2012 Budget Chat with City Manager Matt Zimmerman
August 11, 2011
2012 Budget Chat with City Manager Matt Zimmerman
Moderator: Well it looks like we are ready to start our first budget chat of the day. This is your opportunity to ask some questions about the City budget and the process, we will try to get to as many questions as possible so be sure to submit them early. We will start with the first question.
moderator: Where are we at in the budget process?
Matt Zimmerman, City Manager: Since 2007 the City has reviewed the budget in 3 steps. The first is to review all budget requests from outside agencies and City Departments. The second is for the City Manager and staff to propose a budget, including changes to revenues, expenses and cash reserves, to meet the City Commission’s goals, which are set at the end of Phase 1. The Commission reviews the second draft and makes changes as they best determined. The third step is to review the amended budget and make any last changes before adoption. The City is currently in the middle of the third step.
moderator: What are some of the significant changes proposed for next years budget?
Matt Zimmerman, City Manager: I believe the single biggest change is the increase in debt payments. The City’s general debt payments paid by property taxes will be increasing a little over $400,000 in 2012. Combined with an almost 1% decrease in assessed valuation, the General Fund will be seeing a $462,000 decrease in revenue from property taxes. Fortunately the City’s debt payments start to decline after 2012 (except for 2015), and really decrease starting in 2016. Another change is the decrease in administrative transfers from the Utility and Special Street Funds. The amount going into the General Fund are $73,500 lower in 2012. I think it is important to note that this is a revenue issue, not an expense issue. Revenues are budgeted to be $835,000 less while expenses are budgeted to be $275,000 less. Please check out the City’s budget at www.emporia-kansas.gov. You will see that almost all expenses are the same or lower in 2012 than 2011.
moderator: Is it possible to truly consider adopting a balanced budget without significant revenue enhancements or cuts of city programs or departments?
Matt Zimmerman, City Manager: I don’t believe so. Please remember that the City Commission’s goal is to maintain 15% reserves in the General Fund and 20% reserves in the Water, Sewer and Solid Waste Funds. The City is projecting to have 17% reserves at the end of 2011, so the Commission could adopt of budget with a deficit and still be at the 15% reserve level. However, to eliminate the current draft deficit of almost $1.1 million or even to get to 15% reserves will require significant revenue increases and/or program cuts.
Steve_Corbin: Looking at the 3rd draft, it seems everyone took a hit except the RDA and CVB. The RDA budget includes pay increases and yet you are recommending no merit pay for city employees who make much less than RDA employees. Please explain?
Matt Zimmerman, City Manager: The City receives budget requests from numerous agencies in the City. Part of the allocation request is that each agency must submit a copy of their entire budget and show where the City’s money will be spent. The City can then allocate all, some or none of the request. The Board of each agency then determines how the entire budget, including the City’s allocation, will be spent. While the City can place certain restrictions on how its money may be used, the City has historically not micromanaged the outside agency by designating how specifically the allocation will be spent, as long as the agency can prove it meets any restrictions set forth by State law or the referendum. For example, the ½-cent sales tax that was renewed in 2010 for economic development can only be used to fund economic development efforts, which since the tax’s inception in 1994 has been the RDA.
Harlu: It seems to me that there are essential organizations, services, and departments that are under funded and/or at risk for budget cuts by the city, while other inefficient groups are over funded How do you base funding and salaries to an organization like the RDA, when they are not an effective organization, have brought little industry to town, and are missing out on opportunities with their narrow vision? How long do we have to wait for the RDA to do their job while money is being wasted? Why do they deserve more money and other services do not? How does the city hold the RDA accountable for their budget allocation??
Matt Zimmerman, City Manager: I think that the City has done a good job of maintaining services and programs while decreasing staff. However there are limitations on where certain monies can be spent. In the case of the RDA, the 1/2-cent sales tax that was renewed may only be used for Economic Development. Once the allocation is given to an outside agency, like the RDA, that board implements the budget and oversees the management of the staff. Regarding the RDA's efforts they have had a lot of success in their 16 years of existence. Please refer to their website http://www.emporiarda.org/ or past online chats for information, but they have brought in hundreds of millions of dollars in economic development. Even though we don't see tangible results every year, it is important to keep our economic development efforts going, because when the economy turns around we will be better able to take advantage of new growth by industries and retailers.
Hornets: Do you think there is any waste in the budget that could be cut? With health insurance costs going up is the city covering the cost increase or are they passing it along to the employee? What percent of an employees health care cost does the city pay for and how much does the employee pay for?
Matt Zimmerman, City Manager: I really don't believe that there is any "waste" in the budget. Please remember that one persons waste is another persons critical program. Local governments have been squeezing efficiencies for years and there is really not much left in many budgets. Health insurance is projected to increase 5% in 2012. The City pays 90% of the monthly premium for single coverage and 50% of the monthly premium for all other coverage. So if health insurance goes up 5%, employees will see a 5% increase in their personal contribution. I also think that it is worth noting that the City has seen a net increase of only 10% in premiums over the past 3 years, and we received a refund in the past two years. A lot of this is due to employees working hard to keep the number of claims down.
moderator: What kind of feedback would be helpful from the community to move the budget process along?
Matt Zimmerman, City Manager: Setting a government budget requires a combination of setting revenues, maintaining or changing programs and leaving enough cash reserves in case of an emergency. The City Commission is looking for feedback on what programs should be saved or could be reduced or cut, whether new revenues should be collected (i.e. property taxes) and whether the City should decrease reserves due to the economic slowdown. Please note that the only revenue the City Commission has direct control over is the property tax levy. All other revenues are dependent on outside factors.
moderator: If you could share a few thoughts about the Cities current financial position what would it be?
Matt Zimmerman, City Manager: The biggest challenge is determining how to “right-size” the budget. Over the past few years revenues and expenses have increased. However, overall revenues in the General Fund are budgeted to decline in 2011 and even more so in 2012. During the same time through careful management the City has increased its reserves from $383,000 to $3.1 million. So the biggest challenge is deciding whether to cut expenses and eliminate programs, increase revenues and/or use reserves. The other challenge is that, at least for the past 4 years, revenues have been higher and expenses lower than budget. That’s how the City has built reserves. So the City wants to be careful not to cut expenses and programs too far, then generate a surplus at the end of the year.
Moderator: It looks like that is all the time we have today, on behalf of the Emporia Gazette and the readers I would like to thank Matt for taking time to sit down and answer some of our questions. Be sure to check back in 2 hours for the 2nd of our 3 chat budget marathon.