Fiscal Year May End with a Surplus

Home » City » Fiscal Year May End with a Surplus

Thursday February 09, 2012

According to Deputy City Manager Bob Rusten, in the current fiscal year, expenses were reduced through health insurance cost savings and staff reductions, while revenues were increased through fees and a voter-approved property tax increase. Staff raises were lower than in previous years, return on investment was higher, and the pension liability issue was brought under control. This latter issue had been an albatross around the neck of the City, with $8 million of unfunded City employee pension liability. City management, supported by actuarial recommendation, determined that the least expensive option to deliver South Burlington from this burden involved taking out a loan, payable over 20 years. Although current City financial practice eschews borrowing money, this solution will result in immediate coverage of the liability at minimal cost as well as the ability to contribute additional monies to the pension fund in order to prevent future underfunding.

The number of Special Funds has been reduced to 24 from a high of about 150 in previous years. The funds with activity have become part of General Fund department budgets or Enterprise Fund budgets, as appropriate, in order to consolidate, clarify and increase transparency. By doing so, money will become available for use for underfunded line items. Consolidation was begun in FY2012.

The City and its independent auditors have determined that over $6 million of uncollected revenue has, over several years, added to the accumulated deficit. Upon looking into collection options, it was determined that about $4 million of this money was potentially recoverable while about $2 million was unlikely to be collected or is too costly to pursue. Past due money has been collected from the State for expenses relating to road work on Kennedy Drive several years ago and an invoice has been sent to the State for unreimbursed services for the Airport Parkway Water Pollution Control Facility Upgrade. With auditor support, the City Manager proposes in the FY2013 budget to write off the uncollectible portion. This will in effect “reset” budgeted funds without undue expense at a time of increasing stability and financial health. The “reset” is subject to approval by the City Council.

If FY2012 does in fact end with a surplus, the intention is to begin building back some staff hours and positions that had been eliminated in FY2011. Based on this scenario, the proposed FY2013 budget includes more hours for Community Library staff and the addition of a reference librarian, all to increase and enhance library services that had been cut or that the public has requested. Needed personnel additions have also been budgeted in the Fire Department and Ambulance Services, and in the Police Department.

An important element in the FY2013 budget is the establishment of a Capital Improvement Plan Reserve Fund for the financing of planned capital expenditures and building repairs. This would alleviate deficit spending, borrowing, and unanticipated spikes in expenses. An additional “rainy day” fund, with voter approval, would also be established for unanticipated capital expenditures. Both of these funds would roll over from year to year and grow so that funds would be available when needed for large projects such as the proposed City Center.

The General Fund revenues and expenses are proposed at $18,970,660, an increase of $1,300,108 or 7.36% above the FY2012 budget. Property taxes are anticipated at $11,210,483 for FY2013, an increase of $709,215 or 6.75%. Non-property tax revenues are projected to increase by $840,893 or 12.15%; most of this will come from Sales and Use Local Option Tax and service fees generated by a new fire inspector position. (Fire inspection had previously been done by the State, but now will be done by the City.)

How will all this impact taxpayers? Annual municipal taxes will rise by about $21 per $100,000 of assessed value for property in FY2013. For example, a typical condo owner with an assessed value of $224,000 would have an increase of $47.04 in their property taxes. A single-family-home owner with property assessed at $322,000 would see an increase of $67.62.

There will be some other spending increases on the part of South Burlington residents, as sewer costs will increase by 1.5%, about a $5.36 annual increase for a typical home, and water costs will increase by 2.8%, a $6.43 annual increase for a typical home. Storm water costs will remain the same as last year.

The City continues to work on tightening up its procedures as well as its checks and balances. In addition to recent significant improvements, they are developing a comprehensive purchase order system and establishing the use of encumbrances to guard against line item over expenditures.

SOURCE: Lois Price, Correspondent