Fountain Inn Approves New Irresponsible Budget

As I said before Fountain Inn’s financial plans do not pass the Rob Taylor responsibility test:

While the 2009 financial report Fountain Inn has available on their official site paints a rosy picture of economic stability (using some creative accounting) table A-2 (pg 7) shows that there is a declining trend in wealth generating private business activity and an increase in governmental expenditures.  Specifically, you’ll see that while governmental charges for services, government grants and property taxes have all increased by at least $500,000, private business activity (the fees the city collects from businesses) has decreased by more than $2,000,000. This would indicate to me that the city is raising taxes on businesses which are being forced to pick up the slack for businesses that have been hurt by the recession or have closed down completely. If that’s the case the loss in revenue will be worse for this year’s financial report.

Table A-2 also shows a decrease in government expenditure on city services with a simultaneous increase in charges on those services for private business. This doesn’t seem like a sustainable economic policy.

Table A-4 (pg 9) is more startling, showing that the city has racked up a little under $10,000,000 in long term debt which is a little more than 32% higher than the year before. At that rate, this year the outstanding debt will be over $13,000,000 but the city revenues may still be decreasing by almost 10%.

So now that it’s been reported that Fountain Inn approved the new budget (upon the first reading) I had some concerns:

Fountain Inn City Council approved the city’s 2011 annual operating budget on first reading Oct. 14 with a rollback of the city’s tax rate due to reassessment of Greenville County properties this year.

With the rollback of its tax rate from 66.3 mills to 57.29 mills, city leaders said finances should remain stable without a decline in revenue in a year when by law the city isn’t allowed to raise taxes to make up shortcomings.

The council voted 6-0 to approve the $5.88 million operating budget on an initial reading. It requires one more reading scheduled for a special called session at 6 p.m. Oct. 27 at City Hall.

The total budget reflects a 3.7 percent increase over last year’s $5.67 million operating budget.


The operating budget doesn’t add any capital spending other than those planned for under the city’s capital improvement plan, Case said.

The council voted in June to raise taxes 2.4 mills to fund the next year of its 10-year capital improvement plan. The city plans to spend $330,000 on three police cars, two brush trailers, a leaf truck and a new citywide phone system. It also will pay $89,700 in upgrades and new equipment for Recreation Department ball fields and its Activity Center on Fairview Street.

It does designate $46,375 as a city reserve line and another $222,932 as a fire department reserve line.

The city was able to withstand a $20,000 cut from the state budget to its local government fund, weathered the loss of $75,000 in a traffic safety grant that was not renewed and expects to see business licenses drop another 35 percent, or $50,000, said Mayor Gary Long.

Residents will see an increase in the city’s trash fee from $9 to $14 on their tax bills after the council voted in August.

In these days of unstable economic conditions there have been an explosion of blogs that talk about spending, taxes and the economy in terms that only the most wonkish will understand. If you want in depth analysis I suggest you look up sites like Zero Hedge, BoomBustBlog and Dr. Housing Bubble. For our purposes we only need to understand this: Fountain Inn is expecting less revenue (and their expectations are rosy to say the least) but they don’t have the political will to do the one thing that makes sense which is to cut spending to the bone.

And that will hurt, a lot. But financial reality is that the unending flow of debt based wealth is over and city governments have not yet been made aware of this. Worse, rather than accepting austerity measures the residents of Fountain Inn are actually demanding taxes be raised which will drive more business and people from the area and this will reduce revenue. Even the Mayor released a statement claiming that there should be small tax increases every couple of years to coincide with inflation! Madness!

Meanwhile he’s putting a little under $90,000 into some baseball fields which the community could fix up -if they were interested. If Fountain Inn wasn’t restrained by law they would slap huge taxes on their residents then shrug as they come up short again.

Clearly they’ve never heard of the Laffer Curve.

The housing market makes it unrealistic to suggest Fountain Inn residents head for greener pastures, but I advise all FI residents to start preparing for the shortfalls Fountain Inn is setting themselves up for and the inevitable tsunami of new taxes the “leaders” there will attempt to lay on you to fund their fantasy of turning Fountain Inn into Little Greenville.


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