Fort Smith directors begin review of 2011 budget

The first 2.5 hours of Fort Smith’s fiscal year 2011 budget hearings were calm and quiet, with most of the comments from city directors and recently elected members of the city board focused on areas to make reasonable budget cuts.

Participants of the Monday evening (Nov. 8) budget hearing included City Directors-elect George Catsavis, Philip Merry Jr., and Pam Weber; and Mayor-elect Sandy Sanders.

The roughly $224.5 million budget, with all but about $40 million of that for large capital projects, is about 18% less than the 2010 budget. Estimated revenue for 2011 is $269.5 million, with $72.2 million from tax collections, $60.1 million from water, sewer and other fees and charges and $99.3 million carried forward from capital projects not completed in 2010. (See chart below for more detail.)

2011 revenues for the general fund — from which city administration, police, fire and other essential year-to-year services are funded — are estimated to be 2.9% less than 2010. Much of the reduction comes from not having $1.6 million in federal stimulus funds. However, City Finance Director Kara Bushkuhl said the city anticipates a 1.5% increase in franchise fees, an 8% increase in property taxes and a 1.5% gain in sales tax collections. Revenues for the 2011 general fund are estimated at $41 million, down 3.6% from the 2010 budget.

“Hopefully we’ll be able to show an increase in 2011 in our sales tax collections,” Bushkuhl said of collections from the 1% countywide sales tax that generates more than 40% of revenue for the general fund.

For the first nine reporting months of 2010, the city has collected $11.308 million on its portion of the countywide tax, down 2.76% from the same period in 2009.

Bushkuhl outlined more than $1.43 million in cuts prescribed in 2010 to respond to revenue shortfalls. The biggest cut was a $717,000 reduction in payments to the city’s health & wellness fund. The cuts in 2010 and pushed forward into 2011 also include a decrease of about 28 full-time positions, and a $790,000 proposed cut to payments into the health & wellness fund.

The general fund projected ending balance for 2011 is 8.9% of the total budget, down from the desired goal of 15%. The good news, according to Bushkuhl, is that 2010 budget cuts boosted the estimated 2010 ending balance to 12.7% compared to a previously estimated 7.1%.

Acting City Administrator Ray Gosack provided the city board a list of more than 65 budget cutting ideas totaling more than $1.69 million. The cuts were an alternative to cuts proposed Nov. 2 by then-City Administrator Dennis Kelly. Kelly had proposed to cut at least 20 jobs to cover a looming convention center funding shortfall.

The Fort Smith board of directors spent most of 2008 and 2009 trying to come up with a solution to plug the annual deficit. A state turnback program ends in June 2010 from which the city has received about $1.8 million a year. In 2010 the city will receive only $888,723 in 2010.

Kelly was dismissed effective immediately following a city board executive session held later in the Nov. 2 meeting.

“The board may adjust these items as long as we don’t fall below the target of $500,000 in General Fund spending reductions,” Gosack noted in a memo that accompanied the list.

Gosack’s list labeled each cost-cutting idea as “sustainable” or “temporary.” The top five (by amount) cost-cutting ideas were:
• Not providing pay increases for employees below the pay scale midpoint: $364,571 (temporary);
• Not replacing a fire pumper truck in 2011: $250,000 (temporary);
• Eliminating outside agency funding in 2011: $202,700 (temporary);
• Not providing pay increases for employees paid from the water and sewer operating fund: $122,415 (temporary); and,
• Not providing pay increases for employees paid from the sanitation operating fund: $57,104 (temporary).

Although the hearing is not a voting meeting, Gosack’s alternative was unanimously accepted by the board as a preferred alternative to Kelly’s job cuts proposal.

Other reductions in the 2011 overall budget included a 2010 Fort Smith Transit budget at $2.204 million compared to the 2009 budget of $3.896 million — although much of the reduction came from the end of a capital project. Also, the city’s proposed non-departmental budget is $2.07 million, down from $2.934 million estimated in 2010 and down from the $2.667 million in 2009. Reductions from that budget come primarily from the end of capital projects in downtown Fort Smith.

The board is expected to review budgets for street funds, sanitation and water and sewer at Tuesday’s (Nov. 9) budget hearing. On Nov. 15, the city will conclude the hearings. That meeting may include a presentation about privatization of convention centers.

Each hearing will begin at 6 p.m., and will be held in the Community Room of the Fort Smith Police Department.