Schulte talks about the city's bid for Amazon

Kansas City Manager Troy Schulte discusses the city’s prospects for winning the Amazon headquarters with The Star's editorial board members Colleen McCain Nelson and Melinda Henneberger.
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Kansas City Manager Troy Schulte discusses the city’s prospects for winning the Amazon headquarters with The Star's editorial board members Colleen McCain Nelson and Melinda Henneberger.
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Government & Politics

KC city manager’s power of the purse doesn’t fly in other cities

By Bill Turque

bturque@kcstar.com

December 03, 2017 07:00 AM

Just about any time Phoenix officials want to spend more than $8,600 taxpayer dollars, they must go to the City Council for approval.

By that standard, Kansas City Manager Troy Schulte and his department heads enjoy a blank check. Without council authorization, they can solicit bids and sign off on any construction contract up to $1.3 million, or other expenditures of as much as $400,000.

That broad authority is under challenge from a group of City Council members, who have introduced an ordinance that would trim his power to sign on the dotted line without their approval.

An examination by The Star found that Phoenix was one of numerous big cities where elected officials can scrutinize spending more closely. Localities with lower thresholds for council review include Long Beach ($200,000) Sacramento ($100,000) and Mesa ($25,000).

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Like Phoenix, the nation’s sixth largest city by population, all are governed under the council-manager system used in Kansas City, where an appointed executive runs day-to-day operations.

Administrators in Denver, Charlotte and Portland, cities with larger operating budgets than Kansas City, also have less spending authorization than Schulte and his staff.

Managerial spending limits for non-construction contracts at City Hall have risen by more than 1,000 percent since the year 2000, when the cap was $35,000. The ceiling on construction deals has ballooned more than 3,500 percent.

“It’s a bit astounding,” said Councilman Quinton Lucas, who introduced an ordinance Nov. 30 to reduce thresholds to $750,000 for construction, $250,000 for routine goods and services and $50,000 for consultants and other outside expertise.

The measure would also require Schulte to file quarterly reports on all contracts executed without council review.

Five of the 12 council members signed on as co-sponsors: Lee Barnes, Jr., Alissia Canady, Teresa Loar, Katheryn Shields and Heather Hall.

The support reflects concern that signing power held by Schulte and his staff has grown too broad. In October, some members were unpleasantly surprised to read in The Star that Schulte approved $40,000 to help fund a study of potential downtown sites for a new baseball stadium.

Others are dismayed by consulting agreements he has awarded to handle matters such as crisis communications and the possible replacement of the Buck O’Neil Bridge.

Lucas said he doesn’t believe Schulte was abusing his power. The increases in spending authorization been the result of votes by past City Councils. After discussions with Schulte, he shaved the size of his proposed cut in spending caps.

But Lucas said he was concerned that as demands on local government resources grow, too much cash flows through the system — legally, but without proper oversight.

At a recent committee hearing on transportation and infrastructure, for example, Lucas said he was concerned when he learned that the city’s fleet services division has purchased roughly $10 million worth of new vehicles each year, chopped into a series of smaller contracts under the threshold for council action. The city might have saved money with a larger, multi-year contract, he said.

In a letter to colleagues last month, Lucas, a possible mayoral candidate in 2019, said the balance to be struck is “efficiency of city operations versus budget restraint, fiscal savings and accountability.”

‘All hell would break loose’

Schulte said he was open to changes, but warned that they could make weekly council agendas quite lengthy. He added that the notion of a blank check was misleading. All the money he and his staff spend has been appropriated by the council as part of annual deliberations on its $1.6 billion budget.

“It’s kind of a misnomer that staff has the ability to do a $1.3 million contract, because we’ve got to have the appropriation,” he said. “If we don’t have the appropriation then we can’t do anything.”

In Schulte’s view, there are “a lot of eyes” on transactions even without council review. They include the human relations department, which oversees goals for participation of minority- and women-owned businesses on contracts of more than $300,000.

The 13-member Public Improvements Advisory Committee appointed by the mayor and council, makes recommendations on smaller neighborhood level projects for flood control, street repair and other fixes.

Schulte said if he were to take money approved for one purpose and use it for another, “all hell would break loose.”

Through his spokesperson, Joni Wickham, Mayor Sly James said Lucas’ ordinance has improved since an earlier version, but that he is “still concerned about losing efficiencies since it appears as though more contracts for capital projects would be subject to additional approvals.”

Councilman Jermaine Reed said he would have to carefully consider any change in signing authority.

I’m not necessarily in favor of it,” said Reed, who is a candidate for mayor. “You don’t want to micromanage staff.”

There appears to be no established rule-of-thumb for city manager spending authority. Rick Grimm, chief executive officer of the Institute for Public Procurement, which consults and conducts professional development for purchasing officials. He said the thresholds can reflect the level of trust elected officials have in the city manager.

“The higher the threshold, the higher the trust,” said Grimm.

A vivid example of that principle is Anaheim, Calif., Orange County’s largest city, where the spending cap has waxed and waned in recent years, rising as high as $250,000.

In March the City Council, unhappy with the level of transparency, voted to cut City Manager Paul Emery’s spending authority on contracts from $100,000 to $50,000. Four months later the council asked for and accepted his resignation, making him the fourth manager to exit since 2010.

Mayor Pro Tem James Vanderbilt said the reduction was envisioned as a six month-experiment to see how much more work it created for staff. Even though the city has a slightly higher annual budget than Kansas City ($1.7 billion) Vanderbilt said the impact was “negligible.” He said Kansas City’s threshold of $400,000 on non-construction and personal service contracts “seems high by our standards.”

‘The council feels good’

Before 2001, the Kansas City manager’s spending authority for all contracts was $35,000. At the request of then-City Manager Robert Collins, the council unanimously voted to raise thresholds to $250,000 for construction agreements and $100,000 for all other contracts. The council also agreed to phase out its approval of all contracts by 2009.

Collins could not be reached for comment. Schulte, who joined the city budget office in 1998, said the caps were raised to curb council members’ practice of holding up some contracts for political advantage.

“What they found is that by moving that threshold up they didn’t get into the issues of one council member holding up a project in another district to leverage a vote,” he said.

Former Councilman Ed Ford, who voted for the measure, said he didn’t recall that kind of internal scuffle.

“Basically it was let the city manager be the city manager and let us be the policy makers,” he said.

In 2004 the next council, which took office a year earlier, unanimously voted to rescind the phase-out. It raised the manager’s signing authority on construction to $1 million and established annual increases linked to the Consumer Price Index, which brought the thresholds to their current level.

Former Mayor Kay Barnes, who voted for the increase, said that part of the reason was to help expedite the downtown revitalization that was gathering momentum.

“Because we were on complex and time-driven development tracks, it seemed appropriate that the City Manager would have increased flexibility in keeping multiple projects moving forward,” Barnes said in an email last week.

In Phoenix the council employs a two-step process to review spending, first approving all contracts over $100,000. Any expenditures over $8,600 from those contracts are also reviewed. Staff bundles the measures into one omnibus payment ordinance for each council session, everything down to skirts for tables in the city’s convention center. Not every item gets discussion, but they are all listed for everyone to see.

“We feel pretty comfortable having our council acting on those things,” said city engineer Kini Knudson. “The council feels good about that. They don’t want to micromanage but they want to know what we’re spending money on.”

Kansas City Manager Troy Schulte discusses the city’s prospects for winning the Amazon headquarters with The Star's editorial board members Colleen McCain Nelson and Melinda Henneberger.

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