City starts 2013-14 budget work with $5.2M gap
City officials start work on the fiscal 2013-14 budget needing to close a $5.2 million gap between projected revenues and expenses, Budget & Management Services Director Bertha Johnson said Friday.
The gap is the largest the City Council and City Manager Tom Bonfield have confronted since early in 2010, when they began deliberations on the fiscal 2010-11 budget facing a $16.3 million hole.
But a gap of some sort is the norm so early in a debate that won’t end until mid-June. Revenue projections are still subject to change, and the manager has to cull the requests that come in from city department heads.
“All the things in the gap may not stay in” it once Bonfield and the council are done, Johnson said.
The spending projections assume, for starters, that the council will approve raises for city workers averaging 3 percent for line employees and 3.5 percent for sworn police officers.
Bonfield last year recommended awarding most city workers a 2 percent raise, slightly below the then-prevailing inflation rate. Inflation now is running at about 2.1 percent a year, according to the U.S. Bureau of Labor Statistics.
Johnson’s numbers also assume the council will allot $1 million in cash to keep up with street paving.
That’s in line with the promises officials made community groups in 2010 when they were campaigning for a bond issue to pay for catch-up paving work. Several groups said they thought the city should be using cash, not debt, to pay for basic maintenance.
Officials responded to that prodding by raising cash allocations.
But they should have hit the $1 million mark in the current fiscal 2012-13 budget. They didn’t. Bonfield recommended $750,000 instead, judging that amount “all we could do” given the council’s wish for only a 1-cent increase in the property tax rate, with the extra revenue reserved for low-cost housing projects.
The fiscal 2013-14 projections also call for the city to put $500,000 in cash toward its capital improvement program, and to spend $600,000 on catch-up maintenance, a $100,000 increase from the current budget.
There’s no cash allotment in the current budget for capital projects, a fact Councilman Steve Schewel picked up on.
“I question why we’re putting cash into the CIP when interest rates [for borrowing] are so low,” he said, alluding to a previous briefing from N.C. State University Michael Walden, who said rates are as low now as they’re likely going to be.
Finance Director David Boyd responded that the Wall Street credit-rating agencies that monitor the fiscal practices of Durham and other cities also want to see it rely more on cash.
He also noted that the city has little room, under current council policy, for unplanned borrowing. It’ll borrow to build a new police headquarters, but administrators have already factored that $45 million project into long-range spending projections.