Minutes 03/30/2015 - Laserfiche WebLink

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March 30, 2015 Alternatives to a Tax Rate Increase Spending Cuts As I noted early in this message, the alternative to a tax rate increase would be to reduce funding to the Schools and to cut City services. During the economic downturn that resulted from the Great Depression, the City repeatedly cut department budgets without adjusting service levels accordingly. Departments suffered as a result, even though the impacts of these cuts were not immediately visible to the public. In addition to cuts to operating budgets, positions were eliminated and left vacant, again without a corresponding reduction in service levels. These departments cannot perform their missions without having adequate resources. The impacts of these cuts were tangible, if not immediately obvious. These cuts affect the City’s bottom line, and show up in ways that cost us money – increased absenteeism, employee injuries, increased employee turnover and insufficient work flow. In order to “cut” our way out of the deficit, we would have to eliminate services and the positions that support them. In addition, some General Fund positions are revenue generating or State supported, such as Constitutional Offices, the Assessor’s office, Museums, Recreation, and Permits and Inspections. Moreover, half of the 1,252 General Fund positions are in Police and Fire. Positions in Constitutional Offices, Courts, the Registrar and Assessor’s offices represent 25% of the General Fund workforce. If you assume that cuts would not be made to either of these categories of positions, then that leaves 25% of our workforce. Assuming an average position cost of $50,000, we would have to eliminate 234 positions in the General Fund, or almost 75% of the remaining work force. In addition, cuts to some of those positions will result in lost revenue, which will in turn require further cuts. This would devastate the City’s ability to provide services and would create a downward spiral from which it would be difficult to recover. Another way to look at the impact of cuts is by discretionary versus nondiscretionary costs. Over 47% of the City’s budget is comprised of nondiscretionary costs, such as debt service, local contribution to the School system, the Annual Required Contribution to the City pension plans, and our cost of regional services such as the Jail and HRT. Constitutional offices, Courts and the Assessor and Registrar’s offices make up 11% of the budget. Public safety is 24% of the budget, and 2% comes from fund balance to pay for CIP and the debt service sinking fund. In total, these nondiscretionary and high priority service costs represent 84% of the total General Fund budget. In order to cut our way out of the $11.7 million shortfall, we would have to cut 30% of the remaining budget costs, and as noted above, many of those have revenues tied to them. One cut that City Council could consider is to reduce or eliminate tax relief for the elderly and disabled, which currently costs $1.7 million per year. However, I do not recommend this cut. Other Revenue Increases The City has few options for raising other revenues, particularly those that would generate millions of dollars. We could consider increasing the Personal Property tax rate, but that is a regressive tax that could disproportionately impact our most vulnerable residents. City Council increased the Cigarette Tax and the Motor Vehicle license fee last year. As noted earlier, this budget recommends some limited fee increases, but in total those will generate only around $100,000. Use of General Fund Balance This proposed budget eliminates the City’s dependence on the General Fund Balance for reoccurring operating expenses. The budget proposes to use $706,481 of Fund Balance to continue the debt service sinking fund, which partially funds a temporary increase in debt service costs between now and Fiscal Year 2021-2022. In addition, $3.9 million of fund balance is proposed to be used for one-time CIP expenditures.