Fort Smith budget in better shape

So far, so good, with respect to the Fort Smith budget — a far cry from this time in 2010 when two rounds of budget cuts were needed in response to tax shortfalls.

City Finance Director Kara Bushkuhl still expects a decline of $220,000 in proceeds from the 1% countywide tax — a decline driven partially by population adjustments following the 2010 Census — in 2011. However, that decline was expected and considered in approving the 2011 budget.

The city’s general fund budget, set at $43.106 million in 2011, has been under pressure in recent years as tax collections have declined. A majority of the general fund budget general supports fire, police and other critical city functions. The city made more than $1.43 million in budget cuts 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.

For the first half of 2011, general fund revenues are $15.578 million, or 39.5% of the full year 2011 budget estimate. General fund expenses for the first half of 2010 total $18.531 million, or 43% of the full year 2011 budget estimate.

Bushkuhl said the discrepancy between revenue and expenses is primarily because as of June 30 the city had received only five months of the countywide tax proceeds, and 70% of ad valorem taxes (property taxes) come in November and December.

“It’s just a matter of timing,” Bushkuhl explained. “We don’t have a true picture of six months of revenue. With expenditures we do, but revenues don’t work that way.”

In her report to City Administrator Ray Gosack, Bushkuhl notes that expenses in the first half of 2011 are $704,000 less than the same period in 2010. She credits much of that to key departments maintaining a focus on cost controls. To that point, expenditures in the police services budget is $191,000 less than the 2010 period, fire services expenses are down $169,000 and the parks program has spent $232,000 less than the 2010 period. (Link here for a PDF of the city’s recent financial report.)

“Our spending level for this part of the year is lower than it was even in 2009 in most of the departments in the general fund,” Bushkuhl said during an interview. “I think this year everyone is sensitive to our revenue situation. … I don’t think people give them (department heads) enough credit. People think they spend just whatever is in their budget, but they don’t. They really try to hold the line on that (expenses).”

Another positive is an unexpected increase in revenue from court fines and forfeitures. Bushkuhl’s report notes that as of June 30, court revenue of $1.22 million is 62.6% of the budgeted $1.95 million for the full year.

“If this trend continues, this source may provide an additional $200,000 in revenue for the General Fund,” Bushkuhl wrote in the report.

But there are some concerns.

The sanitation fund — established as an enterprise fund with revenue and expenses maintained as if it were a standalone business — has seen its 2011 revenue estimates lowered by $407,000 because less waste is being sent to the landfill. It’s a growing problem, Bushkuhl said, with private waste haulers possibly going elsewhere with waste they are legally required to send to the Fort Smith landfill.

For the first half of 2011, landfill revenue is $1.588 million, just 34% of the $4.675 million revenue estimate for 2011. Overall, the sanitation department revenue is 44.5% of the 2011 budgeted total as of June 30.

Bushkuhl’s other concern is the “volatility in the general fund,” with respect to fluctuations in franchise fee revenue and sales tax collections

“It’s just a concern, as it always is, of if we will meet those estimates this year,” Bushkuhl said of expected revenues.

Other budget items of interest include:
• For the overall operating funds, revenue for the first half of 2011 is $42.553 million, or 43.7% of the 2011 budget. Expenses are $46.193 million, or 45.6% of the 2011 budget.

• As of June 30, Rental revenue for the convention center has generated 43% of the estimated $650,000 for the full year. However, convention center revenue is often higher in the second half of the year because of holiday events.

• Water sales for the first half of 2011 total $8.083 million, or 44.6% of the 2011 budgeted revenue.

• Contract water sales are $3.508 million for the first half of the year, or 50.1% of the 2011 budgeted revenue.

• Overall water consumption is up 1.3% for the first half of 2011 compared to the 2010 period.

• Fees from building permits totaled $382,644 as of June 30, 58.9% of the 2011 budgeted revenue.

Link here for access to city budget documents.