Corning manager: City must take lean fiscal path
City Manager John Brewer said the city must travel a "very conservative," road during a the mid-year budget review on Tuesday.
Brewer explained that the "heart" of the mid-year review is the 2012-13 General Fund budget.
"We projected to receive General Fund revenues of $4,602,188 this year. At the same time we expected to expend $5,010,198," the city manager said. "So, we'll spend $408,010 more than we take in this year."
He said that was anticipated and the difference would be covered through extra revenue from the prior year's budget.
"Now, if we take that amount ($408,010) from the carryover of $497,566, it leaves us with a current General Fund balance of $89,566," Brewer explained.
Problem is, that balance amount is half of what city staff projected in the budget staff report presented in June, thus Brewer's advise to be "very conservative with expenditures at this point."
"As long was we don't get really wild, we'll end up in good shape. It is fuel sales that bothers me a lot," he said.
Brewer was referring to the downward trend the city is seeing in fuel sales and the revenues from those sales.
"While fuel sales statewide continued to increase modestly ... here in Corning the sales trend was 5.7 percent downward. We're still unsure about what's responsible for that trend," he said. "It's an important matter, since fuel sales tax typically amount to over 61 percent of the sales tax revenue for the City of Corning."
Other tax revenues, such as transient occupancy tax, property tax, and vehicle license fees, all seem to be "right on target," Brewer told the council, with the exception of the building permit and plan check fees.
"Those two items are expected to generate $50,000 in revenue. To date, they've generated only $10,080, well below that expected at mid-year. There is simply very little development occurring at this point, and we should expect budget shortfalls in those categories in the neighborhood of about $30,000 to $35,000," he said.
In the area of utility (sewer and water) fund revenues, Brewer said things are great in the short-term, but he anticipates a budget shortfall in the long-term.
Speaking of the 2005 Waste Water Treatment Plant expansion, he said the original plan was to fund the debt repayment through the collection of development impact fees.
"There is very little development occurring in this economy. So, we must supplement the development impact fees with revenue from the sewer collection fees," Brewer explained.
This year the city is spending $220,000 to pay the debt.
Brewer believes the city will need to extend its sewer increase fees program and up the annual fee increase from 3 percent to 5 percent.
"At that annual rate of increase, the Waste Water Treatment Plant debt load can be covered and annual net income will remain positive," he said.
The city's largest single expense is employee wages and benefits, said the city manager.
The General Fund is the greatest source of personnel cost funding, contributing $3.2 million, or 81.6 percent of the total for this fiscal year.
A few significant projects and purchases the city has undertaken with this year's budget, include restoring the operating reserves to a pre-recession level, paying off the Airport Improvement "loan" taken from its development impact fees, and paving nearly a mile of Solano Street.
"In summary, some revenues are up a little, and some down a bit," Brewer said. "Expenditures are near what we projected when the budget was approved. Overall, barring any catastrophic event or condition, we believe we will finish the fiscal year without the need to raid our $800,000 operating reserve, and be positively positioned to go into next year."