The City of Union’s proposed 2009-2010 budget will be nearly $8 million less than this year’s, finance director Walker Gallman says.

An overview of the budget presented to Union City Council Tuesday morning projects expenditures of $42,506,050 or $7,896,850 less than the current budget. Gallman said this is largely due to the decline in the cost of natural gas, caused by reduced demand.

Gallman pointed out that many of the city’s industrial customers have halted or curtailed operations, cutting into the city’s utility revenues. The proposed budget projects utility revenues of $32,369,690 or $7,479,910 less than what was budgeted for this year.

In preparing the budget, city staff was instructed by Mayor Harold Thompson to find ways to reduce expenses and offset the lost revenue. The utility budget projects expenditures of $35,973,190 or $7,197,581 less than was budgeted for 2008-2009.

Even with the reductions, the utility fund still faces a projected shortfall of $3,603,500. To help close that gap, city staff is proposing:

• A 10 percent increase in sewer rates. Gallman said that with the increase a residential customer within the city who generates 4,500 gallons of sewage a month will see their monthly bill increase by $2.97. Residential customers living outside the city will see their monthly bill increase by $4.45. The increase would generate an additional $150,000 in revenue.

• Water rates will remain the same.

• Increases in water and natural gas tap fees. Utility Director Joe Nichols said that with the current fee schedule the city is not recouping the cost of installation. Under the proposed schedule water tap fees would be increased from $350 to $450 for a 3/4-inch tap; $425 to $650 for a 1-inch tap; $625 to $850 for a 1 1/2-inch tap; and $2,500 to $3,000 for a 2-inch tap.

On natural gas, Nichols said the city does not charge for the first 250 feet of a connection and only 50 cents a foot over 250 feet. Under proposed fee schedule the city would charge $275 for a 3/4-inch gas service line and $350 for a 1-inch gas service line.

• Electric rates will remain the same but the city will use a purchase power adjustment to meet the cost of electricity each month.

The budget also calls for the elimination of two part-time positions in the utility department. 

General fund

The general fund portion of the budget is also lower with proposed expenditures of $5,397,210 or $573,160 less than what was budgeted for this year. Revenues total $5,031,050, leaving a projected deficit of $367,620 despite reductions in virtually all areas of the general fund. 

The reductions include the elimination of two School Resource Officer positions and the elimination of one vehicle.

Gallman said the deficit is due to the ongoing economic downturn which has caused a $276,200 decline in the fee the utility department pays the city; reduced earnings interest; and may result in possible reductions in State Aid to Subdivisions. Another problem facing the city is that municipal revenues have remained largely flat over the past few years and will likely continue to do so in the years ahead.

To address this problem the city has several options including raising revenues through increases in municipal property tax — though this is not being proposed in the new budget; increasing the franchise fee paid by the utility department; and using money from the city’s surplus fund. 

Reductions in expenditures are also a possibility and include personnel and service reductions; delaying equipment purchases; and cutting funding to outside agencies.

Council resumed budget deliberations this morning.