City faces new cuts as state retreats

By Thomas Wilson
STAR STAFF
twilson@starhq.com

   The City of Elizabethton stands to lose $275,000 of state shared tax revenues if Gov. Phil Bredesen follows through on a proposal to reduce state shared moneys up to $165 million this year.
   It is not welcomed news following the 13 percent cut to the city's budget last year.
   "This budget, if not the hardest, is the most challenging of any we speak of today that I've seen in my 20 years of city government," said Charles Stahl, City Manager of Elizabethton.
   The city stands to lose approximately $275,000 this year if Bredesen's next budget includes a promised cut in state shared taxes that typically go to cities and counties across the state. The Associated Press reported Monday that Bredesen had said state shared taxes to cities and counties would be reduced next year.
   Bredesen administration officials said last week they had proposed to keep more than $100 million in state shared taxes for the state's use.
   Nashville-based lobby group the Tennessee Municipal League (TML) alerted cities that state shared taxes could result in significant cuts to revenues for the coming fiscal year.
   The reduction would mean a $50 million cut in the Hall income tax and $56 million in other state-shared tax revenues to cities and counties, according to figures from the TML.
   The governor's budget was also to include a potential $42 million cut in grant programs to provide funding for a city's infrastructure, public safety and public works projects. The city's 2003 fiscal year budget approved by the City Council last year was slashed 13 percent from the previous year.
   "State shared revenues fund government operations of the city such as the fire department, police department, and public works," said Stahl. "Before we were cutting capital ... now we are getting into programs."
   State shared revenues are appropriated into the city's general fund budget. Those revenues also fund discretionary appropriations to the Carter County Health Dept., American Red Cross, Senior Citizens Center, and the Shepherd's Inn domestic violence shelter.
   Stahl said it was premature to discuss potential cuts of personnel or services until the state's budget picture became more clear. He also said the budget he presented to the council would not have any recommendation for an increase in property taxes. He said he expected to present the 2004 city budget to the council by April 1.
   He also said that more proposed reductions in state funding came as no surprise given the previous administration and legislature's battles with funding state services.
   "This is something that is not surprising to me," Stahl said. "It is certainly not something I would have looked forward to by any means."
   The state reportedly faces a $480 million deficit in the fiscal year ending in June, and an estimated $780 million shortfall for fiscal 2004, according to state revenue reports.
   The governor has also asked commissioners of all state departments to slice their operating budgets by up to 9 percent for the coming year.
   Reduced state grant money would limit the city's ability to fund new and ongoing projects such as the Linear Path walkway and traffic signalization projects around town.
   Stahl said a reduction in grants could freeze bridge rehabilitation funding for the Elk Avenue Bridge and even the Covered Bridge.
   Another financial blow suffered by local governments was the low yield on investment income from city revenues. Low interest rates set by the Federal Reserve translated to low interest yields on city dollars, Stahl said. He also said that while larger municipalities could delay immediate impact of cut shared revenues, the city's current budget situation made a new state cut in revenues an immediate problem.
   "We don't have the luxury of deferring the problem," he said.