City Beat: City Council hears proposed budget

City Council held first reading and public hearing May 14 on its proposed 2001-2002 annual budget, which includes a 5 percent pay increase for all employees, including police and fire employees, effective Jan. 1, 2002.

City Manager Tom Finnie presented the $194,983,000 budget proposal, which is 15.6 percent larger than the 2000-2001 budget of $168,606,000.

The proposed budget maintains the current property tax levy, includes no tax increases, and emphasizes traffic and transportation issues, public safety and center city revitalization, according to the document.

It also maintains between 8 percent and 10 percent in reserve for unforeseen needs, about $1,054,000. That fund is for one-time expenditures or projects.

Revenue increase

"Revenue in the general operating budget is projected to increase $2,363,000. Sales tax, the primary source of revenue in the general fund, is projected to increase $1.5 million or 4.5 percent over the prior year," the report stated.

"The increase in sales tax is comprised of a 2.8 percent increase in the existing sales tax base and 1.8 percent growth resulting from major retailers relocating in the city limits." The budget predicts other taxes and fees to increase income by $863,000.

Sales tax revenue "is an important but volatile source of funding for the city," the report said. "Property tax and fees reflect a slower, more stable pattern of growth." Council will vote on the budget at its May 29 meeting.

City Utilities budget

In other business, representatives from City Utilities answered questions on its $24 million proposed budget supplement for this year.

CU board member Curtis Graff said, "Extraordinarily high natural gas prices" were the reason the utility's budget needed to be supplemented. "While the 2001 annual operating budget included some increase in natural gas costs, no one could have foreseen the level of increases that was experienced in this industry. This, coupled with our increases in gas usage due to having the first normal winter that we've had for the past three years has resulted in expenditures far exceeding our budgeted amounts."

He added that the supplemental budget will provide funds for the anticipated higher expense of natural gas acquisition costs this summer when the utility normally injects gas for storage. The utility budgets $1.8 million for that cost, he said.

The overall increase in natural gas cost is expected to be $24.4 million for a total of $88.1 million this year, Graff said. Another $1.1 million is needed to make payments in lieu of taxes to the city as a result of increased gas system revenues, he said. The CU board has recommended that the city approve the budget increase.

Elaine McDonald, CU's chief financial officer, said the utility will actually collect $27.3 million from its customers to make up for the real cost of gas. None of the funds collected will go into a reserve fund, she said.

Council also approved an ordinance that allowed the Land Clearance for Revelopment Authority to issue $4,760,000 in taxable leasehold revenue bonds for the Grand Seville Hotel Redevelopment project to pay for improvements to the old hotel in center city.