By Mark Wineka
mwineka@salisburypost.com
Salisbury city officials received advanced warning at their annual retreat Friday that the city’s 2009-2010 budget could be facing a funding gap of $1.4 million to $1.7 million.
Management Services Director John Sofley said current and predicted economic conditions will crimp several funding sources, making it difficult to maintain city services at current levels.
Historically, Salisbury’s annual revenue growth has averaged $1.1 million to $1.4 million.
But Sofley projects that those same reoccurring revenues will be down at least $300,000 in fiscal year 2010, leading to a difference in available funds of at least $1.4 million.
“It’s a function of the economy and less consumption,” Sofley said.
Mayor Pro Tem Paul Woodson noted the difference in expected revenue was about 5 percent of the city’s general fund.
In a five-year report looking at the levels of service, Sofley and Teresa Harris, budget and performance management manager, wrote, “First, due to the national and local economic downturn, not only are some revenues not growing, they are actually declining.
“The increasing cost to provide our citizens those services that they desire is outpacing our current revenue stream.”
Sofley said the city has done five-year financial projections since 1990 and “they’re almost always dead on.”
The report said sales tax receipts in years past had been growing at a pace matching the city’s growth in spending, but they “are currently falling to levels less than that received last year.”
“They are projected to lag until consumer confidence begins to improve,” the report said.
Salisbury’s current budget projected revenues from the local option sales tax at more than $5.3 million. Sofley said the sales tax receipts for the current fiscal year, which ends June 30, will fall short of that mark.
It’s also doubtful the city will hit that total in fiscal year 2010, if consumer spending continues to lag.
Sofley said Salisbury’s sales tax receipts were down from previous years for six months in a row until January, when they actually showed a slight gain.
Out of the city’s $38.8 million general fund, the sales tax accounts for 14.5 percent of the revenues; property tax, 46 percent; intergovernmental funds, 16.3 percent; charges for services, 8.4 percent; administrative revenue, 6.9 percent; capital leases, 5.4 percent; miscellaneous revenues, 1.5 percent; and licenses and permits, 1 percent.
Sofley projects a slight growth in property tax revenues for the next budget. Sales tax revenues will be down. He expects utility franchise tax revenues to be flat. The city’s earnings on interest will suffer. the current budget depends on about $300,000 in interest earnings.
“If we get $100,000, we’ll be lucky,” Sofley said of next year.
Powell Bill funds, which come from the state for street projects, are more than $1 million this year, but Sofley said those revenues will fall below that in fiscal year 2010.
Some revenue types such as sales taxes and Powell Bill funds are distributed in Rowan County based on population. The growth in population in the county and other Rowan municipalities has decreased Salisbury’s share of those revenues, too.
“The overall share of these revenues will continue to decline without annexation or extensive new growth annually,” the city financial report said.
Harris and Sofley said the forecast for 2009-2010 assumes several things: no new city positions, meeting regulatory requirements, fulfilling contract obligations, minimal capital outlay, a commitment to regular maintenance issues, no growth in operations, a hard look at special projects spending and a 2 percent merit pay increase for employees.
City Manager David Treme said officials will really have to think hard on the levels of service they want to provide, the dollars involved and capital projects that still need to be tackled or deferred.
Salisbury has faced tough budget years in the past, he said.
“I’ve seen this about every 10 years,” Treme said, “but this is the most severe I’ve seen.”
Treme told City Council he will try to deliver a balanced budget package to them with no tax increase. But he warned that the city’s level of services could change.
“Nothing’s sacred,” Treme said.