The problem with relying on one-time funding plugs is that the money is gone by tomorrow.
Well, tomorrow is today, and the city now has to come up with $13.9 million to deliver a balanced budget by June.
Despite estimates that the city will end this fiscal year with a $2 million surplus 1 percent of its general fund budget officials cited several reasons for the gap at a City Council budget retreat Friday.
The city has relied on one-time revenues such as taking money from a transit reserve fund and using a repayment on a shopping center loan to fund operations, city Budget Director Julie Brenman said. At the same time, the county and the Durham Housing Authority are expected to reduce their contributions to city services.
The city's yard waste program, cemetery operations and street parking enforcement all are coming in with lower-than-expected returns. Overall, the city is projecting a decline in revenues next fiscal year, ranging from $500,000 to $2.9 million.
Still, in ranking priorities for the coming fiscal year, the majority of council members said a property tax increase is off the table. They didn't rule out increases to water and sewer rates, new fees and service cuts, however.
Last year at this time, the city faced a $7.9 million to $18.9 million gap. In the end, elected officials delivered a $281.4 million budget with the largest property tax increase in at least a decade 7 percent along with a host of fee increases.
"That has helped level us off a little bit," Brenman said. "But we're not quite back to ground level."
Also vexing the council is an estimated $60 million maintenance backlog for city buildings, streets and parks. The city could issue debt for that amount beginning in 2007 without raising taxes if revenues hold steady and there are no new operating needs, Brenman said.
After delaying a bond referendum for as much as $116 million last year, three council members said Friday that the city should definitely put the issue before voters in November. Two others said they might go along if provided additional information. Council member John Best Jr. missed the retreat, and council member Thomas Stith left early.
Since some voters are still annoyed at the city for not spending all of the 1996 bond money on time, City Manager Patrick Baker said he will recommend a bond issue in the $15 million range to focus on specific needs that can be addressed in the next two to three years. The city has a triple-A bond rating the highest awarded by rating agencies which means it can borrow at lower interest rates.
There was no consensus among council members about whether the city should continue to allocate 1 cent of the property tax rate to a downtown revitalization fund, pay for yard waste disposal through property taxes or increase bus fares and water and sewer rates. A majority of members said they wouldn't consider reducing DATA bus routes.
Historically, transit operations have been a money-loser for the city, and the city is projecting losing $200,000 to $800,000 in state grants this fiscal year. At the same time, the city's transit reserve fund a cushion endowment for operations stands at $1 million, after city officials raided it in recent years to limit a property tax increase and pay to demolish a bus maintenance center.
After increasing water and sewer rates by an average of 11.5 percent for residential users last year, water and sewer revenues are barely covering operations due to flat consumption, Brenman said. She projected a 5 percent rate increase in the coming fiscal year with periodic increases after that to fund system upgrades.
Brenman is projecting a 3 percent increase in property tax revenue the largest source of income for core city operations and a $500,000 boost from the sales tax. The city will again consider charging residents a fee when police respond to false alarms at their homes. Today, residents get one free false alarm per month, which consumes about 6 percent of police officers' time, Brenman said.
Staff writer Margie Fishman can be reached at 956-2405 or firstname.lastname@example.org.