By Jeff Keeling
A sharply divided Johnson City commission wrestled with its most difficult budget in years Thursday night before passing in a split 3-2 vote an amended budget with no tax increase, based on a plan set forth by Commissioner Jeff Banyas. The budget has two additional readings, subject to further amendments, before it becomes final.
The approval followed a 3-2 rejection of an amendment from Mayor Ralph Van Brocklin that would have raised property taxes by 22 cents per $100 of assessed value. Van Brocklin and Jenny Brock supported the tax increase, which would have generated roughly $3.8 million in new annual revenue. Banyas, David Tomita and Stout opposed it and supported the budget with no tax increase.
The amendment restores several items that were cut from a draft budget prepared by city staff, and adds $500,000 to a school budget that was $3.4 million less than the school board requested. It keeps Legion Street pool open and funds the new farmers market and up to six police officer positions, while eliminating special appropriations for non-profit agencies.
The prevailing trio acknowledged the city and school budgets face major difficulties, but insisted that the best approach was to spend a year examining both budgets and seeking areas where savings might be found before resorting to a tax increase. The decision came in the face of calls for an increase from a number of quarters in the city, including the school board and the Chamber of Commerce.
“Difficult decisions have to be made,” Banyas said while discussing his amendment. “We as a government have to learn to live within our means.” His amendment made several cuts, worth nearly $700,000, to the initial budget. It restored $500,000 to the schools and a total of $400,000 to other areas that had been cut out of the original budget, while approving $350,000 from fund balance to help pay for site work at the planned new farmers market. The $902,000 total adjustment also included a projected $220,000 from increasing the city’s gas franchise tax by 2 percent.
A further amendment by Stout failed 3-2 with Banyas joining Brock and Van Brocklin in opposition. It would have reduced the street resurfacing budget by $790,000 and applied an additional $600,000 to schools while restoring $190,000 to the city’s special appropriations. Banyas cited the difficult budget climate and the fact that city employees weren’t getting raises in his opposition.
“I feel that the budget is woefully inadequate to address the needs for the schools and the city,” Van Brocklin said during discussions over Banyas’s amendment. He and Brock both suggested that failure to increase revenues through a property tax increase would harm the schools and delay the inevitable with the city budget.
“What we’re doing tonight is pushing a problem down into 2015 and 2016 in that we have recurring needs for both the city and our school systems that are not going to go away,” Brock said. “I feel like we’re digging a hole for ourselves that’s going to be much harder to get out of.”
Commissioners had started with a staff-prepared budget with no tax increase and no drawdown of fund balance. The draft budget totaled nearly $205 million, $1.6 million less than this year’s budgeted amount due to a $4.2 million decrease in the city’s budget (to $129.5 million) and a $2.6 million increase in the schools’ budget (to $74.9 million).
Combined, the schools and city staff had suggested an additional, unfunded amount of about $3.4 million be added back into the budget. City Manager Pete Peterson had told commissioners adding about $3 million to the city’s budget would produce an adequate budget for the city. That amount, without fund balance drawdown or other cuts, would require a property tax increase of about 38 cents. The current rate is $1.58 per $100 of assessed value.
In introducing his amendment, Banyas called for several changes to the budget approach for next year. He expressed support for:
* a hiring freeze for non-essential positions;
* an effort to reduce fuel consumption by 5 to 10 percent (saving $150,000 to $300,000);
* a review of spending to see what services could potentially be contracted and provide savings; and
* creation of a long-term spending plan for the schools and the city government.
“We’ve been saying that for a long, long time,” Banyas, the most senior commissioner, said of developing the spending plan.
In the prelude to his amendment, Van Brocklin cited goals generated by the commission this year, and priorities found in a 2012 citizen survey and ranging from streets and overall appearance to downtown and economic development.
“All of these goals require an investment of money, and those monies are not available in the current budget,” Van Brocklin said before offering an amendment to add 10 cents to the schools budget and about 12 cents to the city’s. He called that a “partial maintenance” budget.
“We would need a total of 38 cents if we were to fully fund what the schools say they need and if we were to fund what the city says it needs,” Van Brocklin said.
“I’m trying to pare this to a level that I hope would merit some consideration by the commission.”
Van Brocklin also contended that he, too, supported a thorough review of spending at the city and the schools.
“I appreciate the argument that we need to be looking for efficiencies in our budget wherever we can,” he said. “If this is approved I certainly will be pushing city management to be looking for areas to improve.”
After a thorough presentation of the draft budget by City Manager Pete Peterson, commissioners heard from close to a dozen people during a public hearing period. Many supported maintaining the special appropriations to non-profits, which represent a very small part ($362,000) of the budget but were slated for elimination.
They also heard strong recommendations for a tax increase from the current school board chairwoman, Kathy Hall, and former city commissioner Tom McKee.
Hall explained how the schools had been fighting a losing battle with budgets since the state passed a new “BEP” funding model in 2007 but failed to fully fund it. The schools have used federal stimulus grants and then other federal grants to fill those gaps, but those options are gone, Hall said.
She also pointed to the system’s high academic ranking statewide, which exceeds all other Northeast Tennessee systems, and its per pupil expenditures being lower than Kingsport’s by more than $1,000 per year. Funding at Kingsport’s level, she said, would increase the schools’ budget by roughly $7.5 million.
Hall called the cuts in the proposed budget “drastic” and “painful.” In an exchange with Stout, she said the school board would be willing to accept his suggestion that they examine possible joint funding with the city of areas such as maintenance and information technology.
“We’re very open to looking for efficiency, but if you think our budget will ever stagnate, it won’t,” she said.
McKee, who served on the commission in the 1980s, said he believed Johnson Citians would support the first tax increase in 12 years. “They really don’t mind making a sacrifice if it’s justified.”
Tomita, who suggested using short-term capital outlay notes for some expenditures to free up more than $600,000, said he believes the city has time to look for savings before raising taxes.
“We’ve got a year to work on this,” he said. “We’ve got the people in place to fix this. We just need some time. We need to start in July working on this, not in May.”
Tomita added that the private sector may be ready to continue investing in downtown and other areas without all the public spending that’s being proposed.
“There’s momentum,” he said. “At some point in time we’ve got to step back and see if what we’re investing in is working. Will the private sector step in and pick up the ball?”
The commission was set to meet at 7 a.m. Friday for a second reading on the budget ordinance.