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City commissioners have a major question to wrestle with as they work to create a budget for 2008: How big of a gamble do they want to take?
Commissioners didn't fully answer that question at Monday morning's budget study session, which left up in the air issues such as funding for the public transit system, swimming pool fee increases and the size of property tax bills.
The roll of the dice comes with how much money the city expects to receive in sales tax collections in 2008. City Manager David Corliss' recommended budget - which includes a 1-mill increase in the property tax rate - is based upon a 3.5 percent increase in sales tax collections.
That would be about 3.5 percent more than what sales tax collections are growing this year. Currently, sales tax collections are on pace to grow less than 1 percent in 2007. That fact made some commissioners nervous about being optimistic for 2008.
"We have to feel comfortable with our revenue projections, and I'm not sure that I am," City Commissioner Mike Amyx said.
Adding to the concern is that county leaders are taking a different view of the economy in 2008. County Administrator Craig Weinaug built the county's recommended budget on a zero percent growth rate, although county commissioners on Monday directed him to increase his projection to a 1.75 percent growth rate.
Corliss said he and his staff thought that following a slow year of sales in 2007, there would be some pent-up demand in 2008. Corliss also said the 3.5 percent estimate was still less than the city's historical sales tax growth rate of 4 percent. The city also has never experienced two years of flat or negative sales tax growth.
But Corliss also conceded the projection wasn't solid.
"Our projection is the outer limit of what we're comfortable with," Corliss said. "Maybe we need to be more in the middle. We're hopeful the economy will pick back up."
An overly optimistic sales tax projection played a role in the City Commission's need to cut about $3.5 million from the 2007 budget earlier this summer. For 2007, the city projected sales tax revenues to grow at 4 percent, while the county was more conservative with a 2.5 percent projection.
Amyx said he thought the city should count on no more than a 2 percent increase. That would mean the city would need to cut another $300,000 from its proposed 2008 budget or increase taxes more than the proposed 1 mill.
Other commissioners expressed concern that the projection may be too optimistic, but stopped short of saying they wanted to redo the budget with a lower sales tax growth rate.
What's at stake
A majority of commissioners also stopped short of endorsing the full 1-mill property tax increase that Corliss has recommended as part of the budget. That left several key questions unanswered as commissioners head into the final weeks before a budget must be approved. Here's a look at several issues:
¢ Public transit. Mayor Sue Hack and Commissioner Boog Highberger came out strongly in favor of Corliss' recommendation to increase the mill levy by 0.7 mill to save the Lawrence Transit System from service cuts. But Commissioner Rob Chestnut said he supported an option that would move the T's closing time from 8 p.m. to 6 p.m. Even with the reduction in service hours, that option still requires a 0.425 mill increase due to other rising costs.
Amyx and Commissioner Mike Dever didn't endorse either option Monday. Instead, Amyx said he wanted the city to consider passing a new half-cent sales tax for street maintenance, which could free money in the existing budget for public transit funding without requiring a mill levy increase. Dever said he wanted to study possibilities of changing and cutting routes before committing to an option.
¢ Employee pay raise. Hack and Highberger also strongly supported Corliss' recommendation for a 0.3 mill levy increase to provide city employees an across-the-board 2 percent salary increase. Chestnut and Dever both opposed the option because of tight financial times. Amyx said he wanted to find a way to increase employee pay but didn't say he could support a property tax increase to do it.
¢ Swimming pool fees. Both Dever and Chestnut said they were generally supportive of a recommended increase in swimming pool fees that would raise the children's rate from $1.75 to $4. Hack and Highberger said they wanted to look at a smaller increase for the children's rate. Amyx previously said he could support the increase but Monday said he was undecided.
¢ Water/sewer rates. One item that commissioners didn't disagree on was water and sewer rates. Corliss said staff members were now recommending a 5 percent increase in water rates and an 6 percent increase in sewer rates. Those increases are different than what was previously proposed.
Originally, the city had recommended a 4 percent increase in water rates and a 9 percent increase in sewer rates to help pay for a new sewer plant and an expansion to the Clinton Water Treatment Plant. In April, though, Corliss alerted commissioners that rates may have to increase significantly more because of higher construction costs.
Corliss said the city will be able to avoid the larger increases because it will finance the water and sewer plant projects for 25 years instead of 20 years as originally envisioned.
Commissioners are scheduled to take public comment on the budget at their 6:35 p.m. meeting July 24 at City Hall. Commissioners need to approve a budget at their Aug. 7 meeting.