Cover Story: The chinks in Shirley’s armor

Just before noon on the last day of April, four Atlanta City Council members converged on a hastily erected podium in City Hall’s marble atrium. They were there to express outrage that Mayor Shirley Franklin would, within hours, deliver a city budget that was likely to propose staff layoffs, cutbacks in city services and a tax increase.

Clearly, they wanted to publicly distance themselves from the budget – and, by extension, from the mayor. Franklin had left them out of the loop where the city finances were concerned, announced Ivory Young and Joyce Sheperd. Even with the city facing a $140 million shortfall, it seemed an odd position for two council members who had won their last elections with Franklin’s public backing and financial help.

Joining them were C.T. Martin and Felicia Moore, two council members who have traditionally bad-mouthed the administration regardless of who occupies the mayor’s office. “There’s a dark cloud over this building right now,” Moore intoned. She made sure to point out that the current financial crisis wasn’t the council’s fault, but rather Mayor Franklin’s.

The city employees who gathered along the railings overlooking the atrium burst into spontaneous applause.

Applause.

For the public denunciation of a mayor who, not two years earlier, was featured on the cover of Newsweek as being representative of an emerging breed of powerful women. A year before that, Franklin had been anointed by Time as one of America’s five best big-city mayors, alongside NYC’s Bloomberg and Chicago’s Daley. She was profiled in U.S. News & World Report as one of the “Best Leaders of 2005.”

Even a politician who’s received every conceivable accolade must become a lame duck at some point. But it does seem an unusually precipitous fall from grace for a mayor to go from winning a “Profiles in Courage” award to being openly dissed by council members and city workers in the middle of City Hall while her own chief of staff looks on.

Franklin is catching flak from nearly all sides these days: from the council, where even longtime allies are voicing disappointment with the mayor’s oversight of city finances. From the public – or at least those who show up to open-mic hearings and post angry comments on newspaper websites. And even from the boosterish daily newspaper. Earlier this month, when the AJC’s Cynthia Tucker headlined a column, “Fiscal meltdown a blot on Franklin’s tough tenure,” the event elicited a collective gasp from local media watchers. Surely a corner had been turned.

In truth, even before the budget crisis, the mayor’s luster had begun to dim – and, frankly, how could it not? After eight years of Bill Campbell’s corruption and contempt for the public, Franklin brought a new openness, energy, professionalism and humility to the office when she became mayor in 2002. She succeeded in winning over jaded taxpayers, the local media and the corporate poo-bahs who’d bet against her in the election.

And when Franklin ran for re-election in 2005, not a single credible opponent dared challenge her and she received 91 percent of the vote.

All political careers have their ups and downs, but Franklin’s downs have mostly come in the past couple of years. Some, such as the Kathryn Johnston shooting, were government-related scandals. Others were political missteps. Still others, such as the much-ridiculed Brand Atlanta PR campaign, were screw-ups by others that reflected unfavorably on the mayor.

Franklin surely wasn’t helped by news last year that her former son-in-law had received a life sentence for drug trafficking, or that her daughter pleaded guilty in federal court because she tried to avoid detection when she transferred cash she’d received from her then-husband when he was on the lam into money orders.

But it took a surprise budget crisis to bring out the wolves.

Franklin came into office in 2002 like a one-woman government, working 14-hour days, meeting endlessly with department heads and openly discussing the city’s problems and challenges with a refreshing candor.

The city was reeling – both financially and politically – from the mismanagement and indifference of Campbell, who left office under federal investigation.

He also left behind a $82 million budget deficit for Franklin to handle.

Peter Aman compares the state of the city then to that of a hit-and-run victim lying in the street: Yes, someone should call an ambulance, but first we need to stop the bleeding.

Aman is a senior partner with the Atlanta office of Bain & Co., an international management consulting firm that offered the incoming mayor a few months of pro bono assistance in sorting out city affairs. There were so many problems the company signed on for the next three years.

“People have lost sight of how broken the city was and how much has been fixed,” says Aman.

One example sticks out in Aman’s head: Auditors couldn’t figure out why a public works crew was racking up so much overtime until it was explained that their street-cleaning machine sprayed water only out of one side. Therefore they had to go down every street twice until the machine could be repaired. The city’s maintenance department had estimated it would be able to fix the machine – in another year.

