The City of Omaha expects a $740,307 revenue shortfall for the 2011 budget year, and the back and forth over who's responsible has begun.
Mayor Jim Suttle's administration says responsibility for the shortfall lies squarely with the City Council.
Administration officials say the council's refusal to approve a labor contract with the fire union last year has cost millions of taxpayer dollars. At least one council member, meanwhile, said the Mayor's Office is responsible for part of the shortfall.
"They really should be looking in the mirror instead of trying to point fingers and start a blame game," Councilman Chris Jerram said.
Largely at issue in the budget spat are millions of dollars in back payments due fire union members in light of rulings from Douglas County District Court and the state's Commission of Industrial Relations.
One thing is clear, though: Preliminary numbers from the Finance Department show that Omaha's controversial restaurant tax helped minimize the size of the 2011 shortfall.
Restaurant tax receipts exceeded forecasts by nearly $8 million, which officials say helps offset a loss of state aid to cities and millions of tax dollars to settle lawsuits related to the fire contract.
Said City Finance Director Pam Spaccarotella: "There's no question it's been a saving grace. The city has to have flexibility in managing its financial situation."
Originally forecast to collect about $14.7 million, the restaurant tax is now projected to pull in more than $22 million.
The fate of the tax is in the hands of the Nebraska Supreme Court. Two Omaha restaurant owners have challenged the constitutionality of the tax.
The 2011 shortfall, meanwhile, will be billed to the city's cash reserve fund. The hit to the fund's roughly $3 million balance won't fatally disrupt recent efforts to shore up the account, Spaccarotella said.
But the latest fire contract controversy — and its ties to the city's current financial picture — revives a debate ignited last summer. In August, the council effectively killed a proposed fire contract negotiated by the Suttle administration, then voted to take over labor talks from the Mayor's Office.
Part of Suttle's proposed contract included firefighter wage freezes for all of 2010 and the first portion of 2011. The council's revocation of the deal, the administration argues, forced a showdown over back wages in the state's labor court. That eventually resulted in rulings awarding about $5.1 million in back pay to fire union members.
Additionally, a Douglas County district judge in January rejected how the city implemented fire pay scales after a 2008 labor court order. That means the city must pay up to $6.9 million in back wages.
In that case, the city implemented the CIR's ruling on pay scales in a way that meant certain firefighters were paid less than some lower-ranking colleagues.
Under city ordinance, however, the more senior-ranking employee's base pay should have been increased in such a situation. The city assumed that the labor court's ruling would supersede city ordinance — and city officials thought it was reasonable to assume that a judge might agree, Spaccarotella said.
The judge's ruling instead forced finance officials to recalculate back pay scales and place some fire employees on a higher pay grade.
Jerram said criticism of the council is "shortsighted" given the ruling's effect on the city's financial picture.
"And (it is) a shell game for the administration to try and poke the council in the eye," he said, "when it itself, through a mistake in interpretation, is responsible for over $6 million of the shortfall. They gambled, and they gambled to the tune of $6.9 million. They gambled wrong."
The city also should never have budgeted for 2011 under the assumption a fire contract would be approved by the council, Jerram said.
Spaccarotella said the fire contract negotiated by Suttle would have minimized the severity of the district court ruling by correcting overlapping pay scales.
Overall, Spaccarotella said, the city budgeted to anticipate paying some back wages in 2011. But the full cost was unexpected.
"I think there will continue to be unintended consequences until a new fire contract is negotiated," she said. "And I think it's the concern of the administration that the City Council achieve the best possible deal that they can at this point."
Jerram said the council would continue to work to negotiate with the fire union "in an effort to reach a contract fair to the citizens of Omaha and firefighters."
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