Sean C. Morgan
With revenue expected to drop in the oncoming months, Sweet Home officials say they don’t expect cuts in service but they that the city will likely spend down its carryover.
Finance Director Pat Gray is forecasting significantly lower beginning fund balances, or carryover, for the 2011-12 fiscal year. The fiscal year runs from July 1 to June 30.
The general fund will be $1.3 million, down from $1.8 million in 2010-11.
The Police Department levy fund will be $548,000, down from $1.65 million, but approximately $600,000 of that reflects money set aside to pay off the general obligation bonds used to build the department’s new building 10 years ago.
The library levy will have a $12,899 beginning fund balance, down from $82,454.
“We’re using more of our carryover,” Gray said, noting that expenses are higher, and revenues are lower.
The city took a hit on property values in 2003-04, she said. The value of Foster Plywood and local utility infrastructure, such as Comcast’s, decreased that year.
“That was the last time we had a major reduction to our property values, and that had an impact on our levies,” Gray said. That resulted in shortfalls for both the library and Police Department.
The city used general fund money to maintain police services that year.
Real market property values have dipped again this year, from 2009-10 to 2010-11, she said. Sweet Home real market property values decreased from $518.7 million to $484.1 million.
But assessed values increased from $359 million to $367 million.
The $10 property tax limitation for general government is assessed against real market value, while the overall rate is calculated against assessed value, which is limited to 3 percent growth per year.
If taxes exceed $10 per $1,000 of real market value, then taxes are reduced to meet the limit. Taxes are reduced in local option levies first. Local option levies include the city library levy, the Police Department levy and the Linn County Law Levy. If those are reduced to zero, then permanent rates, such as the city’s basic tax rate, the county tax rate, the cemetery district and the Fire and Ambulance District are reduced until the limitation is met. The reduction is called “compression.”
Gray budgeted for $293,409 in police levy compression and $28,424 in library levy compres-sion. The actual amount of compression for 2010-11 is $458,507 in the police levy and $44,417 in the library levy, meaning the city is realizing lost revenue in the current fiscal year.
To balance its budget, the losses will be taken from the carryover at the end of the year, meaning the city will start the 2011-12 fiscal year with lower beginning fund balances.
The city always tries to maintain a good carryover, Gray said. It needs the carryover for cash flow in the first four months of the fiscal year to pay operating costs. The Police Department needs $593,000 to operate the first four months, while the library needs $66,000.
The Police Department’s projected carryover is close to that minimum, Gray said. The department seldom spends its entire budget, so she expects that it will have enough to cover cash flow requirements. The library will be shy some $54,000, based on current figures, so the city is imposing a freeze on spending in the library fund, which means no further book purchases this year.
Overall, in next year’s budget, the city will hold the line on service levels, she said. This year, the city’s general employees will not receive cost-of-living adjustments this year. Police employees are still in negotiations.
Next year, the city is anticipating a 15-percent increase for electrical service along with other expenses, such as retirement.
While the city is spending down its carryover this year, Gray sees some reason to be optimistic.
Foreclosures are selling, and liens are being cleared, she said, something that hasn’t been happening the past couple of years.
The city receives substantial revenue from the state and from franchise agreements as well as taxes.
State revenue sharing seems to be doing fine, Gray said. Cigarette tax revenue is at $14,000, $2,000 higher than budgeted. Liquor revenues will be $113,000, while the city budgeted for $127,000. Transient occupancy taxes are at $21,000, down from $26,000.
In franchise fees, CenturyLink is paying $26,000 this year instead of the budgeted $28,000. Pacific Power is at $250,000, $10,000 higher than expected. The city budgeted franchise fees of $100,000 from Northwest Natural, but actual fees will be $80,000.
Comcast and Sweet Home Sanitation are both expected to pay on budget, at $77,000 and $30,000 respectively.
Municipal Court revenues are $10,000 ahead of a budgeted $200,000.