A Budget “Heads-up” 

I stated this article more times than I am willing to admit.  I finally decided to call it a “heads-up”!  You may have used that term, maybe not.  To me it means I want to tell you about something you need to know but it may not happen, but if it does you need to be prepared.  Let me explain, hopefully I will provide sufficient enough information for you to either; ask questions, talk to your alderperson, come to council meetings or all of the above.  The City has been running a budget deficit for the last five years (annually from $50,000 to $104,000).  Realizing this trend cannot continue, the City Council is starting early this year to review our revenues and expenses for the 2008-2009 budget.  Our fiscal year is July 1 to June 30.  

First, what’s happened these last five years?  There are many details, obviously, so let me stay with the major events with the understanding that details will be available to you now at City Hall and/or later as the council studies and recommends actions. 

REVENUES 

Our biggest source of revenues (40% of our total) comes from the state sales tax distributed to counties and cities by the state.  From 2002 through 2006, this revenue source has been less than its previous year or flat; therefore, our total revenues were virtually flat for this period.  

Because we had a surplus built up before 2003, we have been able to sustain ourselves.  And today our surplus in DC’s is approximately $500,000.  Not only has the surplus allowed us to cover our deficit, but also the interest income has contributed to the revenue total.  

Property tax revenues are flat; remember in last month’s article, I explained we do not receive additional revenues from the recent reassessment of property.  State law requires us to roll our tax rate back to receive the same level of property tax revenues as before the assessment.  

EXPENSES 

Our biggest annual expenses are Police $383,808 and Sanitation $372,368, totaling $756,176.  This is 76% of our total expense budget of $988,373.  Our current police contract with St. Louis County is saving us $25,000 over the Ballwin proposal for 2008.  Our new sanitation contract was $102,000 less than the bid from our previous hauler.  These are examples of our actions to ‘holding down’ those expenses we can control.  Our lawsuit against MoDOT to stop the sound walls along Clarkson Road cost us approximately $55,000 last year.  These costs were not anticipated to be this high, but the courts continue to ask for more information without a decision.  We have been anticipating a decision since early 2007.  The main point on expenses is we feel we are getting the most “bang for our buck”.  However, health insurance for our employees (2) and liability insurance for the City employees, Mayor and council members, continues to climb, near 20% a year.  Recent upgrades in our traffic fees software will soon require a new computer, etc. 

WHAT’S THE BOTTOM LINE? 

  1. We are reviewing all aspects and, to date, we have not found additional revenue sources for the foreseeable future without a tax increase.  However, we’ll continue to explore.
  1. Even with no additional legal action, expenses will increase; i.e. sanitation next year.  Our contract with the County Police will decrease slightly, in 2008-2009 but certainly will increase in 2009-2010.  Employee health care and insurance will increase each year and there are no indications of any future leveling off.
  1. Can/should we continue with a deficit of $60,000 or more a year reducing the surplus to a smaller amount before taking action on the revenue side.

OR

  1. Can we cut services like one sanitation pickup a week or no back door pickup or both?

OR 

  1. Do we look at a tax increase of some type to maintain services?

These are some alternatives, not necessarily all that your council will be addressing during the first quarter this year.  As your Mayor, my preliminary recommendation to address this problem is to increase our current property tax rate from .103 to .203 per $100 valuation.  Let me explain why and then why it’s preliminary.  Why a property tax increase?  Your residential real estate tax rate includes 15 taxing authorities (refer to the December 2007 Mayor’s Corner), i.e. school districts, County, zoo, library, fire district, etc. and Clarkson Valley.  The 2007 total rate is 7.0561 per $100 assessed value.  Meaning a $500,000 home’s taxes for 2007 would be $6,703.30 and Clarkson Valley’s portion would be $97.85.  Our current rate of .103 is included in the 7.`0561.  Clarkson Valley has not had a tax increase since inception.  As a matter of fact, when Susan Shea and I came on the Board in 1987, we were able to cut the tax rate from .250 to .150 and subsequent Councils reduced the tax rate to .100 in 1992 and increased it to .140 in 2000 and because of state law, it has digressed to its present level.  This increase makes .203 a new ceiling for your taxes.  And it would result in an increase of City revenues by approximately $100,000.  The big advantage of having a ceiling is the Council’s ability to better track expenses with revenues.  Just as other Councils have done, reductions in the rate can be made in the appropriate years.  I believe this Council, as in previous Councils, is committed to administering such a tax ceiling.  Using our $500,000 home example, the increase would only be $98.00.

Why preliminary recommendation?  The reasons are: 1) we need to hear from you, 2) more discussion with the Council is needed, 3) I also need more time to complete an in-depth review, and 4) there are always legal issues to resolve before taking any action. 

This is a real Heads-up!