Presentations contained no good news Aug. 26 as staff presented the city council with data for use in developing the 2014 budget.
“We expect to meet or exceed budget forecasts for 2013,” City Manager Gary Sears said as he opened the budget presentation. “For next year, sales and use taxes, one of the major sources of revenue, the estimate is those revenues will increase about 2.4 percent, based on inflation and new development. But we are facing challenges balancing the budget because we know we have higher costs for health insurance, contract-approved wage increases, increased pension obligations and increases in general operating expenses.”
He added that, without increased growth or new revenue sources, Englewood’s ability to provide responsive and quality day-to-day services and to meet capital improvement requirements continues to be difficult.
No decisions were made Aug. 26, but additional budget discussions with the council are scheduled Sept. 3 and Sept. 9. The council will hold the public hearing on the proposed budget on Sept. 16, and the annual council budget workshop is scheduled for Sept. 23.
The general fund is the money the city uses to pay the cost of day-to-day operations and is one of the largest portions of the city’s total budget. In the preliminary 2014 general fund budget proposal, total sources of funds are estimated to be $40,714,232, while the city’s total use of funds is forecast to be $42,303,936.
As the discussion began, Councilmember Rick Gillit said he was concerned because the proposed 2014 budget for the general fund estimates that city spending will exceed revenues by about $1.6 million.
“That is a big number and we need to see how to reduce it,” he said.
Mayor Randy Penn said the council has dealt with forecast shortfalls in each of the last few years. He said that, at this time last year, the forecast was that the city would spend $900,000 more than it received in revenues. Now, the forecast difference has been downgraded to about $400,000.
“The shortfall was $900,000 and now is $400,000, but there is still a shortfall,” Gillit said. “We are required to have a balanced budget so the shortfall must be made up. It can’t be ignored.”
Sears said there is no easy answer on how to eliminate the shortfall. He said, for example, to make up the $400,000 requires shortfall in this year’s general fund budget would require a 1 percent spending reduction. He said the city also faces challenge in the effort to establish a balanced budget for 2014. He said, again, there are no simple fixes to deal with forecast city finances.
To balance the budget, the basic choice facing the city is increasing revenues or reducing spending. The general agreement is that there are no new revenue sources available unless the residents approve increasing taxes. The other choice is determining how the city can reduce spending.
“The council can choose courses of action such as postponing projects, freezing salaries, requiring unpaid furlough days or laying off employees,” the city manager said. “For example, to balance the 2014 budget, it would mean eliminating the jobs of seven to 10 employees. But each of those employees is involved in service to residents, and letting those people go means it would be very difficult to maintain the same service level for residents.”
Sears said one suggestion is to ask voters to approve a property tax increase. He said the annual lease payment on the Englewood Civic Center buildings is $1.5 million and there is still 10 years on the debt. He said the council may consider seeking a voter-approved tax increase to cover the lease payment each year. Voter approval would mean about $1.5 million available to support the city’s operating budget.
After the director of each department presented his or her proposals, the council discussed possible courses of action.
Mayor Pro Tem Jim Woodward said the city reserves are now about 8.2 percent and he would like to see that raised by about 1 percent. Councilmembers Gillit and Joe Jefferson agreed.
Councilmember Bob McCaslin said the level of city reserves is a choice, and the council needed to draw on reserves or ask voters to raise taxes if they want Englewood to remain a full-service city.
Penn said he also thought the voters should be asked to approve a tax increase.
“We need to let people know the tax increase is essential if the city is to maintain its current level of services,” he said. “We need to put the situation to the residents that way and let their votes tell us what service level they want.”