City anticipates $2.2 million budget deficit
By Anessa Myers
Published in News on December 3, 2008 1:46 PM
Goldsboro may see budget shortfalls of more than $2.2 million at the end of this fiscal year, City Council members learned Monday -- shortages that may put pressure on future projects such as the Community Recreation Center.
But, said city Finance Director Kaye Scott, that's only if the economy remains down and trends continue as they have the last few months.
Unfortunately, she and other city officials expect that to be the case.
Overall, a $931,349 shortfall may occur in the general fund, and a $1,360,897 shortfall may occur in the utility fund.
The shortages, Ms. Scott explained, are not because the city's expenditures are up, but rather because of a lack of revenue.
"It's been a third of the year and city departments have spent about 32 percent, so they are on target," she said. "With the economy the way it is, the revenues are just not coming in."
The bulk of the lack in revenue in the general fund will come from a decline in sales tax receipts, a number that Ms. Scott said will be down 4.2 percent according to a 2008 report by the National League of Cities.
City Manager Joe Huffman explained that the sales tax spent by consumers in Goldsboro is collected by the state along with Wayne County's sales tax receipts, and then distributed back to the city.
Ms. Scott added that the city receives that check on the 15th of every month, and that November's payment was $86,000 short.
But, she added, because those sales tax amounts are always one or two months behind, the shortfall likely represents September's numbers, so Huffman's hopeful that with Black Friday and other holiday sales, future checks will be more on target.
"The retail stores that I have talked to did pretty well over the weekend," Huffman said. "And hopefully they will continue to do well."
Property tax revenues also are down 3.6 percent, according to the National League of Cities report, Ms. Scott said, leaving the city short an estimated $421,576.
Additionally, she continued, the city's investments, mostly in CDs, are coming in lower than expected -- about $270,000 less, with interest rates falling from 5 percent to 2.6 percent.
And other revenue streams are falling, too, including the Powell Bill fund, which may be more than $32,000 less than expected, and permits, refuse and golf course revenues, which are expected to be a combined $366,000 less.
Even the city's newly added property won't help, as both property tax and Powell Bill revenues from the recently annexed area off of Buck Swamp and Salem Church roads also are expected to be down by $425,457.
In addition, utility revenues are on the decline.
Water revenues are down $93,000 from what was expected, in part because of the voluntary water restrictions that were in place up until Monday that had caused a reduction in use and revenues.
Huffman said that many major industries have implemented systems that use less water, so that, too, brings less revenue to the city.
Sewer use is also down by $250,000.
Ms. Scott said that many people are cutting back on their sewer use because it costs more than water use, and many businesses are turning toward reuse systems.
All total, she said, utility revenues were down $324,000 through October.
However, despite expecting to see $1.77 million less in the general fund and $1.49 million less in the utility fund come the end of the fiscal year in June, Ms. Scott is hopeful that money-saving measures already implemented will help keep the shortfalls under control.
In the general fund, savings are projected to total $842,251 -- $400,000 for gas and diesel, $8,500 for property tax collection fees, $20,000 for unemployment, $298,000 for utility franchise tax and $115,751 for freezing hiring on all positions.
In the utility fund, savings will include $129,103 for a capitalization payment.
Huffman said that they've known about the likely shortfall for some time, and that because of that, they were giving the board this financial update a bit earlier than usual.
"We usually give financial updates in January and then really go into more detail at the retreat," he added. "This year, the update came early because it needed to. ... We are projecting based on what we have as far as data, and we are making sure that we bring it to council. I've been making sure the council is aware."
Huffman said that he has seen tough economic times while working as a city manager before, and that he knows what the city needs to do.
"We're going to feel the bite. (The economic situation) is going to be a challenge. It's cyclical. I've been through this four or five times within the last 18 years," he said.
So far the City Council has decided to freeze capital items, the hiring of non-essential personnel and the hiring for new positions. It's also asked department heads to trim their expenditures. The council also has discussed increasing service fees and examining the use of its fund balances in more detail.
"I know we need to take these measures, measures that I think are necessary and appropriate. ... This gives us a chance to take a look at what's going on with the economy," Huffman said. "As we develop next year's budget, we will be in tune with what could go on. Experts are saying that the economy will be in the same situation through next year.
"We do what we do to make ends meet. We have not gotten to the point where the city is going to stop services. This is a precautionary measure," he said.
In the end, Huffman admits that some large projects, like the Community Recreation Center or the repair of parks and facilities, may have to be placed on hold.
"I'm sure the council is going to take a look at everything, and make sure that they can move forward before they do so," he said. "I think we are at a good point where we haven't committed resources where we can't make adjustments.
"It's kind of a tricky time. Right now we've got a problem with revenue streams. That may last two or three years. We are going to be paying for these projects for probably 15 or 20 years."
Huffman said that the council has to look at both the short term and the long term when it comes to projects.
Even though the bids may be lower than they will ever be, there may be a cost issue for the short term, he said. In the long term, he said that the projects could be a really wise decision.
"But you have to balance that with the cost flow right now. Nothing stands alone. It's all connected," Huffman said. "The short term is, 'Oh my goodness, how do we go forward with the project right now?' The long term is that the bids are lower now than they will probably ever be. If you decide to undertake a project, then you want it to improve the community. The question is -- is now the time?"
Ms. Scott will update the financial information at the Dec. 15 City Council meeting where the group will discuss it further.