Cut out the cars.

That’s Mayor Mike Rundle’s lone suggestion on how the city might squeeze its budget next year: Cut down the number of city vehicles taken home by staff members.

Other than that, Rundle admits, “I don’t have much specific.”

But he and others say cuts will be necessary. State aid to the city much of which is used to fund local social service agencies will probably be cut. Property valuations aren’t growing as fast as usual; neither are sales taxes. And returns on city investments have dropped to abysmal levels.

All that means the city wallet will be thinner when city commissioners start building the 2003 budget next week unless they decide to raise taxes. That’s an unpalatable solution, commissioners say.

“I think we’ve had a ‘take last year’s budget and add 5 percent’ approach,” Rundle said. “We’re probably going to be looking at things with a fresh perspective.”

City officials say painful budget-cutting sessions such as the Lawrence school board has been experiencing will be the norm this year, not the exception.

“I don’t think any public body is going to be able to avoid those kind of meetings,” Commissioner Sue Hack said.

Where it goes

City expenditures have grown in recent years, from $77 million in 2000 to $101 million this year. Much of the growth has been driven by increased costs for sanitation, water and sewer services which generate funding from user fees but also by increasing costs of debt service ($14.74 million this year), recreation costs, new facilities and the employees to staff them.

At $39.84 million, the cost of employees in wages, salaries, retirement and other fringe benefits is the single biggest piece of the budget. Next is contractual services, at $19.55 million.

The city’s property tax rate hasn’t gone up quite as dramatically as the annual budget, increasing to 24.773 mills this year from a low of 22.6 mills in 1998. This year’s levy still is down from 28.46 mills in 1993, however. A mill is $1 of tax for every $1,000 in assessed valuation.

The tax rate has stayed relatively low because property valuations have risen an average of 6 percent to 8 percent in recent years, allowing revenues to increase. Valuation increases alone won’t do the trick his year, as county officials expect property valuations to rise only about 5 percent.

Another problem is low interest rates. When the city sets aside money for projects like street improvements, the cash often isn’t spent immediately. So the city invests it in short-term accounts to earn interest.

In the 2002 budget, City Manager Mike Wildgen said, the city “conservatively” expects to gain $1.5 million from such arrangements.

The rate of return over the years has been from 4 percent to 6 percent. But as interest rates have been cut in response to the ailing economy, the city’s returns have dropped to between 1 percent and 3 percent.

Watching Topeka

The state isn’t offering any help, either. City officials are watching the outcome of state budget negotiations in Topeka, and expecting trouble.

“The possible way the state’s going to balance its budget will be on the back of local governments,” Hack said.

The city receives about $5 million annually roughly 5 percent of its operating budget from the state.

About half that aid is threatened by the Legislature, which may keep the money to balance its own budget shortfall.

Much of it is money that goes to the city’s general fund (with the explicit purpose of keeping down local property taxes), but much also goes to outside agencies like Hearthstone, Big Brothers/Big Sisters, Watkins Community Museum of History and other organizations that offer social services in the community.

Until legislators finalize their budget, city officials are hard-pressed to know what the consequences here will be.

“We’ve never had this state issue before,” Wildgen said. “The problem is, we don’t know how to gauge that.”

What to do

To deal with the possible cuts, city commissioners will begin the budget process a month early with a study session March 27. Between then and August, when the budget must be finalized, commissioners will have meetings with department heads and the public.

“It’s going to make the process more thorough,” Hack said. “It’s also going to make it more lengthy. But that’s OK.”

Some cuts already are in place. Since the beginning of the year, Wildgen has had a hiring “chill” at City Hall. New employees aren’t hired until a month’s salary has been saved from the departure of the previous employee.

Even then, department officials must justify the need for the employee to Wildgen, who now directly approves any new hire.

“That’s just a little management technique to be careful with what we’re doing,” Wildgen said. “I’m trying to be careful and judicious about these kinds of hirings.”

Wildgen also has put city employees on alert that stricter measures could be in store.

“If economic/revenue conditions worsen,” he said in a January memorandum to department heads, “a hiring freeze and other actions are likely.”

About those cars

There also is Rundle’s suggestion that after-hours use of city-owned vehicles be reduced. Officials say there are 48 take-home vehicles in the city’s fleet of 400 “street legal” vehicles, which includes 166 light trucks and 60 sedans. Ten of the take-home cars are used by emergency services personnel, 17 by Public Works employees and the rest spread among departments.

The rationale for take-home vehicles, Wildgen said, is so employees can get to evening meetings or urgent overnight events when needed.

Assistant City Manager Debbie Van Saun has a car, he said. That helps her oversee utility and other projects. Other workers have vehicles with tools to allow them to respond quickly to, say, a waterline break without reporting first to headquarters.

“You can cut (Van Saun’s) car, and I think we’ll survive,” Wildgen said. “But I want those people at the waterline break as fast as I can get them.”

More likely, Wildgen said, is that cuts will cause staff reductions. Forty percent of the city budget goes to paying salaries and benefits.

“There’ll be different ways to deal with the situation,” he said. “Vehicles could be one part of that travel, conferences, too. But it boils down to this: Most of our costs are in people.”

In the 2002 budget, the city has about 742 employees, not including part-time or seasonal workers.