City budget second reading suggests cuts ahead

By Jeff Keeling

Johnson City commissioners left a marathon budget reading Monday night having thrown out lots of ideas, including financing capital spending through additional debt, reducing employee raises and cutting proposed school spending in hope that revenues would significantly exceed budget and make up the difference.

After three-and-a-half hours, those ideas had provided little clarity on what a fiscal 2016 budget set for third and final reading Thursday will look like, or how much if any of a proposed 40-cent property tax increase will be approved. So little clarity had been provided, in fact, the process almost returned to square one after an unexpected vote reversal by Vice Mayor Clayton Stout that threatened to leave the city without an approved budget by the July 1 deadline.

None of the new ideas to reduce the amount of a tax increase came to a vote Monday. If some of those are enacted, they could drive the increase down from the initial budget ordinance’s 40 cents per $100 of assessed value to less than half, or even less than one-fourth, of that amount.

A 40-cent increase from the current rate of $1.62 per $100 of assessed value – that equals $810 a year for a $200,000 home – would create about $6.8 million ($170,000 per penny) in new annual revenue. It would add $200 a year to the tax bill for a $200,000 home.

By the end of second reading Monday, just less than $170,000 had been cut from the budget, representing one cent of the proposed increase that no commissioner appears to believe has a realistic chance of passage. That is despite support by two commissioners – Mayor Ralph Van Brocklin and Jenny Brock. It was at Van Brocklin’s request that city staff presented a budget with spending that reflected the 40-cent increase, after years of staff-designed budgets that held spending to amounts equal to projected revenue growth.

Along with Van Brocklin and Brock, Stout approved the 40-cent increase on first reading June 4, simply to move the process along. But in a twist that almost left the city faced with having to redo its budget completely, miss its normal deadline of July 1 and be forced to operate under a continuing resolution, Stout opposed the amended 39-cent increase on second reading.

Only a changed vote to “yes” by Commissioner David Tomita prevented that scenario – leaving much to be determined Thursday. Commissioner Jeff Banyas voted no as he had June 4.

“There’s an awful lot of work to be done at third reading,” Van Brocklin said at meeting’s end. “I hope the proposals people bring forward are very concrete so we don’t have to spend too much time sorting through them.”

The most significant of the partially discussed proposals Monday night, several of which included motions and seconds but none of which were voted on, included:

• Tomita’s suggestion, and motion, that for up to $3 million of the proposed new spending – that involving capital projects or capital equipment – the city borrow money on 10-year capital outlay notes at a cost of about $337,000 per year. This could lower the tax rate increase by about 15.5 cents.

• A suggestion by Banyas that the administrative fee charged to the city’s water and sewer department be increased to help offset higher street resurfacing spending set to add 10 cents to the tax rate. Banyas’ rationale was the degree to which utility cuts in the city’s streets by that department help drive up street repair costs. City staff plans to have information on the feasibility of an increase Thursday.

• A suggestion by Tomita that – like it did last year to the tune of $600,000 – the city “backstop” the school system’s $1.6 million proposed increase. If school system revenues don’t exceed estimates by the $1.6 million, the city would make up the difference (this fiscal year school revenues have exceeded the $600,000). “I think there’s a reasonable expectation we can hit that funding, and if we don’t I’m willing to back you,” Tomita told school representatives. Van Brocklin called the hope of the schools ending next year with $1.6 million in revenues over budget, “wildly optimistic.”

• A motion by Stout to reduce budgeted employee raises for city, library and school employees from 4 percent to 2 percent. Passage would decrease overall expenditures by $1.46 million, or 8.5 cents of property tax. That motion earned a second from Banyas but was withdrawn pending further discussion Thursday.

• An end-of-the-meeting, 20-cent increase proposal that Stout had prepared that included 10 cents for street resurfacing; a penny each for street reconstruction/sidewalks and traffic calming/snow removal/traffic signals; four cents for reoccurring school technology needs; and two cents each for additional debt service and adding to the city’s fund balance.

“I don’t think there’s anything frivolous in this budget,” Tomita said prior to introducing his capital outlay note suggestion. “I just think there are other ways we can go about it.”

Tomita said since the items in his list were one-time purchases, he wasn’t ready to support a permanent tax increase to fund them.

Brock and Van Brocklin had a different take. Brock said she appreciated the work Tomita had invested in the idea, but said she needed more time to learn details. She, and Van Brocklin, also warned against getting into a practice of paying for ongoing needs through debt. City Manager Pete Peterson has estimated the city needs about $1 million more in annual funding for capital needs than its current level to keep pace.

Tomita said with borrowing still relatively inexpensive and what he saw as a good possibility for a return to robust economic growth in Johnson City on the horizon, the problem could take care of itself within a few years through organic revenue growth – thus negating the need for a tax increase.

“Let some of the things we’ve been working on (in economic development) take root,” Tomita said. “I’m not philosophically opposed to a tax increase, but why don’t we leverage what we can while we can do it affordably.”

Van Brocklin said he believed such an approach would simply, “defer the inevitable.”

“I will grant you that there is a certain amount of growth that we can expect,” Van Brocklin said.

“But at some point we’ve got to have a defined way to pay for equipment. At some point we have to have a defined way to take care of the other needs in the way of capital projects in this community.”

For the first two-plus hours of Monday’s three-and-a-half hour session, commissioners dug into specifics, reached a few compromises and pared the proposed budget slightly. Several proposed new positions got the ax, often with the commission’s two fiscally divergent camps in agreement.

As commissioners prepared to cut a recommended new $57,000 fire marshal position, Van Brocklin said proposed new positions were among the areas he was willing to compromise.

“I’m trying very hard to find a few things I can compromise on, because I realize we’re not likely to get the recommended 40-cent increase approved,” Van Brocklin said before supporting the cut.

For his part, while discussing a proposed senior services director position, Stout said the Parks and Recreation Department could continue to provide the service without the position. He said Parks and Rec Director Roger Blakely, who has been overseeing the provision of those services, “is well compensated.

“That’s what happens when you run a business. You do a lot of different things. There’s got to be a little give and take here and that’s all I’m saying.”

Banyas has remained the strongest voice against a need to increase the tax rate. He has voiced support for increasing the road resurfacing budget, but he disputed any notion that the city would suffer unduly if other proposed spending increases didn’t occur.

“I don’t think that it all has to be done this year,” Banyas said.

“If we do none of this, we’re still going to make progress in the city. We’re still going to pave roads… we’re still going to make public works improvements. It may not be to the degree that’s on this list, but we’ll still have things to do.”

Though the meeting ended with the surprise of Stout’s reversal, and clear differences in desired approach between two main camps, Tomita put on an optimistic face that matched his hopes about the area economy’s future.

“Let’s roll up our sleeves and get it done,” he concluded.