10/15/2011 7:30:00 AM City budget deficit larger than anticipated
Kyle Rogers River News Reporter
Balancing the 2012 budget just got a little harder for Rhinelander officials. A deficit was already anticipated due to cuts at the state level and the city still having union contracts to honor. That eliminated the ability to realize much savings from employees' increased retirement contributions. But now that hole is even larger due to a budgeting error recently discovered that has been occurring for the last three years.
In 2009, 2010 and 2011, city officials had thought they approved a balanced budget said City Administrator Blaine Oborn. In fact, there was around $400,000 in revenue each of those years that was incorrectly recorded, making it appear as if there was more money available for city operations than there actually was. Now that $1.2 million of incorrectly recorded revenue over three years is catching up with city officials.
"The actual expenditures and reporting was done correctly, but the budgeting was wrong," Oborn said.
The discrepancy was with the revenue generated from the city's TIF districts. Those districts have a property tax base. Any tax revenue generated beyond that due to improvements in the district is separate from the rest of the city's property tax revenue. It is meant to be used for infrastructure improvements in those districts, not toward city operations. But that wasn't how it was listed on the budget city officials would see. On the budget that TIF revenue was lumped in with the rest of the property tax revenue in the general fund.
Oborn said it won't be known for sure until later next year when the 2011 audit is complete, but it appears as if the city will be starting 2012 with a general fund balance of around $955,000. Ideally, for cash flow and borrowing purposes that fund balance would be at $1.5 million he said.
Oborn, who has been in the city administrator position for a month and a half, said the error was only truly realized after the 2010 audit was recently completed, and due to a difference in figures, further analysis of the city's budgets was done.
"It's basically a three-year cycle from the creation of the budget, the actual budget year, and the post-year, the audit," Oborn said. "To really understand a budget you have to take it through the three-year period."
"I don't think there's anything dire (about the situation)," he added. "We had a healthy general fund at the time (of the error) and we'll make it through it. We're taking the necessary steps to make sure it doesn't happen again. It's bad, it's misfortunate, but the city has the capability to weather through it. You say $1.2 million, but the three-year budget was $30 million, so that gives some perspective."
But the city's fund balance will have to be built back up, and that means some decisions have to be made.
"If we had a healthy fund balance, we probably could phase it (cuts, etc.) in over a few years," Oborn said. "It's gotten so low, we don't have an option and we really have to have a balanced budget this year."
In a closed session Thursday night, city officials discussed some of those possible decisions.
"We went over a lot of informational stuff," City Council President Alex Young said. "Given the budget situation we're in, it's a pretty tough spot, so we're looking at a lot of different options to get the budget balanced. It's turning out to be more difficult than people anticipated. Obviously, nobody wants to do anything that's detrimental to city services."
Discussions Thursday revolved around possible changes to the contracts the city has with the restaurant and the golf pro at Northwood Golf Club, as well as changes to how the animal shelter is funded.
"With the shelter ideally we'd get some more help from the townships," Young said, citing a statistic that around 60 percent of the animals at the shelter come from outside the city limits. "For the city to be incurring (so much of) the cost is probably inequitable to city taxpayers."
Also discussed Thursday was the possibility of going to the city's union employees and asking for some help in filling the hole in the budget. The city has only 11 non-union employees subject to the increased retirement contributions. If the city could also apply the provisions of the new state law to all its union employees, Oborn told city officials that there would be another $150,000 of savings.
Another proposal presented Thursday was what it would cost city residents if garbage and recycling collection was charged as a special assessment. The city could cut about $252,000 from the budget if that was done. The annual cost for each of 2,825 households would be $89.10. If that cost was kept in the budget, and taxes were raised to cover it, the estimated increase would be $42 on a $100,000 home. City officials took no action on the proposal Thursday night.
The time to make some decisions is quickly approaching though. Young said some of what was discussed Thursday could come back before the City Council in the near future as the 2012 budget is finalized. He said more information about the budgeting error will likely be shared as well so that city officials, city employees and the public have a clear understanding of what happened.
"It is what it is," Young said. "The error was made three years ago and it's my opinion that we should be as clear and transparent as possible with it."
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