City budget shortfall prompts hiring freeze
The freeze began on Thursday, June 18. The freeze does not affect certified police or dispatchers, EMS, firefighters or lifeguards, because those are considered to be critical services, Kovacs said.
The city has 105 full-time employees and another 50 to 60 who are seasonal, part-time and temporary, including volunteer firefighters.
The hiring freeze leaves only a few slots unfilled. Positions for a maintenance worker and a part-time trolley driver are open. The Public Works Department director’s spot technically remains open, but the Port Aransas has a temporary worker, former Aransas Pass City Manager Tom Gintner, in that role right now.
The current general fund budget is about $7.7 million, and the city is looking to cut about 5 percent from that amount for next year’s budget, Kovacs said.
Kovacs said cutbacks in service or personnel are not inevitable, but he also wouldn’t rule them out.
“It’s going to be challenging, but I think we’ll be in pretty good shape,” Kovacs said. “We can definitely get there. We are in much better shape than most cities all over the country. We really are.”
The revenue shortfall has come as a result of lower revenue from building permits, a flat tax base and lower sales tax revenue, Kovacs said. Interest rates also are down on city bank accounts, he said.
While revenue from building permits was $181,693 last year through the month of May, the total is only $131,728 for the same period this year, a decrease of more than 27 percent, according to Darla Honea, finance director for the city.
Sales tax income through May last year was $461,082. It was $436,207 for the same period this year, Honea said. That’s a 5.39 percent decrease.
The city was earning interest rates of 2.417 to 4.939 percent on bank accounts last year, Honea said. The interest rates on the accounts now are .4245 percent, she said.
Hotel-motel occupancy tax collections are down, according to records from the city’s finance department. From October 2007 to May 2008, collections totaled $853,606.98, records indicated. From October 2008 to May 2009, the total was $793,507.77.
Preliminary appraised property values in Port Aransas have dropped about $8 million in the past year. A drop of about 30 percent in the value of raw land is particularly hurting revenue, Kovacs said. New construction also is down, which has hurt some more, he said.
The current city tax rate is 27.6157 cents per $100 valuation.
With the debt service on a $4.9 million bond issue approved by voters in November, next year’s total tax rate will have to be at least 30.91504 cents, Kovacs said. The tax rate could go up to 31.9451 cents to pay for the rest of city government’s needs, but it isn’t expected to be higher than that, Kovacs said.
The city council has asked staff to produce proposals for making cuts of $360,000 or $500,000, the city manager said. Council members want to see staff’s proposals for both, the $360,000 and $500,000 cutback scenarios, before making decisions on the tax rate, Kovacs said.
“The budget must be sustainable and focus on reducing ongoing operating costs and not deferring maintenance,” Kovacs said.
A council workshop meeting on the budget is scheduled for 5 p.m. Thursday, July 30, at council chambers. State tax laws require that the council make a decision that night on a not-to-exceed tax rate and schedule public hearings.
“We’ve got to take a really good look at how we’re doing things,” Kovacs said. “We’re going to focus the next couple of years totally on changing budget philosophies. Previously, the budget philosophy was to build and improve, expand city services. … Now we’re at a point where we’ve got to look at the next two years and figure on having no extra revenue.”
The city will look hard at how it does business to find savings, Kovacs said. For instance, he said, the city’s windstorm insurance bill, which most recently was for a total of $87,000, has been paid in the past from the general fund. About $44,000 of that could be paid from other city funds, which would provide savings in the general fund, Kovacs said.
Kovacs said he discussed the budget situation with city department heads on Wednesday, June 17. “We’ve encouraged them to solicit ideas from the troops on different ways we can save money,” he said.
Kovacs told the Port Aransas City Council about the shortfall at a goals workshop on Tuesday, June 16. Councilman Mike Hall said it wasn’t a complete surprise for council members who have been following city financial issues.
“What I don’t want to see is a straight, across-the-board cut of X percent,” Hall said. “We’ve got to do an analysis of each department and what is needed.”
It could turn out that the city will need to hold off on certain purchases or improvements it has been wanting to do, Hall said.
“I just think everything is on the table,” Hall said. “I don’t have preconceived ideas about how to do it.”
Councilman Keith Donley said the city has made a lot of progress recently in taking care of infrastructure and that he doesn’t want to give up any gains.
“That said, if we find ourselves in a shortfall, I think we have some programs we may have to cut or reduce,” he said. It’s too early to say which ones, he said.
At the goals workshop, council members asked Kovacs to later provide them with a list of city projects and their expenses, Donley said.
“There are areas we could probably save a lot of money,” Donley said. “You can always improve your efficiency.”