Potential deficit climbs to $731,000

The budget deficit facing the city of Hillsboro in 2011 could be as high as $731,000, according to city auditor Gary Lewis. 

Lewis presented council with two sets of budget numbers which contained the recently submitted budget requests from city department heads, which shows approximately 8 percent of the city's budget will have to be cut in order for it to balance. 

"Your total general fund anticipated revenue for 2011 will be $4,768,000," Lewis said. "Your beginning balance of $324,560... With the amount of appropriations that you see, a $5,542,000, that includes the sheets where (city department heads) turned over what they felt they would need in 2011, so I put in those exact numbers that (Hillsboro Safety and Service Director Ralph Holt) gave to me, and then added in the payroll and those types of numbers as well. So what that amounts to there is an ending balance in the hole close to $600,000."

Lewis said he did the same thing in a subsequent budget using  figures, "giving you an expended balance of $192,000 rather than the $324,000. I kept encumbrances the same at $150,000. (Which) gives you an ending balance of negative $731,000. So, somewhere in between there, if all things fall out the way it looks like they are going to, those are the two numbers that we are looking at. It's going to end up between that negative $731,000 and negative $600,000."

Lewis said that Holt had requested he and the department heads meet to see what they could cut out of what was requested. 

"Having given that, there is still going to be a negative balance when that is accomplished," Lewis said. 

During the meeting, which lasted approximately 45 minutes, there were several long moments of silence as council members looked over numbers from Lewis.

Shoemaker asked the difference between the two, saying that the budget seemed to change on the figure $324,000. Lewis said it depended on whether or not the city chose to pay on certain items in 2010 than in 2011.

Responding to questions by council member Bill Alexander, Lewis said that anticipated revenue is determined by historical data, and averages of numbers from previous years. 

When looking at the anticipated revenue from income taxes, anticipated at $3.1 million, council member Bonnie Parr asked Lewis if those numbers could be lower than projected, and he said they could be, which could increase the negative balance. Lewis said the income tax collections have steadily decrease since 2007, "for the obvious reasons."

Shoemaker asked if that $3.1 million figure could decline due to some residents' unemployment running out. Lewis said that was possible.

Alexander asked Lewis where the city would stand if they reduced expenses in 2011 to be the same as 2010. Lewis said the city would still have a negative balance as they are no longer able to use $250,000 from Tax Increment Finance (TIF) which had been used in 2010. 

Some of the expenses the city faces are paying fixed bonds on recent and ongoing construction projects, according to Lewis, which are between $210,000 to $220,000 a year.

Alexander asked if the budget numbers presented included a potential increase to fire contracts to area townships, as they are being negotiated by Holt. Lewis said he increased those numbers by $91,000 to accommodate a potential negotiated increase.

Lewis said he had hoped that collections from EMS runs would have been higher. The city is owed approximately $900,000 from those runs, an only around $400,000 has been collected. The city recently contracted with a collection agency to try to get more of those bills paid.

"I haven't looked at this enough to see the comparison of expenditures this year - in these figures - is comparing to last year," Alexander said. "Is is substantially higher?"

Lewis said, "Right now, it shows higher than last year," but department heads know the numbers are going to be cut. 

"We know that this is kind of a wish list," Holt said. "Gary (Lewis) is working the numbers, but the department heads need to work the priorities. There are priorities in each department on things that need to be accomplished next year if possible. I want to make sure the department heads are in on the discussion so (they) can tell us about the priority. 'Cause Gary handles the money. He doesn't handle the departments. He doesn't know what priorities are."

Alexander asked how hard it was going to be to cut more than $730,000 out of the budget. 

Holt said, "It's just like at home. You don't have any money, you don't do anything. You stay home. And we're in a position where we don't have the funding, we don't have the monies, then we're going to have to reduce services. My only concern is this. The auditor showed us the numbers. If that's accurate, my issue are the employees. Cause I've told everybody that I can think of, is that's the only thing in Hillsboro that keeps Hillsboro going, are the employees. I mean, we all walk in and we're here for four years or eight years or whatever, and then we all hit the door. These people are here for 20, 30 years. They make Hillsboro work. We don't. They make it work ... I have a real problem, and that's why I'm really interested in sitting down with Gary and the department heads on the budgets to see what we can do. If there is an issue where we have to do something, tragically we'll do it. But until I see the big red cross, I'm going to manage the budget that I have."

Holt said each year the city manages to work within the budget council approves. 

Council president Lee Koogler said "prioritizing expenditures for next year would seem to be a first step in the right direction. Establishing what our expenditures will be, but that only gets us part of the way there.

Finance committee chairperson Peter Pence said, "This is not going to be a fun question to ask, but it probably needs to be asked. What benefit would there be if this year's budget were to be revised?"

"This year, 2010?" asked Holt. 

"Yeah," said Pence. 

"It's a little late," Holt said. 

"No, I think it can be changed," Pence said. "But my question is if ... where we're at ... between $600,000, $750,000, if you wait, then next year you have to do twice as much to address the problem ... I'm not saying that's the way to go, I'm just saying is there any benefit?"

Lewis said that the higher the unexpended balance is over the course of the year and at the end of the year, "the better off you will be. The sooner that is addressed, the better off you would be going into next year."

The committee did not discuss possible cuts that might be made, but Pence indicated that the committee would meet some time next week.

Following the meeting it was noted by some council members that there may not be a quorum for the June council meeting, as Parr and Alexander would be out of town, and council member Rod Daniels has not yet returned to council meetings following a leave due to joining the military. Lewis said he also would not be in attendance. 

Koogler told The Highland County Press after the meeting that he was encouraged Lewis and Holt were going to be meeting with department heads, to "pare down what we can."

"Obviously council already knows that action is going to be necessary," Koogler said, which would have to include cuts. Koogler said that specific areas of cut have not yet been discussed by council.