City leaders to receive updated revenue projections, begin discussions related to 2023 budget
photo by: Mike Yoder
Lawrence city leaders will soon get an update on revenue and provide direction to city staffers as they begin developing the 2023 budget, including whether the city’s tax rate should change.
As part of its meeting Tuesday, the Lawrence City Commission will receive updated 2022 revenue projections and discuss six “key policy decisions” affecting the 2023 budget, according to a city staff memo to the commission. Those include whether the commission still supports additional staff raises, sustained funding for capital projects, and a budget that holds the city’s property tax rate flat.
As the Journal-World reported, the city did not increase its property tax rate in 2022 but did increase utility rates. The city’s 2022 budget was also “structurally imbalanced,” including almost $8 million more in spending than the city was projected to collect in normal revenues — a gap offset this year by the city’s first installment of $19.3 million in federal relief funding from the American Rescue Plan Act (ARPA).
Much of the excess spending represents ongoing rather than one-time expenses, including new positions and staff pay increases, meaning the city must account for the budget gap in years to come. The city projected that revenue increases would fill the gap once the rest of the ARPA money is spent, but commissioners approved the 2022 budget with the understanding that the city would have to cut services or increase taxes or utility rates if that did not occur.
The city’s most recent revenue projections indicate that the budget gap is less than initially projected, but still something city leaders must address as they prepare to consider the city’s 2023 budget this summer.
As part of the 2022 budget planning process last summer, the city projected that it was facing a $21 million budget gap over the next two years, according to presentation materials for Tuesday’s meeting. Now, the city estimates the budget gap over that time period is about half as much, or approximately $10 million over the two-year period, meaning that less ARPA money will be needed to cover the gap.
That’s due in part to increases in projected revenues, including projected property and sales tax collections. Specifically, increases in property valuations have resulted in a $3.49 million increase in projected property tax collections, and increases in projected sales and use tax collections have resulted in a $10.7 million increase. As a result, the budget gap that has to be covered by ARPA funds over the next two years decreased from $20.88 million to $9.98 million.
As far as spending of the city’s $19.3 million in ARPA funds, $3 million was used to pay for 2021 expenses, $6 million is projected to be spent in 2022, $4 million in 2023, and $6 million in 2024, with the remaining money possibly allocated to fund some projects. The presentation notes the city has also received various other state and federal grants to help address the effects of the COVID-19 pandemic.
As part of its presentation Tuesday, the city will go through updated revenue projections for eight major revenue sources: property tax, sales/use tax, franchise fees, charges for service, transient guest tax, gasoline tax, liquor tax and federal funding. The six policy questions that city staff is asking the commission to provide direction on are as follows:
• “Do you continue to support a market-competitive compensation plan for all employees?”
• “Do you continue to support funding the Capital Improvement Plan at the same pace as in (fiscal year) 2022?”
• “Do you support a budget with a zero mill levy increase?”
• “If budget reductions are required, do you support prioritization of funding based on the programs identified in this presentation utilizing the (priority-based budgeting scoring) methodology?”
• “Are there any specific programs identified in this presentation that you would like to see given a higher priority than the score indicated?”
• “Are there any areas or services where we should look more closely for savings or that may not be as high a priority as in the past?”
Going forward, the recommended Capital Improvement Plan will be presented June 14, the city manager’s recommended budget will be presented on July 12, and the public hearing for the budget will be held on Aug. 23.
The Lawrence City Commission will convene at 5:45 p.m. Tuesday at City Hall, 6 E. Sixth St.
COMMENTS