Is city budget in trouble? Carryover might run out at New Year

Budget revenue projections for Athens by City Auditor Kathy Hecht are indicating that the city will have very little carryover to next year's budget beginning in January. With much of this money used to pay city salaries at the beginning of the year, several city officials met last week to discuss various scenarios, including effects on personnel.

"All our money won't be in the bank on Jan. 1," Hecht said. "Utility receipts, tax receipts, they come in weekly throughout the year. So we need carryover, we need money in the bank to start up. They make payroll and do first-of-the-year purchases and pay bills."

Hecht said that she isn't expecting an extreme decrease in overall revenue, but expects it to flatten. "I do see a problem with the lack of carryover. Basically, our budget this year has eaten that up," Hecht said. "That is something that City Council needs to decide, depending on the amount. When that gets to be a lot of money, then it does affect personnel. And we're looking at quite a shortfall in the general fund."

Carryover should be about $1 million, or 10 percent, of a $10 million budget in the general fund, Hecht explained. She said the minimum that the city would want for carryover would be $600,000 to $700,000, which is where it stood when she started as auditor in 2004. Since then, she said, it has gone back up to around $1 million. This year, she is projecting carryover to be between $200,000 and $300,000.

Last week, City Council scheduled a special executive (closed-door) session so that finance chairs Jim Sands and Nancy Bain could talk about the situation with other council members. After protests from several members of the local news media who said the meeting should be open, that session was cancelled in favor of a smaller meeting with at-large City Council member Sands, Third Ward member Bain, Hecht, her deputy auditor and Mayor Paul Wiehl. City Council is expected to discuss the projections at the next finance committee meeting scheduled for September.

Hecht listed several options for dealing with the budget shortfall in the general fund, which receives revenues primarily from income tax.

With general fund revenue coming from income taxes, she said she expects that recent layoffs at Ohio University will begin to show negative revenue effects in the coming year. She, however, pointed to growth areas of the city, such as the new Holzer Clinic on the far east side, as bringing income tax revenue back to the city.

"Of course 'layoffs' is the dirty word that nobody wants to say. Nobody wants that period," Hecht said, pointing out that 70 to 80 percent of the budget is personnel costs. "There are other options. You could do some reorganization. We can change [how much] income tax goes into the general fund. There are several things we can do other than layoffs."

Hecht said she understands that the city has not laid anybody off since 1986. She said that the budget figures do suggest potential shortfalls in the future, so just cutting something like supply costs won't be enough to solve the problem.

Citywide payroll is about $900,000 every two weeks, Hecht said. This means that the city will need $450,000 in the general fund on Jan. 15 just to meet one week's worth of payroll, let alone pay the city's bills. The general fund is used for police and fire payroll, Hecht said, while the city's streets, water and sewer departments have their own revenue sources.

"There's not a simple solution. There's a lot of options, and nobody wants anybody to lose their job," Hecht said.

City Council finance chair Jim Sands said that the committee will take up the subject when it meets in September.

"The auditor's projections may lead us to some changes in exactly how we do business, with regard to contracts, etc.," Sands said, adding that he didn't mean personnel contracts, but other city contracts. "It's an issue that will be discussed more fully at our next committee meeting. We don't plan, at this point, to get together throughout the month of August."

The city's fiscal year coincides with the calendar year, so the city budget must be finalized by the end of December. With three readings needed for passage, it's expected that council will introduce some sort of budget in November.

In February, City Council trimmed $460,000 from the 2009 Appropriation Ordinance after projecting a $1 million shortfall in the city's 2010 budget due to the struggling economy.

Council President Bill Bias explained at the time that one reason for the city's budget shortfall is that Athens is no longer seeing tax revenue from major construction projects that have been taking place over the past couple years, including the new Ohio University Baker Center and the Holzer Clinic.

At the time, Mayor Wiehl said any eventual personnel cuts from the city would likely affect overtime hours first, seasonal employees next, then part-time employees. Cutting into staff levels would erode essential city services, making it a last-resort option the city is looking to avoid, he said at the time.

Wiehl could not be reached for comment Friday or over the weekend.