Million-Dollar Deficit Case Study

In the case study What Do You Do When Your City Is Looking at a Million-Dollar Deficit in the Current Fiscal Year, Howard Balanoff and Charles Pinto explore the challenges faced by a newly hired city manager of Lemon, Texas. After time on the job, the new city manager came to believe that the previous manager may have misused City funds. Thus, he began to meet with his executive staff, Council, and the Mayor to determine the issues and form an action plan. What Don Ford revealed during his research was that there was a $13 million decrease in reserve and capital improvement funds over a six year span. In addition, funding for specific programs and departments were not allocated in the budget due to intended privatization and the need to …show more content…
As property values increase, revenues increase. However, this could prove to be detrimental to society. Over-inflated property values may lead to a “housing boom” which has, historically, proven to have negative impacts on the overall economy. Property taxes are a very stable source of revenue, but are not necessarily balanced. For example, more rural communities may require more services, but have fewer taxable properties. Property taxes are also very regressive. Corporate income taxes are another good short-term solution. Politically, these types of taxes are popular with the public primarily because it tends to redistribute the wealth. However, this type of taxation reduces investment revenue and causes double-taxation. These taxes are also often passed on to the consumer by increasing the price of products or …show more content…
Control is simply a “tight control over executive expenditures” (p. 505). Essentially, control means to ensure that monies are being spent on the things they were allocated for. In the case study, the control element is missing. Executive staff identified several unaccounted for expenditures in their budgets. In addition, city revenue is several million below what it should have been. Management is a quantifiable standard in budgeting. It “emphasizes the efficiency with which ongoing activities are conducted” (p. 505). This efficiency may be measured by performance standards. The situation with the state Environmental Affairs Committee is a great example of where the city of Lemon, Texas struggles. In order to come into compliance, more revenue is needed for staffing. In addition, executive staff members were not given the means necessary to control their budgets and were thus, left unaccountable for the efficient operation of their departments. Finally, planning is simply preparing for the future. On a broad scale, if the city decides to implement new programs, objectives and performance measures are necessary. The budgetary impacts, whether positive or negative, should also be identified. In the case study, there was a lack of planning for the future. The previous city manager spent monies without regard for the future impacts. Privatization efforts failed and no