2019/03/22 - Walter's Blog: Budget Revenue
I previously wrote about how our annual budget is structured. This time I will discuss our revenue situation. Local revenue sources are improving, and this budget does not contain any major cuts in programs or expenditures. 95% of residents believe O’Fallon is a great place to live and this budget will continue to provide high quality services to the community.
We are required by state law to have a balanced budget. Our total budget for FY2019-20 is $83,968,042, equally balanced by revenues. which means we have $83 million in revenues to equal $83 million in expenses. This represents an increase of approximately 12% compared to the previous year. The reason for the increase is due to scheduled capital projects, primary for improvements at the Wastewater Treatment Plant.
Where possible, we have included the City Council’s priorities to guide our budget decisions, which focus on Public Safety, Economic Development, and Infrastructure. In particular, City Staff developed a Capital Improvement Plan (CIP) that schedules equipment and construction projects into the next five years. The CIP served as a planning document for this proposed budget. This budget was programmed around these goals of the Mayor and City Council as expressed through direct input from the Mayor and Council, Staff input, and refinement through City Council Committee review.
The General Fund is the main fund for the City, and it includes the budgets for Administration, Police, Community Development, Streets, Facilities, Police and Fire Commission, Cemetery, Information Technology, and 911 Dispatch (MECOMM) departments. The General Fund revenue is estimated to increase approximately 2%, mainly due to projected increases in the State Use Tax and Income Tax.
The revenue for the General Fund is proposed to be derived as follows:
Source | Proposed Budget FY2020 |
% of Total | Amended Budget FY2019 |
% Change |
Sales Tax | $ 8,500,000 | 42% | $ 8,503,500 | 0% |
State Income Tax | 2,876,500 | 14% | 2,750,000 | 5% |
Food & Beverage | 930,000 | 5% | 865,000 | 8% |
State Use Tax | 837,100 | 4% | 755,000 | 11% |
Combined Dispatch - | 817,150 | 4% | 790,000 | 3% |
Fee in Lieu of Taxes | 740,130 | 4% | 712,660 | 4% |
Utility Tax | 670,500 | 3% | 784,300 | -15% |
Telephone Franchise | 100,000 | 0% | 114,000 | -12% |
Cable Franchise | 435,000 | 2% | 475,000 | -8% |
Property Tax | 500,000 | 2% | 500,000 | 0% |
Ameren Franchise | 245,000 | 1% | 245,000 | 0% |
Road & Bridge | 290,000 | 1% | 290,000 | 0% |
Building Permits | 350,000 | 2% | 300,000 | 17% |
Crime Free Housing | 170,000 | 1% | 165,000 | 3% |
Administrative Tow Fees | 60,000 | 0% | 60,000 | 0% |
Circuit Court Fines | 55,000 | 0% | 55,000 | 0% |
Transfer from Other Funds | 1,789,760 | 9% | 1,758,954 | 2% |
Other | 1,060,240 | 5% | 996,347 | 6% |
TOTAL | $20,426,380 |
| $20,119,761 | 2% |
Sales tax comprises the largest part of the General Fund (42%). Sales tax revenues for FY2020 are estimated to be the same as in the FY2019 budget. There are no large sales tax generators proposed to open in FY2020 and retail sales are uncertain in the new economy of online sales.
We anticipate a 14% increase in the State Income Tax revenue, which is funded on a per capita basis. When the state government approved their annual budget in 2018, the State Income Tax distribution to local government was reduced by 10%. The reduction was approved for only one year, but the Governor’s recent budget proposal extends the 10% reduction for another year. As of the approval of this budget, the state’s budget has not been approved, so we do not know whether the 10% income tax reduction will continue. Since this is the second highest revenue source for the General Fund, any additional cuts in the State Income Tax would require the City Council to revisit the budget.
Property tax encompasses only 2% of the City’s budget and is ranked eighth among City General Fund revenue generators. Property tax revenues remain the same as last year. The property tax levy supports General Fund programs such as police, street maintenance and construction, and general administrative functions. Property taxes are also levied for Special Revenue Funds such as the Public Library, Parks and Recreation, Emergency Medical Services, Fire Department, and employee pension funds.
Combined Dispatch is a relatively new department that was created in 2017 to capture the costs for the 911 dispatch center (MECOMM) serving O’Fallon, Shiloh and Fairview Heights. This is a result of the state mandate to reduce the number of dispatch centers. Shiloh and Fairview Heights pay for a share of the Dispatch Center’s expenses.
The Food & Beverage tax is anticipated to increase due to the growth of eating establishments and the influx of visitors from the opening of St. Elizabeth’s Hospital and the Destination O’Fallon projects.
The “Fee in Lieu of Taxes” represents the portion of administrative salaries and benefits that were originally reflected in the Enterprise Funds (Water and Sewer). State law requires that municipal utilities charge an administrative fee, so they are similar to private sector utilities that must pay property taxes and utility taxes.
Utility Tax revenues are estimated to decrease and are dependent on weather conditions. The Utility Tax is a tariff that is based on consumption and not the actual rate. Warm winters and cool summers can significantly affect Utility Tax. A large portion of the Utility Tax is committed to paying off the $7 million Public Safety Facility that was completed in 2004. The remainder is used to fund the Parks and Recreation Department. The Telecommunications Tax also is declining due to reduction of phone lines in homes.
In summary, the City’s revenue situation is stable and growing, although we are concerned about the state government’s actions to reduce the City’s share of the state income tax. In my next blog, I will address our expenses in the annual budget and how it reflects the priorities identified by the City Council.