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Council Gets Peek At Budget Projections

City Council got a dose of economic reality when they listened to Deputy City Manager Mark Jinks and budget director Bruce Johnson give city spending and revenue projections for FY2005 at last week's meeting at City Hall.

“On the national level, jobs are increasing; inflation is at about two percent; productivity is a positive 8.3 percent; consumer confidence is at 91.5percent and mortgage rates are increasing,” Jinks said. “It is still a good time to sell a house and borrow money.”

On the state level, sales and withholding revenues are up five percent; job growth usually outperforms the national rate and state funding needs result in a $1.2 billion shortfall. “This means that we can expect no increases and possibly some decreases in current levels of funding from the state,” Jinks said.

As for the city’s revenue picture, the unemployment rate is at 2.5 percent; jobs are increasing; the office vacancy rate is at 10.8 percent; home sales volume is level and hotel occupancy levels are down to 65 percent.

“Once again, most of our revenue will come from real property tax,” Jinks said. Around 30 percent will come from residential property tax and about 21.6 percent from commercial property taxes. About 11.5 percent will come from intergovernmental transfers, mostly from the state. About 8.1 percent will come from personal property tax and the rest will be derived from sources such as business licenses, utility tax, user fees, etc.

REAL ESTATE growth is based on trends to date. Single family home assessments are up by 11 percent; condominium assessments are up by 18percent; commercial property assessments have increased by seven percent and new construction has increased by 1.8 percent.

“In general, we can expect a growth of a little less than six percent in general fund revenue or a total of $22.9 million,” Jinks said.

The expenditure side of the budget has challenges. The current city budget is $398 million. “Each one percent increase will cost $4 million,” Johnson said. “Maintaining current staff services and policies will require a significant increase in spending as costs increase. Unless the budget is cut, funding new initiatives will require more than a 7.2 percent increase in revenue.”

To maintain that current level of services will require an additional $28.5 million and revenue growth is only projected at $22.9 million, leaving a shortfall of $5.6 million.

The largest expenditure is employee salaries at 55 percent of the total operating budget. Employee benefits account for an additional 16 percent of the budget, leaving every other operating category plus debt service at 29 percent of the total budget. A cost of living increase of 2.8 percent and merit increases will account for $16.4 million of the projected increase in expenditures. An additional $2 million will be required to pay for increased health benefit costs and an additional $4.8 million will be required to pay increased retirement costs.

OTHER PROJECTED increases include $2.3 million to fund services under the Comprehensive Services Act; $2 million increase in the cost of debt service and $1 million for transit subsidies.

“It is clear that we are going to have some challenges ahead,” said Mayor William D. Euille. “Everyone should keep that in mind as we begin to think about next year’s budget.”