Worthington income tax revenues are down 5.78 percent in the first quarter of 2009, leaving city officials considering cuts in programs, projects, and personnel that they hope will never come about.
City income tax revenues are down 5.78 percent in the first quarter of 2009, leaving city officials considering cuts in programs, projects, and personnel that they hope will never come about.
Shortfalls have already resulted in delays in capital improvements projects, such as purchases of new vehicles; curtailment of travel and training expenses; and reductions in personnel costs by not filling positions and closely managing overtime.
Whether more substantial cuts will be necessary should become obvious within the next few weeks, said City Manager Matt Greeson.
"In a month we will have a better handle on projections," he said.
For now, residents need to understand that Worthington is not immune from the financial woes of the rest of the world. Locally, other communities have been forced to lay off employees and to curtail services.
Greeson did not want to speculate on the reductions that could loom if revenues do not rebound soon. He would only say that he has been meeting with department heads to discuss the possibilities and that any reductions would probably be shared among a reduction in reserve funds, more delays in capital projects, and, if necessary, more reductions in personnel costs.
"A prolonged continuation of this economic trend will result in the need for additional revenues or significant expense reductions to sustain adequate city service levels and maintain sufficient fund balances and reserves," Greeson wrote in a recent brief to City Council.
Since approximate 62 percent of the city's income comes from income taxes, the loss has hit hard. The city lost $348,614 in income tax revenues during January, February, and March.
But other sources of revenue - property tax, local government fund from the state, court fines, and EMS transports - are also down.
Those losses are offset by a reimbursement for wind damage caused by Hurricane Ike, and slight increases in interest income, membership revenue, and miscellaneous reimbursements.
The bottom line? A budgeted shortfall of $368,157 in the operating budget, $47,410 in the capital improvements program, during the first three months of the year.
In 2008, income tax revenues were actually up by about 4.1 percent. The city had attracted several companies with incentive packages over the past three or four years, and all were doing well.
The 2008 carryover balance was 12.2 percent of the $2.6-million operating expenses, a $555,525 increase from 2007.
Council has set a target of a 15 percent carryover, a target expected to be met in the next few years.
Council has also created a restricted reserve, or "rainy-day account," of $1.5-million to be achieved over two years by diverting funds from the capital into the operating budget.
The carryover and reserve accounts are needed to guard against emergencies or sudden economic turndowns, such as the loss of one of the city's major businesses.
Since income tax revenues reflect the condition of business in the preceding quarter, the early year losses may represent cuts in the number of employees at the end of the year, a reduction in year-end bonuses, or other adjustments made by businesses during the fourth quarter of 2009, said Worthington finance director Steve Gandee.
"Once we get through early May, we'll have a better idea of where we're gong to be," he said.
He and Greeson will look closely at the city's top 100 accounts and have more up-to-date numbers before them before they begin work on the important projections for the remainder of 2009 and 2010.
A report on reprojected revenues for 2009 and an updated five-year forecast, as well as any new strategies that may need to be taken, will be before council in May.