Finance official warns Lawrence City Commission of projected deficits, dwindling general fund

City Hall, 6 E. Sixth St.

Lawrence’s main fund for public services will continue decreasing over the next five years — and operating at a deficit — if the city continues making and spending money at the same rate it is now, the City Commission was told Tuesday.

At the City Commission’s first meeting on the 2017 budget, city Finance Director Bryan Kidney called forecasts for the general fund “dire” and “very drastic.”

“Something is going to have to be done,” Kidney said. “That’s where we are. The general fund has a structural imbalance that we need to do something major to fix.”

Preliminary numbers show Lawrence overspent by nearly $220,000 in 2015, and projections released last week said the city was on pace to have a $990,000 deficit in 2016. According to a five-year forecast presented to commissioners, the deficit would increase each year — and Lawrence would operate at a deficit of $3.5 million in 2021 — if the same level of spending were to continue without an increase in revenue.

Projected totals for Lawrence's general fund from 2016 through 2021.

The forecast warns the amount of saved money kept in the general fund, which serves as a cushion, would be depleted in 2019. The fund would have a negative balance by 2020.

The city’s policy requires it to keep as a cushion 15 percent, or about two months’ worth, of what’s spent annually from the general fund.

Approximately $12.7 million, or 16.6 percent, was in the fund at the end of 2015. It’s forecasted to fall below the 15 percent mark in 2017.

“Looking at these numbers, it’s almost making me cry,” Mayor Mike Amyx said.

“Oh, yeah,” Kidney responded. “We have to increase revenues or decrease expenditures. Hopefully I’m way off, but I’m not sure what I’d be way off on.”

The deficit comes at a time when the city is preparing for a lid on property tax increases, which, under legislation sent to Gov. Sam Brownback last week, would take effect in 2017. The City Commission will also soon be considering large requests for affordable housing efforts, the Lawrence Police Department and pedestrian and bicycle infrastructure, among other things, City Manager Tom Markus said.

As it is, the budget does not provide room to create new city programs without cutting other services or finding a new source of revenue, Kidney said.

The general fund consists mostly of revenue from property and sales taxes. Sales tax revenue can be volatile, Kidney said, and he estimated it conservatively in the five-year forecast.

Kidney said the “lion’s share” of the 2015 deficit was created by the city’s $500,000 grant to the Dwayne Peaslee Technical Training Center, which hadn’t been budgeted. Also contributing to the deficit, Kidney said, was that most city departments spent the full amount they were budgeted. Usually, there is some money left over, he said.

The city also overspent from its special alcohol fund in 2015. Kidney said that was because of the $50,000 paid from the fund to the Lawrence Community Shelter, which was facing a drastic revenue shortfall last summer.

The projected deficit this year for the general fund likely won’t be as much as the $990,000 projected last week, Kidney said.

“I told department heads to look at their 2016 projections and adjust anything down,” Kidney said. “We may get closer to getting back to zero.”

For the 2017 budget, the finance department will look to transfer resources to the general fund from other various city funds, Kidney said.

“My challenge is beating revenues hard, looking at other sources of revenue from other funds to see if we can build up the general fund,” Kidney said.

In response to a call for transparency regarding how different funds are used, commissioners will go over in its budget process all of approximately 30 special revenue and enterprise funds used for city operations.

The city will pass a 2017 budget by August.

Commissioners will meet in a study session at 3 p.m. May 10 to review funding for capital improvement projects in 2017, among other things.

The city will host two community meetings this month for residents to talk with commissioners and provide input on funding priorities. The first is planned from 6 to 8 p.m May 12 at the East Lawrence Recreation Center, 1245 E. 15th St. The second, also from 6 to 8 p.m., is planned for May 16 at Holcom Recreation Center, 2700 W. 27th St.