It's Budget Time again in the City
Between now and the end of June, City Council works on the Fiscal Year 2015-16 Budget. We have some difficult decisions lying ahead.
Before I get into the specifics,with which I will follow up next week, I would like to lay the groundwork so that those of you who follow can be informed to ask questions, make suggestions and otherwise exercise your opportunity and responsibility to be part of the process. Though decisions lie with City Council, the more input we get from citizens the better.
Capital vs Operations Budgets
In order to understand the budget process and the budget, one must know that while the city used to piggy back long and short term capital improvement costs into a unified budget with operations. Thanks, in large part, to many years work by former council member Mike Sutton, there are actually two budgets: a capital budget which is composed of dollars set aside over the years and more often than not, matched by grants for each project. On the other hand, the Operations Budget is composed of revenue generated through property taxes, fees and business licenses to fund the day to days costs of running the City. Capital and Operations funds are segregated and restricted to their respective revenues and costs.
For example though we have more than $30,000,000 in the queue for capital improvements (Boundary Street Redevelopment, Fire Station, Marina Improvements, Day Dock, Allison Road storm water improvements and Spanish Moss connector to Beaufort Memorial Hospital, Southside Boulevard sidewalk improvements and Southside Park development, Duke Streetcape to note the larger ones) none of these projects (other than future maintenance) are related to the City's Operations Budget and General Fund. They are all in the totally restricted Capital Improvements Budget.
Funds in this budget, including a separate open space fund, have been building for years and more importantly are used to leverage more than 95 % (if not more) of the total of these projects from Federal Grants. These dollars cannot not pay salaries and benefits, general maintenance, utilities, small equipment and repairs, information technology and advertising to ensure the best possible means for transparency and the many other day to day costs.
State Government Involvement
Some people do not understand this, but State Government imposes restrictions on local governments that control revenues for the costs of operations
(Having served in the SC House, I think it is fair to say that actions by the State Legislature likely impact our budget more than City Council or the many citizens who take part in the process.)
The best example is the much discussed Act 388, which increased the tax burden on businesses, rental properties and second homes and also imposed caps on property taxes. (We cannot raise property taxes as we are at the cap.)
Accommodations and Hospitality taxes, which are used to pay for some services to tourists, but mostly toward marketing to future visitors and potential new residents and businesses, are also capped by State law.
While I believe the Local Option Sales Tax is one way to raise revenue while reducing taxes makes sense, the State requires a county wide vote thereby not permitting the city voters to vote for a stready stream of revenue and associated credits against individual tax liabilities. Beaufort County Council, with varying interests in the unincorporated areas and different needs among the five municipalities, does not want to let us vote on this option and the state has refused to move the option to each municipality.
By neglecting, due to costs of course, to maintain its assets, the majority of which are state roads, sidewalks and storm water systems, there is an additional burden put on our citizens. We have no choice but to assume some of the unfunded responsibility if we want our right of ways tidy, our storm water to flow to where it is supposed to go and to protect citizens from flooding when the state storm water system fails. To help cover a small portion, local governments have imposed storm water fees (taxes) on residents, businesses and even non-profit organizations throughout Beaufort County. What we raise does not cover the entire cost, but we have worked to hold down these fees. (The City has joined the County Council in a study to determine the real costs of storm water management and the fees that should be associated.)
A pending initiative from the State is to cap business licenses, practically the only source of revenue over which cities, towns and counties have control. (I have no intention of raising business licenses which I personally believe are more than I would like.) Should this measure pass the State Legislature, City residents could lose between 18-20 % of the revenue that covers the operations of the City. (While I do not anticipate the measure will pass this year, when the legislatures goes to work next year I have no doubt this measure will be in line for consideration.)
And finally, while we cherish and in no way want to discourage or send the wrong signal to the large numbers of people from outside of the city who shop, dine and play in our great hometown, providing services to them is paid for by our 12,500 - 13,000 residents whom the Bureau of the Census maintains are of "low to moderate income." It is noteworthy that considerably more than fifty percent of our fire (first responders to accidents) and police calls are to serve people who live outside of the City of Beaufort.
The State collects about 75% of the fines the City collects from traffic violations and other issues that are run through the municipal court.
Furthermore, we cannot ignore the fact that while throughout SC's forty six counties collect an average of 14% of their revenues from manufacturing interests, Beaufort County only generates .14 %. This means there is much larger burden on home owners because we do not have the businesses to help pay the bills. This is to say nothing of better jobs for the people who grow up here and those who come to work.
If there is good news, the Temporary Debt Mil we initiated last year to make up for property tax short falls, delinquent payments and unexpected drops in value, did its job and will be removed.
I mention the above not to point fingers or whine, rather to simply set the stage with important facts which must be taken into consideration during budget deliberation.
Process
Prior to starting the annual budget process, each member of Council toured every department, met with the department head and staff as appropriate so that we would have a firsthand view of the workings of every departments, its staff, equipment and operations.
The second step was for staff to interpret the transcripts from our annual two day retreat and to confirm with council the priorities we set. The need to grow the tax base as provided in our comprehensive plan and to share the burden as fairly as possible.
Staff then presented revenue forecasts based on last year and data received on a regular basis from the County Auditor who sets property values on which tax mil rates are based.
This week, in a work session, we will review expenses based on last year's budget so we will have a frame of reference against which we can compare proposals for the new budget.
Following that each of the Department Head will present his or her proposed budget and answer questions from the Council and the public at our public work sessions.
After we have completed department budgets, including recommended changes by council and the public, the Finance Director completes the final draft of the proposed budget, presents it to the council, and makes it available to the public on the website and a newspaper advertisement.
Following that there will be a public hearing, then first reading by council with possible amendments followed two weeks later with second and final reading at which time amendments can also be incorporated if it is the will of Council.
One complicating factor is that if any of any potential "solution" to making up projected revenue short falls are to be considered it takes about six weeks because the change has to be made in the form of an ordinance (law), for public input and council consideration of a short fall. That is the reason staff put in front of us one suggestion so early in the process.
In conclusion, we are still paying for costs of the recession, short falls in property taxes and will have some difficult decisions to make. I want to personally urge city residents to stay tuned and become engaged as your City Council will need you guidance. I cannot guarantee that we will agree on every issue, but our process is such that the citizens will have plenty of time to engage.
The ultimate decision falls in our hands a responsibility we accepted when you elected us to serve
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