A unexpected possible decline in property valuations has complicated finalization of the city’s 2014 and 2015 budgets, city officials said Monday.
City finance officials now expect valuations to drop slightly, driven by the housing market, council member Jeff Longwell said.
Much of the city’s budget is based on property tax revenue, and past budget cuts have been driven by significant declines in that revenue. The projected decline is further evidence of a continued economic slowdown that compounds projected city deficits of $1.3 million this year, $3.6 million in 2014 and between $4 million and $4.9 million in 2015.
On Monday, two days before the 2014 proposed budget is scheduled to be rolled out in a Wednesday night meeting with the city’s district advisory boards, city finance officials and council members were still working through budget issues.
Sedgwick County officials indicated in March that home valuations would decline slightly, but city officials thought valuations would increase slightly. All valuation estimates this month are only projections, with the official valuation number set July 15 by the county.
“I would argue at this point that this is one of the most difficult budget years,” Longwell said.
In late April, city finance officials projected that spending is expected to grow faster than revenue in the next few years. They indicated that many of the variables that have tested past city budgets have moderated: Sales tax and franchise fee revenue should grow, the city expected its assessed valuation to grow slightly, health insurance costs have decreased and pension and fuel costs have moderated.
But the city is limited in how it can cope with future deficits because City Manager Robert Layton and his staff have already used a variety of tactics – adjusting street maintenance through pilot programs using cheaper techniques, service reductions such as cutting library hours and leaving many open positions unfilled – to bridge deficits of $1.4 million in 2012 and $6.5 million this year.
Longwell said he believes the city has successfully “repurposed” the organization, including some downsizing and outsourcing of city functions.
He said he was surprised and frustrated by the projected valuation downturn.
“I don’t understand it,” he said. “We do budgets three to five years out, and back then we felt good that the valuations would be at least increasing slightly.
“We’ve cut all the fat. What do you do when you’re cutting the meat?”
The city is not in a hiring freeze, with 20 positions currently open on wichita.gov. However, most are seasonal part-time positions.
Longwell said the city still needs to fill some positions to “at the very least maintain the level of service we’re trying to provide.”
“You can still get frustrated calling some city departments,” he said. “There are positions we need to backfill to address that.”