Mural moratorium gets first reading amid heated debate

City commissioners start an emergency meeting to discuss murals Wednesday at city hall. (Hannah Brown | State Journal)

The city will be looking at dipping into its reserves for as much as $1 million in the current budget year, partly due to increasing pension costs.

But despite incrementally increasing pension contributions over the next several years, city officials say they are not concerned about depleting the almost $15 million reserve.

The topic arose at the city commission’s last meeting with a presentation from Finance Director Jennifer Jenkins. Commissioners trepidatiously questioned what the impact on the budget would be for pension costs in the coming year.

“FY20 we are dipping in approximately $1 million, which is a little high,” Jenkins said of the fiscal year that began July 1.

A notably long pause followed.

City Manager Keith Parker said the tentative pull from reserves comes out to $948,766, and he attributed the additional costs mostly to personnel expenses, which make up about 69% of the city’s entire budget. Commissioners also approved a 3% across-the-board raise for city staff this year.

Parker said that about $500,000 of the additional expenses on the city is attributed to pension contributions.

“I was very conservative on revenue projections and liberal on expense projections,” Parker said. “In those projections, I assumed we would be more fully staffed than last year.”

The recent rule of thumb for the commission has been to keep about $13 million in reserves for emergencies. The amount in reserves has fluctuated over the years, dipping at times to about $11 million and surging at times, such as when the city generated a $2.6 million surplus in 2016 that also resulted in cuts to property taxes.

The obligation for pension contributions, Parker estimated, is expected to continue to increase the city’s expenditures year-over-year until it reaches about $2.5 million annually.

However, city commission members said that with a watchful eye on the city’s purse strings the city will be able to meet the increasing costs in the coming years.

Commissioner Scott Tippett called the fiscal year 2020 budget cycle an “anomaly” because of the absence of revenue from the demolished Frankfort Convention Center and a shift to replacing several vehicles in the city’s fleet from the capital development budget. He said that within a couple of years, though, the city will see a $1 million annual bond payment for the public safety building drop off and tax revenue from a new state office building — recently named The Mayo-Underwood Building — as well as the Capital Plaza redevelopment project.

“There’s no crisis, no need to hit any panic button,” Tippett said. “We just have to be judicious and prioritize projects based on data. There are several people lobbying for capital projects. The needs and the wants just far outweigh the resources.”

Some of the projects waiting on commission approval are upgrades to the Capitol View soccer fields, a building for a new animal shelter and a new fire station. 

Commissioner John Sower also said he thought the dip into the rainy-day fund would be short-lived.

“Our finance director has forecast a surplus of $250,000 when our final receipts and expenses are calculated,” Sower said of the 2018-19 budget year. “Even if we get into a bind, we can always postpone a budgeted expenditure — for example, large equipment — we can make use of a small KIA loan at 1.75% or, yes, dip into the rainy-day fund.”

Kentucky Infrastructure Authority (KIA) Loans are low-interest loans for water, sewer, solid waste facilities or other infrastructure projects. The loans typically have a lifetime of 20 or 30 years.

However, Commissioner Eric Whisman pointed out the $250,000 surplus was partly due to the sale of the Gooch House earlier this year for $500,000. 

“In a sense, if not having done that, we would’ve went in the hole $250,000,” Whisman said.

Mayor Bill May said growth downtown will also be a consideration in the coming years.

“Obviously, the increase in pensions costs are concerns for anyone in local government, and it will cause us to adjust our budget practice in the future,” May said. “The one positive thing is Frankfort is seeing renewed growth — despite what some people say. We’re seeing population growth and a renaissance downtown with business.”

Parker said he has asked that the commissioners be cautious on projects until a long-term financial forecast can be compiled. He said that finance director Jenkins has been putting together a five-year projection for the board's consideration, and it should be ready sometime in the fall.

Parker, too, said that the city is counting on revenue from The Mayo-Underwood Building and Capital Plaza redevelopment. The Mayo-Underwood Building is expected to bring about $500,000 in new revenue annually from occupational taxes, and the impact of the Capital Plaza redevelopment on property tax and occupational tax revenue is still unclear. But running the rainy-day fund dry is not a concern, Parker said.

“At some point dipping into reserves will have an impact, but we don’t have any concerns about depleting our reserves,” Parker said.

Recommended for you

Load comments

Thank you for Reading!

Please purchase an Enhanced Subscription to continue reading.Please log in, or sign up for a new account and purchase an Enhanced Subscription to continue reading.