City leaders weigh in on what to do with $2.25 million budget surplus

photo by: Journal-World Illustration

City of Lawrence budget

City leaders will soon decide what to do with more than $2 million of additional revenue for this year, and early discussions point to the city putting it in a reserve fund or spending it rather than using it to directly provide tax relief.

As part of their work session this week, Lawrence city commissioners provided city staff some general direction regarding what could be done with the surplus. City staff is recommending that the entire $2.25 million surplus be transferred to the city’s capital improvement reserve fund, which is used to fund improvements to city facilities and infrastructure.

The commission will not vote on the topic until next week, but did express a general interest in using part of the money for a housing voucher program for homeless families. Mayor Stuart Boley, Vice Mayor Lisa Larsen and Commissioner Leslie Soden all said they would be interested in providing $200,000 for the program.

Part of the $2.25 million surplus came from approximately $700,000 collected late last year due to a city-commissioned billing audit, which found the city failed to bill various entities. The 2018 budget increased utility rates by about $65 annually and property taxes by 1.25 mills. The extra revenue collected in 2018 could be used to help build the 2019 budget, which commissioners are in the process of doing.

Following the audit that found the $700,000 in missed billings, then-Commissioner Mike Amyx suggested that part of the $700,000 be returned to taxpayers via property tax relief. Amyx is no longer on the commission, and the commission’s discussion this week didn’t include that option. The city’s draft budget for 2019, however, does propose to keep the city’s property tax rate flat. Earlier this year, city staff proposed using $600,000 to fund affordable housing construction projects with cash instead of debt, which would offset future property tax increases in the bond and interest fund. Ultimately, the commission voted to use $49,000 of the revenues to cover the cost of the audit and preserve the rest to be discussed during the 2019 budget process.

The commission has been aware of the expected surplus in the general fund, and also previously discussed providing money for housing voucher programs through the city’s affordable housing trust fund. At this week’s meeting, Larsen said she would like to provide $200,000 toward a winter housing voucher program for families, which is administered by the Lawrence-Douglas County Housing Authority.

“Come wintertime, the goal is to make sure families have a place to live outside the community shelter, to get the kids out of the shelter,” Larsen said. “So the $200,000 would be ear-marked for that through the housing authority.”

Commissioner Jennifer Ananda expressed some hesitation about the suggestion. Though she said she was not opposed to funding the voucher program, she asked whether the commission had followed enough of a process, and whether providing funding to other local organizations should be considered.

“I’m touchy because I feel like there are a lot of worthy organizations in our community, no less so than this kind of a program,” Ananda said.

Boley said that the commission had the conversation regarding the voucher program months ago, but was asked by staff to wait until fund balances were known. He also said that he thinks voters showed they were supportive of the city’s affordable housing efforts when they voted in favor of a new special sales tax to fund the housing trust.

“And I’d point out that the voters approved the sales tax, but the sales tax doesn’t kick in until April of 2019,” Boley said. “So this is something we can do now that’s in line with that effort that we’ve been working on.”

Finance Director Bryan Kidney told the Journal-World in an email that the additional money in the general fund was due to both an increase in revenue and a decrease in expenditures. Kidney said the 2017 revenues came in 1.2 percent higher than projected and the city spent 5 percent less than anticipated that year.

The $2.25 million transfer out of the general fund, which functions as the city’s savings account, is required due to the city’s reserve policy. The policy states that the target general fund balance is 25 percent of the expenditures for the previous year. Previously, the policy was for reserves to equal 15 to 30 percent of expenditures.

Kidney told the commission that the $2.25-million transfer out of the general fund would bring that fund’s reserves to just over 25 percent. If approved as suggested, the city would transfer the $200,000 from the general fund to the city’s affordable housing trust fund, thereby reducing the transfer to the capital improvement reserve fund recommended by staff.

As part of the work session, the commission also received an adjustment to the 2019 proposed budget. Boley and Larsen both expressed interest in providing funding toward completion of the few remaining gaps in the Lawrence Loop, the trail system that goes around the city and will be 22 miles long once complete.

The commission will formally vote on amendments to the 2018 budget and the maximum amount of expenditures for the 2019 budget at its meeting July 17. Once the maximum expenditure amount is set for the 2019 budget, the commission can only adjust the budget downward. The public hearing and first reading of the budget is scheduled for Aug. 7.


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