Minutes 03/30/2015 - Laserfiche WebLink

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March 30, 2015 This proposed budget also includes limited fee increases, to better reflect the cost of providing Inspection and Engineering services. In addition, ambulance fees will be indexed to 110% of the Medicare Allowable rate. This budget proposal does not recommend any increase in utility rates. This proposed budget centers on investing in our community, our Public Schools, and our employees while strengthening Portsmouth’s financial position for the future. Major Budget Challenges and Drivers In preparing this budget proposal, we faced some very significant challenges:  A significant gap between General Fund revenues and expenditures We started this budget with a gap between revenues and expenditures of approximately $11.7 million. This amount does not include all the additional funds that the various City departments requested above and beyond their base Fiscal Year 2014-2015 budget. Many of these requests were justified, but I was unable to recommend them in this Proposed Budget due to other priorities. The $11.7 million deficit included a built-in gap of $6.4 million between our General Funds revenues and expenditures that was a result of the adoption of the City’s current operating budget for Fiscal Year 2014-2015. This gap equates to ten cents on the City’s real estate tax rate. As you know, when City Council adopted the Fiscal Year 2014-2015 budget in May 2014, it adopted an ordinance to appropriate an additional $6.4 million to the Public Schools’ Fiscal Year 2014-2015 operating budget. At its May 27, 2014 meeting, Council voted to use the General Fund Undesignated Fund Balance as the source of funding for this appropriation instead of increasing the real estate tax to fund the same. Although the language of the ordinance appropriating this additional $6.4 million stated that this is a “one-time appropriation,” my proposed budget assumes that this additional $6.4 million is now part of the Schools’ base budget for Fiscal Year 2015-2016. As such, this $6.4 million expenditure must be supported by an ongoing revenue source. It is not financially responsible for the City to use the Undesignated Fund Balance of the General Fund to fund this ongoing expenditure. Further, City Council’s Adopted Financial Policies require a balanced budget, with ongoing expenditures supported by ongoing revenue. This budget proposal accomplishes that requirement.  Real estate values and the Great Recession: It is a well-established fact that the recession that began in 2007 reduced real estate values nationwide. As a result, a pre-recession real estate tax rate does not generate the same amount of revenues in post-recession times. The City of Portsmouth did not fully adjust its real estate tax rate upward during the recession to maintain level real estate revenues for each budget year. In order to generate the same amount of revenue from the real estate levy as we did in 2010, we would need a tax rate of $1.31. Therefore, we need to increase the real estate tax rate by four cents in order to restore revenue lost to the effects of the recession.  Flat revenues and the impact of tolls on the City’s economy: We are experiencing flat revenues in our major sources of revenues, and the tunnel tolls are exasperating the matter.