City Councilman Chad Magill’s questions raised about sales tax revenue at the October 17, 2015, council meeting seemed to foretell the message delivered to Council by City staff at the April 16, 2016 meeting. At that time, Magill said, “Corpus Christi has a strong economy right now.” Later he added, “Why I’m asking the questions I am is to prepare for potential challenges that may or may not come. But it’s better to be prepared and ready than not.”
“We have been losing revenues through March 31 of this year,” said Deputy City Manager Margie Rose to City Council at the April 16, 2016, regular meeting. “We’ve lost about 4.9% of what was budgeted. We believe we will continue on this track through the end of the fiscal. If that is the case, we do believe that we will be short about $8 million as is outlined on the left side of the chart.”
This shortfall staff attributes to a loss of sales tax revenue, a decrease in the property values for Flint Hills and Valero, and municipal court costs outweighing revenues. Councilwoman Carolyn Vaughn said, “The municipal court really stands out to me.” This concern was echoed by several other council members.
“Whatever the issues are, they occurred beginning in Fiscal15,” said Rose, in response to Vaughn’s comment.
City Manager Ron Olson explained what was being done to rectify the problems. “The dip in the revenue is a result of the lag in receipts due to the implementation of technology.” He explained that they are currently looking at this problem and at the judicial policies about setting payment plan. “We’re in the process of looking at both,” Olson said. “But cutting expenses is probably a bad idea in court, but getting all the planned revenue is something we really need to do first. We’re working on that now.” Magill pointed out that outstanding warrants may also have potential revenue capture.
Rose explained how the City could adjust the budget to make ends meet. “We have about $10 million in of unreserved funds in our debt service funds that we would like to use. The $4,179,000 (See chart) would come from these unreserved funds,” she said. Rose also told Council that:
- $500,000 earmarked for Development Services would remain in the General Fund;
- $151,000 of the budgeted $208,000 for Intergovernmental Relations Contracts with lobbyists at the state and federal levels would remain in the General Fund;
- Cutting fuel costs and leaving open positions vacant in all departments except in the areas of engineering, streets, and public safety would leave $2,144,370 in the fund;
- Rebates from MIS, Fleet, and Development Services would add another $1,025,630 to the kitty.
Councilwoman Lucy Rubio asked about the Council’s request made last year to look into car allowances and electronic expenditures. Olson gave an update, explaining that the car allowance policy has been amended to include contract positions only and that take-home cars have been reduced by 30 or 40 cars. He also said, “The big money saver is going to be in electronics, like cell phones and iPads.” Olson related that in the past 10 years, each of the 34 city departments had its own service contract for the devices. By bringing all departments under one umbrella using the same carrier, Olson said he believes the City will see about a 35% savings.
“I know it doesn’t seem like a lot of money, but at the end of the day, it all adds up.”
“No one likes to be in this position where we have to make adjustments because we’re over budget,”said Mayor Nelda Martinez. Referring to the drop in sales tax revenue, she said, “We knew it was going to be lower, but we didn’t know how much, but we’re prepared for it.”
Magill reminded everyone that the debt fund balance was at $15 million two years ago, then dropped to $9.9 million, and to around $5 million with the mid-year adjustment. Magill asked if the City was still meeting the fund balance requirements in the fiscal policy, to which Rose answered, “Yes. We are required to keep a reserve of 2%, which would be about 4 or 4.5 million dollars.”
Earlier in the meeting, Magill said, “I’ll start at the bottom line, and the bottom line is that healthy fund balances see us through challenging times. This is why we have a mid-year budget adjustment.” He continued, “Fund balances make all the difference. I always try to push to be as clear as possible on our fund balance policies. Policies on both ceilings and floors of fund balance give predictability to our rating agencies. That’s what helps our ratings in the future, too, and helps us pay less interest on our debt service.”
Magill cautioned City staff, saying, “We don’t want to compound the shortfalls in sales tax revenue by not lessening our dependence on new property growth values. Often the city over the last few years has paid city employee raises – and more – with the 6-8% property value growth each year. Everything I am hearing right now is that 2016 is stable, but 2017 is where we see 2-3% property value growth.”