Economy could force city to cut '07 budget

Economic conditions could force the Mitchell City Council to chop some projects out of the 2007 budget, the council's vice president said this week.

Councilman Britt Bruner said the ongoing drought could further hinder the city's already sluggish sales tax revenues, and the increasing costs of fuel and construction materials could raise the city's expenses.

Under the circumstances, he said, the city may need to budget more than its typical $1 million year-end balance in the general fund.

"If we have flat revenues coming in and our expenses just go out of this world, I feel we need maybe even a bigger cushion until we see how this thing plays out," Bruner said.

To increase the projected balance of the general fund, cuts will have to be made. Bruner declined to identify the items he wants to cut, saying he wants to hear all the proposals before deciding.

The council conducted the first two of its four scheduled budget hearings this week. The final two hearings will be Thursday and Aug. 8. Council members will then finalize the budget for 2007.

The economic factors that Bruner referred to loom over the hearings. City sales tax revenue is up only 2.7 percent this year after growing by an average of nearly 8 percent annually over the last 10 years; area precipitation for the year is 7.4 inches below average, causing concerns about the agricultural industry; the state's average gasoline price is a near-record $3 per gallon; and the cost of construction materials such as asphalt has increased by double-digit percentages over last year.

The draft version of the budget presented this week to the council includes total expenditures of about $28.6 million and total revenues of about $27.2 million -- a difference of about $1.4 million. If the draft budget is approved without any changes, carryover balances in the city's various funds would make up for the shortfall.

Bruner, though, said budget cuts are in store.

"Everybody that comes to us with a request is just going to have to understand that we can't fund them all," he said, "and it's our responsibility to take a look at the big picture."

Some budget items that could be doomed include requests for new or increased funding by organizations outside of city government, and requests for new buildings, equipment or programs by city departments.

Outside groups are requesting $537,397 in new or increased funding. The requests include equipment for a proposed conference center, new bleachers at the rodeo arena, and increased funding for the Mitchell Area Development Corporation, the Mitchell Area Chamber of Commerce and the Corn Palace Convention and Visitors Bureau.

City departments are requesting about $3.5 million in "capital" expenditures for buildings, equipment and other physical assets. Notable requests include a proposed shooting range for the Police Division, a "columbarium" to store cremated remains at the cemetery, additional bleachers for the ice arena, a new restroom and storage building at the Cadwell Sports Complex, and an addition and reconfiguration at the golf course clubhouse.

Council members have not yet discussed proposed raises for city employees or requests for additional full-time positions. Those issues will be covered during the Aug. 8 hearing.

If council members think the budget should be trimmed, the onus is on them to do so. Because of the way the city budget process works, all the requests are in the budget until, and unless, they are taken out.

Here's how the budget is drafted:

* Department heads bring their budget requests to City Finance Officer Marilyn Wilson, who compiles the data and adds in the requests from outside organizations.

* Next, Wilson runs the numbers and projects what the year-end balances will be if the requests are funded.

* Then, if the projected balances are too low, Wilson goes back to the department heads and asks them to make adjustments.

* Finally, the budget is compiled and presented to the City Council, which uses it to adopt a spending ordinance for the coming year.

The procedure contrasts with the process followed by states and the federal government, which rely on the offices of the governor and president, respectively, to compile the budget for presentation to lawmakers.

Wilson said Mitchell's process is better than those used in some other cities.

"Some places, the finance officer does everything and says, 'Here it is,'" she said. "We do it a little more democratically."

Bruner said he likes the city's budget procedure, because it encourages department heads to cooperate and look at the city as a whole.

But the process also puts pressure on the council, which inherits the task of removing items that are already in the draft version of the budget. Bruner said he doesn't mind the pressure, because it's the council's job to manage the city's finances responsibly.

"My philosophy when I got elected was that I don't expect to get re-elected," he said, laughing. "So I can make my decision based on what's right or wrong, not on who I want to make happy or keep from getting mad at me."