No budget is set to be adopted at the Dec. 3 regular meeting of the Fort Smith Board of Directors following Monday's (Nov. 18) budget session.
At issue is how the city's finance department and administration plan to address revenue and expense concerns first raised by Director Keith Lau during last week's budget meeting, and now revenue increases and personnel cuts are openly being considered.
At the Nov. 14 budget meeting, Lau pointed out a line item showing either an excess or a deficiency in revenues over expenditures from FY13 through FY15 projects out to slightly more than a $10 million deficit in FY15. That would bring the end of year fund balance in FY15 to a negative $6.664 million.
Not only are the FY15 figures running at a deficit, Lau said, but taking any unspent funds from the current fiscal year and using those to help balance the budget for FY14 shows that the budget really is not balanced, he said at the time.
"I understand the governmental accounting method of saying (you have) a balanced budget, but it's really not a balanced budget because you're spending money out of that end of year fund balance. And I'm concerned because of this collision course I think we're on."
Those concerns were not relieved at Monday's meeting as Lau listened to Police Chief Kevin Lindsey discuss what the proposed 2014 budget meant for his department.
"During the past annual budget discussion and reviews by the Board of Directors, almost without exception I have been asked by the mayor or the Board of Directors if we can live with the existing budget as proposed," he said. "My response this year will not be any different other than we'll do the best we can as we always do. And just like any other city department, we have an obligation to provide the very best services to our residents and citizens."
Lindsey also said he is "hesitant about next year. We're working to find those efficiencies and doing the best we can."
Among the efficiencies is not filling eight open patrol officer positions, which is estimated to save about $650,000 in annual payroll and an additional estimated $200,000 in annual benefits.
Additionally, the department is not purchasing new fleet vehicles for patrol. Instead, patrol vehicles are being used for longer than recommended lifespans with the possibility that some patrol units will rack up 300,000 miles before they can be replaced.
Lau said even with the cuts in the police and other departmental budgets, the city was still on a collision course with a negative cash flow situation beyond the 2014 budget and it needed to be addressed before the Board voted to approve the budget currently under consideration.
Among the ideas proposed to increase revenue was increasing franchise fees and alcohol taxes, which the Board can do without having to have voter approval. An increase in the franchise fee could cost a utility user as much as 35 cents each month, depending on usage, according to City Administrator Ray Gosack.
Another proposal made by Director Mike Lorenz was to take sales tax money for street improvements coming up for renewal in 2015 and propose that voters approve a re-allocation to the general fund upon reauthorization should the tax pass.
Lau was clear in stating that he would like to see several different proposals brought to the Board at a Nov. 26 study session which would address his concerns mentioned during last week's budget meeting, namely having an additional $2.6 million in the budget to avert the collision course he said is coming.
Among the different items that could be seen in the proposals are personnel cuts, franchise and alcohol tax increases, or a combination of both.
Speaking after the three hour long meeting tonight, Gosack said he was surprised the budgeting process had taken the turn seen during the last week.
"It's been a little bit surprising because we had a similar discussion last year and it seems as though in these calculations, we're ignoring the ending balances that the city begins the year with. We're approaching this as though that money doesn't exist – but it does exist. It is available to be used."
Gosack said Lau's concern about the budget and possibly dwindling end of year balance projections was something that should not be a concern. Specifically, he said Lau's assertion that the city would not have a balanced budget were unfounded.
"Well, legally we can't. We can never present a budget that's not balanced. But you know, we can't have a budget with a (year-end) balance below 7.5%. Otherwise, we would have cash flow problems. So we would never present a budget to the Board that had an ending balance less than 7.5%."
Discussing scenarios he is likely to bring back to the Board next week, personnel cuts will be an option brought to the table, according to Gosack. He said the general fund budget has about 450 personnel, which could be reduced by as much as 20% to 25% should the Board actually adopt a plan that would reduce spending by $2.6 million so revenues and expenditures more closely align.
In all, that could be approaching more than 100 jobs cut. But Gosack was clear in stating that he does not believe that is a realistic proposition, adding that the impact would be devastating for the local economy and the services the city provides citizens.
"I think it's more damaging to the economy because of the reduction in service levels from city government," he said. "Not because of the reduced spending (by those laid off employees in) city government, but I think it's much more damaging by a substantial reduction in service levels being provided by city government. That would be the real harm to the economy."
Lau was clear in stating that he is not proposing that the Board take any one approach but wants to be presented with options to consider.
No further action was taken at Monday's meeting. A regular meeting of the Board addressing non-2014 budget items will take place Tuesday, Nov. 19.