Mayor doesn't foresee layoffs; auditor still sees future budget deficit
Lead Summary
By
Brandy Chandler-brandychandler@gmail.com
Hillsboro Mayor Dick Zink says that city workers do not have to be afraid their jobs are in danger due to a pending deficit of more than $400,000, as project by Hillsboro Auditor Gary Lewis. Lewis said he hoped the deficit would not result in layoffs, but that is hard to guarantee with the current numbers, and that the city should consider layoffs.
The finance committee of the Hillsboro City Council met May 6 to discuss the projected deficit that Lewis announced during the April 12 council meeting. Lewis provided members of the finance committee – chairperson Peter Pence and Bill Alexander - as well as other members of council, including Bonnie Parr, Mary Brown Turner and Brian Waller, and Hillsboro Mayor Dick Zink and Safety and Service Director Ralph Holt, with a breakdown of the city's year-to-date fund reports from 2003 to present, as well as bank reports. Finance committee member Dave Shoemaker was not in attendance.
Lewis showed council members the progression of the city's finances.
"Based on the revenue figures from the 2010 budget with a revision increasing revenues in the ambulance collections and fire contracts by a total of $130,000 and taking away the transfer of funds from TIF (tax increment finance) to the general fund of $250,000 which is no longer available, lowering carryover encumbrances to just $50,000 - that's the amount of debt that is encumbered for this year that you carryover, show you're going to pay for next year - and increase the carryover balance to $100,000 from the original projected amount of $2,800, I am projecting a budget deficit for 2011 of over $400,000. This also assumes the appropriations remain at 2010 levels," Lewis said in a report to the committee, echoing the report he made to council announcing the pending deficit during the last council meeting.
The revenue projection for 2010 shows the total general fund at $4,959,215, with a "plus beginning balance of $1,151,335.06, with less encumbrances at $737,054.96, which leaves the total amount of of available "plus balances" at $5,373,495.10. The total amount of appropriations is $5,328,729.47. That leaves the city with an end balance of $44,765. Lewis said the end balance would have been $2,800, but the sale of the modular, at approximately $15,000 and unexpected increases in tax revenue.
During the meeting, Zink told Lewis "Something I haven't been able to understand, in CDs, in our year-to-date bank report, what monies comes out of the CDs that goes into the general fund of operations?"
Lewis said, "Rather than looking at a CDs in a specific account, look at that bottom line. That is why you always get a fund report and a bank report. Because that bank report is really like the city's checkbook, more or less. That's the amount that the city has in the bank. The number that you have at the bottom of the bank report is always the same as the number you have that is unspent on your fund report. Looking at a specific line on an account like a CD is really not accurate. Those flow back and forth a lot. Some of them, depending on the need, they change banks, sometimes we cash some in. Inside those specific lines in that bank report, money flows in an out, to pay bills, to make payroll and that sort of thing. The bottom line really to pay attention to is the bottom line number."
Lewis said an easier way to understand it is to think of the bottom line number as a number in a checking account, but the fund report is more like a budget book where you keep track of finances. "It tells you what you might have for your utilities at home, like a general fund tells you what you have in the street fund, and what have you."
Zink said that looking at the bank reports, in January 2004 there was more than $2 million and an additional $1 million in CDs. "As of now, there is $1 million in National Bank and Trust CDs. There's $700,000 in NCB CDs ... There's $300,000 in a Liberty Savings Bank CD. On top of that, there's $1,058,000 in the lock box. So that totals up to $4,662,000 vs. $2,690,000. How are we going to be so bad off if we've got $2 million more in the bank?"
Lewis said that not any specific CD or bank account takes care of the general fund. "All monies are dispersed within those accounts and just under $900,000 of those funds are allocated to the general fund."
Projections for 2011 show the total general fund at $4,783,425, with a plus beginning balance of $100,000, with a less encumbrance of $50,000. The total amount of available plus balances are $4,833,425, with the total amount of $5,240,797.36, leaving the city with a deficit of $407,372.36.
"I need to understand it, because if we're going to be held to the fire at a $407,000 deficit, we need to know what we have to do to make that up," Zink said. "And what's been said by (Lewis) and (Pence) in the last couple of meetings, our employees are on edge right now, because they don't know if they're going to have a job or not. As long as I'm here, they're going to have a job as long as there is any possible way to keep them working."
Lewis said, "I agree – if there is any possible way."
Zink said, "Well, we're looking at different avenues right now to do that. I still can't see where we're going to come up with that much money."
Council members looked over the budget numbers and projected numbers, but did not have any discussion on how the pending deficit could be addressed.
Zink and Pence told The Highland County Press following the meeting that it was too soon to make a decision on the budget.
"Obviously, we're trying to be proactive in handling this," Pence said. "But we want to be cautious in how we handle it. We don't want to create a sense of panic. We know there are things that, if the auditor's projections are correct, there are going to have to be some decisions. I won't say layoffs because that's not what I want."
