Anchorage Assembly members tonight will take up a city attorney's report accusing former Mayor Mark Begich of concealing from them the city revenue crisis that has caused a cut in worker pay and city services this year.

On the table is whether the Assembly should look deeper into the last months of Begich's tenure, the accusation that Begich's behavior violated the city charter and what changes in law, if any, are needed.

Begich and former members of his administration are pushing back against the investigation of Municipal Attorney Dennis Wheeler, calling it unfair, inaccurate and politically motivated. "The suggestion that the Assembly was not fully informed about the municipality's financial condition is absurd and totally at odds with the record," Begich said in a statement released after the report became public.

Begich's chief financial officer, Sharon Weddleton, says Wheeler's report is full of mistakes and misstatements.

His budget director, Wanda Phillips, said Wheeler didn't review crucial documents and records, so she refused to be interviewed by him.

Wheeler's 60-page report, released Nov. 18, is the latest battle in a political war, pitting conservatives against liberals, that has consumed city government, talk radio and editorial pages all year.

The issue is how much the Begich administration officials knew about the looming revenue crisis and how adequately they shared with the Assembly what they knew about plummeting city investment returns and other recession-related revenue shortfalls.

Wheeler's report weaves through six months of city meetings, workshops, recordings, minutes, memoranda and e-mails about complex financial calculations. He concluded that the Begich administration was not forthcoming on both 2008 and 2009 revenue problems, and he said the Begich team's handling of retirement account expenses might have caused unnecessary city spending. Here is a look at these three key conclusions and the arguments against them.

HOW MUCH 2008 REVENUE?

• ISSUE: Did Mayor Begich withhold information about the performance of city investments and other revenue to hide their effect on the 2008 city budget and year-end fund balances?

• WHAT THE REPORT SAYS: Begich administration officials knew months in advance that city revenue was coming up short last year, but they didn't fully disclose that to the Assembly.

• DISCUSSION: Wheeler says the city's treasury department internally produced monthly reports from June 2008 through November 2008 that estimated city revenue for the year would fall short by between $5 million and $11 million. "We have no evidence the revenue analysis reports prepared by Treasury were shared with the Assembly at any time between June, 2008 and the end of December, 2008," Wheeler's report says.

Weddleton and Begich say Wheeler is wrong. Assembly members were briefed several times at their work sessions as well as through memos about how the national economic collapse was harming both short- and long-term city investments, they say.

Both sides point to an Oct. 17 Assembly work session to support their clashing positions.

Wheeler says the work session focused on part of the city's revenue problem -- how the national economy was affecting the city's ability to borrow money by issuing bonds. He says Begich and Weddleton didn't tell members about the treasury department's internal projections of revenue shortfalls for the year. The Oct. 17 work session did not, for example, touch on a projected shortfall in the hotel-motel room tax, the attorney's report says.

Wheeler's report says the Begich administration glossed over the large, looming paper, or "unrealized," losses in the city investments that would have to be recorded at year-end. This would plunge what is known as the "fund balance" into a negative number. The city tries to maintain millions of dollars -- a fund balance -- in a collection of savings accounts for emergencies, for times when revenue falls short and for reassuring its lenders that they'll be paid.

To the extent the Oct. 17 work session discussed the city's general cash pool, "the losses were minimized to a 'real' number of $1.6 million," Wheeler says. He cited a transcript of the meeting in which Weddleton briefly discusses $9 million in unrealized losses as of the end of September. "However, that's comprised of U.S. government backed investment securities that we feel reasonably confident will mature in part and we won't incur a loss," Weddleton said in the transcript.

Wheeler concludes: "Reliance on the October 17 work session for the proposition that the Assembly was fully informed is misplaced."

Weddleton, however, says Wheeler's assessment of that meeting is "absolutely untrue."

The meeting touched on many issues other than just bonding problems, she notes, including investment losses to a big trust fund that contributes dividends to city spending, and to potential problems the Port of Anchorage might have in short-term borrowing. "Three different places in that presentation we talked about investments and in particular realized versus unrealized losses, and we told the city (in October) that our investments had an $11.5 million problem," she says.

The former city CFO says Assembly members surely should have realized that such a large pending investment loss would affect fund balances.

"If your spouse said, 'I wrote a check for $5,000 from our checkbook,' and then you were reconciling your account at the end of the month, and you said, 'You didn't tell me our cash would go down.' Well, she told you she wrote a check. See what I'm saying? Anytime you have a problem with your investment portfolio, of course your fund balance is going to be affected."

HOW MUCH 2009 REVENUE?

• ISSUE: Did the Begich administration know and fail to tell the Assembly that revenue projected for 2009 would not be enough to pay for the 2009 city operating budget?

