I sent my questions over to Al Hudzik yesterday as he is the one putting the budget together along with Linda Sharp. I have a hard time understanding how the city can project the revenue they are when all signs point to similar cash flow to the year we are just finishing up.
My questions in black, Al's answers in blue.
I have looked at this a few times and I see where the money can be made up if this occurs and expenses need to be wrangled in to stay in the black but wouldn't the budget be "more real" & "worst case scenario"if we showed up front with a negative income right below the positive for the arrearage figures the state owes us for the same amount. I understand we need to show the money owed somewhere but realistically that money will not be flowing into the city in the next year, or ever for that matter.
It’s difficult to show a worst case scenario by indicating that you feel some of the projected revenues are not going to be received (even if there is a 50-50 chance of that being the case), because you would then have to make a similar calculation on the reduction of expenses put in the budget that you don’t feel will be spent (e.g. total amount of legal fees) – in order to be able to spend funds, the expense items must appear in the budget; however, steps can be taken throughout the year to reduce the expenses (as necessary) if the income reflected is not received. Additionally, our goal was to show a cash balance at year end greater than or equal to the $288,000 state income tax arrearage – the Draft Budget falls a little short, but other adjustments are being made to meet that goal.
I believe you mentioned the budget reflects $77 a resident for funding from the state. Should we be taking into account that the state will miss at a minimum 3-4 payments? Nothing over the last year has showed us they can or will provide what is owed to us. This would be another (-$250,000) depending on what months the state decides to keep what is owed to us.
I feel there’s a possibility that the state may fall farther behind than the current 4 mos., however, there’s no way to tell; therefore, I wouldn’t know how to estimate the arrearage we are going to see – as stated above, expenses will have to be controlled throughout the year based upon the income we see coming in.
On the same issue should the city figure anything in for the decline in funding the state is proposing to the municipalities in regards to income tax? The reduction from the municipalities share of 10% down to 7%. Again I am not sure when this would take place in regards to them passing a budget but should we take this into account? As the state really has no backup plan and if this reduction do not take place then I feel the missed payments mentioned above would most definitely continue, either case would be a large reduction in revenue, I fear both will happen.
There’s no way to tell what steps the state legislature will take in the matter of the governor’s request on the reduction of the state income tax receipts to the cities – this would take legislative action and is not something the Governor can implement without the legislature; additionally, there’s a possibility that the state will increase its income tax rates (both individual and corporate), and if so, the reduction the governor mentioned in his budget speech may be reduced/alleviated depending on whether the cities receive a portion of the funds attributable to the income tax rate increase.
In regards to the revolving loan fund, I noticed Bon Vivant was listed, I believe this was some improvement work to the facade of the building or it was in a main street improvement program and since the store is no longer there I wondered what the status of that would be. I have nothing against the uses of these funds to help our local businesses, just trying to see what their status would be.
Bon Vivant is current on its loan and it was a topic discussed at a meeting held this morning – this issue will be reviewed and addressed, and I’m sure whatever funds are due the city will be repaid.
Could the city prioritize the capitol development plans in terms of streets and infrastructure plans for the next few years so when they need to be scaled back or cut the community, the council, and the streets department knows what stays and what goes in order of importance and not just what people want at the time.
I feel the capital development plans suggestion is a good one and will try to work on it, however, one thing to keep in mind is that elections are held every two years and the priorities of different councils may change with the election results.
In general I feel Al gave some good responses. I still have an issue with projecting more revenue than anyone can realistically expect.
No comments:
Post a Comment