And so it was throughout the city: wasteful practices, lousy communication, overspending. Aman’s company worked with the mayor’s transition team, which found the city’s workforce bloated with Friends of Bill who had the haziest of job descriptions.

According to a member of that team who asked not to be identified, Franklin’s administration was forced to conduct what amounted to a “crony inventory” – going floor to floor in City Hall, comparing employee rosters to payroll logs and asking office managers, “Do you recognize this name? What does he do? Have you ever seen him here?”

The morning of Franklin’s inauguration ceremony, she fired 100 city workers. In her efforts to erase the post-Campbell budget deficit and purge the payroll of dead wood, the new mayor ultimately eliminated 1,000 city positions. She deprivatized a city water system plagued by poor service. She merged traffic court and municipal court. She closed the old city jail and forced Fulton County to take custody of city convicts, as required by state statute.

Those were easy tasks, compared with selling the public on a tax hike of nearly 50 percent to cover the budget shortfall left by Franklin’s prison-bound predecessor. Or pushing the council into approving a $4 billion sewer program – complete with steep rate hikes – to satisfy federal consent orders and rescue the city from receivership. Or persuading the anti-Atlanta state Legislature to approve a citywide sales-tax referendum, and the Republican governor to agree to extend the city low-interest loans to help pay for the sewer work.

After these early triumphs – and, by all accounts, they were acts of political courage and perseverance – Franklin launched initiatives and appointed blue-ribbon commissions to work on a variety of ambitious goals: to end chronic homelessness; to create sustainable arts funding; to ensure affordable housing in the city; to build a civil rights museum; and to create the Beltline, a green transit corridor around the city’s core.

Yet the mayor, by her own admission, waited until 2005 – the final year of her first term – to begin a full-scale reform of the city finances. And when she did finally order an overhaul, it became the cure that almost killed the patient.

Atlanta officials who’ve grappled with the city’s budget describe it as complicated, jury-rigged, arcane and impenetrable.

Much as Atlanta’s sewer infrastructure was allowed to decay, little had been done through the decades to modernize the city’s financial and accounting practices.

By the late ’70s, the business world and most sizable city governments had transitioned to an accrual accounting system that allows better tracking of anticipated costs and revenues. Not Atlanta.

Then there was the city’s obsolete financial software system. Or, rather, systems. Over the years, city departments had independently bought their own operating and accounting software, sometimes modifying the systems so much that the manufacturers could no longer provide support and upgrades.

For the most part, the various systems couldn’t communicate with each other. When Hartsfield-Jackson airport officials would complete their annual budget proposal, for example, the information was put on a floppy disk and driven to City Hall, where it would be printed out, reformatted and keyed in so the finance department software could understand it.

Also, Atlanta was one of the few cities of any size still operating on a calendar-year budget, rather than the familiar July-to-June fiscal year model.

When former Councilman Lee Morris chaired the Finance Committee in the late ’90s, the city was required to adopt its budget by Feb. 28 – a full two months into the budget year.

“When the budget year began, we didn’t yet know how much money was left over from the previous year,” he says. “By the time we approved the budget, a sixth of the money had already been spent.”

Not that it mattered much. Morris says his committee had trouble prying even basic financial information out of the Campbell administration. Once, when he asked a city official why department heads appeared to be outspending their allocations, he was told the budget was intended as a “guideline,” not gospel.

Morris, a corporate CPA and lawyer, became so frustrated he didn’t run for a third term.

So how did Bill Campbell, who chewed up and spit out five city CFOs during his eight years in office, manage to keep the budget from derailing until he was ready to leave office?

The short answer is he didn’t – at least not exactly. Instead, his administration played an interdepartmental shell game with funding, shifting money to where it was needed and effectively making up the budget on the fly. A sort of “slush fund” was maintained, Morris says, by routinely funding about $10 million worth of police positions that were never filled.

And if cash was short, the administration simply skimped on routine maintenance and replacement of city equipment. Despite the police department’s padded budget, Morris says officers routinely complained of having to double up in cars because they didn’t have enough street-worthy cruisers.

