Budget Shortfalls Avoided

Those who have followed the public meetings and articles about the city budget may have picked up conflicting messages. Earlier this year, we expected a shortfall for 2010. Budget work sessions for 2011 led off with similar concerns. Recently, we discussed how much reserves will increase and future resources will be freed up after final a debt payment next year.

The good news for 2010 came over the summer months when Salida was busy with visitors. After reporting decreasing sales tax revenue for 19 consecutive months, the summer months delivered a 4% increase in general fund revenue.

This positive news arrived after we cut expenses from the 2010 budget. The employee raise pool approved by council was eliminated and several capital projects were deferred or scaled back. Department heads tightened their belts when it came to discretionary spending in several different areas. We made organizational changes when employees resigned and kept the same level of service with fewer staff members in some departments.

In August, Salida received an unexpected one-time distribution from the county-wide sales tax. Salida’s share of a Chaffee County tax audit settlement was $134,151.

Based on information available today, the City will add at least $200,000 to reserves in 2010. The year end balance sheet will reflect more than adequate reserve levels based on Colorado statutes and accepted municipal standards.

The budget for 2011 will also improve general fund reserves. We will use reserves specifically set aside for the final payment on 1998 revenue bonds and increase unrestricted reserves by over $200,000. Yes, the city had a “shortfall” in the initial drafting of the budget. Again, the department heads tightened their belts. Salary freezes, hiring freezes, reductions in operating expenditures and deferrals of capital investments kept the 2011 budget in balance. We expect to be okay financially next year.

The key message during the 2011 budget process was that this approach to balancing the general fund budget is not sustainable.

Expect the shortfalls we worked through in the 2011 budget work sessions to be back in 2012. We cannot keep cutting staff and freezing wages and expect to deliver the same level of services that the community currently receives.

Increases in sales tax revenue are unlikely to keep up with the inflation in costs for the services we provide. The city’s “basket of goods” is heavily weighted with commodities and services experiencing greater levels of inflation – gas, electricity, fuel, asphalt, employee medical costs.

Staff has committed to the council that over the next six months we will review what services are provided and how they are delivered. Changes are needed.

We also need to explore more steady and predictable revenue sources.

More information about the 2011 is described in the budget narrative. Access an electronic copy at www.cityofsalida.com under Departments / Administration on the right sidebar. You may also request a hard copy at City Hall.