These figures were presented to the Board of Mayor and Aldermen during a budget discussion Monday afternoon and are a preview of things to come later this year as city officials continue their work on finalizing a budget for fiscal year 2011, which begins July 1.
According to the city’s finance department, Kingsport’s general fund is projected to have a $2.25 million shortfall at the end of the current fiscal year (ending June 30). The largest shortfall is in sales tax collections ($1.37 million), with the other shortfalls coming from state-shared revenues ($259,024), investments ($248,700), building permits ($174,900) and miscellaneous areas ($205,500).
Kingsport is not earning anything off its cash, even though the city has a record level of cash on hand, City Manager John Campbell said.
By the end of the fiscal year, Kingsport is estimating sales tax collections to be just over $14 million — the lowest amount collected in four years.
Last month, city officials told the BMA sales tax collections for the entire fiscal year would be down at least $1.26 million — from $15.3 million to $14 million — with the general fund having an estimated shortfall of $1.8 million to $2.1 million by the end of the fiscal year.
Campbell said this year has been the toughest end year adjustment he has had to make during his career.
“Our staff is working hard to make sure we’re in a balanced budget situation this year. The dilemma for next year is the big hole to dig out of,” Campbell said. “The national economy is really fuzzy, but we still have an opportunity to be better than the worst situations out here. This puts us in a real challenge for next year and limits us to what we can spend in terms of new money.”
Campbell did say sales tax collections may be a little better at the end of the fiscal year but noted the $14 million total is a reasonable projection. In addition, Campbell said the city does expect decent growth in property taxes next year, what with the Rock Springs annexations fully coming online.
In order to overcome the shortfall, Campbell presented the BMA with a list of savings and holdbacks the city plans to implement (or has already implemented) to meet budget. A main savings comes from when Campbell directed all city departments at the beginning of the fiscal year to be prepared to hold back 3.5 percent of their budgets.
Other sources of money include unused bond funds, unused funds from various projects, fuel savings and engineering fees earned. In addition, Kingsport is not filling 21 full-time and nine part-time positions, resulting in a savings of $585,000. In all, Campbell said these holdbacks and savings would be enough to fill the $2.25 million shortfall.
Kingsport’s sewer and water funds are both projected to have shortfalls this year — $258,000 and $400,000, respectively. Campbell said a series of savings and holdbacks in both funds would be able to cover those shortfalls. The sewer fund has $5.2 million in reserves, while the water fund has $3 million.
Kingsport, like most cities across the nation, has seen a drop in sales tax collections. On Monday, city officials showed a breakdown of sales categories and how much they were up or down during the first six months of the fiscal year (July through December 2009).
Small drops in sales tax collections were reported with motor vehicle dealers (0.094 percent), general merchandise stores (4 percent), building materials (6 percent), and eating and drinking places (0.26 percent). Kingsport saw larger drops in sales tax collections from other categories including manufacturing (22.5 percent), wholesale trade (20 percent) and electric gas/sanitary services (10.9 percent).
And finally, one category caught the attention of the BMA, especially Mayor Dennis Phillips — sales tax collections from furniture stores were down nearly 46 percent during the first quarter of the fiscal year.
Campbell said the drop might be the result of a coding error, where another city or county may be getting the sales tax collection instead of Kingsport.
“It would be worth checking into,” Campbell said.
Phillips said he feels fairly confident Kingsport will end up with a balanced budget by the end of the fiscal year.
“It’s not a good picture, but the world’s not coming to an end,” he said. “So far we’ve been able to manage it, and based on the six month figures, we’re doing okay.”