As long as the booming economy kept growing and Campbell kept deferring capital improvements, the city was able to conceal its financial shortcomings, even as such critics as Morris, then-Council President Robb Pitts and a few others were publicly predicting a budgetary train wreck.

It arrived just in time for Shirley Franklin.

At a recent press conference, Franklin was asked if she had made any mistakes that led to the current budget crisis. She answered thoughtfully, as if considering the question for the first time. Perhaps, Franklin offered, she had erred in not launching a top-to-bottom reform of the city’s finances sooner. “I may have been wrong,” she said.

From the beginning of her administration, Franklin talked about the city’s abysmal financial situation and its backward accounting practices.

That’s why, instead of hiring a new finance chief versed in the latest accounting techniques, she reached out to someone already familiar with Atlanta’s screwy way of doing business.

Rick Anderson, Atlanta’s longtime budget manager under Maynard Jackson and Andrew Young, was persuaded to come out of retirement to help save the city from ruin shortly after Franklin took office.

He agreed to step in for a few months, until a permanent CFO could be hired and trained, but ended up remaining more than two years.

Franklin instituted some small reforms in the department. Most notably, she changed a provision that had been in place since 1937 that said the city could not plan to spend in any year more than 99 percent of its total revenues from the previous year.

Since annual revenue growth was assumed to be the norm, the aim was to always produce a year-end surplus – a built-in buffer, so to speak. But in practice, the city simply became accustomed to rolling that surplus – called the cash carry-forward – into the next year’s budget.

Franklin lowered the revenue-anticipation rate from 99 percent to 96 percent in an attempt to impose a more conservative stance on spending. But Councilman Howard Shook – who currently chairs the Finance Committee – says it didn’t quite work out that way. Instead, it gave department heads less incentive to watch their spending because everyone knew there was a soft cushion to absorb overruns.

But Franklin also delayed addressing the most fundamental issue – an overhaul of the finance department several studies had urged. When a top-to-bottom audit of the 2002 budget was completed by Ernst & Young in the spring of 2004, the firm reported that Atlanta had some of the worst bookkeeping practices the auditors had ever seen. The report added that many finance department employees were clearly unqualified for their jobs, a conclusion that didn’t surprise Morris.

“That department had long been the dumping ground for political operatives,” he says.

Franklin had waited to fix the city’s finances until she had a permanent CFO in place. In mid-2004, she hired Janice Davis away from Philadelphia, the mayor’s hometown, where Davis held the same post.

When Franklin determined the time was right for financial reform, she decided to undertake three biggies at once. Starting with the 2006 budget, the city began the difficult, 18-month transition to a standard fiscal year. Around the same time, the city started to move away from cash accounting to the standard accrual system.

Perhaps biggest of all, the city was preparing for the installation of a computerized operating system custom-designed by Oracle that would finally allow departments to share information. Ideally, it would also provide a more or less real-time picture of the state of the city’s finances, something Atlanta had never had.

All of the reforms were necessary to bring the city out of the fiscal dark ages, but doing them at the same time had the effect of overwhelming the finance department and obscuring budgetary mistakes. A city notorious for lousy accounting had left itself with little margin for error.

Martin, Moore and other council members who lay blame for the busted budget at the feet of the mayor seem to be forgetting their own contributions to the problem. For one, the council approves the budget every year. But, more importantly, the council foisted a 50-percent hike in police pensions onto the city in 2001, saying the increase would stem department turnover. Two years later, it did the same for firefighters.

In 2005, the council was debating whether to give other city workers a 25 percent pension boost. Anderson, who had re-retired by then, wrote members privately to warn that the city couldn’t afford the added financial burden. The council approved the pension increase anyway.

A short time later, the feds issued new guidelines for meeting pension obligations that hit many cities in the pocketbook. Atlanta, which had long shorted its pension funds, found itself forced to play catch-up and inject additional millions more into those funds than it had anticipated.

Since Franklin has taken office, the city’s annual pension and health-care costs have risen by an estimated $100 million. To meet those obligations last year, the mayor ordered city departments to eliminate hundreds of unfilled positions and trim budgets by 10 percent.

Those increased expenses, combined with falling revenue and other recession-related setbacks, haven’t helped the city’s financial picture. Nor did such basic accounting errors as forgetting to budget for the city’s annual $8 million subsidy to Underground Atlanta.

