Some Corning revenues may be threatened

While Corning City Manager John Brewer was pleased to announce during Tuesday's City Council meeting that sales tax revenues were up in the second quarter, he was not so pleased to explain that revenues from fuel sales tax are down.

Mayor Gary Strack said he wanted to make it understood the "City Council has been saying how rosy everything is and how great a job city staff and City Council has done to get us to this point, and we have, but we have come to some bumps in the road."

Brewer reported sales tax was up in most categories over the second quarter of the 2011-12 fiscal year, but sales tax receipts show a 5.6 percent reduction in the fuel category.

"We are reliant on fuel sales," Brewer said. "Gas and diesel are big ticket items for the city of Corning."

Fuel sales account for 61 percent of the city's sales tax revenue, with the three travel centers at the South Avenue truck stop interchange making up the lion's share of that category, Brewer explained.

"We noted the other day that there is work going on at two of the travel centers, and possibly a third one may have work coming in the future," he said.

The work consists of fuel line and dispenser replacement at Travel America and Petro, both under the same ownership.

"The projects encompass both the gasoline and diesel fuel islands," Brewer said. "Many of the fuel aisles are temporarily closed during the construction."

Some of the work is related to an additive, Diesel Exhaust Fluid, that the state is requiring for diesel engines.

John Richards of Walberg Construction, which is working on the project, said the Petro construction is going well and should be complete soon, but the Travel America work has run into snags and its completion date is unknown.

He said Love's truck stop will be starting the same type of projects soon.

"Some of the loss in fuel sales may be mitigated by the higher cost of fuel," Brewer said.

Third quarter losses in fuel sales revenues won't be reported until January.

"But we should anticipate a reduction in our sales tax revenue for the current quarter as well," said the city manager.

Brewer also reported the city is not receiving the $210,000 in misallocated sales tax revenue it has been seeking since 2010.

According to Brewer, the state inaccurately allocated the funds to Butte County, which has been notified of the mistake and now has 30 days to appeal the decision to redirect the funds.

In anticipation of receiving the funds in a timely manner, the council approved including the $210,000 in the 2012-13 budget.

In addition, the city's sales tax consultant, Hinderliter deLamas, is requesting 15 percent of the funds for helping present the claim to the state Board of Equalization.

With these two sales tax issues on record, Brewer presented the council with revised budget figures.

"That means we'd need to utilize $102,000 of our overall general fund reserves in order to balance the current budget," Brewer said. "That would cause our total general fund reserves for the next fiscal year to dip below the $800,000 operating reserve threshold to $775,000. That is not desirable."

Despite this news, Brewer said he is not convinced it is time to overreact.

"I believe we should proceed with our plan to end (employee) furloughs or otherwise fulfill our planned personnel changes," Brewer said. "But we should be careful not to take on additional fiscal obligations."

The council previously approved taking all city employees off the 10 percent salary reduction furlough plan at the end of December.