Outgoing City Manager Pat McCourt will present a $20 million tentative City budget to the Willcox City Council for final approval on Monday, June 17.
By state law, the total budget amount that is tentatively approved cannot be increased before its final adoption in August.
“If changes are made after the tentative budget is approved, the overall amount can be reduced or maintained at the current level, but it cannot be increased,” said Ruth Graham, the City’s finance director.
The tentative budget includes a Cost of Living allowance (COLA) to City employees for only the second time in seven years.
In her June 3 letter to Council, Graham said that City staff will recommend adoption “of the tentative budget for the 2013-14 fiscal year totaling $20,111,684, net of inter-fund transfers totaling $1,406,838.”
“The tentative budget covers all of the operations of the funds managed by the City,” she said.
“In addition to the operating needs of the City, this budget includes capital expenses for a wastewater treatment plant (WWTP) at an estimated cost of $10 million,” said Graham, adding that the budget also includes “anticipated grant revenues and expenses.”
She pointed out that the fiscal year 2012-13 budget totaled $22,286,659, net of inter-fund transfers of $849,409.
Graham told the Council that the 2013-14 tentative budget has been published, and has been open for public discussion at both the June 3 meeting, as well as the upcoming June 17 meeting.
In his fifth and final budget message to the Council, McCourt said that fiscal year ‘13 (July 1, 2012 through June 30, 2013) has been challenging, adding that fiscal year ‘14 will be challenging, as well.
“While I will not be part of the City in fiscal year ‘14, I know the staff is committed to providing the highest quality service in the most efficient manner possible to the people of Willcox and our visitors,” he said.
McCourt said that national and state economies have continued to improve since he wrote last year.
“While the State economy and therefore the State government income has improved, as can be seen in the State revenue sharing – this is State income tax – the State Government has dug a very deep hole and it will take several years before it climbs out,” he said.
While “the temporary one-cent sales tax has helped the State a great deal, that tax expired as of the end of May 2013,” McCourt said.
He said that the City of Willcox will likely continue to bear the burden of the economic woes of the State, especially now that the one-cent sales tax has expired.
McCourt explained that the exception is State revenue sharing, which the voters put into the State Constitution, “where the Legislature cannot change the distribution formula up more than $35,414 for fiscal year 2014.”
The long range projections of the four City Enterprise operations – Water, Sewer, Solid Waste (Garbage) and Gas – indicate that three are all in fairly good condition, he said.
“There are some problems associated with the fourth, the Sewer Fund,” said McCourt, explaining that they are caused by “the uncertainty surrounding the cost of construction of the new wastewater treatment plant and the amount of assistance the City will receive from the Federal funding sources.“
He said that the necessary steps to construct the WWTP continue.
“This is part of the long term plan to ‘fix’ the current problems at the WWTP; building a facility which will handle the sewage; protect the environment; and keep down the costs of all of the foregoing,” said McCourt, adding, “Staff continues to work to secure maximum grant and low cost loans to finance the new WWTP.”
“Whatever the mix of grants and loans; there is likely to be a substantial increase in rates in the Sewer Fund to cover the cost of operation and construction: the Council has been proactive in the adjustment of sewer rates in order to avoid ‘rate shock,’” he said.
“Currently, the City is in a planned reduction of fund balances in the Gas and Water Funds,” said McCourt, explaining, “this has allowed the overall rate package (combination of the four utility rates) to remain close to inflation.”
He said that the inflation figure for the last year has been about 1.7-percent.
“The Streets Fund (Highway User Revenue Fund - HURF) continues to have reduced State funding – down $3,500 for fiscal year ‘14 – as the State Government takes money for their State operations (Arizona Department of Public Safety – Highway Patrol) before the money reaches the distribution formula for cities,” said McCourt, explaining that “this is money from the State Gas Tax paid at the pump – there is no sales tax on gasoline sales.”
“Additionally, with improved fuel economy the number of gallons per mile has declined; since fuel tax is levied on a per gallon basis, the amounts are not keeping up with the Cost of Living or the increased mileage (wear and tear) on the roads,” he said.
The City Council has committed one-third of the City sales tax – one-percent of the total three-percent collected by the City -- to the Streets Fund, McCourt explained.
“This City sales tax source is recovering, and is allowing the City to perform basic maintenance on the streets,” he said.
“We have a long road to recovery in order to reach past year’s levels of income,” said McCourt, adding, “The City continues to hold positions vacant in the Streets Fund.”
The City’s General Fund income – where most of the City Services are delivered – is approaching the levels of three years ago, he said.
“This has been aided by the sale of City-owned property, which is not an ongoing source of revenue,” McCourt said.
“The City staff has continued to hold positions vacant (Library, Police, Community Development, Finance, Parks, and Public Works Administration),” he said.
“I know this has resulted in a reduction of service to the public,” said McCourt, adding, “when income levels return we will review returning to former levels of service.”
“I have prepared a budget which would allow a 1.7-percent Cost of Living increase to the City employees,” he said.
McCourt pointed out that it would be the second COLA in seven years, and that “there has also not been any ‘merit’ raises given during this time period.”
The preliminary City budget McCourt will present to the Council shows a “large ‘planned’ operating deficit in the General Fund ($494,362 as of this writing).”
“I do anticipate there will be an operating deficit in fiscal year ‘14, as with the past four budget years, the staff has restrained spending and the actual deficit has been, and is anticipated to be, much smaller than the ‘planned’ operating deficit,” he explained.
“As of this writing the ending balance in the General Fund for fiscal year ‘13 appears to be positive,” McCourt said.
There is a large, planned transfer of $300,000 from the General Fund to the “Repair and Demolition Fund” in fiscal year ‘14, he said.
“This is likely to be a one-time expense, and will impair the recovery of the General Fund; but it should not stop the long term recovery,” said McCourt, adding, “The staff continues to search for any grants which might lessen this transfer.”
“There appears to be adequate reserves to protect the existing level of operations until fiscal year ‘17; if the City restrains spending and does not institute new services,” he said.
McCourt strongly recommended that City Council establish a “target opening balance for the General Fund.”
“I would recommend six months of operating expense,” he said.
“While this is not required it is, in my opinion, prudent fiscal planning.”
“The City recognizes that it cannot force economic development to occur; we can provide a stable infrastructure and a safe environment for the Private Sector to grow,” McCourt said.
“We remain committed to growth which does not destroy our culture and our community.”