City View: City budget requires perspective, practical decisions, proactive measures

More than 125 years ago, Ralph Waldo Emerson asked, “Can anybody remember when the times were not hard and money not scarce?” Concerns about money and the economy are nothing new. Market forces and the rules of sound budgeting remain the same, but the players have definitely changed.

Columbia now competes nationally and internationally for jobs and economic development opportunities, and worldwide economic pressures have a direct impact on our pocketbooks. Skyrocketing energy costs, mounting fuel prices, escalating health care costs, rising insurance premiums and overall price increases for basic goods and services are just a few of the pressures on our bottom line.

The City’s financial position will continue to be sound in the coming year. However, as we plan our fiscal year 2009 budget, we must be cognizant that costs will continue to rise as revenues remain flat, leaving the City with very few discretionary dollars. As I recently told the Council and staff, this is not the year for new initiatives or major increases in existing programs.

In my recent State of the City address, I suggested the City expand partnerships, develop new alliances and do its business more intelligently. Through collaboration and coordination, we can achieve more with fewer resources, particularly in the areas of economic development, health, social services and police.

Understanding the current financial situation requires a basic understanding of the City’s operating budget. An in-depth overview is available in the FY 2008 annual budget, which is online at www.GoColumbiaMo.com. For the sake of space, I will try to provide a simplified primer on the four general categories of the City’s operating budget.

The general fund

This fund accounts for a large portion of the City’s operating expenditures and day-to-day services such as police, fire, health and planning. Primary revenue sources include general sales tax, gross receipts tax and PILOT payments from City enterprise funds. (More on PILOT, later)

Since the general fund is the source of most of the City’s discretionary dollars, here are a few important facts to consider:

• 28 percent of the general revenue fund is generated by a 1-percent general sales tax.
• Sales tax revenues have been growing at less than 3 percent the last few years.
• Sales taxes are expected to grow about 1 percent in the coming year.
• 66.7 percent of the general fund pays for personnel services. Of that, 61 percent is spent on public safety, which includes police, fire, joint communications, emergency management and Municipal Court.
• 14.3 percent of general revenue funds are budgeted for things such as utilities and services, which primarily fund street, sidewalk and park projects.
• 95 percent of park expenditures are paid through designated funding sources.
• 100 percent of street activities have designated funding.

Special revenue fund

This fund represents money restricted by federal guidelines, state law or City ordinance. Examples include voter-approved park, transportation and capital improvement sales taxes, convention and tourism hotel tax and the federal Community Development Block Grant fund. Special revenue funds must be spent for their designated purpose and come with obligations the City must meet.

Enterprise fund

This fund stems from business operations that serve the public, including electric, water, railroad, sewer, storm water, solid waste and parking. City enterprises make Payment-in-Lieu-of-Taxes (PILOT) disbursements to the general revenue fund that are equal to what privately owned utilities would pay in gross receipts tax. Three enterprise funds receive substantial City subsidies – airport, transit and recreation services.

Internal Service funds

Each City department supports internal service operations such as fleet, information technologies, public communications, utility customer services, custodial/building maintenance, self-insurance and employee benefits and health insurance.

So, if our income streams are limited, expenses are growing more rapidly than our revenues and our financial obligations leave very few discretionary dollars, what do we do?

First, we plan conservatively, budget prudently and maintain the appropriate reserves, as required by ordinance. We take a hard look at what works and what doesn’t, seek ways to “work smarter” and use existing resources more wisely.

Then, we take a visionary approach to the future.

I plan to further discuss these ideas in future issues and appreciate the opportunity the Columbia Business Times has given me to do so.
As we enter the FY ’09 budget process, there will be several opportunities for public input. I encourage you to get involved by going to public hearings, attending Council meetings and reviewing the financial information on the City’s Web site, www.GoColumbiaMo.com.

Budget decisions are never easy, but together, we can weather the current economic downturn, plan for the future and continue to enjoy the benefits of living, working and playing in a full-service city.