The Fayetteville City Council and department heads met Monday to talk about more financial belt-tightening. Several possible outcomes include a millage rate increase, fewer city workers, a depleted reserve fund and remaining employees paying for any hikes in cost of benefits.
The session was a wrap-up of the council retreat held Feb. 12. Much of the meeting centered on upcoming budget cycles and the effects of the recession on tax revenues that is leading to the depletion of city reserves, further reductions in staffing numbers, increases to staff in benefits-related items and the potential for an increase in the millage rate.
City Manager Joe Morton during the discussion said that the most important thing for the council to accomplish would be to have a balanced budget.
Fayetteville for the past three years has implemented numerous cuts in personnel-related areas and in operational areas to offset the decrease in revenues stemming from the recession.
All at the meeting agreed that further general fund budget reductions would be required to weather the recession’s continuing effects. Some of those reductions will come in the form of impacts to city staff.
City employees for the upcoming 2011 budget cycle that begins in August will see no salary increases, and staff will be responsible for all increases in benefits.
Additionally, the city’s match to the defined contribution program, totaling $67,000, will be eliminated as will $160,000 in job positions through attrition. Cuts will also be made to the Main Street Tourism Association.
“Everybody needs to understand that these are gone,” Morton said, adding that adjustments to one or more of the target areas could be made if the economy turns around or shows substantial improvement.
Those cuts will likely not solve the problem. The city began the 2010 fiscal year last summer with an unreserved fund balance of $381,105. Unless the city depletes nearly all its reserves, the council will have to look at a millage “roll-up,” Morton said.
Those numbers are currently unknown though that action could amount to an extra $25 in property taxes for a house valued at $175,000, said Finance Director Lynn Robinson.
“We will have to do what’s necessary to maintain the level of the tax base,” said Morton. “By budget time we’ll know the tax digest numbers.”
Fayetteville’s current millage rate sits at 2.988 mills.
But unless the economy recovers quickly that matter could become more negative in the next few years. Fayetteville has managed its finances and for several years has made adjustments to the budget to offset the recession. Those efforts may not be able to forestall the continuing effects of a down economy.
Robinson provided a view of what the general fund would look like in the coming years with and without a millage roll-up.
Even after the personnel-related adjustments, the city without raising the millage beginning in August will see the unreserved fund balance shrink to $18,220. From there the city will be in the negative for 2012 at -$241,467, at -$434,200 in 2013 and at -$435,642 in 2014, Robinson said.
Adjusting the millage upward in 2011 would still cut reserves nearly in half at $163,053, Robinson said. After that, 2012 would see reserves at $43,980 followed by a -$6,732 in 2013. Reserves are expected to return to a positive $136,687 in 2014 under that scenario, Robinson said.
“I would have never thought (the recession) would have lasted this long,” Robinson said, echoing the sentiments of those around the table.
Mayor Ken Steele said city employees should have input in the decisions that will be made.
“I think they deserve input into the decision-making,” Steele said.