Extraordinary year sets stage for historic $302 million budget

City Manager Pete Peterson. PHOTO BY DAVE ONGIE

Dave Ongie, News Editor 

Citizens who have seen the price tag on Johnson City’s fiscal year 2022 budget may be experiencing some sticker shock. 

At approximately $302 million, the budget that will go before the Board of Commissioners for a third and final reading during Thursday night’s meeting is easily the largest in the city’s history. But according to City Manager Pete Peterson, an extraordinary year has paved the way for an extraordinary budget.

“Obviously 12 months ago, we were looking at a worst-case scenario because at that point in time,” Peterson told the News & Neighbor. “A lot of things were closed and we weren’t sure what was going to happen with the economy. 

“So far during FY21, which comes to a close here in a couple weeks, we’re way beyond what we budgeted for, so it’s allowed us to be in a position to make up for the capital equipment that we didn’t purchase last year. We can do capital projects now and get those things caught back up.” 

Either directly or indirectly, the COVID-19 pandemic played a huge role in almost every aspect of this year’s budgeting process. Bracing for the worst, last year’s budget was winnowed down to the bare essentials in the 11th hour to ensure the city could stay on solid financial footing even if sales tax revenue fell substantially during a prolonged economic shutdown. 

Capital projects were delayed, as were equipment purchases. Planned raises were not included in the final budget, and spending was frozen wherever possible while city leaders waited to see what unfolded during the pandemic. 

“As others have said before me, they didn’t teach us about pandemics in school,” Peterson said. “We felt confident that if a worst-possible scenario played out, we were going to be fine from a financial perspective.” 

As it turned out, the economic shutdown in Tennessee was short-lived, and the result was an unexpected windfall of sales tax revenue. With very few people traveling, Peterson said discretionary income that would have normally been spent on vacations or other travel was spent locally.  

Direct stimulus payments to individuals during FY21 only added fuel to the fire, creating a flow of cash into the city’s fund balance during a year when they feared they’d have to draw down the city’s reserve to cover shortfalls. Additionally, an influx of sales tax revenue from online purchases made by folks in Johnson City kicked in this past year to further drive revenue higher. 

Beyond sales tax revenue, Peterson said property tax collections – another major source of income for the city – remained strong. And one-time money from the federal government as a part of COVID-19 relief measures has Johnson City positioned to catch up on capital purchases and projects delayed last year and also get started on other major projects aimed at checking off items on the city’s strategic plan. 

It all adds up to a historically large budget, but Peterson argues the spending is an important investment in the city’s future. Money spent this year will help complete a $30 million water/sewer project that includes the Brush Creek interceptor replacement and get the ball rolling on the West Walnut Street Project, which Peterson estimates will cost $25 million. 

The city has also budgeted $13 million to build five new diamond fields at Winged Deer Park. Peterson argues the investment at Winged Deer kills two birds with one stone, improving the quality of life for residents while creating the potential to draw in more tourism dollars. 

“In the strategic plan, we wanted to make investments in quality of life to make this an attractive place for people to stay or for people to relocate to,” Peterson said. “The investments in the ballfields are really important because what we have is not enough to meet the demand of citizens. 

“There’s also the ability for us to host tournaments where we have 10 fields all in the same location,” Peterson continued. “That really kind of slides us in to a different group of facilities that are able to accommodate tournaments that size, which helps our hotels, restaurants and gas stations, which is a big shot in the arm for the local economy.” 

While higher-than-expected sales tax revenue and one-time payments from the federal government has created the means for the city to check items off its to-do list, there is also a palpable urgency to strike while the iron is hot, so to speak. Peterson said he expects stimulus programs to come to an end as COVID-19 continues to wane, a move he believes will slow sales tax collections heading into FY2023.

“That money’s not going to be there,” he said. “I don’t look for sales taxes to take a big decline, but my crystal ball right now would be that sales taxes in FY23 will probably be flat.”

In addition to a slowdown in sales tax revenue, Peterson said most experts are bracing for a rise in inflation in the future, meaning the cost of borrowing money is almost certain to rise from the historically low rates that are being offered at the moment. 

“We feel like the safest bet is to borrow the money now and get projects started, because the cost of doing business always continues to grow, and we think the cost of borrowing is going to get more expensive,” Peterson said. “Now is the time. Our fund balance right now is probably the largest it’s ever been.” 

While this year’s budget may appear to be a spending spree, Peterson said the major projects on the horizon are calculated investments in the future of Johnson City. The West Walnut Street Project, for example, is being designed to boost property tax revenue, connect ETSU to the city’s revitalized Downtown District and provide spaces for ETSU graduates to launch businesses in Johnson City more easily, which would ideally help combat the “brain drain” that has plagued the region.

“I think we’ve got a good handle on it, and I feel very positive the city is in good financial shape and we’re making some tremendous reinvestments in the community that will keep the economy strong for years to come,” Peterson said.


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