Guiding Expectations

Guiding Expectations

City Council adopts a resolution forcing city manager to keep current tax rate.

Don’t touch the tax rate. That was the sentiment of City Council members, who adopted a resolution formalizing the guidance to City Manager Jim Hartmann in a unanimous vote Tuesday night. The move represents a break from previous years, when members of City Council set "budget targets" limiting the percentage of growth when compared to the previous year’s spending.

Budget officials claim that keeping the current tax rate this year would produce a budget of $537.2 million, which would represent a 3.4-percent growth over last year. Although Tuesday night’s resolution did set a cap of 5-percent growth, the city manager would have to find new sources of revenue to accomplish that kind of spending without raising the current real-estate tax rate beyond the current rate of 81.5 cents for every $100 of assessed value. After discussing the various options, members of the city council were quick to point that out.

"There is no suitcase full of money in the basement of City Hall," said Vice Mayor Del Pepper. "So this is going to be one whale of a challenge."

With real-estate assessments expected to show a second year of stagnation, budget officials are bracing themselves for a challenging year. Residential property taxes are the city’s top source of income, representing more than 30 percent of revenue for the overall General Fund. So holding the tax rate at its current level will produce $369 million on the city side, which would be a 2.7 percent growth, and $168.2 million for the school system, which would be a 5 percent growth over last year. Although the city manager will be required to stick to the current tax rate, members of the City Council could decide to raise it when they take a final vote in February.

"If a tax increase become necessary, it will be very transparent as to why we would need it," said Councilman Justin Wilson. "This resolution starts us off with a bias that we’re not going to contemplate an increase in the tax rate."

RECENT YEARS have seen a trend toward more fiscal restraint at City Hall, a counterbalance to tremendous growth in revenue that coincided with a booming housing market and spiraling real-estate assessments. In 2006 — just as the boom was coming to a close — City Council members unveiled a new process that set a targeted range for spending requiring the city manager to set a budget somewhere between 6 percent growth and 8.5 percent. In the end, council members voted for a 5.5-percent increase — a budget that was within the target, yet some critics said that the process was too vague.

"Everybody’s lost the stomach for two targets, so now we have just one," said Councilman Tim Lovain. "Although there were aspects of that approach that I liked, I can understand the argument against having two targets because it made the city manager come up with two separate budgets."

Last year’s target was more specific, holding the spending increase to 2.3-percent growth. But City Council members abandoned the target and increased spending 5.2, raising the tax rate to pay for the increased spending. The increased specificity brought its own hazards, and City Council members were criticized for relinquishing the goal they had set for themselves. This year, council members sought to manage expectations.

"The council’s targets or guidance — whatever you want to call it — has never been designed as a tool to predict somehow six months ahead of time what the final budget would be," said Councilman Rob Krupicka. "We’re not trying to play Karnac the Magnificent here."