City Braces For Projected ‘$24 Million’ Shortfall
City staff is predicting a $24 million shortfall in tax revenues over the next 16 months, but are awaiting actual numbers from business and sales tax through the month of March to confirm the shortfall.
“The (predicted) losses are kind of across the board,” said City Manager Rod Wood. “They will initially be across the business sector: sales, hotel and business license taxes.”
Wood also predicts if the economy continues to decline, people will file for reductions in property taxes.
“This has not started, but if the recession goes on for the rest of 2009, my guess is people will file for reductions,” said Wood. “Not this coming fiscal year but the next there will be a decline in property tax.”
This represents a 15 percent loss from the City’s general fund, affecting every department aside from police and fire, said Wood.
Because police and fire represent almost 50 percent of the City’s budget, this decline in revenue will mean a 30 percent loss in every other department, he stated.
Wood has asked each department head to draft a 20 percent reduction plan that he will present to the Council.
“The goal is to have the least amount of impact on core services,” he said. “The City Council will balance (the plans) out with the different interests of the community.”
Wood is proposing using some of the City’s $54 million in reserves to create a “glide path” to reduce services, in hopes to soften the direct impact on citizens.
He assured using the reserves would not affect the City’s AAA bond rating.
“If we come up with a proactive plan we will get extra points by acting in a fiscally responsible way,” said Wood. “We will maintain our AAA ratings as long as we adopt a rational plan.”
The City has already been preparing for the decrease by “belt tightening” and slowing the process of filing vacant positions in the City’s staff, explained City spokeswoman Cheryl Burnett.
In January, the City Council directed Wood not to impose a hiring freeze across the board. When sales numbers are received at the end of March, Wood said the City Council will look at the recommendations of the department heads.
At this time, they can change the City’s priorities, and decide not to fill a vacant position.
As people retire, some positions will transition out, and Wood said he intends to recommend backfilling to avoid layoffs.
“I have worked aggressively to avoid layoffs,” said Wood.
In his 38 year career, including working through five recessions, Wood said he has been able to prevent layoffs. He has done so by moving people to different positions for temporary reassignments.
Wood also sad there will be “no reduction in salaries.”
“Most are locked in by contracts,” said Wood. “The City Council does not have the right to reduce, unless unions agrees. If it gets bad, which we are not there yet, we can do furloughs. Let’s say a position in the library becomes vacant, and we don’t need a City planner. I can transfer that City planner to the library position. So then we can get the services met and we have still retained a City planner when the economy turns around.”
All staff recommendations would be evaluated in open council sessions and decided upon by the council, said Burnett.