ELIZABETHTON — The process of setting a budget for the 2012-13 fiscal year began last week with a more optimistic outlook than the past several years. On Friday, City Manager Fred Edens Jr. sent out the annual proposed city budget memorandum to the seven City Council members who will decide the final budget.
Edens expressed a note of optimism this year. “As per previous years we have proposed an extremely tight budget. In this coming year we are hoping to benefit from a slight upturn in sales tax revenue.”
Edens summarized his memorandum by saying “all funds are balanced without a tax increase.”
City Finance Director Jerome Kitchens said he has taken a cautious approach to the recent rise in sales tax revenues.
The state is projecting a 4 percent increase but Kitchens said Carter County usually sees a trend later than the state as a whole. He said the state started experiencing an improving sales tax picture around September, but the taxes didn’t start improving in Carter County until the all-important December collections.
The latest report, for January, shows a continuation of the trend. Even so, Kitchens is projecting an increase of only 3 percent in his budget estimates for the next year.
Another reason for optimism at the start of the budget process is because of the new revenue coming in from last year’s 21-cent increase in the property tax rate, going to $1.78 per $100 of assessed value. It was the first property tax increase in Elizabethton in 19 years. Kitchens estimates that should bring in an additional $58,904 next year.
The city also should be receiving an additional $75,000 payment in lieu of taxes from the Elizabethton Electric Department as a result of the increased value of its substations following the rebuilds.
One other increase is only a mirage. For accounting purposes, there is a $365,000 increase in garage services, but that is balanced by interdepartmental sales of gasoline.
Speaking of gasoline, Kitchens has factored in a 10 percent increase in the cost of gasoline. His figures reflect a hope the recent spike in gas prices will follow the pattern of the past few spikes and prices will once again decline nearly as much as they have risen. If the prices do not go back down, Kitchens said a mid-year adjustment will have to be made.
The bottom line is Kitchens is projecting an increase in revenue next year of $142,000, bringing the General Fund budget to just short of $15 million. He is also anticipating a strong desire by City Council to give city employees a pay increase this year after several years of no increases. He said a 2 percent pay increase would cost around $120,000, leaving about $20,000. While this may seem like a small annual growth, it still looks good after the declining revenue trends over the past few years.
Kitchens would like to see the $20,000 put in the unrestricted fund balance to reverse yet another trend of the past few years. The justification for last year’s property tax increase was that the city was drawing down its fund balance each year instead of raising property taxes. Adding $20,000 to the fund balance after several years of decline is seen by Kitchens to be a positive step.
The modest revenue increases are not good news for the Elizabethton City School System, which has not had an increase in city funding since 2001. During those years, the city has consistently given the school system $2,332,000 a year.
This year, School Superintendent Ed Alexander has asked the council to increase the funding by $375,000 to cover the loss of federal stimulus and Race to the Top funding that had been used to create student support programs that have been effective.