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Financial Forecast: City On Track to Spend Down Fund Balance by 2017

Administration pledges to study ways to increase revenue, cut expenses and bring recommendations to city council.

The may deplete its fund balance by 2017 if the trend for expenditures exceeding revenues continues without change, according to a five-year financial forecast.   

"We're seeing a trend that obviously needs to be addressed," Director of Finance Kelly Vaughn said during a city council work session April 10. "We look like we're going to be on a pace that we're going to need to have discussions about going forward." 

In early 2012, the city expected to have a fund balance of $12.25 million at the end of the year, which is well above the goal of 20 percent. The anticipated expenditure in 2012 was $38.04 million and anticipated expenditure was $38.05 million. 

The expected revenue was revised to $38.47 million after the City Council in February approved an increase in the ambulance fees that people pay when they use city ambulance services. That increase is expected to bring in an additional $700,000 in 2012. 

By 2017, the fund balance is projected to drop to -$131,954, with anticipated revenue of $43.1 million and expenditure of $47.6 million. 

Vaughn cautioned that the five-year forecast is a tool that can change based on different factors and performance. She said the further out you go, the less accurate it is. 

She said the city will have to keep a close eye on the 2012 budget to make sure there is enough revenue to cover expenditures. 

"Clearly we've got a wreck coming," Council Vice President Dave Beckering, Ward-7, said. "All you've got to do is compare the top line and the bottom line, revenues and expenses. We cannot continue down that line." 

City Administrator Michael Spurgeon said the city administration and council would have to make some hard decisions. He said they would begin looking at options for cutting expenditures and raising revenue and come back with recommendations. 

Five year projection assumptions: 

Revenue 

  • Telephone revenue is down $800,00 because wireless companies did not submit taxes related to data plan services. Going forward, the tax revenue is expected to grow slowly at 2 percent a year.
  • Local sales taxes were 4.5 percent higher than expected in 201. 
  • Cigarette tax revenue has been declining and is expected to continue to decline.
  • Gaming revenue was down 5 percent last year and it's expected to decline a further 3.8 percent in 2012 because of the bridge closure.
  • Court revenue is expected to be down this year. 
  • Ambulance fees are expected to be up significantly since hte coity council approved a 

Expenditures

  •  Salaries and wages will grow at 2.5 percent annually for employees. Salaries and wages for fire, police and Local 1489 represented employees are expected to grow 3.5 percent annually.
  • Health insurance is expected to increase 10 percent. 

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