The city projects a $1.4 million budget shortfall for this year after the first quarter of 2012.
The forecast is unlikely to change through 2014 as the city remains handcuffed by stagnant property values, poor investment returns, and rising pension and health insurance costs.
The 2012 shortfall is manageable with some tweaks to the city’s street maintenance plan, finance chief Kelly Carpenter and City Manager Robert Layton told the City Council on Tuesday.
“Any kind of deficit is serious,” Layton said after the meeting. “But we believe we can adjust our expenditures to address that, and we think we have a good plan.”
That plan targets street repair through pilot programs developed with Alan King, the city’s public works director.
“Alan wants to do some pilot projects with different surface treatments that are less costly, but over time could allow us to cover more miles,” Layton said. “We want to stretch our dollars and get the same kind of coverage at less cost.”
King said the city plans to tailor road treatments it contracts out to builders by using new road-sealing technologies instead of the costly “grind and overlay” process popular here for years.
“We’ve got a road restoration strategy,” King said. “We don’t have a road preservation strategy and we need to develop one. We’re going to use as many of the more inexpensive treatments as possible and as few of the expensive treatments as possible, looking at some of the newer treatment techniques to see what the traveling public and our decision makers think.”
The deficit drivers this year, Layton said, include a projected $1.6 million reduction in interest earnings and reduced franchise fees largely due to the softness in the natural gas markets. At the same time, the city projects that home values will remain flat
“They’re kind of the same themes that we’ll face in 2013,” the city manager said. “We’ve had a significant reduction in interest earnings. We were projecting $2.1 million in interest and now that looks more like a half-million. We’re getting almost nothing for our deposits.”
Unlike businesses, the city is prohibited by law from speculative investments like stocks and commodities. It’s limited to certificates of deposit and U.S. treasury notes “which are yielding almost nothing as well,” Layton said.
The city’s economic indicators provide little optimism for easier budget years in 2013 or 2014.
“There are still benefits costs through employee retirement, and health insurance is hitting every employer,” Layton said.
“We’re still going to have interest earnings issues, utility franchise fees, and the property value issue will hit us in 2013. We really felt confident that property values would be increasing by 1.5 percent, but our projections from the county is they’re going to be at best stagnant.”