But the real culprit was the city’s riskiest accounting trick – one that still hadn’t been abandoned despite other reforms: the cash carry-forward.

According to an April report by city auditor Leslie Ward, the Franklin administration had consistently overestimated its annual cash carry-forward since the 2003 budget year. This meant the government started out each year thinking it had more money to spend – tens of millions more – than it actually did.

That mistake alone didn’t mean the city would necessarily go bust; as long as it collected enough new revenue to cover the shortfall, a year-end deficit could be avoided.

Because of the city’s outdated accounting practices, such discrepancies wouldn’t be obvious within a half-billion-dollar budget. With millions in the bank at any given time and revenue constantly flowing in, the city would never run out of money. But, with millions going out to pay invoices, the city likewise could never catch up with its bills. That meant it was always running behind.

In the past three years, at the same time City Hall was overestimating its cash carry-forward, it was spending more than it collected. Finance officials contend both mistakes were missed, in part, because the changeover to the new accounting procedures masked them.

It’s now known that the city began the current budget year, FY 2008, believing it already had about $60 million in unspent cash.

In fact, it had less than $1 million.

The mayor’s round-the-clock involvement during her first term helped “disguise a lot of the mediocrity in City Hall,” according to another member of her transition team who also asked not to be identified. In the wake of the Campbell era, competent managers and well-trained workers were in short supply. But even her staunchest supporters agree the mayor could not possibly keep up such a grueling schedule.

Following her landslide re-election that fall, Franklin’s stature had never been higher. Buoyed by the national awards and accolades, she delved deeper into such ambitious projects as negotiating the purchase of the King papers, bidding to bring a NASCAR attraction to Atlanta and pushing for a civil rights museum.

As her visions became grander, she handed off more of the day-to-day responsibilities of running the city to top lieutenants such as Young and Davis.

The mayor attended fewer local events and became less visible, helping spur criticism that she was away from the city too often. According to records obtained by CL, Franklin made more than 28 trips outside of Georgia between January 2005 and June 2007, including to several foreign countries.

Franklin also seemed to lose her grip on one of her greatest assets during her first term: the unaffected political savvy she’d used to build coalitions and consent.

An early signal that the mayor’s common touch was faltering was Brand Atlanta. The idea for a municipal marketing campaign was pitched by some of the city’s top businesspeople and Franklin bought in, pledging $14 million of city money. But despite the high-wattage creative talent involved, the slogan “Every day is an opening day” quickly became a citywide punch line. Now derided as a public-relations fiasco, Brand Atlanta ended up reflecting poorly on the mayor who OK’d it.

Then, in late 2006, Franklin participated in a racially charged political ad for John Eaves, a Democrat running against Republican Lee Morris for chairman of the Fulton County Commission. The radio ad began with Congressman John Lewis, who invoked the image of “fighting off dogs and water hoses in the ’60s.” Then Franklin warned that if there was a Republican victory, “the efforts of Martin and Coretta King, Hosea Williams, Maynard Jackson and many others will be lost.”

Her reaction to the criticism she received after the ad made visible a side of the mayor that was unfamiliar to many city-dwellers: defensive, unwilling to apologize, perhaps even arrogant.

On top of that, the shining promise of her first term – the much-heralded Beltline that has the potential to change the face of the city – began to bog down from financial woes and a lack of vision that has left the project stuck in neutral.

Although Atlanta has gotten safer over the past decade, an upswing in the crime rate also became a major concern during her second term. In 2006, Atlanta had the fourth-highest murder rate in the country, and it rose 21 percent over the first six months of 2007.

A watershed moment of Franklin’s second term was the police killing of 92-year-old Vine City resident Kathryn Johnston by corrupt narcotics officers in November 2006. The officers used an illegal warrant to break into her house, and two of them have since pleaded guilty to voluntary manslaughter.

Chief Richard Pennington has supporters and detractors, but Franklin expended a good chunk of political goodwill when she stood so solidly by the city’s top cop in the aftermath of Johnston’s death.

The public furor over that incident still simmers. The council unanimously approved a Citizen Review Board, with subpoena powers, in early 2007. Franklin didn’t approve of the measure, but had no choice but to accept it. Her office missed the council deadline to organize the board, which – as CL reported last week – has still yet to hire a staff or begin work.

