COLUMBIA — The city will have to reduce expenses for the next two years, according to a presentation Fourth Ward Councilman Jerry Wade gave to the Muleskinners.
Members of the local Democratic Party club listened in a Stephens College auditorium on Friday afternoon while Wade painted a bleak picture of the challenges facing the city. With projected gaps between revenue and expenditures of $7 million in 2010 and $7.5 million to $8 million in 2011, the city has tough decisions to make, he said.
“The city hasn’t had to deal with a retracting budget for more than one or two years since World War II,” Wade said.
The reduction in revenue means the city will have to use around $3.4 million of its reserves this year, and even if the city uses its expected $5 million to $6 million in reserves for the 2010 fiscal year, it still needs to find a way to fill a gap of $1 million to $2 million, Wade said.
“There will be a reduction in services,” he said. “But we’re doing it in a way so there’s not major layoffs.”
Little room to maneuver
The difficulty in managing the city budget is that there is only a small portion, about 17 percent, that the City Council and staff can actually change. The rest is funded by dedicated taxes and grants that cannot be used for other programs or services, suchas electricity, that the city provides for a fee.
“The city does not have one budget,” Wade said. “It has a series of small budgets that must stand alone.”
In the past, when the city staff prepared the budget and finally sent it on to the council, which has to approve it by the last meeting in September, it was so late in the process that the council could only “piddle around with little pieces,” Wade said. That wasn’t fulfilling the council’s responsibility.
“(Third Ward Councilman) Karl (Skala) and I discovered that the council did not have an intimate relationship with the budget,” Wade said.
Now, the council is trying to take a more active role in formulating the city’s budget. But to do so, Wade said he first had to try to wrap his mind around the complex process.
The value of hard times
Each of the council members is working on developing expertise in one or two budget areas, Wade said. The council has formed subcommittees to go over and evaluate the services the city provides.
“You need to have hard times every five to 10 years so you stop and evaluate: ‘What are my fundamental purposes?’” Wade said.
There was no incentive to identify unnecessary programs during the good years, Wade said, because revenue was growing at such a rate that there was no question that they could get funding. Holding up nine pages of lists, Wade explained that they contained the non-mandated programs operated by city departments. The council must define its priorities and goals, something he said Fifth Ward Councilwoman Laura Nauser has been urging the governing body to do since she was elected.
“There’s a very simple definition of core services,” Wade said. “It’s whatever the council says they are.”
Skala, who was also in attendance, chimed in that the council will identify core services based on what constituents say they are. But residents have to let the council know what services they feel are most important, he said.
Raise rates or reduce services
Operations in the largest portion of the budget, which encompasses the city utilities and other services provided for a fee, are required to submit business models and recover the cost of service. As long as they are operating under legitimate models, the council is committed to raising rates where necessary to recover the cost of services, Wade said.
However, three services — the bus system, the airport and recreation services — are subsidized by the city. These need to recover more costs or reduce services, Wade said.
Recreation programs are probably most likely to see “pretty significant increases in fees,” he said. But the council wants to target programs that serve primarily the middle and upper socioeconomic classes.
Skala said somebody has to pick up the tab if the city is going to continue to financially help programs serving the poor.
“If we keep subsidies in place for low-income programs, the middle class has to pick up that slack,” he said.
The impact of online shopping
Columbia’s general revenue fund depends heavily on sales taxes. Wade said the significant increase in online shopping, which is not subject to sales tax, is a major issue Congress needs to address because it hurts municipalities dependent on sales tax.
He also said the Missouri legislature needs to eliminate Transportation Development Districts. The governmental bodies, which impose their own half-percent sales tax in many Columbia shopping centers, make it almost impossible for the city to try to convince voters that another sales tax is necessary, Wade said.
While those changes in state and national policy would help cities struggling to keep up their services, there really isn’t any significant movement to address those concerns. For this year and the next, Columbia faces hard budgeting choices.
“This is a tough balancing act, and some of the pieces are going to fall off,” Wade said.