10% DEBT LIMIT!
Council members had their first peek at the dismal preliminary budget outlook at a Monday morning briefing presented by the Director of Finance, Ann Shawver.
A previous Council’s self-imposed debt policy looms large. The policy states that tax-supported general obligation debt service will not exceed 10% of General Fund expenditures. Growth assumptions have declined significantly since the last projections were calculated. A 1% decline in expenditures is projected for 2010, followed by growth of 2% in 2011 and 3% thereafter.
The prior year projected growth assumption was 3 to 4% with fiscal year 2010 peaking at 9.6% of General Fund expenditures. The projection there after declined through 2014.
Prior to that growth was projected at 4% with fiscal year 2009 reaching 9.5% of the General Fund expenditures then declining thereafter. At that time then Director of Finance, Jesse Hall, stated that year 2009 was the peak due to the issuance of bonds for the new William Fleming High School.
In an explanation from Hall in an email dated June 23, 2006: “We adopted our original debt policy in September, 1999.” Hall named the many school projects planned including the two new high schools. Hall continued, ” We were aware at that time that these big ticket items, in addition to a number of city projects included in our capital improvement program, would significantly change our debt position. Thus we realized that a debt policy would be an important point of reference, one that our bond rating agencies approved of, as we proceeded with a City Council adopted capital improvement program that included these and other projects such as stadium financing, the “Biomed Park”, curb gutter and sidewalks, storm drains, a new police building, new fire stations, and various other projects.”
“There is no room for any additional projects,” said Shawver and advised Council to reprioritize as she gave this example – “if the Market building will come on as a priority CIP then something else has to come off.”
The fiscal fear 2009 revenues that are expected to decline include the sales tax, personal property tax, and business license tax. If that were not depressing enough, fiscal year 2010 revenue is expected to decline even further at $3.6 million. Then there is the loss of State funding which now stands at $1.4 million. The Governor is expected to release additional cuts for 2010 on December 17th and localities will get more bad news shortly thereafter.
Shawver, said that employee medical coverage increased $800,000. The City Manager, Darlene Burcham, promised that should the situation improve the first priority would be to add back the half million dollar yearly increase that Council committed for the schools. Burcham put it bluntly, “we will have to cut positions to balance the budget” reallocating staff to other positions as best she could. Hiring freezes are in place now, with the only exception being public safety.
Sherman Stovall, Director of Management and Budget, wanted to “plant the seed” with suggestions of possible service reductions – library and recreation program hours; mowing and refuse collection frequency; reduced Human Services and Cultural Agency funding increases; possibly even a library branch closing and leaf collection elimination.
Council members David Trinkle and Alvin Nash, wanted to see a more comprehensive list of possible reductions. Burcham replied, “don’t wait on a list” and wanted Council’s ideas for reduction so she could present them with the operational impact.
Councilman Court Rosen asked about reallocating and/or pushing out the incremental funding of some projects. Burcham indicated that this was a possibility but said that “there is no getting around that we are going to have to change the services we deliver or the way we deliver them.” Rosen was adamant that this was the worst time to implement any tax increases.
Burcham summed up the discussion by saying, “we are going to look at all the moving parts. We are not going to let the amount for debt service be more than your guidelines. We’ll come back to you and say you can’t do what you want to do because you’re going to violate this policy.” The important year for Council to look at is 2010 and the rest of it is a plan because “candidly something is changed every year.”
A Financial Planning Work Session is slated for February . The public will have to wait until April 30th to way-in on the recommended budget.
Posted By Valerie Garner
Tags: budget, city_debt