Most of the issues regarding the $700,000 deficit were cleared up and I have posted Matt Dixon's response in the download section or it can be found here. He shows we are not as bad as we have been hearing; yet being in debt is still not great. Mr. Dixon's explanation and proposed cuts help us to see South Ogden really is doing a lot to balance its budget. Interestingly some of the proposed cuts are to things like $12,500 in 401k matches, changes to insurance benefits, and reduction in staff. Also of interest is the fact that if we didn't have a $23,000 bill for the gym facility, we could have saved some of those items. Sorry employee benefits...the gym has priority. Big cuts are coming to our fleet services as well, which I think will hurt is in the long term; but a quick solution for now.
However the question remains, why are we so off? I asked the city council and Steve Liebersbach, the city Finance Director, how South Ogden calculates its sales tax projections to help get a better understanding of how we became so off this year. Steve went on to explain he uses historical data from the past five to seven years, he also takes into consideration trend analysis, monthly reports from the state tax commission, and of course he also looks at the local, state and national economic situations. So what has the past years data shown us and what did we estimate? Here is the answer:
The 2008-2009 budgeted sales tax revenues were down 4%. The 2009-2010 revenues were down 5.7%. Based on this information, how would you budget? Would you project sales tax revenues to be up or down. Well Steve suggested because reports showed the recession had ended in 2009, South Ogden should project a 2% increase in sales tax revenue. Yes, you heard me right, South Ogden City projected for a 2% sales tax increase while during a recession (or in the aftermath of one).
Since we had a delay in the effects from the recession, it would only be safe to say we would have a delay in the recovery, don't you think? But we didn't plan that way, we decided to defy all expectations and expect increased revenue.
The Result?
The following cuts and then some:
- Early retirement offers in early 2010
- Reductions in force
- Replacing one full-time position with a part-time position
- Elimination of the employee 401k match program
- Moving to a HDHP/HSA medical insurance plan
- Delaying certain capital equipment purchases
- Cuts in training and travel
- Reduction in overtime allocations
- Amending building cleaning contracts to 2 days and 3 days instead of 5 days per week
- Scaling back community and employee special events - no more Timbermine :(
My last question was how South Ogden would survive with revenues going down every year and not being able to cover expenditures. Remember revenue has gone done $360,000 in the past two years and expenditures have gone down only $160,000 in the same time frame. I used the analogy, if my household failed to bring in enough revenue to cover expenditures I would lose my home. Steve replied,
"We can't make the comparison between a household budget and city budget. A city has savings it can utilize to cover it's losses. The city doesn't operate like a household checkbook, and that is a good thing. Like all of the funds that come in and out of the city there are multiple checkbooks and it doesn't work like a house."
Well I am sorry he sees it that way, but I disagree. The profit function is the same for everyone, Profit = Revenue - Cost. Tonights cuts are only a band-aid if sales tax revenue continues in a free fall. But no worries...South Ogden has savings.
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