.
• There are “serious issues with water wells,” Swingle said, confirming investigative reporting by the Sun (see Related stories below). Swingle did not provide a cost estimate.
• The city owes the IRS $100,000.
• The city owes Sierra Vista Hospital $173,000, Swingle said. Later in the meeting, Luna explained the reimbursement was for medical care “for prisoners.”
• The city pool is leaking 34,000 gallons per week, Swingle said, necessitating immediate repairs at a cost of about $37,000 “that will last for about two years,” according to Pool Manager Kyle Blacklock.
• The city “owes” the police department $284,000 because gross receipts tax revenue dedicated to the department was used to build the animal shelter.
Here follows department summaries of the budgeting and policy issues that were discussed on May 5. Four major city departments will be included in Part 1 of the Sun’s coverage. Parts 2 and 3, to be posted later this week, will cover other departments whose budgetary issues became a focus for discussion.
A presentation on the electric department was first on the agenda. Department Director Bo Easley dropped the bombshell that the “northern transformer” had been “lost.” Easley did not explain if the transformer is located on the north side of the city or if it serves the northern section of town. “We’re running the whole town on the southern transformer,” he reported. Both transformers were installed “in the 1960s and ‘70s, and if you get 50 years out of them, you’re doing good,” he explained.
The dimensions of the problem became somewhat clearer three days later, on May 8, when the city posted on its public information Facebook page that the tap changer, which regulates output voltage, “has been lost off” the northern transformer, rendering it inoperable. The “parts have been ordered,” and the work will be done on June 15, the post states. Until then, the city requests electric customers to conserve electricity, especially between the hours of 1 p.m. and 8 p.m. “until the necessary repairs have been made.”
The city did not clarify whether this emergency work will obviate the replacement of the northern transformer altogether or is a stop-gap repair that will increase the cost of solving this problem.
Easley initially stated during his presentation that the cost to replace the northern transformer was an estimated $1.5 million. After questioning by Luna, he reduced his cost estimate to $1 million.
As for how to pay for a new transformer, Easley noted that the city had submitted a grant request to the USDA (U.S. Department of Agriculture) and “we’re waiting to see if we get it,” he explained.
In the interim, Easley said, seasonal increases in the use of air conditioning, which are fast approaching, will be “very hard” on the sole, southern transformer. “We’ve installed fans to cool the transformer,” he said.
For the third time in as many months, Luna observed: “We are an electric utility that runs a municipality.” She noted that this concept that had been “drilled into me” by the city commissioners with whom she had served during her first stint as a commissioner 10 years ago.
Swingle tactfully corrected Luna’s misperception that using utility funds to run the city is good governance. He pointed out that the preliminary 2021-2022 budget calls for $1.4 million to be transferred from the electric department fund into the General Fund. The city’s historic practice of depleting utility funds to make up general operating deficits is “leaving him [Easley] with fumes.”
“They [the electric department] have given and given and given. He [Easley] doesn’t have the money to address this problem,” Swingle said. Waiting on a grant to pay for an urgent replacement is “symptomatic” [of bad management practice].
“We’ve got to stop that,” the new city manager informed the commissioners. “It’s too late this year. But in two years we will have a plan so we are not transferring money out of utilities,” Swingle said.
Luna did not acknowledge that the city has been misusing utility revenue. All she said was: “We need $3 million today.” But this response indicates she had made a lightning-quick pivot, acceding to Swingle’s plan to stop using transfers to balance the budget.
By adding the $1.6 million budget deficit that Swingle had announced at the beginning of the meeting to the proposed $1.4 million transfer from the electric department to arrive at her $3 million figure, Luna signaled her agreement that the electric fund should not be raided in order to bolster the General Fund this year. “We have to cut,” she said.
Commissioner Randall Aragon, who shares legal responsibility with his fellow commissioners for prudent stewardship of the public coffers, spoke next. His comments indicated that he had not familiarized himself with department expenditures, nor determined which were efficacious or wasteful. Suggesting instead that the commission’s fiscal oversight duties be delegated to staff, he recommended that the same percentage be cut from each department, with department heads making the decision as to priorities. “We don’t know what they need,” Aragon said.
“That’s what we did yesterday [cut 10 percent from department budgets]. Swingle said. He then diplomatically informed Aragon that it is the commissioners’ job to become conversant with every aspect of the city’s operation and budget. “We cut as much as we could without getting into policy; and that’s your responsibility,” Swingle said. “Staff can’t do that.”
