Betting on business : Coody puts Fayettevile’s money on Sam’s Club, Malco
Posted on Sunday, September 30, 2007
URL: http://www.nwanews.com/nwat/News/57722/
Fayetteville Mayor Dan Coody is betting on Sam’s Club and the Malco Theater to make up for slowing sales tax growth and to defray some of the city’s expected $ 2. 4 million shortfall.
Coody said he believes the two businesses alone will have enough of an impact on the economy that the city’s sales tax will grow more than the 2 percent projected by the finance director, Paul Becker.
That confidence is why Becker is only requesting a property tax increase of. 9 mills, instead of the 1. 5 to 2 mills he initially wanted, Coody told members of the City Council, who gathered at Drake Field Saturday for a budget meeting. Aldermen Kyle Cook of Ward 2 and Bobby Ferrell and Robert Rhoads, both of Ward 3, were absent.
Becker said he is being very conservative with his projections, but said he thought he had been conservative when he projected a 3. 5 percent increase this year.
“ It turns out was aggressive, ” he said.
Becker said sales tax for the last month collected for July was $ 30, 000 less than in the previous year, which translates to $ 105, 000 less than what it was expected to be. That means slow growth will contribute to the budget being about $ 1. 5 million short, at the end of the year.
That $ 1. 5 million shortfall will be covered with part of the nearly $ 10 million in reserve funds. The decision for the council is whether to continue dipping into that fund balance to make up for the 2008 budget being short $ 2. 3 million.
The proposal before aldermen would combine increasing property tax by. 9 mils and cutting back on capital projects being covered by the city’s 1 cent general sales tax. Money brought in on that penny tax is split 50-50 between operations and capital projects, though Becker is recommending going to a 60-40 split.
If changing that split doesn’t cover the shortfall, Becker said the reserve funds can be used. In addition to switching the split and increasing property tax, he has omitted a cost of living adjustment for city employees. The budget will increase by $ 1. 2 million during this year because of compensation alone, Becker said. That growth is a combination of increases implemented throughout the year, the remainder of target increases as well as raises next year, he said.
Because the city gives raises on an employee’s anniversary date, the full financial impact isn’t felt until the following year. That means that if an employee is given a raise in July, that only affects half of that year’s budget, but all of the next year’s, Becker said.
The only other option for making up for the shortfall is to cut services, Becker said. Division leaders were asked to make cuts this year, he said, after the big three — fire, police and parks — were asked to cut 2 percent last year.
Coody said it is important to educate people about such things. It is also necessary to do everything possible to make sure people understand that even with a property tax increase, the city’s tax bite is relatively small.
People don’t realize how efficient the city is being in balancing services with taxes, Coody said. Sales tax is not a stable source of revenue, he said, and all across the country governments are having to find ways to deal with shortfalls.
“ Fayetteville is not unique at all, ” he said.
Educating residents about the city’s tax structure garnered a general level of agreement at the meeting.
Ward 2 Alderman Nancy Allen said many people she has spoken with seem to have misconceptions about the city’s finances and believe that there is a “ big pile of money. ”
Allen said people see the city is “ trying to clean up the sewer debacle, ” and just passed 1 cent sales tax for transportation projects, so many think city officials simply can’t manage money.
Coody took offense to Allen’s use of the word debacle when speaking about the $ 186 million Wastewater System Improvement Project, which was originally scheduled to cost $ 120 million and be finished in September 2005. Coody described being more than $ 70 million over budget and three years behind schedule as the project’s “ only hiccup. ”
The easiest way to understand what happened with the project is to think in terms of building a house, Coody said, which always costs more and takes longer. The project has not involved any lawsuits, nor bankruptcies, he said, alluding to a previous upgrade to the Paul R. Noland Wastewater Treatment Plant.
The sales tax collected for the sewer and transportation projects are completely separate and cannot be used on any expense not set out in the election.
Coody said, while the city is dealing with unforeseen increases in cost on the sewer project, the sales tax slow down was projected five years ago by the city’s previous finance director, Steve Davis.
Allen asked why it was the city is still in this position if aldermen were warned five years ago. Ward 4 Alderman Lioneld Jordan said while this was forecast, he said aldermen just didn’t anticipate the magnitude of the situation.
Ward 4 Alderman Shirley Lucas described a change in the mindset, which until recently has been to spend down the reser ve funds because the city collects taxes to spend, not to save.
Ward 1 Alderman Brenda Thiel said the decisions made at budget time are “ painful. ” Thiel offered one way residents could look at it is that the council has kept them from having to pay the full cost of the services they receive as long as possible.
Coody defended the council, saying much has been done in trying to keep the budget in line, and that it would be unreasonable for them to be expected to make decisions that far down the road. The council is just like every other, he said, in that it deals with the problems of that year.
It turns out the council was mistaken two years ago, Coody said, when it voted to reduce the millage increase to 1. 3 instead of 2 mils and chose to budget based on 6 percent growth, instead of the conservative estimate offered by staff. Had the council gone with staff, he said, the city wouldn’t be in the same position.
Of course, residents also have a certain level of culpability, Coody said.
“ If they would just shop in Fayetteville we wouldn’t have to have these discussions, ” he said.
The council will continue the budget discussion at 4: 30 p. m. Thursday in Room 326 of the City Administration Building.