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CIty Council, November 25

Despite anticipated fall in revenues, no tax increase in 2009 Budget
City to draw modestly on General Fund balance

Warwick Jones

Mayor Riley presented the proposed 2009 budget at last night’s Council meeting. And for tax payers it was pleasing. Despite conditions described by the Mayor as the “toughest budget ever put together”, the City was able to balance its budget without a tax increase or curtailing major services. The Mayor stated that it would be wrong to raise taxes considering that so many people are affected by the economic downturn.

Of course there will be pain. Staff and workers earning over $60,000 will get no “cost of living adjustment” (COLA) to salaries while those below will receive a graduated increase up to 2%. Firemen and police will get a flat 1.5% increase. There will be delays in filling staff positions that become vacant and an increase in parking fines.

To draw down $2.2 million of General Fund balance
Perhaps not surprising, the City is drawing down modestly on its General Fund balance to balance the budget. Generally, municipalities keep a reserve or “fund balance” to meet contingencies. The size varies across municipalities but ideally it is amounts to about 2 month’s expenditures. In recent years, the City has maintained a high fund balance more or less in line with this and it is a factor in keeping ratings high for borrowing purposes. Presently the General Fund Balance is $18.3 million, equal to 15% of the proposed 2009 expenditure but the proposed draw down will cut the Fund balance by $2.17 million to $16.1 million, between 6 and 7 weeks of projected spending in 2009, we estimate.

The Mayor went to some lengths to justify the City’s decision to draw down part of the balance and cited a text from the Government Finance Review; “a financial crunch owing to fundamental mismatch between income and outflows requires a different approach from one that arises from a temporary downturn in revenues. Temporary downturns that are reasonably anticipated to last less than 2 or 3 years could be weathered by using reserves”.

2010 could be bad, some relief from falling fuel prices
The Mayor implied that he expected the downturn now afflicting the US economy to be temporary though he also cautioned that it was possible that 2010 will be as trying as 2009. The Mayor also said that it was possible the City could receive some relief from the 2008 budget as expenses, particularly those of fuel, may be lower.

Viewers may see a summary of the proposed budget by pressing Download file

Revenues to fall 1%
Revenues at $126.1 million will be 1% lower than 2008 reflecting - a 3% fall in property tax collections, lower collections on construction permits and business licenses, and a $600,000 reduction in contributions from the State. All tourism related income projections have been lowered 15%. These reductions will be offset to some extent by an increase in parking fines, from $8 to $14 per offense,

Spending up 0.5%
Expenditures projected at $126.5 million will be 0.49% higher than 2008. Reductions should be achieved by a 60% cut in Travel and Training, and Memberships and Publications City wide, a 25% cut in office supplies, and a delay in hiring though 12 firefighters will be hired in November 2009. These will be offset by a COLA, which although modest by previous years, will amount to $870,000. Health care spending will increase $1.04 million.

Disparity between parking fines and cost of parking
The Mayor said that the increase in parking fines was more to drive people to City garages than to balance the budget. At present levels, it was cheaper to risk a fine for illegal parking than to pay for parking in a City garage. This should now change with fines up $6 to $14 an offence. Staff noted that College of Charleston students made up a major part of those fined. Generally collection of parking tickets ran between 70 to 75%, a high collection rate in the SE part of the US.

The Mayor also reported some changes within the City administration. The Planning Preservation and Economic Innovation department now becomes Planning, Preservation and Sustainability. A position is to be created – Sustainability Director - to integrate the City’s energy efficiency, waste reduction etc . The Economic Development Division will be eliminated and all efforts will be consolidated in the Executive Department reporting directly to the Mayor. Ernest Andrade will be the Business Development Director.

Budget on City Web Site
The Draft budget can be viewed on the City’s web site by going to Budget and Management Division under City Departments and Boards. Access the website by pressing here We hope to undertake a fuller review of the budget figures within the next few days.

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