Small Town News

Budget Whoas

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Capital improvements left out of proposed FY 2010 budget so city can pay down bad debt and overdue payroll taxes

Tuskegee City Manager Alfred Davis released a proposed budget to members of the City Council last week. It's slim, bare and shows the city could spend almost as much reducing its debt over the next 12 months as it will on the Tuskegee Police Department.

It also predicts the city will help make some of those payments with revenue from four proposed new taxes.

But the city doesn't have much choice. In 2010, citizens will be trading any idea of capital improvements to avoid the possibility of receivership.

The budget went up for review and discussion before the Tuskegee City Council during a called hearing Wednesday, September 2, but the meeting occurred after The Tuskegee News went to press so no information could be provided for this week's issue.

The first reading of the budget is scheduled for the regular council meeting Tuesday, September 8, and is scheduled to be adopted in a called meeting at noon on Tuesday, September 15. The fiscal year begins October 1.

Bad debt

With the FY 2010 budget, Tuskegee will be rolling over approximately $900,000 in what Davis calls "that debt that will get you in trouble quick" and approximately $2 million in outstanding payroll taxes. Neither of these categories includes the additional $9.6 million Tuskegee owes in long-term bonds and loans.

In short, Tuskegee owes in total more than $12 million, but only about $3 million of that is concerning. However, it's of great concern.

Davis said the troubling debt is comes from the FY 2009 general fund, meaning the city government overextended itself by close to seven figures last fiscal year. The backed up payroll taxes are worrisome, Davis admitted, but said Monday, August 31, he was meeting with representatives from the United States Internal Revenue Service this week to develop a payment plan.

"A couple years ago city was able to raise the occupational license tax and catch up its back payroll tax," Davis explained. "Well, if you don't adjust the size of the government, the problem reoccurs because you're still paying people's salaries and you still have to pay those taxes."

Davis said, and as was previously reported, the Cost Reduction Plan was instituted to gash payroll - by far the city's biggest expenditure. In FY 2009 it composed nearly 67 percent of the $7.28 million budget. In FY 2009, thanks to furloughing Fridays across the board and eliminating some positions, the payroll dropped to $4.3 million - 57 percent of this year's $7.6 million proposed budget.

"We continue to want to shrink this thing," Davis said. "If you'll notice, we ain't filling positions."

The Cost Reduction Plan is also in place to shave down as much of the city's bad debt as possible. Davis said the $895,000 rolling over from last year was the result of the natural cost of operation coupled with the staggering recession and decrease in spending experienced nationwide last year.

"It's bills you haven't paid that pile up when your revenues go down," Davis said. "Even though you're cutting, cutting, cutting you still have to operate the city."

The proposed budget features a line item this year to deal with $741,000 of that bad debt by year's end, but it comes in place of capital improvements. Not one capital improvement is scheduled in the FY 2010 budget.

"One good thing, from our perspective, is we're current on all our loan and bond payments," Davis said. "We just have to keep it that way."

Since a payment plan for the unpaid payroll taxes has yet to be established, Davis and Tuskegee Finance Director Harvey Smith did not include any unknown revenues in the proposed budget. Davis said those unknowns, like sales tax from the Dollar General currently being built in Tuskegee, were intentionally left off and will be used for the IRS payment plan.

New taxes

The proposed budget also predicts $133,500 in new revenue for FY 2010 from four new taxes the council will soon review. If approved, many Tuskegee citizens may not be affected. But, citizens who own pets, rent apartments and use dumpsters could see some changes.

The proposed budget lists a new residential rental fee, commercial rental fee, dog license fee and an increase in the commercial garbage fee for the upcoming year as new revenue sources. But Davis said most of these will make Tuskegee consistent with its neighboring communities of Auburn and Montgomery.

Davis said the proposed rental taxes would likely blanket all rental properties in the city and would be placed on the property owner. He could not say if any would be grandfathered in. He also said the dog license fee - $5 for sterilized dogs, $15 for non-sterilized - was designed to allow Tuskegee to identify animals in the community and match it with an owner. In addition, the hike in garbage collection fees would only affect commercial properties, not residences.

"We're not going to triple the rates or anything like that," Davis said of the garbage collection fee increase. "But we are going to try to keep pace just to cover our own costs.

These ordinances, Davis said, would mirror those from neighboring communities but have not been finalized for council review.

Budget notes

Eight of the city's top ten revenue sources decreased between July 2008 and July 2009 by an average of 14 percent. However, two major funding sources, sales tax and occupational license fees, increased during the period.

The FY 2009 budget predicted sales tax revenues approximately $170,000 higher than actual revenue generated.

City of Tuskegee employees will not see a pay increase in FY 2010 and uniformed and fire personnel will defer overtime pay.

Furlough days will continue. The proposed budget predicts a total savings of approximately $700,000 through furloughs and FY 2009's elimination of 16 positions.

Tuskegee is current on all bond and loan payments, which total approximately $791,000 of the proposed budget.

Tuskegee will pass on a Blue Cross Blue Shield of Alabama increase in health insurance rates to its employees. Family coverage will increase by $84 and single coverage will increase by $35 per month.

If funds become available through grants, the city has budgeted for 24 new employees. The cost of these employees is neither anticipated nor included in the proposed budget.



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© 2009 The Tuskegee News Tuskegee, Alabama. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

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