continuing our investigation into the financial crisis this time with municipal finances from somebody who you're really going to want to know is name is harry gach and otherwise known as citizen harry in my edmonds news harry welcome to the show thank  year i was just thrilled when i saw the column that you wrote in my admin's news and about municipal finances i learned so much about it we're going to be going through that in detail but might have been susan citizen harry tell us just a little bit about what that one day i finally decided to go down and actually see one in person and it was so totally different experience of watching on television and i met a woman who was in charge of my vns news there and i had written for my own purposes a recap of what it was like to try to get a point of the city council and she said because of my few good for her readers to get that same experience and then from that i just started writing articles about what i thought was going on the city's finances not as well versed in environmental issues or those sorts of issues but from a financial perspective i could see what they were doing a lot of what they were doing didn't make sense so i started writing articles trying not to be too critical but trying to put it in the format that the average citizen could understand what was they were talking about when they're having these discussions with actually have the column that we're talking about we have it up on the screen and we will be getting it up on the screen throughout the show because i want to make sure though you're writing about edmonds it seems like from what i saw you could be a political to just about any i mean i think what's going on is not to municipalities also works on the state and federal level everybody is having financial crises at this point and you know the citizens don't want to lose their services they don't want to pay more taxes the city says they need more revenue well the only revenue they have is taxes so it becomes an issue on how do either raise more revenue or at some point we're going to need to required by law to have a balanced budget every year so they can't go farther and farther into debt and so they're they're going to face issues quicker than the federal government's going to phase it seems like that had you in a lot of people in small cities atmosphere and the other are it's probably more engaged than a lot of cities i think we had over sixty five percent in the last election for city council out of you know presidential election of a new term elections which is a pretty high percentage for a state in washington city in the state of washington there was in preparation for the show because let's just get right into it because we're going to going to talk about municipal finances there well government finances is pretty tough right now you said that all you have to do is just look at one very simple deadman's economic projections where you got it and we've got it up on the screen where you got expenses going up then revenue coming down so this is even means there's a five year projection of what they expect their expenses to be and i said by law they are required to have a balanced budget every year and so last ten years they've always had somewhat of a balanced budget but they show projections for what they expect to happen in expenses over the next five years and those go up an average of three three and a half highest source of revenue comes from sales tax as everybody knows the economy's in bit of a downturn and the city that has doesn't have a big retail base anyway so their projected revenues only increased by one percent a year bankruptcy in two thousand and seventeen if they don't grab a hold of those two lines and change while well let's go right to the column reading from the column as the city abandons looks forward in its financial forecast it sees nothing but reading projected what can be done to stem this trend and make sure that our city continues to be livable without taxing citizens into poverty my question when i read that is is this the new normal for governmental entities particularly cities that have mandates pushed down having it so you have to start cutting services so it sounds like you're talking about that city's edmond's being one of them is going to have some kind of really drastic change revolutionary change almost in the way that it approaches people you know get together to be able to agree upon something or is that going to happen i think they can and i'm somewhat i have a different approach to it than i think politicians have i i think the citizens like adams and i'm sure in whatever other city are they like their city they don't want to pay more taxes or but they put their pretty don't want to use they don't want to pay more in taxes when they think the government is misspending the money they're already getting and the city council and the edmonds and of his he say well you know people don't want to pay more taxes going to make it a tax for parks they like parks so they'll pay that money and but what happens is it becomes kind of a shell game to the citizens and they see what you're doing you're just asking for more money but you know you're going to be are going to vote for more money for general government so they say well let's let's charge money for taxes and people vote for that i think the citizens care enough about this city that if you just laid it out and release carp about it clearly and precisely that this is how much money it cost to run our city if you like the way or city runs we need more money and this is how much more money you're going to have to come up with but there is also going to a point where unless they can figure out some way to take control of the expenses there isn't going to be any more ability to tax the citizens of the city of adams reposed property tax levy of a million dollars a year  and the problem with that was never want to got defeated handily because it was split up into various things that looked like a shell game but also million dollars a year would cover the city for three years at the end of the three by the end of the three years then nollywood you need to renew that levy but now because you continue to let the expenses grew at a faster rate than the than the tax have you can have to add another million dollars well now know and sooner or later people just can't can't afford to pay more taxes well oftentimes the public is criticized as being short term thinkers but it sounds like in that instance that the public was a long term thinker and perhaps those who propose levy were thinking a little bit shorter term i'm afraid they're both short term thinkers at that point because nobody really addressed what the long term issue was i have been speaking to the city council the last couple years that you just cannot continue to make projections that show your expenses growing a faster rate than your revenues and it's foolish to make that projection and try to scare people who think we're going to because we're right it just can't happen let's go back to the column the bulk of the city's revenue comes from two tax sources property tax and sales tax with the economic downturn and the lack of major retail centers in the city sales tax or taxes are growing at a very small level so i come back to my question for a before isn't this the new normal for cities to yes in this i mean all source of revenue for