Farmersville may begin budget cut backs
Midyear budget report says city has enough revenue to cover operations but can’t save for the future
By Reggie Ellis @Reggie_SGN
FARMERSVILLE – After years of slow, steady economic growth following the Great Recession, local cities are just now starting to project revenues that may surpass expenditures in the coming years. Unfortunately, many could begin to cut back services as economists are already projecting a new recession on the horizon.
The City of Farmersville is already talking about freezing wages and capping unused leave time for employees and says it is unsure if two sales tax measures passed in November will be enough to maintain service levels in the coming years. The news was presented by interim city manager Mario Krstic and finance director Steven Huntley during a mid-year budget report at the Council’s Feb. 26 meeting. Calls to Farmersville City Hall were not returned as of press time.
Overall, the city has received about 50% of all major revenue sources which Huntley stated was “a good sign” because “revenues do not flow in evenly in any year.” Property tax revenues are at 41% of expected, only slightly off pace from 43% last year at the halfway mark. Sales tax is returning closer to normal levels following two years with 13% and 8% shortfalls. Some of the growth has come from restaurants but most the increases this year are sales tax on fuel and service station purchases, which is up by 40% over last year. Vehicle license fee revenue will be up 2.5% by year end, according to the State. The city has seen very little growth in other areas including property tax increments from the dissolution of the former Redevelopment Agency,
On the expense side, Huntley identified three areas where the city needs to control costs including administration, police, fire, as well as salary and benefits. Administration costs for insurance has increased 53% in the last four years and is expected to increased by another 18% this year. Workers compensation is expected to increase 13% by the end of the year and has increased by 67% over the last four years. But overall, insurance costs are expected to drop by 3% for the first time in five years.
The City has taken some steps to reduce other administrative costs including printing and paper. By renegotiating their printer lease, getting newer, more efficient printers and reducing color prints and waste Farmersville reduced its monthly printing bill by 57%. The city’s annual cost of paper was negotiated down to 15%.
After three straight years of increases, salary and benefits are expected to drop by 6% this year, mostly due to unfilled positions including city manager, a police officer, as well as code enforcement/animal control officer. After losing two positions in the fourth quarter of FY2016-17 and four more in the first quarter of FY 2018-19, Huntley combined the cost to date for paying out and covering those positions, adding new positions, promoting people to fill some of those positions for a net saving of about $49,000 to the General Fund by the end of the fiscal year in June. The City’s SAFER grant, which funds two full-time positions in its fire department, is also running out in June 2019.
“In total, the General Fund is in a much healthier position now than in years past. However, in order to solidify growth, more tax base development is needed. Diversification of tax revenues is extremely important. The City must not become reliant upon one-industry and one-time money for ongoing expenses.”
The city’s largest project, an $8 million expansion of its wastewater treatment plant, has been delayed again this year and may be only 20% complete by this June. The city will also delay the purchase a replacement vehicle for fire department and removed it from the budget for this fiscal year.
The Sewer Utility fund will be stretched during the construction of the wastewater treatment plant. The Water Utility fund has lost 60% of its cash position over the last four years and is projected to lose another $134,087 this year. A large portion of that ($860,000) was used to pay for operations, forcing the city to forego maintenance and replacements in the system. The new metered water system and new rates will improve the fund but they will take place slowly over time.
The Solid Waste fund is by no means on solid footing due to a sunset on annual increases in line with the consumer price index (CPI) yet its contract for waste hauling will continue to increase through FY 2021.
“This budget should be considered neither positive nor deficit, but neutral in the sense that every ounce of revenue is being used just to fund current operations as is,” Huntley stated. “The General Fund may prove to still be a deficit when the year is done.”
Farmersville will not begin seeing any additional sales tax revenue from Measure P until the current fiscal year is almost over. The half cent sales tax measure will not be enacted until April 1 with the city receiving from the state in June at the earliest. Similarly, Farmersville will not see any sales tax revenue from Measure Q either. The tax on sales by commercial cannabis businesses may not see any revenue until January 2019.
“Due to the industry’s speculative nature, early implementation of a new industry, existing and ongoing legal entanglements, and other constraints caused by decriminalization of the industry only just beginning, there are a lot of hurdles to overcome first before any revenue can be realized. Even if revenue is realized, it will have significant amount of expense to balance out initially before any real ‘net income’ will be had.”
With a recession projected for the near future, Huntley said the City cannot expand any services and must begin to plan for future downturns by finding ways to cut expenses and using the savings to build up reserves.
Huntley also pointed out some problems that have persisted for several years. Unused leave accrued by employees has climbed to $805,438, with 75% owed to the General Fund. Huntley urged the Council to immediately implement a plan to cap unused leave time to prevent the amount from ballooning larger.