Drops in income tax, sales tax a concern in DeKalb
By ELENA GRIMM egrimm@daily-chronicle.com
DeKALB – Early signs show the city is on track to have a balanced budget, but could see $2.5 million to $3 million less in revenues if trends in sales and income tax continue.
The first three months of the fiscal year show that revenues and expenditures are keeping pace with each other, with about 31 percent of total budgeted expenditures spent and 31 percent of total budgeted revenues collected.
The city projected that it would have about $29.7 million in revenue for Fiscal Year 2010, which began July 1 and ends June 30, 2010. For the same time period, the city expected it would spend about $29.4 million.
But two revenue sources are already way down: Income tax and sales tax.
State income tax is down 14.5 percent, which is attributed to the high unemployment rate, Assistant City Manager Rudy Espiritu said last Monday during a presentation of the first quarter financial report to the city council.
"This is something that all municipalities are facing with: income tax going down," he said in a phone interview Friday.
Mayor Kris Povlsen said that after going into the new budget year with "serious adjustments" to spending – including wage freezes and possible layoffs – the city is now faced with revenue shortfalls that can't be controlled.
Sales tax revenue is also down, about 15 percent less than the first quarter last year.
"It's gone beyond just tightening the belt," Povlsen said in a phone interview Friday.
To correct possible budgetary problems midway through the year, Povlsen said that "very decisive actions" need to be taken by the city council. Recommendations made by a financial consulting firm earlier this year may have to be accelerated, he said.
Alderman Dave Baker urged for more special meetings to be held to discuss finances, and Povlsen anticipates that happening.
One area that may see drastic changes soon is how employee health insurance is paid, Povlsen said. Some employee groups may be contributing more to their plans, and others might have certain benefits phased out over time, he said.
The city has also discussed refinancing its debt to free up money for capital or operational use and getting a line of credit to cushion cash flow.
Espiritu said that the city council will likely choose a lender for the line of credit by December.
The financial report showed a few positive signs: The city is seeing an unexpected increase in building permits, and the cost of rock salt – which doubled in price last year to $83 a ton – has dropped back to $55 a ton.
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