Tough budgeting ahead

Energy costs have soared, yet many sources of city revenue have flattened - a fiscal challenge in an era of daily jaw-dropping, roller-coaster news from Wall Street and Washington.

Wednesday was the official start of the 2009 state budget year, and across the Shoals, cities ranged from near budget approval to preliminary budget drafts. Colbert and Lauderdale county commissions have approved their budgets for next year. None of the four cities within those counties, however, has passed their budgets.

In the past year, the cost of electricity from the Tennessee Valley Authority increased 25 percent, and fuel has increased more than 50 percent, according to officials.

Throughout the Shoals, sales taxes, a significant source of revenue for municipalities, has flattened compared with the past few years as residents watch their spending more closely.

Property taxes, however, saw a boost after reassessments at the end of a four-year cycle. The state Legislature passed a law that requires property reassessments annually after this year instead of the previous four-year cycles.

Florence city council members will vote Tuesday on the largest municipal budget among the four Shoals cities. The finance committee approved the budget at the end of September.

"Maybe we ought to retain status quo for three months and see what happens," said Councilman James Barnhart after last Tuesday's finance committee meeting. "I'd rather not promise a department head a new truck and not be able to deliver."

Florence's budget plan cuts $75,000 from city travel and $600,000 from the purchase of large equipment. Florence expects energy costs from TVA utilities and fuel to increase an additional $738,000 for fiscal 2009.

An estimated $504,760 will come from utility cost increases, with the remaining $233,800 from increased fuel costs.

Florence officials expect zero growth in city revenue, including sales taxes, which was budgeted at $25,853,000 last year and will remain the same for fiscal 2009 budget. The most recent figures from Florence showed that sales tax revenue was nearly $10,000 behind expected levels.

In Florence's proposed budget, city employees were not given a general wage increase.

Although Florence officials spent September negotiating with department heads, other cities have just started with their budgeting process.

"It's a crazy time in the financial world," Tuscumbia Mayor Bill Shoemaker said. "I know our fuel costs have really gone up. I think we did well in the first nine months, as far as keeping on pace. We made some progress, but there's not a lot we can do. We just have to accept it and do the best we can with it."

Shoemaker said he and other city leaders have looked at ways to offset costs. "There's a lot of talk about flex hours and trying to use battery-and-gasoline engines. I think that's on the horizon."

Budget adjustments were made about a year ago, particularly to handle departments that use the most fuel, including police, fire and street and sanitation. "But we've seen gas go even higher," Shoemaker said.

Through 11 months of fiscal 2008, the city spent $200,000 on fuel, and officials expect to spend an additional 20 percent next fiscal year.

This past year, the city spent $210,713 on electricity bills and officials expect an increase of 16 percent with little expected increase in usage.

Tuscumbia also spent $27,870 on natural gas during fiscal 2008.

Shoemaker believes gas prices eventually will settle and go down to around $3 a gallon, but he said city leaders will continue to look at ways to compensate for rising energy costs.

Muscle Shoals City Clerk Ricky Williams said department heads would begin meetings with the mayor soon to discuss the budget for the next fiscal year. This year, money was reallocated from the general fund to cover increased fuel costs.

Williams said they project higher sales tax revenues for the new year, but have yet to estimate the amount. He said it is possible, however, that the new budget could match the sales revenue of $10.4 million in the fiscal 2008 budget.

Williams said he did not know if they will have to cut any line items from the budget to accommodate fuel and electricity costs for next year. But if so, the money will come from the general fund. Total electricity costs were budgeted for fiscal 2009 for about $122,000. Williams said he does not foresee any additional revenues.

Muscle Shoals has projected a $25,000 to $30,000 increase in electrical costs for the next fiscal year. The money will come from the general fund. As of right now, Williams said he did not know if budgetary revisions, cutbacks or minimizations were necessary.

Sheffield City Clerk Clayton Kelly said that after the city's department heads submitted their funding requests for 2008-09, the budget showed about a $500,000 deficit.

"We're definitely going to have to trim," Kelly said. "We've got some room to do it."

Projected 2008-09 revenue will appear to increase because of an additional 10 mills in property tax. That revenue, about $430,000, will go directly to the Sheffield school system.

With that money taken out, Kelly said revenue is projected to be lower than it has been in the past five years. One reason for the reduction in tax revenue is the loss of the Marvin's store.

While the budget has not been finalized, Kelly said the city is projecting revenue of about $7.2 million, which is lower than the $7.32 million averaged during the past five years. He said the city will enjoy some increased revenue from its new privilege license fee schedule and fees on rental properties.

The city is feeling the effect of higher energy and fuel costs, Kelly said. For example, it costs about $200,000 to keep the city's street lights burning each year. The 20 percent increase in the cost of electricity from the Tennessee Valley Authority will cost the city another $40,000 annually just to keep the street lights on.

"We had an increase in debt service this year, too," Kelly said.

He said he would suggest the council ask department heads to go back and trim their budgets on a prorated basis.

"There is some stuff you have to let go of, so long as it doesn't hamper their ability to provide services," Kelly said.

Colbert County Commission Chairman Tim Leigh said increased energy prices did not cause large reductions in other parts of the 2008-09 budget. The road department will be hurt by increased fuel costs and the cost of other petroleum-based products used in road maintenance. Less fuel purchased also means less gas taxes being returned to Alabama counties.

"There will be a lot less money for paving," Leigh said.

"The road department's really going to suffer."

Leigh said the county's revenue was projected to be up over the previous year because of increased property tax revenue generated by the most recent property appraisal.

The three major areas that increased were worker's compensation insurance, fuel costs and employee health insurance, Leigh said.

The increases didn't prevent the county from giving employees a 2.5 percent pay increase, but Leigh said the commission would have liked to have given employees more.

Lauderdale County passed its biggest budget Sept. 22 and gave employees an average 10 percent pay raise.

The increased funds mainly, but not exclusively, came from the ad valorum tax windfall that the county saw this year when property taxes were reassessed after four years.

"With the annual reassessment, it gives us a better, more stable revenue source on an annual basis rather than every four years," said Dewey Mitchell, chairman of the Lauderdale County Commission.

"The commission has been very conservative in their expenditures and adoptions of budgets over the last 14 years I've been here," Mitchell said.

Inflationary costs are affecting not only cities and counties, but their employees, Mitchell said. "If we had any money, we wanted to pass it on to our employees, which is the backbone of any business."

Trevor Stokes can be reached at 740-5728 or trevor.stokes@TimesDaily.com.

Staff writers Shelbia Brown, Russ Corey and Bernie Delinski contributed to this report.