cities are going to decrease either decrease or not increase very rapidly  and certainly not going crease at the speed at which the expenses are so the cities and state and federal government need to figure out a way to reduce the increase in expenses throughout the united states and particularly in smaller cities the demographic the population is aging at a greater rate than than in the larger cities that being the case mean as people age they don't buy more things because they've already got the stuff so then that means that sales tax revenues are likely to not to  hit yet again and that's regardless of the economy so even if the economy does recover you've not got a population that spends correct and facing all of this you are in government i mean what do you do well i think what you really need to do is you need to look at the services you provide and you're just going to have to got some point soon we can't do this anymore now but when you say cliques in the streets you know unfortunately none of those things i want all of that yeah but i really don't want to raise my taxes and that's were the citizens also have to try to pick up the ball and say what can we do need to start all over from scratch and say ok this is all the money we have and these are the things we have to do and how can we allocate the money and then what's the cheapest way we can do these and good may not be the way they did in the past that's really hard though because i mean that's a true shock to the system but the shock has already happened i as well it's a shock to the system in many cities are still fighting it but again they're all facing a point where sooner or later we're not going to have any money and it's better to plan for  this way it's partly based on the economy economy has certainly made it more of a bigger impact and what you have in the in our in city of edmonds budget is that they've cut all the things they can cut outside of personnel cut costs and there's a lot of union people in the city and there's union contracts to get negotiated health care costs are going up and you can't really blame the do to help out the city if you had wins that same union represents people throughout throughout the country and if they make a concession for the city of edmonds then boston and los angeles and seattle and everybody's going to ask for those same concessions so they fight as hard as they can and they're going to make an concession it's not going to be for a small city first it's going to be for a bigger city where they have to and that's where you have the problem in minnesota with the with the teachers and again and there's no really perfect answer for it as the city can afford to pay what they were paying as they couldn't afford to pay the money their pain but you don't really want to penalize the teachers even if it's a very important service so what do you do and they ended up in the huge fight with  whereas a very short break we're very fortunate to have harry gadget is where this as we continue on in our investigation into the financial crisis around the united states what we're talking about is how it is what hits home and harry gadget is an accounting and financial management professional who writes a column called citizen harry in my in this news where he lives in edmonds washington and we're going to put the web site up on the screen strongly encourage you to go to that that website read the column perhaps it's a pleasurable to your city more than likely it probably is i also want to put this up on the screen the edmunds economic projections the percentage increase you've talked about how the city of edmonds is looking at the possibility if it doesn't change of bankruptcy in two thousand and sixteen two thousand and seventeen if they don't make changes for the projections and that's what the numbers show obviously because they're required to have a balanced budget that isn't going to happen and because it isn't happening that's why somewhere down the road this is going to happen but i just think you know they've been showing this same projection for five years now and it's always just moved out another years with no way of the citizens look and say well that's what you told five years ago didn't happen so why do i think it's going to happen this time so they just basically the powers that be just aren't dealing with it i think so yeah i think they need to be rather than just saying we need increased revenues i think they need to talk seriously about at some point  know that they have ever increasing revenues over the last five years now they keep saying they need to and so they have to admit we're not going to be able to do that so let's start talking about what things we can do to cut the expenses is it just too hard his get is government in a small city or or a large city is it just too hard now it's certainly very hard but it can be done if you know if you are worried about your own particular reelection and you're willing to be absolutely up front of the students and say this is where we stand this is what's going to happen but nobody wants to give that bad news the city that once interesting it's got the beautiful coast and there's some beautiful parts to it and then there's highway ninety nine and you know a lot of people who are ninety nine isn't all that attractive but isn't it a pretty significant retail core it can be right now a lot of highway ninety nine through edmonds is all dilapidated properties and so the city is going through a strategic plan to develop better totally separate from the rest of it means and i think the people who operate operate business and the highway ninety nine feel that they think you know whenever you talk about edwin's issues you're always talking about what's down of a downtown born you don't care about us and then i also don't think people are doing enough to help either help get that developed and you know what can we do to make it more attractive for thriving businesses to take these pieces on highway ninety nine rather than upon shop or the old out of business tire store what do you think what can be done well i think they need to focus on working with the business community that's already there there's a lot of ships has become a new asian market center and they're very thriving but if you go in between them are down south of them and there isn't much and i think you need to work with those t business sectors and say what can we what would we do that would make it more attractive for more businesses like yours to come here you know interesting i'm sure that people who live in edmonds may think that this is that their cities the only one that's like that but actually there are there are other cities like that just here inside our viewing area in in king county as a matter of fact there are small cities that are just like that i used to live in one des moines it sounds exactly like that and in other cities in the united states the same issues seem to be happening so when you talk about the finances of the city of edmond you could very well be talking about the finances of the city of fill in the blank correct absolutely let's go back to the column the only way property taxes can go higher or lower than that is either by a reduction in the rate approved by city council which is highly unlikely or a voter approved increase which is the levy rejected last november so my with property values they're not going up