In hard numbers, city officials are estimating Kingsport will experience a $5.5 million loss in revenues next fiscal year. However, through a series of tough cuts, some belt-tightening measures and tapping the city's rainy day fund, Kingsport will start the new year with a balanced budget and no property tax increase.
In addition, city officials are recommending no increases to the water and sewer rates, no new bond issuances this fall and no salary increases for city employees. Kingsport will be able to perform about $4 million in paving next fiscal year.
“It's safe to say that as we move through this (process)...this was by no means the budget we had when we sat down in January,” City Manager Chris McCartt said.
This information and more came out of a Monday afternoon work session of the Board of Mayor Aldermen, where city leaders reviewed the fiscal year 2021 budget for the first time publicly. The fiscal year begins July 1, 2020, and runs through June 30, 2021.
TIMES ARE TOUGH
During Monday's work session, McCartt told the BMA that he and his staff are anticipating a $5.5 million loss in general fund revenue for the coming fiscal year. The general fund is the main operating fund of the budget and covers everything from city administration to police and fire services to the parks and recreation department. It’s funded mainly by property and sales taxes.
Specifically, the city is estimating a 2% drop in property tax collections next year, an 8% drop in sales tax collections, a 25% loss in motel/hotel tax receipts and a 31% drop in fines and forfeitures (since courts have been closed for three months).
In order to balance the proposed budget, more than $3.9 million in cuts were made, including ones to programs, training, temporary labor and the recent pause in recycling. McCartt said all unfilled positions (11 of them) are being held, there's no increase in health insurance and no raises for city employees.
McCartt and members of the BMA did say if revenues were to change later on in the fiscal year, the city would come back to the issue of raises.
To close the $1.6 million gap between the projected revenue loss and the cuts made, McCartt said the city is tapping its $16 million rainy day fund.
BALANCING THE BUDGET
As mentioned during last week's BMA meeting, Kingsport is not planning to do its annual capital projects bond issuance later this fall. Regardless, McCartt said the city is still managing more than $20 million in capital projects next fiscal year.
Kingsport is not anticipating a maintenance of effort increase from Kingsport City Schools next year. KCS officials will be presenting their proposed budget to the BMA on Thursday.
Currently, Kingsport has $247 million in debt — $117 million in the general fund and $129 million in enterprise funds (water, sewer and stormwater). With debt roll-off and the city not issuing any new debt this fall, McCartt said for fiscal year 2021 the general fund debt will be $108 million and the enterprise funds will be $120 million.
Deputy City Manager Ryan McReynolds told the BMA the city plans to perform more than $4 million in paving next year, with $2.5 million going toward main roads throughout the city. In-house crews will begin July 1 on the repaving of “worst case” roads within the city.
“In the midst of a pandemic and with these revenue concerns, we've been able to figure out a way to make it work,” McReynolds said.
To help balance the proposed budget, Kingsport is cutting its special programs budget by nearly 22%. This budget covers city funding to more than two dozen organizations within the city, such as the Arts Guild, NETWORKS, the Theatre Guild and a number of Chamber of Commerce programs.
Many programs had a 6% cut in their budgets, but some had more. No funding is allocated for the summer concert series and economic development. McCartt said the concert series is not going away and if social gathering recommendations allow, the matter would be revisited for future funding.
“We will look again at this budget in September ... to see what our revenues over expenses are and make changes as we see fit. We'll do that again in January and in March,” McCartt said. “We hope it's a budget where we can come back and make positive adjustments throughout the fiscal year.”