City budget faces $843,000 shortfall

October 7, 2008

By Jim Feehan

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Slowing home construction, rising fuel prices and a sluggish economy have punched an $843,000 hole in the city’s revenue projection for the year.

Revenue for the first half of 2008 has fallen below budget projections and the forecast shows the pattern continuing into 2009. The year-end revenue collection is estimated to be $6.7 million dollars from a $7.6 million budget, said Christine Olson, budget manager.

“It’s way worse than I thought,” she said during a presentation to the City Council at its Sept. 2 meeting.

Going into this year, city officials expected to have to take $56,000 from reserve funds. With the current forecast, the estimated draw down of reserves is going to be about $224,000, Olson said. 

In the listless economy, residents are not buying as much, contributing to a decline in retail sales tax. Roughly $982,000 was collected in local retail sales tax in 2007. About $924,000 is estimated to be collected by the end of this year — a 6 percent drop.

A decline in home construction and the downturn in the real estate market contributed to the bleak revenue picture. In addition, the city no longer has significant land for major development as in years past, Olson said. 

The city relies heavily on property taxes and development-related fees. The lion’s share comes from permits from land-use planning and construction, and sales tax receipts from home sales.

There were no single-family permits issued in May and only eight in the first five months of this year. By comparison, 113 single-family permits were issued in 2005, when the Reserve subdivision was built, and 79 permits were issued the following year, when the Ridgewood subdivision was constructed.

Revenue was down in three categories — building and other permits by $265,000, development review fees by $270,000 and interest earnings by $292,000.

Several options are being considered to help close the gap, including reducing the travel and training budget for city employees; eliminating one or more city staff positions; increasing permit fees; raising property taxes; and establishing a utility tax.

In 1999, the City Council passed a 6 percent utility tax, which would have applied to cable, phone service, gas and electricity. The measure passed 4-3 with Sonny Putter, Jean Garber, Stuart Liddle and Claudia Scrivanich voting in favor of the tax. John Dulcich, Pam Lee and then-Mayor Gary Adams dissented.

Adams said that passing the tax without notifying the public was like “passing the pay raise at midnight.”

The action brought outrage — residents circulated petitions and the council repealed the tax before it was enacted.

At the study session last month to discuss the budget, Mayor Ben Varon offered another suggestion.

“It’s time to think outside the box,” he said. “How about closing City Hall for a day and have employees work four 10-hour days?”

Last month, Gov. Chris Gregoire asked a few hundred state employees to start working four-day weeks as part of a pilot project. Earlier this year, the state of Utah went to a four-day, 10-hour-per-day workweek for most employees.

City Councilman Steve Buri said he wasn’t surprised by the budget projection. 

“Any discussion of cutting expenses or raising revenues needs to be discussed in public,” he said. “There needs to be an open process on both sides of the ledger.”

The council will hold its next Town Hall meeting at 7 p.m. Oct. 28 at Newcastle Elementary School, 8400 136th Ave. S.E. Earlier this year, the council held a Town Hall meeting at Hazelwood Elementary School.

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