Budget problems haunt City Council

By Abby Morris
Star Staff
amorris@starhq.com

   With cuts to state-shared revenue pending, the City of Elizabethton is remaining resilient in hard times by proposing a balanced budget that cuts costs from the previous fiscal year.
   "This budget is a challenging budget," said City Manager Charles Stahl, adding that the level of services the city provides would be maintained if the City Council adopts the budget as it is proposed.
   Stahl, along with city Finance Director Bradley Moffitt and Mayor Sam LaPorte, met with City Council members Monday night to discuss the budget proposal and determine if there were any questions they wished to ask of the different department heads in the city.
   This is the second year in a row the city has faced severe budget cuts. The budget proposal on the table for the coming fiscal year would set a balanced budget at $11.3 million, an 11 percent reduction in spending from last year. The city's 2002-2003 general fund budget was cut by 13 percent from the previous year.
   "This is the second year in a row that the city has lost a major industry, a major employer," Stahl said. Moffitt estimated that the city will lose $150,000 in revenue from property taxes on the property that formerly housed Alcoa.
   The loss of revenue from taxes is not the only major burden facing the city budget this coming fiscal year. "A major issue in this budget that stands out besides the loss of industry is the loss of state-shared revenue," said Stahl, adding that the city will lose approximately $155,000, or nine percent, of those state-shared funds. The loss of that money will have a big impact on the city, according to Moffitt. "We're losing $300,000 in revenue that we will not be able to make up," he said.
   Despite having to build a budget around major losses and a shaky state budget situation, Moffitt and Stahl worked to keep the proposal balanced without dipping into reserve funds or raising taxes. "This budget is balanced, even without $155,000 in state-shared revenue, without a property tax increase," Stahl said, adding that the city has not raised property taxes in several years.
   According to Stahl, the budget proposal that is before the City Council is essentially the same as the budget the city is currently operating on, with the exception of increases to cover rising health insurance costs.
   Despite the fact that the budget is balanced and cuts costs, City Council members will be asked to look at expenditures that were not built into the budget. "This budget does ask you to look at some large capitol needs," Stahl said. "Like any other budget, there are some needs that need to be addressed. Some departments, particularly the police and fire departments, have some capitol needs that need to be addressed."
   The city will consider replacing a 20-year-old pumper truck that is currently in service with the Elizabethton Fire Department. Stahl stated that, according to insurance regulations, the city must look into replacing the truck after its 20 years of service, something that could cost the city between $200,000 and $420,000.
   Another expenditure the council will consider is the demolition of the old Carter County Hospital building, Stahl said.
   In the event the city does need to fund major expenditures such as a new fire truck or the demolition of the old hospital facility, there are options available. One such choice would be to take money from reserve funds.
   Another option would be to look at the local option sales tax. The state sales tax in Tennessee is set at seven percent. Local governments are then given the option of assigning up to an additional 2.75 percent local option sales tax to that. Currently, the City of Elizabethton's local option sales tax is set at 2.25 percent.
   "By comparison, Johnson City is at 2.5 percent," Stahl said.
   In order for the local option sales tax to be increased, City Council would need to design a referendum and allow voters to decide whether to raise the local option. According to Stahl, voters considered a referendum raising the local option sales tax in 1993, 1994 and 1996, and it was defeated each time.
   Stahl stressed that there is no current plan to attempt to increase the local option portion of the sales tax; however, it is something the council may want to consider if it decides to fund any large expenditures.