Although the city has adopted a new budget that projects less revenue than expenses, overall the city can function well with its financial resources, says Mayor Matt Hall.
“But some on the council want people to be aware, it’s tight,” he added.
At least one councilor sees operating with a deficit budget as irresponsible.
It’s time to fund “needs” rather than “wants,” Glenn Nielson said.
On Monday, the City of Cody started a new fiscal year budget projecting $9.32 million in general fund revenue and $9.98 million in expenses. To make up the discrepancy, $666,490 will come from unrestricted reserves.
The general fund pays for city operations such as law enforcement, the Rec Center, streets, parks and administration.
Even so, the budget sets aside enough in savings to meet the council’s policy to keep at least 23 percent of the city’s general operating expenses for one year on reserve.
Presenting the budget at a June 18 public hearing, finance officer Leslie Brumage said after subtracting the $666,490 needed to balance the budget, the general fund unrestricted reserve account is still above the 23 percent “floor” by $789,000.
According to Brumage, the city projected starting the fiscal year with $5.1 million and ending the budget year June 30, 2020, with $2.97 million.
She said due to accrued liabilities at the end of fiscal year 2018-2019 paid out in FY 19-20, the change in unrestricted reserves includes more than just the FY 19-20 budget deficit.
In her presentation, Brumage said by taking $666,490 in reserves to balance the budget, the general fund unrestricted reserve total is still $789,000 more than the required minimum.
If the year plays out as the budget predicts, the city will end up with about 27 percent of operating expenses in savings, she said.
Budget not sustainable
After the budget hearing failed to draw comment from the public, the council and mayor, in a 5-1 third-reading vote, adopted the FY 19-20 deficit budget by ordinance.
Largely funded with tax revenue, the general fund portion of the budget makes up about one-fourth the total $43.52 million overall budget that also includes four utility accounts, a specific purpose tax fund, $6.32 million in economic development pass-through grants and a few other accounts.
Dissatisfied with a budget in which city expenses exceed revenue, Glenn Nielson voted no. Justin Baily, who supported the budget on the first two readings, was absent.
Hall, Landon Greer, Jerry Fritz, Diane Ballard and Heidi Rasmussen voted in favor.
Nielson also voted nay with Rasmussen on first reading June 4. He was absent for the second reading June 11 that passed unanimously.
Nielson and Rasmussen have each said depending on reserves is not a sustainable practice.
Budgets are simply a financial plan, and Brumage provides conservative revenue numbers and is liberal with expenses.
At the June 18 meeting Greer said it’s likely the city won’t end the fiscal year in the red.
Greer, first elected in 2012, said during his tenure on the council, it seems each year the city has projected a deficit budget.
But that ends up not happening, he said.
“I’m not super concerned,” he said. “I think we can close that gap.”
Later by email, Nielson, a “strong fiscal conservative,” said he fears if nothing changes, financial collapse is inevitable.
He agrees with Greer’s point that historically, each year city staff has performed better than the budget, which helps minimize the projected shortfall.
But, rather than continuing to spend irresponsibly, it’s time to become more disciplined, pass a balanced budget and adapt city services accordingly.
The city can do more with less spending and still have adequate, or even improved, services, Nielson said.
“I will argue vehemently with staff, council and any citizen in the city that there most definitely are ‘nonservice impacting actions’ we could take as a city to reduce the spending level,” he said.
Balancing the budget could mean some simple restructuring of staff, some review of where the city reaps the most “bang for our buck” and some cleanup on health care and other expenses, he said.
“I don’t want to have a run-down city and to cut all spending,” he said. “Rather, I want to evaluate what spending generates results and focus our spending in those key areas.”
Hall says overall the city is in good financial shape. The problem is a lack of money for major projects.
“We’re not in dire straights,” he said by phone last week. “We can cover our expenses and we’re actually able to maintain our reserves.”
But this may hold true only as long as the economy keeps a steady path forward, he added.
Revenue, such as the city’s $5 million from Park County’s now-expired specific purpose sales tax, has helped pay for street maintenance and infrastructure updates. But the 1-cent sales tax is assigned to specific projects and not available for general operations.
If the city wants to add fire suppression sprinklers to bring the Cody Auditorium in line with fire code or to build a new street, that’s where funds are stretched thin, Hall said.
“We don’t have a lot of capital on hand to tackle those projects,” he said. “In some cases we have a hard time tackling maintaining buildings and the other resources we have.”
Stockpile or spend?
At the June 18 meeting, Greer cautioned against stockpiling taxpayer money.
The council’s “floor” is 23 percent, and the budget ups it to 27 percent, he said.
“I think it will actually be 30 percent in the end.”
The conversation we should be having is whether 23 percent is enough, he added.
“Until we hit that floor, I think we should be spending that money and not sitting on it.”
The mayor agrees the city should not grow reserves beyond necessary.
“If we have more than we need, to me that says we’re banking taxpayer money,” he said. “If we have extra money beyond (minimum) reserves, we should be able to give people better services.”
At the same time, the city is operating within a budget with little to no room for surprises.
“If all of the sudden we have a major project we have to get done, it gets harder to find money to take care of it,” he said.