The HCP asked Zink if he believed the city was facing a deficit.
"I'm not sure," Zink said. "I don't know. I know we've got $2 million more in the bank. There's another million that should be coming out of the lock box. I don't understand. (Lewis made a statement in the meeting we could possibly have layoffs) ... "
Zink brought up the year-to-date bank reports, and noted that there were increases in bank accounts. "We may have less money coming in this year, but who says we're going to spend $400,000 more? We haven't even got the budget requests from the departments. How are we going to know that until we get those in and go over them?"
"It's too early," Pence said. "We're not even halfway through the year. According to our year-to-date reports, we are behind as far as revenues. Our expenditures are higher than our revenues. But there are month-to-month fluctuations in our revenue stream. It's too early to make any kind of decisions. We don't know exactly for sure where we are going to be at the end of the year."
Lewis told The Highland County Press on May 7 that were it not for two funding moves, the city would have been in a deficit in 2010, but "$250,000 was transferred from TIF, and we split the cost of the auditor's office and the mayor's administration costs with the the general fund and enterprise funds."
Lewis said the TIF transfer was available because of an advance from the general fund several years ago for improvements to Harry Sauner Road. Because those moves were done for the 2010 budget, the options are not available for 2011.
"Were those two move not done, we would have faced it this year," Lewis said. "Or, we would have decided what to do and be dealing with the consequences now. Those two moves are no longer available to us."
Lewis said that he has taken a budget and cut it "to the bone" without making personnel cuts, and the most he was able to cut was less than $250,000, and those cuts were enough to effect services by city offices.
"If you cut everything else out, you are left with nothing but a reduction in force," Lewis said. "There is nothing uncertain about the numbers. These are not my numbers. I am using their numbers – the budget that was approved by council this year. And I am very accurate with my projections. There is nothing uncertain about this."
Lewis said that if council waits to address the pending deficit, "They wait at their own peril. Here is why. If they do a reduction in force now, they can use funds appropriated in this year to take care of unemployment options this year. If they wait until next year, it will have to be close to double a reduction in force to get the same effect. They don't have to take my work for it. They can ask the county commissioners the problem with waiting."
Lewis said that it would be difficult to estimate how many people could have to be laid off to balance the budget, as different employees have different wages and salaries, and "It wouldn't be my call to make."
Highland County Auditor Bill Fawley, as the request of Lewis, took a look at the city's numbers, and agreed with what has been projected.
"As far as what I have seen, his projections are accurate," Fawley told The Highland County Press. "They can't approve more than their anticipated receipts. (Lewis) is trying to get them to reduce their appropriations this year, so before next year and their cuts won't be so significant."
Fawley said that with $5.2 million appropriated for this year, and with the income only projected to be $4.8 million next year, "Why not reduce it to $5 million this year so they don't have to cut it all at one time so significantly."
Lewis noted that the audit for the city of Hillsboro is scheduled to begin May 10.
Pence told the HCP May 7 that council has not discussed layoffs.
"If the city auditor is going to make remarks like that, they need to be made during the committee meeting, not for press purposes," Pence said. "We're not halfway through the year and he is projecting a carryover of $44,000 for next year. That was in the paperwork he handed out. I didn't hear him in the meeting (Thursday) night say that we needed to be considering layoffs."
Pence said that he didn't specifically say he thought Lewis' numbers were incorrect. Pence said that thought Lewis and Zink discussed layoffs, he did not think that immediate layoffs were being recommended.
The finance committee waited to discuss the matter, Pence said, because "there were some things Ralph Holt was working on that I felt, that he felt, were important and needed to be discussed. He had materials he wanted to hand out at the committee meeting. There was some information he said he was putting together, which was discussed in executive session [See sidebar].
"It's not responsible for me to say 'We need to make cuts here and here,' because I don't manage the day-to-day operations of the city. The mayor and the safety and service director does. Inevitably, there will be cuts," Pence said. "What kind of cuts, what departments, what the cuts will consist of, it's too early to say. There is still a lot of information to be gathered (like department head budget requests) and I'm not going to say one way or the other, because I don't know. It would be irresponsible for me to when I don't know one way or the other."
President of council, Lee Koogler, who was not in attendance during the finance committee meeting, said that he spoke with Lewis and Pence regarding the budget on May 7.
"I am the individual who asked the auditor to prepare projections for next year," Koogler said. "I am also the one who asked council to look at it. I don't think anybody is in any better position than Mr. Lewis (regarding understanding the budget). I have asked council to look at it, I have asked council to continue to look at it, and I have great concern, if we choose not to do anything, where we will ultimately end up. As president of council I can only ask council to look at it. What I am going to do is what I have already advised Mr. Pence, and sooner than later make some educated decisions on this."
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