CFO Frockt: City Government on strong financial footing
But Metro still lacks significant resources to address billions of dollars in needs
LOUISVILLE, KY (April 12, 2016) – Louisville Metro Government is in a strong financial position, due to a balanced annual budget, high ratings from credit agencies and a rainy day fund of $66.1 million, according to city Chief Financial Officer Daniel Frockt, speaking today during the first meeting of a special Metro Council committee examining city finances and future investment needs.
“Our financial outlook today is much stronger than five years ago, when Mayor Greg Fischer took office and faced a $22.5 million structural budget deficit,” Frockt said. “We closed that deficit while also making city government more efficient, through data-driven decisions at every department, and through programs such as LouieStat, led by Theresa Reno-Weber, chief of the Office of Performance Improvement and Innovation.
“The economy also has rebounded, for both jobs and wages, which generated more tax revenue for city government.”
Louisville Forward Chief Mary Ellen Wiederwohl, who, along with Reno-Weber, also spoke during today’s committee meeting, said the rebound is coming through a variety of methods – growing the population and workforce, and increasing wages, all of which will have a direct impact on Metro Government’s finances.
But even with a solid budget and growing economy, Frockt said, the city has relatively few dollars each year to invest in capital projects and other needs.
With revenue and expense growth, he said, Metro could reasonably support debt of approximately $40 million a year for each of the next three years, but that doesn’t begin to touch the billions of dollars in needs. For example, paving and road repairs alone could total $112 million, according to Public Works. In addition, there are many other investment and infrastructure needs across the city, including JCPS, Louisville Water, MSD and LG&E.
That’s why any investments that are made with available dollars need to be strategic and thoughtful, Frockt said. It’s also the reason Mayor Fischer has been focused on pursuing local option legislation in Frankfort – allowing people to vote on investments in their city. Without local option, there are very limited ways the city can raise revenue.
Frockt’s presentation came during the first of six meetings of the Metro Council Ad Hoc Committee on Deferred Maintenance, which will examine the needs of most city department agencies, from the library to the zoo to public safety agencies and Public Works and Assets.
Among highlights Frockt mentioned today:
- The city continues to maintain strong ratings from Fitch (AAA), S&P (AA+) and Moody’s (Aa1).
- In 2009, the city’s annual financial audit cited nearly 70 major weaknesses. There were none cited in the current year.
- The city’s annual contribution to the pension fund administered by the state retirement system is currently $72.3 million, up from about $31 million when Louisville and Jefferson County merged in 2003. That’s nearly 13 percent of the city budget. The city’s pension liability to the County Employee Retirement System (CERS) is $524 million.
“The Mayor’s team works every day to create a strong government for citizens,” Frockt said. “But the reality is that the city’s needs and deferred maintenance far outstrips our resources to pay for them.