City's Budget Reflects Mixed Financial Performance

Mayor Daniel Brown told City Council at the Budget Retreat held Feb. 4, 2011that the city has experienced a mixed financial performance so far during the 2010-2011 Fiscal Year but it will continue to provide the same level of public services and support its redevelopment efforts. 

Brown, speaking at the mayor's annual budget retreat for Council and directors of the city various departments said the city is seeing some favorable trends in terms of sales taxes, while at the same time seeing poor growth in property tax numbers. 

"But signs are more positive than we have had during the last few years," Brown said before adding "We have confidence in our forecasts but there are always risks. While things look better we are not out of the woods yet." 

"In short, we will have to be very careful with our resources," he said. 

The annual mid-winter meeting - held this year at the Square Room in Cafe 4 - provides a snapshot of the city's financial status halfway through the budget year as well as a preview of the next fiscal year. 

Fiscal Year 2010-2011 - the current one - runs from July 1, 2010 through June 30, 2011. 

Jim York, the city's director of finance, told the group that the city is in good financial condition and has weathered difficult economic conditions nationwide much better than most cities. Knoxville had reduced its general fund budget during the last two years opting to stretch its resources to make ends meet. 

York said the city projects general fund revenues of $166 million by the end of FY2011 - nearly $3 million more than the city forecast in this year's budget. City government, however, anticipates spending $169.8 million during the same period. 

That deficit is primarily the result of decisions reached by the administration and City Council earlier this year to spend $8 million from the city's $60 million fund balance - essentially its savings account - for one-time expenditures ranging from the planned expansion of the State Street Parking Garage, prepayment of debt and a business recruitment effort. 

The city will still finish the year with more than $50 million in its fund balance - built up from $18 million in 2003. 

York said that while there are hopeful signs in the economy the city will face some significant challenges during the next year. 

"We're going to say the overall picture is mixed," York said. "There are some positive signs and some negative ones as well." 

He said the good news is that sales and business taxes are trending up reversing nearly three years of steady declines. The city forecasts an overall growth in revenue next year. 

The bad news is continued slow growth in housing and business sectors which translates into poor growth in property tax revenues. Property taxes are the largest single source of funding for city services. 

"The big issue we're worried about is property taxes," said York, who has been with the city since the mid-1980s. "Last year we forecast the lowest growth rate ever, and the actual amount came in slightly lower than that." 

"It was a dramatic drop over what we had historically seen," he said. 

York said the city also faces increased pension fund expenses and will carefully monitor fuel costs. The city operates a fleet of hundreds of vehicles primarily for its police, fire and public service departments and provides millions of dollars to KAT. 

"A one cent increase in the cost of fuel equals about $19,000 for us" York said. "If it keeps going up we could see some significant issues."

He told Council other negative financial issues the city could face include potential cuts in state and federal funding and the costs of things like city elections and the new citywide curbside recycling program that starts later this year. 

He concluded by saying that while there are some favorable economic trends, "We don't think this is necessarily going to be the easiest budget to do…there are some difficulties associated with it." 


BUDGET INFORMATION

2011-2012 Budget Info
Six Month Financial Report [PDF]
Budget Retreat Presentation - Financial Update [PDF]
Budget Retreat Presentation - Purchasing [PDF]
Budget Retreat Presentation - Regional Plan for Sustainable Development [PDF]
Budget Archive (Budgets from years 2001-current year)


BUDGET CALENDAR

Feb. 4, 2011 – City of Knoxville Budget Retreat and Six Month Financial Report released
February – March, 2011 – Departments Submit Budget Requests, Base Numbers Calculated, and Capital Budget Prepared
March 23 – March 24, 2011 – Mayor’s Budget Hearings
April 8, 2011 – MPC Hearing on Capital Improvement Program
April 21, 2011 – Mayor’s Budget Address
May 3, 2011 – First Reading of Budget and Tax Ordinances
May 6- 30, 2011 – Council Budget Hearings & Public Hearing
May 17, 2011 – Second Reading of Budget and Tax Ordinances