Elected officials are rarely surprised when roads, transit lines and parks go over budget. It's a different matter when they learn that the cash they earmarked for those projects doesn't exist.
Such was the case when, shortly after the Atlanta City Council returned from its spring recess in April, some members found anonymous letters informing them that the $5.6 million the city had pulled together to help fund the proposed downtown streetcar project had actually been spent years ago. Sorry, try again.
"The money's already been appropriated," says Felicia Moore, one of Council's most vocal fiscal watchdogs. "You can't spend the same money twice."
The revelation has kicked off a flurry of whispers and activity at City Hall, including an internal audit to determine why Chief Financial Officer Joya De Foor recommended the transaction to Council. While no one has alleged criminal wrongdoing, Moore and other City Hall sources also tell CL that the city attorney's office has launched its own investigation into the matter.
"That part that [the law department is] looking into is more who-knew-what-when," Moore says. "Basically, how did we come about getting the legislation to use the money if it's already been used? That's their issue."
After Atlanta was awarded $47.6 million in federal funding last October to build the transit line connecting the King Center and Centennial Olympic Park, the city and private partners — including Central Atlanta Progress and the downtown improvement district — kicked in money to fulfill the local match. City finance officials proposed tapping a rental car tax fund, which Atlanta had gained access to after settling a 2009 lawsuit with College Park. Council members, save for Moore and C.T. Martin, agreed.
But, as Council members were reminded by the anonymous letter in April, Council had already spent that cash in 2009 on then-Mayor Shirley Franklin's recommendation to fill budget shortfalls, specifically for public safety.
"As soon as I looked at that, it rang the bell," says Moore, who was among the letter's recipients.
"If someone gives us information and it's incorrect information in a financial manner, we have a responsibility to clear it up," says Councilman C.T. Martin, who also received the letter.
In early May, Moore introduced legislation clawing back the $5.6 million in phantom funding to "correct the legislative record." Shortly after, City Auditor Leslie Ward informed Council members that she'd launched a "limited scope audit" to probe the transaction.
"Were the funds ... available when the legislation was adopted in December 2010?" Ward asked in a May 9 memo to De Foor. "If not, what factors contributed to the Finance Department providing inaccurate information upon which the legislation was based, and what actions can prevent this from recurring?"
Of course, figuring out how the mistake occurred won't make the $5.6 million reappear. The city, which is currently grappling with next year's budget and an increasingly testy battle over employee pension reform, will somehow need to replace the money in order to maintain its hold on the federal funds for the streetcar.
"They're going to have to find it somewhere else," Moore says.
Explains Sonji Dade, spokeswoman for Mayor Kasim Reed: "The administration believes this was an honest mistake. We will await the [audit's] results and will respond accordingly at that point." She adds that the mayor's office has identified a replacement source of funding that wouldn't impact the city's general fund, but declined to discuss specifics.
Though budget reserves could be tapped in a worst-case scenario, such a move would lend credence to the argument by streetcar opponents that the transit project could become a money-sucking white elephant.
Dade couldn't comment on the city attorney's probe, nor on rumors that the mayor's office has obtained outside counsel to assist with the investigation.
How federal transportation officials will view the fumble remains to be seen. Thanks to persistent lobbying, Atlanta has managed to cut a more sophisticated image when it comes to transit planning than the state, which has been warned by Transportation Secretary Ray LaHood to "get its act together."
Dade, who didn't know whether the city had notified the feds, says the mayor doesn't believe this misstep will hinder the city's chances for future transportation funding. But at least one City Hall insider, who asked not to be identified because of the ongoing audit, is worried that the feds would cut off the spigot. A Federal Transit Administration spokesman contacted by CL says he's unaware of the specifics and has no comment.
The mix-up has also turned the spotlight on the city's finance department, which, year after year, has been plagued by human and computer errors, resulting in what some view a one-step-forward-two-steps-back routine. City Hall sources who asked not to be identified say De Foor, who arrived in Atlanta last summer after a decade in Los Angeles, is unpopular with staffers who disagree with her management decisions and leadership style.
Ward, the auditor, is expected to give a preliminary report to the Council Finance committee this Wednesday. A final report is taking longer than expected, and should be released in coming weeks.
"Determining whether the funds in question are available is fairly straightforward," Ward says. "A full and accurate accounting of how and why we got to this point is more complicated."
Council members, some of whom say they still haven't been briefed on the issue, are expected to enter into executive session to address the matter.
"We'll see what the investigation reveals," says Dade. "The mayor's commitment to the streetcar project is unwavering."