City Finance Director Predicts $1.25 Million Budget Gap in 2013
Revenue is not keeping up with expenses, he reports, and that can be expected to continue for the foreseeable future, reducing the city's options each year for continuing to fund the existing level of services.
An analysis by the city's Finance Department forecasts a shortfall of $1.25 million in next year's budget as revenue is expected to fall while expenses continue to rise.
That's based on a "cost-to-continue" study of current levels of municipal services.
The study, presented this week by Finance Director John Ruggini, looks at both known costs and predictions based on a range of factors such as the general state of the economy, the housing market and interest rates.
Ruggini also looked back at the past 10 years of actual revenues vs. expenses in reaching his conclusions.
His findings: Revenue to the city could drop by more than $400,000 in 2013, while expenditures would rise by nearly $850,000.
Unlike most years past, the cuprit this time is not in personnel costs. A $350,000 increase in regular pay is very nearly offset by a $325,000 reduction in costs for employee benefits, mainly through new contracts with firefighter and police officers.
Rather, the largest factor driving increased expenses is a transfer of about $665,000 to the debt service fund, partly due to increased capital spending but mainly to loss of interest revenue from maturing city savings.
On the revenue side, property tax revenues are expected to increase by less than $100,000 while, again, lower interest income and a reduced "applied surplus" from the General Fund offset that by nearly $850,000 in the negative column.
Increases in some areas, including hotel room taxes and fees, together totaling about $200,000, help soften the blow.
Ruggini said that the city had overcome a budget gap more than twice as large – $2.6 million – for 2012 and that a $1.25 million gap was "significant but not insurmountable."
He also assured citizens that the city remains financially strong, with a healthy General Fund and a AAA bond rating.
He warned, though, that each successive year in which the city must address shortfalls reduces the options for savings in the next.
Ruggini said he would follow up soon with a five-year outlook for the future, which he said "will continue to show expenditures persistently outpacing revenues, which only reinforces the need for sustainable budgetary strategies as opposed to one-time fixes."