one percent a year and it can go up no more than one percent again it could go on less than one percent if the city council chose to do that but trust me with an economic system that's not going to happen but what happens is that's for this event and property taxes for fourteen million dollars and if the price of all if the price of the land goes up thirty percent of the property tax still can only go up by that one percent they just take a forty million dollars and now they spread it equally over the increased value of property same thing the value of property goes down in my particular house has gone down in value by over occurred at the property taxes still continue to go up one percent a year and i suspect that the the public especially the public who has lived in the same house for a long time that were happy about that are not happy about it and they say ok my house value went down i got my notes i got my notice from the county saying my house was only wor written for but my property taxes go up what is it and how can i afford that you know and a lot of people in the city are on fixed incomes or limited income and certainly you know the economy isn't making huge raises for people so for property taxes even go up by that one percent a year still causes a real issue for something else that there really seems to be changing and it's largely due to technology is that office buildings those types of properties and i know you probably don't have a whole lot of a very tall office buildings in adams but but office buildings and other commercial structures aren't nearly as valuable as they used to be because so many employees are now working out of their house it's certainly not spurring  development in athens or in the you know other cities and businesses the city of edmonds doesn't have a business tax there's no tax on the business and so the fact that people are now running businesses out of their home  not only doesn't bring new businesses buildings into the city but there's no tax for the city to collect on the people who run the businesses out of their homes because this other cities at least have a business business a business license but there's no business occupation tax are in other parts of other cities so this is an awful lot for for someone inside government to face though let's let's say that you're not in i'm employed but you're an elected official and you're in small cities you're part time or not if we are in  news because for the bulk of the citizens it just doesn't make sense i don't know what they're talking about and even for the bulk of the city council i mean city council need people who are multiple skills and not everybody on the city council is going to have any kind of an economics degree or even a really good understanding and so the city councils need to have these somebody and real and a good finance director for the city who can explain what's going on and that's what i issues are you know i don't have the answers i threw out some suggestions you know maybe he will maybe want to think about putting in casinos or or maybe you want to allow taller buildings i'm not saying those things are the right things to do but if you don't want to pay more taxes these are some options that the city needs to think about and you should let your city representatives know what your thoughts are let's go back to the column so obviously the city wants to pay fair and equitable wages and provide quality insurance benefits to its employees and to date the unions have not been willing to make huge concessions in these areas some other organizations are negotiating concessions from unions but it is a very difficult task and so my question is is the union issue aside is it really time for all cities to look at exactly what they do and maybe go back to the very beginning i think we kind of touched on this earlier i mean right left lists are reasons for saying well we're cities you know where you start with the basics you know you get a police and fire and transportation suspect what else what else to the citizens have to have do they have to have economic development do they have to have some type of charitable participation what is it is is that where cities are going to go where they have to go back to the very basic and then all the you know police roads infrastructure you know anything beyond those are absolute must haves the city has to revive those things then there's parks or libraries or parks those are things that are more optional and but if you want to if you want to have a livable city you want to have those things some cities have and now they're paying for that service at the time it made economic sense when the contract comes up for renegotiation since they don't the fire department or they don't have a whole lot to go shooting  power for a new price one of the ways that the city of edmonds tried to do it but it got rejected and it is through levees the city of seattle is where i live and there are just a ton of levees that are coming up and actually there's an article from the seattle times just from just from a few days ago well when we when we do this show there are the library levy one hundred twenty three this is all this year library levy one hundred twenty three million seawall waterfront two hundred fifty million fire facilities and that one expires so that's the juvenile justice center two hundred million automated fingerprint informations which is up for renewal that is just this year and i'll tell you as a citizen i elect the people inside inside every government to do the job there say this is what amount of money takes to run our city this is the amount of money we need to ask you to give us and if you do it in a convincing manner and you don't you don't spend money foolishly which is the first thing people point out as well you spent money foolishly on this recent money foolishly on that so you really have to think about the money you know you're going to run out of money so you got to think about the money you spend and don't do it on things that are sort of more of a whim thank you very much for writing th fantastic column because i learned so much from it and unfortunately i only have like about a minute and a half left but i gotta get to this just one thing with the change of business is today something that it seems like it is absolutely necessary is good bandwidth is that a way to go for a potentially additional tax revenues are in a business if edmunds were to become the most wired city and western washington well edmonds happens to have the benefit of having some high speed fiber excess businesses and that's something i think you should look at her closely for someone who's watching this show whether they live in edmonds or not what should they do i think they should pay attention to what's going on in the budget one of the things that cities are doing to postpone this inevitable problem is they are stopping doing paying for maintenance and stopping for roads on buildings on streets those things are part of that general group of things we said they're supposed to pay for well because it doesn't show till ten years later you do maintenance on a building it's a way for them to hide from the reality and i think people need to make sure that all of those things occur when they need to pay attention to their city well we've come to the end of maybe the thing that that we should do in all cities is to clone harry