By Brett Rosenberg and Debra DeHaney-Howard
July 14, 2008

Members of the Conference’s Membership Committee met June 20 to discuss the impact of high fuel prices on city budgets and operations and shared strategies to address those impacts. Specifically, the committee used the session as an opportunity to examine ways to address the fiscal challenges cities now face due to high fuel costs coupled with the downturn in housing markets, which are requiring cities to change their budgets and operations to accommodate declining economic conditions. The interactive panel included speakers who addressed the current fiscal challenges and presented innovated ways to address them.

Committee Chair Piscataway (NJ) Mayor Brian Wahler introduced this session, noting that two years ago, asphalt cost $30 per ton but now it costs $60, so fewer potholes get filled. "Energy cost burdens will be around for a while. Whatever the solutions the federal and state governments come up with, it won’t happen overnight," Wahler said. The panel, consisting of Laredo Mayor Raul Salinas and Larry Spring, Jr., Chief Financial Officer of Miami, then delved into their remarks.

Salinas, with 27 years experience as an FBI agent, brought his own unique perspective to bear for the committee, by commenting on Laredo’s situation. Among the challenges Laredo faces, Salinas mentioned that the city’s budget reflects a diesel fuel cost of $2.90 per gallon when in fact it now costs $4.15 and continues to rise; the city currently faces an $800,000 budget shortfall based on diesel costs alone, while property tax contributions continue to decline.

Meanwhile, like many other mayors, Salinas is hearing from his citizens how rising fuel costs are cutting into their lives. For instance, Laredo food banks cannot maintain enough supply as demand for their services surges while senior citizens are cutting back on vital medications in order to cover transportation and other energy costs.

Laredo has implemented several strategies to close its fuel-related budget gap, including minimizing overtime for city employees while encouraging comp time, freezing capital outlays, implementing a hiring freeze, banning most employee travel, capturing all budget surpluses, encouraging idling reduction for all city vehicles — including police cars, setting building temperatures at 78 degrees, and turning off all computers at the end of each day.

In spite of his efforts, Salinas called on fellow mayors to demand more of state and federal government policies. "We need to take the bull by the horns," Salinas said. "But we also need to make sure people are listening to us, especially our national leaders and the presidential and congressional candidates," he added.

Several mayors echoed Salinas’s concerns and challenges. Las Vegas Mayor Oscar Goodman, whose city is largely dependent upon tourism, responded to the call to hold the federal government accountable. "We have the bully pulpit, we are constituents, and we are proactive — we need to figure out why fuel prices are rising and who is responsible," Goodman said. McKinney (TX) Mayor Bill Whitfield suggested that one way to address the fuel crisis is to greatly expand freight and passenger rail service in the U.S. Other mayors commented on the catch-22 cities often face when rising diesel prices force them to cut bus service while they’re in fact trying to encourage more ridership. The conversation also touched upon rising energy consumption in China and India and the oil-refining bottleneck in the U.S.

Following the discussion, Spring presented a perspective of his city’s fiscal state of affairs. In the face of what many are calling a national recession, Spring cited several local indicators that, in several ways, reflect national trends. For instance, Miami’s taxable sales figures are down 6.3 percent since March of 2007; foreclosure filings are at pace to double the 2007 figure; the local unemployment rate as of April, 2008 was 4.5 percent, up from 3.4 percent a year ago; and there is limited credit availability for real estate transactions.

Fiscal impacts to the city include a 7.5 percent ($2.5 million) reduction in state shared and half-cent sales tax revenue; a 21 percent ($2.1 million) rise in utility costs; and a 19.2 percent ($1.0 million) increase in fuel costs.

However, according to Spring, the city is doing much to address the local, regional and national economic downturn, including an overall reduction in citywide operating costs; working with unions to fix pension costs; and looking through its balance sheet to identify and leverage value from poorly performing assets.

Wahler closed the session with an update of the membership report. Wahler said, "Progress has been made during the past year in recruiting and retaining members." He also commended committee members for their continued commitment and support of the Conference’s membership campaign, encouraging them to continue their aggressive membership efforts.