The City Commission has postponed filling a $1.2 million budget deficit, but decided to continue longevity pay for employees and rejected suggestions to increase the city’s occupational tax.
The unofficial decisions regarding longevity pay and the occupational tax will continue the city’s trend of rising costs for wages and benefits while revenue remains stagnant, Finance Director Steve Dawson said after Monday’s afternoon meeting.
During the May 14 work session, Dawson told the commissioners a nearly $1.7 million deficit needs to be filled before the 2012-2013 budget can be balanced.
However, since last week, Dawson spoke with department heads, and found another $500,000 that possibly could be cut – by reducing nearly each department’s funding requests by 1 percent and eliminating working spouses from the city’s health care plan in January. That would reduce the deficit to $1.2 million.
“Our revenues are only $31 million at best, and that’s why we are struggling,” Dawson said during Monday’s meeting.
On the eve of the 2012 primary election, the commission decided – after weeks of discussion – to continue longevity pay for city employees at 1 percent over a three-year cycle. The current longevity pay program is set to phase out by the end of this fiscal year.
Four agreed to the plan while Commissioner Michael Turner suggested a 1 percent increase over five years.
“We have to meet the budget,” Turner said. “I understand that, so we have to figure out a way to do this – we lost quite a bit of experience this last year, and we can’t afford to do that all too often.”
To help close the gap between cost and revenue, Commissioner Sellus Wilder said he would support a .25 percent increase in occupational tax if it accompanied a 2 percent property tax decrease. However, the other commissioners declined support for any tax increase.
The city’s occupational tax – 1.75 percent – hasn’t been increased for about 10 years.
Several years ago when the economy was healthier, the occupational tax brought in an increasing revenue stream, said City Manager Fred Goins. Now that revenues have gone flat and payroll expenses are going up, the deficit grows every year, he added.
“We aren’t going to be able to sustain this unless we come up with a significant revenue source,” Goins said. “And we have not developed any major new revenue streams in several years.”
Over the last three years, the city has deferred purchases and made several capital acquisitions from accounts other than the general fund to keep the budget balanced, Goins said.
“That has helped us get through those short-term periods, but what that has done is push us into a corner where the only significant line items we have to look at have been reduced,” Goins said.
“So we have evolved into where we are now, and at the same time our revenues have been flat.”
“And now the city has a structural imbalance,” Dawson added.
Dawson said over the last year the city has seen $1.565 million in changes to the budget – by either an amendment or through natural increases.
“The biggest bulk of those changes are wage or benefit increases; it’s fixed costs, and that doesn’t go away,” Dawson said. “To trim away at that is to start talking about furloughs or worse, and that’s kind of where we are, and that’s why we are out of sync.”
However, Commissioner Katie Hedden and Wilder had lists of items that – if eliminated – could cut several thousand dollars from the deficit leaving $800,000 for the city to close.
Per Commissioner Bill May’s request, the commission agreed to submit its list of line items to cut from the expenditure side of the budget to Goins, and staff will report the impact of each item at the May 30 special meeting. That meeting starts at 5:30 p.m. and will focus on balancing the budget, which must be done before June for Dawson to have time to finalize the budget booklet before the July 1 deadline.
“I think to overcome the $800,000 – I don’t think we can cut our way out of that much,” Turner said about needing to find new revenue streams soon.
Monday, the City Commission also went into closed session to discuss property and personnel.