A Glance at the budget evolution for 2010

At a budget workshop in February the City staff began preparing estimates for the 2010 budget based on information available and current in February. At that point we were expecting sales tax to be down 14% compared to budget for the 2009 fiscal year (runs from Oct 2009 to Sep 2010). That would be a drop of 12.3% compared to the 2008-09 year. We were also expecting a 1% drop in property values, and given the same property tax rate, a similar drop in property tax revenue. Licenses, permits, interest income were all expected to be down. In all we expected revenue for 2009 to be down by almost $217,000 or about 1.68% compared to what was planned.

Using that as a starting point, we were expecting revenue for the 2010 fiscal year to be down $354,000 compared to 2009, or about 2.74%. Assuming the same expenditures for 2010 as were budgeted for 2009, that would leave a gap of about $497,500 that had to be made up.

By May 20th, the next budget workshop, the picture had changed, and for the worse. While the sales tax picture had improved from -14% change to -9.77% compared to the 2009 year, the property tax values were now predicted to be down by about 3.5%. Property tax makes up almost 49% of the tax revenues the city generates - sales tax about 7.7%. So you can see that a percent change in property value (and thus property tax) has a much greater impact than a percent change in sales tax revenues. Now projecting $12.3 million in revenues for the 2010 fiscal budget, we would now be close to $900k short. At this point the staff made the first moves to reduce the budget.

The 2009 budget had been adopted at ~$13.2 mil. The city manager and staff had made efforts to begin reducing the spend during 2009, and on May 20, the projected expenses for 2009 were at ~$12.9 mil. By May 20, staff had shaved about ~$17,000 from the budget (net) over 2009. This left us still about ~$600K short for 2010.

The July 8th meeting was little different: at that point, we projected ~$12.4 mil in revenues, had shaved expenditures to ~$12.6 mil, still about $196k short. So some discussions ensued around methods to make up the deficit including a tax rate increase to the effective rate (more on that later), a water franchise fee, and some additional cuts, possibly including the on demand transit service, our part of the Lake Cities library, and various printed communications the city sends out.

By the way, this is all referring to the General Fund. There are several other funds maintained by the city, including utilities, the EDC, Hotel Tax, etc. all of which are "in shape" meaning that there are no deficits in those budgets.

More Later.