The Duluth Advanced Budget Committee recently looked at long-term ways of maintaining a balanced city budget. The city’s expenses have exceeded revenue for the past several years due to declines in property tax and other revenue as a result of the economic downturn.
The committee considered employee/service reductions and a potential tax increase as drastic measures.
Chairman Joy Thompson presented the committee’s report to the Duluth City Council at its Feb. 13 meeting. In addition to Thompson, the committee was comprised of Harry Andrews, Susan Cross Holland, Miguel Figueroa, Kelly Kelkenberg, Marcus Ladd, Jean Laino, Jack Beecher, Bradley Carroll, David Edwards, John Moore, Cathy Rosser and Jefferson Tutt. Then Duluth City Administrator Phil McLemore, who has since retired, but serves as a consultant to the city; Administrative Assistant Susan Weber, and Finance Manager Ken Sakmar worked closely with the committee.
The committee studied budget constraints and opportunities including the Service Delivery Strategy dispute between Gwinnett County and the cities, which has since been settled.
Other constraints included potential loss of SPLOST funds in the future, reduced revenue from a continual decline in real estate values, and unfunded state and federal mandates for local government. The committee identified other budget opportunities such as increases in the tax digest through annexation and new development, improved real estate values, a property tax increase, and a reduction in the number of city employees and city services.
The committee recommended the city maintain a four-month reserve fund.
According to the report, by taking the following steps, if necessary, the city could save the following amounts:
- All city departments reduce spending as much as possible – $100,000
- Hiring freeze on all non-essential positions – $125,000
- Freeze on all cost of living and merit salary increases – $125,000
- Four furlough days for employees – $74,370
- 10 furlough days for employees – $247,900
- 10 percent reduction of employees (14) and services – $773,712
- 20 percent reduction of employees (28) and services – $1,547,424
The committee also considered a property tax increase based on the rollback to taxpayers from the SDS settlement to generate revenue.
“At the time the Advance Budget Committee was meeting there was not a settlement yet on SDS, but one was anticipated,” McLemore clarified. “The committee felt that people would not want a tax increase if the economy got worse and Duluth needed more revenue. However, if the SDS settlement occurred and there was a millage rollback from what people in the city were currently paying, the committee felt that taxpayers would not object to paying the same tax, if necessary.”
Based on a tax millage rollback of 1.6 mills, the committee determined there could be a similar increase of up to 1.6 mills, if needed, with no additional taxes paid by citizens than what was previously paid, McLemore explained. This would have generated up to $2 million in revenue, he said.
All of these recommendations were based on what to do in the worst case scenario and the economy going downhill,” McLemore said. “The economy seems better off now and so is the city, so there are no plans to do these things unless things change.“