Democracy on the Front Lines
City Administrator’s Blog
Walter Denton
September 11, 2009
You may recall that our fiscal year runs from May 1-April 30, so we are a third of the way through our budget year. With four months of revenue and expense, this is a good time to review our budget situation and make adjustments.
The current state of the economy has made budgeting quite difficult. I have mentioned previously how the City of O’Fallon has had to make several significant cuts as a result of revenue shortfalls. Last August, we cut 5% from the budget and instituted a hiring freeze. Last December, we made additional spending cuts including travel and capital projects. For the annual budget beginning May, 2009, we cut an additional 8% from the General Fund (which funds services such as police, streets, stormwater, code enforcement, planning, engineering, finance, and administration).
The Management Team reviewed the budget this week to evaluate our financial condition after the first third of the budget year. Even with our previous cuts, sales tax revenues continue to decline and are $100,000 below last year at the same point.
We are unable to calculate property tax and income tax revenues because we have not received them yet. St. Clair County is four months late in distributing property tax payments and the state is holding income tax payments. As a result, we have had to fund our property tax-funded services (Fire, EMS, Parks, Library) with cash reserves until property taxes are received. (School districts are experiencing the same dilemma.)
Although we have yet to receive our property tax revenues and the state is still holding our income tax revenues, we feel our budget estimates are still in line with actuals. We will not be making any additional cuts at this time, but spending restrictions remain in force: 11 positions will remain vacant, out-of-state travel curtailed, projects deferred, spending restrained.
Some people have asked whether the “Cash for Clunkers” program will relieve our sales tax woes. While there is no doubt that more cars were purchased in July and August because of the program, it is too early to tell whether it will be significant over the long term.
Within the two-month incentive period, we estimate 40-50 more cars were purchased than would have been sold without the incentive. This should result in $45,000-50,000 in extra sales tax from the “Cash for Clunkers” program. We do not know for sure because the $4,500 incentive was taken off before taxes – while more cars were purchased we will receive less sales tax revenue per car sold.
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