During the turmoil that has marked her second term, several people close to the mayor say she’s become less given to taking advice from once-trusted aides and advisors.

Franklin made her political name bringing a new openness and transparency to City Hall, yet observers note that she has grown increasingly guarded and combative, especially in her attitude toward the local press.

She thinks both the AJC and Creative Loafing stepped over the line in reporting on her daughter’s troubles with the law – as confirmed by late-night comments she posted on the CL Fresh Loaf blog in response to a story about her daughter’s guilty plea. She protested the paper’s “unfair, illogical and inaccurate reporting” and said, “It’s call sic tabloid and yellow journalism.”

Franklin turned down a request to be interviewed for this article, and, earlier this month, sent her staff to explain the budget shortfall to the AJC editorial board – a mission she undoubtedly would have undertaken herself in her first term. Afterward, Cynthia Tucker wrote her first openly critical column of the mayor’s job performance, saying the budget crisis was a blot on Franklin’s legacy.

The mayor responded the same day by posting a shoot-from-the-hip statement directed at Tucker on the city’s website. “You quickly conclude my record is blotted,” Franklin wrote. “Did you think I was running for prom queen, a one night stand?”

For Franklin to restore her image in the coming months, supporters and critics alike say she must again assert stronger leadership with regard to city operations.

“The mayor’s style of governing is a Michael Jordan-style model,” says state Sen. Kasim Reed, D-Atlanta, one of Franklin’s closest allies and her hopeful successor. “The team just doesn’t look as good unless she’s playing the dominant role.”

Whether the council will allow her to reassert herself is another question.

With at least three council members planning to compete with Reed in next year’s race for mayor – including council President Lisa Borders – there’s likely to be stiff competition to come up with a reform-minded alternative to Franklin’s budget proposal. Throw in other members eager to claim credit for holding the line on taxes or looking out for city workers at the expense of a lame-duck mayor, and you’ve got a council that’s already in open revolt.

When the mayor proposed a major hike in water rates to cover a loss in revenue due to Atlantans’ drought conservation efforts, the council reacted by passing a resolution calling for an audit of the Department of Watershed Management. Franklin vetoed it. Last week, the council overrode her veto, 15-0.

At the end of her first term, Franklin appeared to have locked in an impressive legacy. She was the mayor who bravely dealt with the city’s decades-old sewer problem. She put the city on firm financial standing and got the Beltline rolling. But the latter two of those three achievements now stand in serious jeopardy.

Even the AJC’s Tucker, long a Franklin booster, has written: “After six years in office, she presides over a budgeting process nearly as dysfunctional as that left behind by her criminal predecessor.”

But however painful and badly managed some of the reforms have been, Franklin’s supporters say the city’s financial infrastructure should emerge up-to-date and greatly improved. The city should be able to take real-time snapshots of its financial health, something it’s never been able to do before. And the city has jettisoned the practice of the cash carry-forward, making unpleasant budget surprises less likely in the future.

Emory University political science professor Alan Abramowitz says it’s typical for chief executives to get the blame when budget problems arise, but notes that after the passage of time, people tend to remember the bigger picture.

“The mayor came into office facing a number of long-neglected problems,” he says. “I think she’ll be remembered for dealing with those challenges.”

Former Mayor Sam Massell also believes Franklin’s legacy is secure, no matter how her tenure winds down. He credits her with severing the link to the racial politics of Atlanta’s past, and with bringing a new integrity and candor to city government.

“If the mayor has a fault, it may be that she’s too ambitious, that she’s tried to take on too many projects,” Massell says. “But if she didn’t, they would never get done.”

While the current picture may look dark, Reed believes history will be kind to Franklin’s legacy. “I don’t think that where people are now on the mayor is where they’ll end up,” he says. “This is not where the story ends.”

Howard Shook agrees it will take time to judge Franklin’s legacy.

“The metrics for judging her performance are already apparent,” he says. “Have we met the federal consent decree for fixing our sewers? How has the airport expansion been handled? How’s our tax burden compare to when the mayor came into office? Will Atlanta still be regarded as an attractive place to move or do business? The curtain’s just going up on her final act.”