Reserves will be needed for projects

While residents scratch their heads and wonder how they can cut back on spending, city officials did the same thing March 20.

Mayor Troy Childers Sr., aldermen and some department heads met at City Hall that Saturday morning for their annual budget session.

Reserves will be needed for projects

While residents scratch their heads and wonder how they can cut back on spending, city officials did the same thing March 20.

Mayor Troy Childers Sr., aldermen and some department heads met at City Hall that Saturday morning for their annual budget session.

Office manager Denise Passage ran the PowerPoint presentation showing figures of revenue and expenditures, plus projects for each department.

The city’s projected income for the fiscal year, which begins May 1 through April 31, 2011, is $1.39 million for the general fund, which is a decrease from the previous year’s $1.57 million.

The projected decrease, she told those in attendance, is due to income tax.

As residents lose jobs, the city also loses income tax revenue. Additionally, residents tighten their spending, cutting into sales tax figures.

Gov. Pat Quinn also proposed decreasing municipalities’ share of the income tax revenue from 10 percent to 7 percent as well, but that was not figured into the budget.

“If it passes, then we’ll be back here,” said Passage.

The state also is behind four months in paying income tax to the city.

Sales tax is down about $50,000, but property taxes are up about $81,000.

While talking about sales tax, Passage addressed a misconception of residents about Summer Camp and sales tax.

“We hear a lot, ‘Well, you should get a lot of revenue for Summer Camp.’”

Historically, she said, the month of May is a little higher for sales tax revenue, but not a substantial amount.

She said the combination of Summer Camp, Claud-Elen Days and graduation promotes traffic in and out of town.

Passage also noted the state is not behind in paying out sales tax money due to the city.

Officials also anticipate about $23,000 that the entertainment tax will generate in its first year. The tax recently was passed for events with tickets of more than $50. Currently, Summer Camp at Three Sisters Park is the only event which the tax affects.

The telecommunication/simplified tax is down slightly as well at $281,000. Passage explained that as more people use cellular phones, the tax will decline.

“If you compare projected expenses, $2.1 million to income, if we didn’t have a reserve, we would be in dire straits,” said Passage about the city’s total revenue of $1.78 million. “But, since we have a reserve, we should come out next year, if everybody spends everything, with a net operating, cash balance carryover of $1.6 million.”
General fund expenses
Passage said the main reason for the increase of expenses is due to labor and benefits.

But, in the public works department, two employees plan to retire in April and September.

Their leaving, she said, offers the city “flexibility” not available in recent times, as officials could decide to either not replace them or go to part-time workers. One person not on insurance saves the city $12,500 per year, she said.

Chillicothe Police Chief Steve Maurer cautioned the council on not replacing employees, as the city has kept staffing the same for more than 20 years.

“You’re taking away from the taxpayers what they deserve,” said Maurer about the staff who perform the daily functions of the city.

Public works committee chairman Denny Gould said the department already is stretched thin, but looking at schools and other municipalities, everyone is making do with less.

Passage said officials cut $70,000 of operating funds and noted that both operations and staff are at “bare bones.”
General fund projects
Maurer suggested cutting out projects, but Passage noted that projects are not included in the city’s budget.

They are approved by the council on a case-by-case basis, and any approved, based on the proposed budget, will need reserve funds.

“Most of the projects — $77,000 of those projects — is within the road and bridge (fund) to show the citizens that we are still trying to do what we’re supposed to do,” said Passage about Priority 1 projects. “We are still planning on putting the sidewalk program in, we’re doing drainage improvements, alley improvements, there’s some maintenance on the mosquito sprayer ...”

The list of possible projects are prioritized by numbers one, two and three. Generally speaking, Priority 1 projects are ones officials probably will approve during the current fiscal budget, with two being next year’s fiscal budget and three the next year.

Priority 1 projects add up to $130,000, followed by Priority 2 at $195,000 and Priority 3 at $221,000.

Some items, such as the elevator for City Hall and a building code inspector, may not come to
fruition, but are kept on the project list as Priority 3 possibilities.
Water/sewer fund
Separate from the city’s general fund, the city’s water service is in a $105,000 deficit for 2010-11, of which reserve money will be needed.

The council approved a water rate increase two years ago, keeping in mind at that time, Passage said, the increase would hold the city over for two years.

Passage told the aldermen they needed to seriously consider raising water rates, calling it “inevitable.” A flat increase is expected of $2 to $5. That money could then be used half for operating and half for reserves, which would assist in replacing the old water meters with radio read meters, she said.

Twelve radio read meters are being tested currently. If approved by council, the old meters could be switched out in phases to avoid the city spending a lot of money at once. The radio read meters, from what officials have said, seem to give more accurate readings, allow the meter reader not to have to write down each read, assist in determining leaks and can even tell residents when they have high usage.

A hand-held device will cost $6,000, along with software updates. In the projects for the water/sewer fund is $20,000 for meter replacement.

Childers said some meters need to be replaced anyway, so some of the cost may be a wash.
Budget recap
“In the end, the budget recap looks good,” said Passage. “The city is in good shape, but if you did not have your cash carryover and you’re not prudent in cutting and watching your expenses in a few years out, you could be in a disaster situation where you have not enough income to fund your expenses.”

The budget will be presented to the council at the April 12 meeting.