Shortfall Of $1.6 Million Forces Council To Cut Proposed Budget

By Tammy Gray-Searles
   Facing a $1.6 million shortfall in the 2008-09 budget, the Holbrook City Council slashed the unfilled economic development and city planner positions, but kept a cost of living increase in place for current city staff members.
   The council met in a work session Tuesday evening to discuss the proposed budget and how to bring it into balance. With all of the items requested by council and department managers, expenditures were predicted at $16.6 million, while revenue is estimated at just over $15 million. Interim City Manager Fern Lar-son asked the council members if they had any direction or suggestions for bringing expenditures in line with revenues. She specifically asked for guidance on whether to keep a proposed five percent cost of liv-ing increase for all employees, and the salaries and department budget for economic development and city planner in the upcoming budget, or to eliminate them.
   Larson noted that a five percent cost of living increase would cost the city $210,000, and economic de-velopment and city planner budgets are just under $300,000. She explained that eliminating all of them would reduce the shortfall by nearly half, but would also mean that there would be no increases for city staff members at a time when nearly all costs of daily living are rising rapidly.
   “I can go to the department heads and work with them on the rest of the budget, but I need to know what you want to do about the cost of living,” Larson remarked. “Do you want to leave it or do less?”
   Councilman Charles Haussman noted that he would like to see an increase remain in the budget, even if it is not the entire five percent.
   “I place great value on our city employees,” he said. “They are our greatest asset.”
   Haussman asked whether it would be appropriate to reduce the increase to three percent in light of the large deficit being faced by the city.
   Councilmen Stuart Szink and Phil Cobb agreed that it might be a good compromise.
   Councilman Kent Darris proposed a 2.5 percent increase for all employees and up to 2.5 percent in merit increases.
   “The people that do a good job need to be rewarded,” he remarked, noting that the city has had a merit raise policy in place for several years, but it has never been funded.
   Darris noted that including the merit raises would not help solve the budget problem, but he felt it was important to try to include them and find other ways to reduce the budget.
   Councilman Wade Carlisle agreed.
   “There’s only two things I want to see kept in the budget, the merit raises and the police vehicles,” Car-lisle said. “We have to cut a million, no matter how it comes.”
   The council asked Larson to keep a five percent salary increase in the budget, with 2.5 percent desig-nated for a cost of living increase for all employees and 2.5 percent set aside for merit increases.
   The council also discussed the new budget item for buying out sick and vacation leave when an em-ployee leaves the city.
   City Clerk Cher Millage explained that the city has always paid this, but it has never been included as a line item before. The suggestion to include it was made by the city’s auditor.
   Larson noted that she arrived at $100,000 for the line item by calculating how much the city would pay out if all employees eligible for retirement chose to retire during the 2008-09 fiscal year. She explained that the total expenditure may be less, depending on whether the employees retire.
   Council members discussed how payouts are calculated and how much leave can be accrued.
   Larson noted that employees with more than 10 years of service are paid for one of every three sick days they have accrued when they leave the city, and all employees are paid their vacation days. The coun-cil suggested that the personnel policy committee look into ways to reduce the city’s liability for unused vacation and sick time without harming current longtime employees.
   “What we’re saying is, go easy on them, but it’s got to change somehow,” remarked Mayor Jeff Hill.
   Darris added, “We can’t do it anymore, because we just can’t afford it.”
   Larson then asked the council members what they would like to do concerning the economic develop-ment budget. She noted that if the department is funded at the same rate as last year, a $270,000 transfer will need to be made from the general fund.
   Larson also told the council that she budgeted the anticipated lodger’s tax revenue entirely for the Chamber of Commerce, as the council decided to do last year.
   The council discussed the history of the lodger’s tax and whether it was appropriate to use any of the funds for activities other than promoting tourism.
   “If we collect the money from tourists, it should be used for tourism, not other places,” Darris com-mented. “It’s not legitimate if we’re not using it for what it was intended.”
   Haussman and Szink agreed, and the council asked Larson to keep the line item for the Chamber of Commerce the same as last year, which includes all anticipated revenues from the lodger’s tax.
   The council members then discussed whether to eliminate the economic development budget.
   Haussman noted that he thought it unlikely that a new economic development director would be hired in the next fiscal year.
   The council discussed how the position of economic development director was created and funded.
   Hill noted that the council should be careful not to overstep its bounds by determining what positions should or shouldn’t be filled.
   “Hiring personnel is what we hire a city manager to do,” he said. “What’s up to us is, are we going to fund it or not?”
   The council asked Larson to remove the economic development position and department funding from the budget.
   “Something has to go,” Councilman Phil Cobb said. “We haven’t got any money, so it has to go. We have absolutely no choice.”
   The council then asked Larson to work with department heads to determine what other items should be removed from the budget, and bring a balanced budget back to the council for consideration.
   Hill noted that at that point, if any urgent projects are left out, the council can meet with department heads to try to incorporate them into the budget.
   Haussman noted, “Let’s work from a balanced point.”
   Larson asked for approval to add a $200,000 expense for mapping city utilities and $200,000 revenue in loan funding to balance it. She explained that the city needs to map its utilities and that a low-interest loan may be available for the project. Larson advised the council members that by including the item, they would have the option of either approving or declining the loan for the project in the upcoming months. The council approved the additions.
   “Now that’s real economic development,” Hill commented.
   The council also briefly discussed health insurance costs and asked Larson to look into any options that would reduce the cost of providing health insurance for city staff members.
   Larson told the council she will meet with department heads and return to the council with a balanced budget as soon as possible. She noted that she hoped to have the preliminary budget approval process com-pleted by the end of June.
   The next regular council meeting is scheduled at 7 p.m. on Tuesday, May 13, at city hall, located at 465 First Ave.