The city of McMinnville is not headed for financial disaster in three years because the economy will improve and revenue will increase, according to Alderman Ken Smith.
Three-year budget projections calculated by city administrator David Rutherford and published in the Aug. 9 edition of the Southern Standard puts the city at $800,000 below what will be needed to begin fiscal year 2016-17. The city needs $2 million in fund balance to begin a new fiscal year.
By Rutherford’s projections, the city’s fund balance will dwindle the next three years. By 2015-16, it will be just $1.2 million at the end of the fiscal year.
“I do appreciate David putting that information together for us because it does show us how much revenue we have to generate over the next three years to avoid financial problems,” said Smith during a Finance Committee meeting.
Rutherford’s information was based on expense projections.
“The expense section is exactly right,” said Smith. “We have an increase in the expense section, but we don’t show an increase in revenue. Obviously, if your expenses go up and your revenue doesn’t, you will eventually run into a shortfall.”
Smith says the numbers are skewed because they don’t reflect an increase in city revenue.
“In the three-year budget, revenue didn’t increase any,” said Smith. “We increased our expenses in almost all categories, about 90 percent of them, but we didn’t increase revenue. We know we are going to have increased revenue over the next three years. So, that will alleviate any shortfall.”
The only revenue increase Rutherford’s three-year projection shows is an increase in sales tax recovery due to an agreement between the city and county that will return 4 percent compounded annually. In fiscal year 2013-14, the sales tax recovery payment is projected at $140,000.
Smith says other areas in which the city gets revenue will increase:
• “We know the wholesale beer tax, which is $520,000 in the 2013-14 budget and $520,000 in the 2015-16 budget, will more than likely will go up. We don’t know how much.”
• “The state sales tax is $900,000 over each of the next three years. Well, with the economy getting better, people will spend more money. Therefore, we are going to get more taxes.”
• “We have driver safety school at $60,000 for the next three years and city court fines at $300,000 for the next three years. I bet those will probably increase. I don’t see it going down.”
Smith wants next year’s projection on expenses to include a projection on revenue increases.
“So, I guess that kind of stuff gets people riled up and concern is something we need to watch in the future,” said Smith. “I think next year, when it comes out, we need to have a three-year increase in revenue, too. We can guesstimate on revenue as well as we can guesstimate on expenses.”
Rutherford’s projections did not include funds to pay the debt service associated with demolition or renovation of the Blue Building, or operating expenses for Park Theatre.