Union City Council opened its first workshop session of the 2010-2011 budget process Tuesday afternoon with a presentation by Gallman on the proposed budget and the city’s overall financial condition. The budget is projected to total $43,858,140 or $1,027,650 more than the $42,830,490 budgeted for the current fiscal year, an increase of just 2 percent.
The general fund portion of the proposed budget totals $5,343,340 or $74,980 less than the $5,418,320 in the current budget. The utility fund portion of the proposed budget is $37,346,510 or $1,059,830 more than the currently budgeted $36,286,680. The proposed solid waste fund budget is $963,290 or $92,800 more than the current budget of $870,490.
Gallman said a number of the factors contributing to the increase in the proposed budget are largely outside the city’s control and include a 2.9 percent increase in the Consumer Price Index and an anticipated 9.5 percent increase in health insurance costs expected to take effect Jan. 1, 2011.
In his presentation to council, Gallman also reviewed the state of the city’s finances over the past eight years beginning in 2002. Gallman said those years have seen either no increase or an actual decrease in city revenues including State Aid to Subdivison, fines and fees, interest and property tax. This is also true in the utility fund which is projected to generate revenues totaling just $34,420,810 for a projected deficit of $2,852,700. Gallman said the utlity budget will have to be balanced through either deferring major capital projects, rate increases or transfers from retained earnings.
Gallman said transfers from retained earnings reduce the financial cushion the city has built up over the years. Retained earnings are used for emergency situations and daily cash flow. Gallman said the city needs to keep at least $1.5 million on hand in the general fund and $3-$4 million in the utility fund. While the city can use those funds to balance the budget, Gallman pointed out with the decline in city revenues this could reduce its retained earnings to an unacceptable level.
“If the city is to maintain a general fund balance of $1.5 million, which I think is prudent, it will have to look at alternative sources of revenue, either in the form of a tax increase, increased fees, reduced transfers to the Solid Waste Management Fund,” Gallman said. “The alternative would be to reduce expenditures.”
Gallman said the same applied to the utility fund only there it would be either rates increases or deferring major capital expenditures.
One area where savings could be realized is in the Solid Waste Management Fund. The propose budget offers council the choice of either purchasing a new brush truck or leasing it. Gallman said if council decides to lease the truck the savings would be realized through spreading the payments out over five years. He said leasing the truck would reduce expenditures in the proposed budget by $100,000.
Council will resume its budget deliberations at noon today.