City Manager Greg Burris presented a proposed $348 million budget to City Council Tuesday, May 2, at the start of a month-long series of budget workshops. The City consists of more than 20 diverse departments.
The City’s fiscal year runs from July 1 to June 30 each year. Revenue projections are made several months in advance, with the adopted budget due by June 30. The City Charter outlines the process for the budget’s creation, which requires the City Manager to present a balanced budget to City Council for consideration at least 60 days prior to each budget year.
City operations are classified into fund groups for budget purposes, with the $83 million General Fund being the City’s primary operating fund. The General Fund covers most Police and Fire operations, Public Works, Planning and Development, Building Development Services and all administrative support functions. It relies on sales and use taxes for the majority of its revenue. Other General Fund revenue sources include the payments in lieu of taxes (PILOTs) from City Utilities and revenues from licenses, fines, and fees.
The City’s budget for the remaining governmental funds are specific to designated revenue sources and the restricted activities and services that are provided by those funds. The business-type funds are those funds that are fully supported by user fees. These “enterprise funds” are the airport, sewer, landfill and golf fund which generates fees that fully cover the costs of operations, including all capital acquisitions. These enterprise funds operate without tax revenue or support from other City funds.
“The General Fund is the focus of most of the City’s annual budget process because it funds many of the high-profile citizen services and is the revenue source that provides the most flexibility in use by City Council,” Burris explained.
He said two primary factors made the development of the fiscal year 2018 (FY18) balanced budget in which projected revenues must equal proposed expenditures challenging: a very small projected revenue growth and significant prior-year commitments consuming most of that projected revenue. By city charter, the budget the City Manager submits to City Council must be balanced – projected revenues must equal proposed expenditures
Although fiscal year 2017 (FY17) still has two months remaining, Finance Director David Holtmann doesn’t expect sales tax to hit budgeted projections. This shortfall will create challenges over the coming months for City departments. City Council has already committed to covering the shortfall with FY16 carryover funds.
“The volatility of our main revenue source (sales tax) and the transformative changes occurring in retail are making life difficult for municipalities across the country – not just in Springfield,” Burris said. “E-commerce is booming while retail brick and mortar stores are struggling and even closing. Until there is an Internet sales tax, there will not be a level playing field and I suspect we will see many more closures of brick-and-mortar stores until the field is leveled.”
Defunct shopping centers represent lost tax dollars for already cash-strapped municipalities. Three major retailers have closed stores in Springfield within the past few months: Staples, MC Sports and Kmart. About 30% of citizens surveyed recently reported making retail purchases online. According to a story published in The Atlantic on April 30, thousands of store closings nationwide are projected through 2017, which is likely to surpass the Great Recession year of 2008.
Holtmann projects a conservative revenue estimate for FY18. Total revenue growth from budget FY17 to budget FY18 is estimated at only 0.9%. FY18 sales tax, the largest source of revenue, is estimated to be 1.3% lower than the FY17 budget, which makes this year’s budget process even more difficult. Growth over FY17 anticipated actual ending sales tax is estimated at 1.5% Helping offset some of the sales tax shortfall from FY17, other revenue sources, such as payments in lieu of taxes (PILOTs) from City Utilities and Licenses, Fines and Fees, are trending up slightly in FY17 and are projected to continue to do so next year, which officials hope will soften the impact of the sales tax revenue shortfall.
“We’re getting squeezed on both sides,” explains Burris. “Revenues aren’t keeping pace with inflation and the majority of any ‘new’ money will go to honor prior-year commitments to fund the ongoing costs of 21 additional police officers hired during the past few years as a result of two, three-year federal COPS grants. “When we get to the fourth year,” Burris said, “the grant has expired and these positions are 100% our expense to cover.” Additionally, City Council has authorized a federal grant application for potentially seven additional fire staff. If the City is awarded these additional positions, too, the City’s General Fund budget will need to absorb the cost during the next few years.”
In addition to needing to cover the cost of these prior commitments, the City is also having to budget almost $1 million toward the unanticipated cost of third-party jail facilities and prisoner transportation. Due to the lack of ongoing revenue, and the hope that this cost will be temporary in nature, this additional cost is being funded via one-time sources in the FY18 budget.
The proposed budget attempts to address funding needs within all areas of the organization. However, consistently over the past six years, law enforcement and public safety have been the clear funding priority. In the proposed FY18 budget, 62% (or more than $51 million) of General Fund appropriations address public safety needs.
Burris says the FY18 budget prioritizes public safety, economic growth and increasing operational efficiencies. He plans to improve operational efficiency by addressing employee safety, recruitment and development, and succession planning.
As always, the budget requests received by the City Manager from City departments far exceed available funding. “All of the requests are for needed items and would improve the service we are able to provide our citizens,” Burris said. “We are committed to living within our means and our departments have done a remarkable job of that, based on citizen satisfaction scores and voter confidence in sales tax renewals. It’s clear, though, that a new funding model – and one that does not raise taxes – is needed.
As always, the budget requests received by the City Manager from City departments far exceed available funding. “All of the requests are for needed items and would improve the service we are able to provide our citizens,” Burris said. “We are committed to living within our means and our departments have done a remarkable job of that, based on citizen satisfaction scores and voter confidence in sales tax renewals. It’s clear, though, that a new funding model – and one that does not raise taxes – is needed.
City Council will continue budget workshops over the next three to four weeks:
- Revenue and pre-commitments: May 9
- Proposed funding priorities: May 16
- Proposed funding priorities: continued May 23
- Continued discussion if needed: May 30
For more information, contact Finance Director David Holtmann at 417-864-1632 or Cora Scott at 417-380-3352.
Where to Find Budget Details:Throughout the budget workshop process (May 1 - June 30), the public has access to both the proposed budget and the later adopted budget online at Springfieldmo.gov/Budget and at the City’s data portal: Springfieldmo.gov/OpenData.
On both of these web pages, there are links to full line item detail budget reports in addition to helpful summaries.
Printed copies of the proposed budget are available at a cost of $45.44 (the cost of printing).
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