• WHAT THE REPORT SAYS: Begich himself knew about looming revenue problems by early December at the latest. Officials in his administration minimized the expected problem earlier than that.

• DISCUSSION: In late 2008, the Assembly members were busy making spending decisions for 2009 and beyond. They approved a $433 million budget for 2009. They approved four new labor contracts setting wage rates for about half the city's employees for the next five years.

The question of whether the Assembly had enough knowledge about the city's financial outlook when it passed the 2009 budget and the labor contracts is at the heart of all this.

Wheeler says that Begich himself had "reasonable certainty" that there would be a budget problem on Dec. 9, when Weddleton e-mailed him about horrible November investment returns and suggested a hiring freeze.

Earlier than that date, other Begich administration officials were lax in foreshadowing for the Assembly the city's 2009 revenue woes, the attorney says.

Throughout the fall, Wheeler's report indicates, Assembly members were expressing concern about the status of the city's fund balance and other accounts. At their request, Begich administration officials projected the year-end fund balance at $9 million. In fact, the fund balance ended the year at negative $15 million, according to Sullivan administration figures.

Begich, Weddleton and others say the year-end fund balance never is truly known until the first quarter of the following year. In normal times, if the balance is too low, the city shifts money around to shore up the shortfall rather than cut the budget.

Weddleton says Wheeler didn't report that a memo she handed Assembly members with that fund balance report cautioned that it was a draft -- the word was underlined -- and that the calculation is "extremely complex and has not been estimated mid-year" before. The memo also said that the projection could change significantly, and that much of that $9 million would be designated for a required set-aside for emergencies. In practical terms, she says, that means the year-end fund balance forecast actually was about break-even.

The city's 2009 revenue problem publicly came to light just a few weeks into the new year, shortly after Begich left office. Acting Mayor Claman announced that the city faced a $17 million deficit. He started imposing budget cuts that affected employee pay, hours worked, bus service, library operating hours and other services.

Mayor Sullivan blames the problem he inherited in large part on the five-year labor agreements. Annual multimillion-dollar shortfalls will continue for years if his administration doesn't make steep cuts in spending in 2010 and 2011, he says.

Some Assembly members argue that the bargaining agreements might not have passed if more complete revenue projections had been available to them.

The Assembly approved the last of the new labor contracts, with the police and firefighter unions, on Dec. 16 and 17. That was a week after Weddleton's e-mail warning to Begich of horrible investment returns and urging spending restraint.

Both Begich and Weddleton have downplayed the significance of that Dec. 9 e-mail. Begich says Weddleton listed risks of bad events hurting city revenue. By its nature, this ignored positive changes in city finances, and that several potential problems she highlighted failed to materialize later. He didn't want to overreact, especially to volatile investment returns, because investments can rebound quickly, he says. In fact, that has happened to some extent this year. The union contracts are fair to both sides and entail smaller pay increases than unions have negotiated with the state in recent years, Begich says.

On the last two union contracts, Weddleton notes, she sent two memos to the Assembly on Dec. 15 identifying several likely contract costs totaling millions of dollars that had not been reported earlier.

She says she was surprised the contracts passed, given the new information she presented.

Wheeler's report, however, says those Weddleton memos also say the already-passed 2009 budget took these almost all of the costs into account.

HANDLING RETIREMENT EXPENSES

• ISSUE: Did the city manipulate some 2008 budget entries to make the budget look better than it was?

• WHAT THE REPORT SAYS: Some retirement plan entries were correct in the audited annual report for 2008. But they were handled differently in internal budgeting and the city might have actually spent more than it would have otherwise.

• DISCUSSION: Weddleton says Wheeler is wrong and the city actually saved money.

The dispute centers on PERS, the state Public Employees Retirement System that is the retirement plan for many city employees. To keep the funding adequate, the employer contribution in 2008 was about 38 percent of payroll. Starting at midyear, the state began paying about 16 percent of the city's obligation for the Anchorage workers. Weddleton and city budget officials were concerned that department heads would think they were way under-spending on this item and had extra money for other things.

So they created an artificial expense for the state's full 16 percent share. This did away with the under-spending appearance and made it look like the PERS expense was over budget instead. The effect was to make department heads more cautious with their spending. At the end of the year, city budget officials erased that midyear entry so that the budgets reflected actual spending.

Wheeler says all this may have been intended to conceal 2008 budget shortfalls from Assembly members. He cites a garbage service finance manager who believed her agency was going to fall $700,000 short of meeting its budget and wanted to ask the Assembly for more money.

Weddleton refused that request. She says the garbage service director was new and didn't understand what was happening with the budget -- especially with the PERS accounting. The agency was not $700,000 short, and in fact ended the year $3.7 million under budget.