Democracy on the Front Lines
City Administrator’s Blog
Walter Denton
November 12, 2009
You may have seen a couple of articles this week (here and here) concerning Monday’s City Council Planning Session. We have received some calls from people who believe the City voted on Monday to increase their property taxes. That’s not what happened and is not what the article says, but it is the impression of
some residents.
The reality is not quite as dramatic but it is a serious situation. The City of O’Fallon has cut more than $2 million out of the budget over the last 18 months. So far in this budget year, our sales tax revenue is down 7% and our state income tax revenue is down 15%. Our expenses are in line with revenue and our budget is balanced, but we face a budget next year that looks to be worse than the one we are in now.
The Planning Session lasted five hours and there was considerable discussion on a wide variety of topics including the economy, revenue, taxes, and financial trends. The meeting was a brainstorming session and no votes were taken on anything. It was an opportunity to present complex issues in an informal environment. Every issue discussed must be presented formally in a future committee meeting and any new revenue options must be voted on in a City Council meeting.
We are six weeks away from beginning the budget process for fiscal year 2010-11, which starts May 1. As the article mentions, we have cut expenses to the point where any more significant cuts will impact service levels and/or manpower.
This was the reason for the Planning Session. We, as staff, need guidance from the City Council on their priorities for the next budget. Our budget is dependent on sales tax and state income tax, so we would like to diversify our revenue sources to stabilize the budget. If the City Council wants to maintain our current level of services, then additional revenue is needed. If not, then we need to make some difficult reductions.
There was also a lot of discussion on revenue raising strategies that could relieve our budget shortfalls. The article did a good job summarizing the various options, and they will be addressed in future committee meetings for additional consideration.
The issue of property taxes was presented as an example of what could be generated if the City levied the maximum allowed by state law. Staff was not recommending such an action, but rather it was to represent what the City Council was foregoing in potential revenue. The City Council decided many years ago not to use the property tax as a primary revenue source so the public schools could adequately fund their operations. As a result, only 11% of your property tax bill goes to the City of O’Fallon.
We believe it is prudent to be proactive and discuss these difficult topics before our budget situation becomes too dire to do anything about it. Such open discussion on revenue and taxes may confuse and upset some people, but it is good management.
Over the next six weeks, the Finance Department will prepare budget documents for the city departments. Departments will submit budget requests back to the Finance Department early next year and the City Council will approve the budget in April. Until then, we do not know what the economy will do or how revenues will trend. Media reports indicate the economy may be recovering, which would be good news for our sales tax revenues. However, revenue trends to date are down dramatically and we must review all contingencies.
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