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Saturday, July 2, 2022
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2011 City Budget Preparation

By Councilman Bill Summers

The new proposed city budget review is underway.  I thought I would pass on a few highlights thus far.

It is not uncommon for it to take 12 to 18 months or longer to close out a fiscal year.  Part of this due to the city being repaid for work it does by the state or federal government due to grant payments or reimbursements.  Often the city is promised a future payment if it goes ahead and does the work today.  While this means the city has to take the financial burden upon itself to get projects done, it does eventually get paid back.  Also, the city does not always get the property taxes it should within the normal budget year.  Late payments, with interest or settlement of delinquent taxes come after the regular budget cycle is closed.  In other cases the city may be competing for a grant that requires the city to provide a partial match that may be 10-20% or more to compete.  The city will budget that money, but in the end may not win/receive the grant.  The unused money from the grant effort returns to the city fund at the end of the year or after official notification that the grant will not be received.  However, this adds or reduces the budget projections and expectations.

However, funds or financial gains are credited to the proper year as they are received.  Thus, it has not been uncommon the last few years to wind up a balanced or surplus budget once all the money is in.  This turns out to be the case for 2008 and 2009.  This is possible only through the diligence of our city finance department and the assistance of all other city departments in their spending.

In 2008, we closed the year with a net surplus of $111,623 and a fund balance of $21, 343,463 on a final spending budget of $64,118,333.  Remember the fund balance is used to make up for shortfalls in either real time budgets or future proposed budgets.

The city has had a history of keeping large reserve budgets.  Until last year (2009) we had maintained reserve balances of 22%.   A good size reserve helps the city with getting lower interest rates on bonds and other borrowed money, but it also hamstrings the city in not using money it has on hand for needs of the community.  The city really needs to maintain a balance that allows the city to cover it debts in months where income from taxes and other revenue sources are lean or for emergencies.  The current balance the city strives to maintain is now 20%.  Even that may be a bit high.  It has been said that a reserve fund balance as low as 18% would maintain our bond ratings and meet monthly city needs.  However, it does cause our finance director to eat additional Tums and aspirin, as a higher fund balance is always better in their viewpoint.

The final numbers for the 2009 budget show that the city had a net surplus in its budget of $477,796.  The ending fund balance for 2009 was $21,821,259 on a final spending budget of $64,889,947.  The original proposed budget in 2009 had a deficit of almost $4.7 million.  As we prepared for the 2010 budget last year, the numbers showed that FY 2009 deficit has shrunk to less then $1.5 million.  In the end we had a net surplus.

As we head into the end of the 2010 budget, the original budget was forecasting a deficit of  $4,382,147 million, with a reserve of  $17, 439,112 based on a budget of $71,644,164.  As of today, the projected deficit is down to $1.8 million on a budget of $69,569,080.  The fund balance is pegged at $20,017,316.  If 2008 and 2009 were indicators, the deficit in 2010 will shrink more, perhaps close to another surplus.

The 2011 budget we are studying now is calling for a budget of $71,533,714.  The deficit is projected at $4,553,217 and the fund balance will be $15,464,099.  To maintain a 20% fund balance at this budget amount would require $14,306743.

We are looking at each individual department budgets, along with personnel requests and capital project outlays.  There appears to be some items that need to be added to the budget due to late developments.  For example, money to update the East-West Corridor will need to be included.  It appears that amount will be in the area of $40,000.  Another example is the purchase and installation of a blinking yellow warning light at a dangerous Clarksville intersection.  However, it appears the state will reimburse the city later for that project and work.   I’ll provide more data and thoughts on the current budget process tomorrow.

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