FAYETTEVILLE -- The city's general fund will have less money next year and will operate on a deficit, but there's enough reserve to get by, the City Council heard Tuesday.
Chief Financial Officer Paul Becker gave his annual preview of the next year's general fund budget during the council's meeting, held online via Zoom. The general fund usually makes up about 30% of the city budget. It covers mostly personnel but also supplies, services the city pays for, the motorpool and assistance to outside agencies such as 7 Hills Homeless Center and the Boys & Girls Club.
Becker proposed $49.4 million in general fund expenditures for next year, with about $47.8 million in revenue, leaving a $1.6 million deficit.
The overall city budget for this year is $187.5 million. The council will hold its workshop to discuss next year's overall budget in November.
General fund revenue is projected to fall about 2% next year, or about $901,000, from the nearly $48.7 million in budgeted revenue this year. Most of the revenue for the general fund comes from sales tax. Becker projected a nearly 4% drop in sales tax revenue next year compared to what was budgeted for this year. The 2021 projected sales tax revenue is $28.3 million, compared to $29.4 million in sales tax revenue budgeted for this year, a difference of about $1.1 million.
This year likely will end with slightly higher sales tax revenue than budgeted, at nearly $29.6 million. Becker said he expects revenue to decline over the next five months, but higher-than-expected returns early in the year, before the covid-19 pandemic hit, will help offset the pandemic's economic toll.
"I think this year's an anomaly because it didn't hit until March," he said. "Also, you had a bunch of -- I wouldn't say panic buying -- but a bunch of purchases at the retail level, building up storage and supplies as people weren't sure what was going to happen."
Property tax revenue likely will be up based on assessment information received from Washington County, Becker said. The city is seeking no change in the property tax levy.
Becker projected $4.2 million in property tax revenue next year, up about 10% from this year's budgeted $3.8 million amount.
A net difference of $500,000 in cuts to general fund expenses is proposed for next year compared to this year. Included is more than $281,000 in reduced personnel costs, mostly because of turnover from retiring police officers, Becker said. Also anticipated is $95,000 more to Central Emergency Medical Service.
The city should have a reserve balance of about $13.5 million at the end of the year, Becker said. Subtracting more than $8 million for a 60-day emergency fund and the $1.6 million to cover the general fund deficit, that leaves just more than $3.7 million in reserves at the end of next year.
The general fund has operated on a $1.2 million budgeted deficit this year. For last year, the budgeted deficit was $846,000. Reserve money has covered those amounts. The city planned in 2017 to dip into reserves for a few years to cover raises for police and firefighters, who are paid on a step system.
The council in April indefinitely tabled citywide raises for employees because of economic uncertainty over the pandemic. Administrators typically use a mix of projected sales tax revenue and available reserve money to dole out raises in spring.
Becker said his budget projections didn't include wage adjustments, but there's still time to look at the issue this year.
However, the gap between general fund revenue and personnel expenses is narrowing, Becker said. With the nearly $47.8 million projected in general fund revenue next year, about $40 million is budgeted to cover personnel.
The difference between the two numbers is what the city has available to spend on things other than personnel, Becker said. The difference for this year is about $8 million, last year it was $9 million and in 2018 it was nearly $14 million.
Fayetteville’s proposed 2021 general fund budget breaks down to:
• General government activity: $4,997,579
• Outside agencies: $1,236,032
• Salary contingency: $254,942
• Fayetteville Public Library: $1,706,178
• Cost reimbursements: ($2,695,542)
• Finance and internal services activity: $6,438,512
• Police activity: $16,648,907
• Fire activity: $13,244,674
• Community planning and engineering: $4,851,496
• Parks and recreation activity: $2,505,222
• Transfer to drug task force grant: $233,000
• Total: $49,421,000
Stacy Ryburn can be reached by email at [email protected] or on Twitter @stacyryburn.
Print Headline: Financial officer presents general fund preview to council