Luna had no problem exercising her authority when it came to Easley’s $150,000 line item for electric-vehicle charging stations.
Easley and Madrid had approved the project behind closed doors months before, issuing a request for proposals to install four low-power charging stations downtown that would require eight to 10 hours of charging time to “refuel” an electric car. When the project came before the city commission last month, it was for discussion, not formal approval. No market study or cost-benefit analysis was presented to the commission demonstrating that municipally owned charging stations would be money-making operations, rather than a drain on revenues from T or C utility customers’ fees.
During their discussion of the project’s merits (see Related stories below for the Sun’s coverage), the city commissioners had decided that neither locals nor tourists would frequent a low-power station. In response, Easley had issued another RFP, this one to construct high-power charging stations, he announced to the commissioners during his budget presentation. The project’s cost had risen from $100,000 to $150,000.
Although still lacking a cost analysis and formal city commission approval, the project’s inclusion in the budget at the higher cost won Commissioner Luna’s favor. “We need to keep investing in city projects that make us money,” she argued without citing supporting evidence.
None of the other city commissioners commented, and funding for the project remained in the budget.
August 2019 the city commission green-lighted a similarly un-vetted project to replace the analog electric meter readers of city electric utility customers with smart meters. The commissioners passed a motion to purchase the new meters relying solely on then City Manager Morris Madrid’s verbal assessment the cost would be “about $1 million.” In retrospect, it appears that money should have been spent on replacing the 60-year-old northern transformer, a much more urgent need.
Jesse Cole, director of the water and wastewater departments, included among his 2021-2022 capital projects requests the construction of a new building to house both the water and wastewater departments he heads. There was nothing in Cole’s proposed budget or oral presentation that addressed the well-water problems Swingle mentioned at the beginning of the budgeting session. Remaining silent, the commissioners took up neither Swingle’s warning nor Cole’s request.
The day before, in discussions with Swingle, Cole had agreed to cut a $40,000 line item designated to pay outside workers to fix water leaks. Cole’s requested funding for the equivalent of 1.5 additional positions was also cut.
The extra positions and outside labor will not be needed, Cole postulated, because, “We are not anticipating a lot of leaks this year,” explaining that the system’s “weak spots were exposed” by the numerous leaks that the water department had repaired during this fiscal year.
Cole’s request that wastewater employees be given a raise “based on merit” spurred Luna to recommend that all requested salary and wage increases be taken out of the budget, to be re-considered in December, the middle of the 2021-2022 fiscal year.
Luna went on to express her disapproval of the merit-based system for awarding raises initiated by Madrid. “It is hard to do on merit,” she observed. “There is no rhyme or reason to the pay scale we have now. It leads to awarding favorites and we are accused of being unfair.”
None of the other commissioners commented on the proposed moratorium on raises or on whether the merit-raise system instituted without city commission approval should be revamped.
Swingle asked how raises had been handled “historically.” “It wasn’t consistent,” City Clerk Angela Torres said.
“If the expectation is there [for a raise], we don’t want to harm employees if we don’t have to,” Swingle said.
“No, there were some years when we couldn’t do it,” Mayor Sandra Whitehead said.
The ensuing silence indicated that Luna’s policy recommendations would stand.
SOLID WASTE DEPARTMENT
Swingle informed the commissioners that, as he had not met with Solid Waste Director Andy Alvarez the day before, no prior cuts had been made to that department’s proposed budget.
Although solid waste had just purchased a new trash truck budgeted at $250,000 in fiscal 2020-2021, Alvarez asked the commissioners to approve a 2021-2022 line item for $217,000 to enable the purchase of another new trash truck. He pointed out that each waste truck must “carry 8,000 to 12,000 pounds of trash,” giving them a short shelf life of “three to five years.”
Nevertheless, the department head agreed to cut the truck purchase from his budget after Luna reminded him: “We are $2.6 million in deficit.” Evidently, the commissioner had been keeping a running tally of cuts made to reduce her estimation that next year’s budget was $3 million in the red.
Alvarez’s request for a new $115,000 backhoe survived Luna’s questioning about its necessity. The department uses a backhoe to pack trash into trucks that carry it to the landfill used by the city near Las Cruces. The existing backhoe has reached the point where it can no longer be repaired, Alvarez explained, and must be replaced. His explanation was accepted.
Part 2 of the Sun’s coverage of T or C’s budgeting deliberations will be posted on Wednesday.
CORRECTION: This story has been changed to reflect the number of gallons the municipal pool is leaking each week, not each day, as erroneously stated in the original version.