Cape city expenses exceeding revenue; staff to propose changes, cuts

Cape Girardeau city government expenses are exceeding revenue, forcing city staff to look at making changes to city operations going forward, including possibly cutting services.

That’s the message from city manager Scott Meyer and finance director John Richbourg.

A team of employees from city departments, headed by deputy city manager Molly Mehner and deputy finance director Victor Brownlees, will begin reviewing city finances in July or August, Meyer said.

The team will look at “all of our ongoing costs with the idea of trying to cut ongoing costs to the point where it gives us some room to operate,” the city manager said Friday.

Meyer said “literally everything is on the table” from ways to operate more efficiently to cutting back on services and raising user fees.

The review process will begin after the city council has adopted the budget for fiscal 2020, which begins July 1.

Meyer and Richbourg said this year’s proposed $71.98 million budget is balanced, because it envisions dipping into the city’s unreserved fund balance to help cover expenses.

The anticipated budget is up less than 2% over last year’s budget, according to Richbourg.

The budget includes $59 million in operating expenses and $12.9 million in capital outlays.

But the 400-page financial document does not include capital projects being funded with the city’s parks and stormwater tax. Richbourg said the budget does not list those projects because they will be completed over several years, not just one budget cycle.

The budget proposes a 2% pay raise for city employees.

“We did not feel we could go without raises again,” Meyer said.

While the fiscal 2019 budget did not include a pay raise, the city upgraded the employees’ retirement plan at a one-time cost of $4.5 million.

The city government, as required by its city charter, maintains an emergency fund balance equal to 15% of annual operating expenses for a six-year period, according to the budget document.

But Meyer said money is set aside to cover expenses in the aftermath of a tornado or other disaster displacing city revenue.

It cannot be used simply as a mechanism to balance the budget, he said.

Basic operating expenses — projected at $24.8 million in the coming fiscal year — are funded out of the city’s general fund.

The city does have an unreserved balance in the general fund, but that amount is steadily decreasing as it is used to cover expenses, according to city officials.

The unreserved fund balance is projected to decrease from $1.9 million by June 30, 2020, to just over $198,000 by June 30, 2025, according to the budget document.

In the annual budget message, Meyer and Richbourg wrote sales tax revenue, on which the city heavily depends for funding, must grow at 1% above the rate of inflation for the next five years for the city to meet its emergency reserve requirements.

“However, with this growth rate, the city will recognize operating deficits in each of the (next) five years,” they wrote.

During the past decade, inflation has outpaced the growth in sales tax revenue, the budget message stated.

“The city cannot meet its operating and capital equipment needs in the future with its current revenue and expense structure,” Meyer and Richbourg wrote.

According to the city budget message, a “fundamental review” of city finances is needed to provide “a sustainable budget plan” over the next five years.

Meyer said Friday the internal review will form the basis next year for the fiscal 2021 budget.

The review, he said, also will have to look at how to cover future anticipated expenses, such as operational costs for a new aquatic center once it is built.

Meyer said if expenses continue to exceed revenue, “eventually you run out of the ongoing surplus that you have.”

The city already has taken steps to improve efficiency, such as upgrading its computer system. But going forward, Meyer said, the city must look at “hard hitting” changes.

City government must look to become “leaner,” he said.

Even if the city does consider eliminating some services, Meyer said, the city will continue to provide essential services, such as public safety.

“I am not saying that that means that police and fire don’t get any cuts, but we are not going to cut that critical part of their service,” Meyer said.

Meyer said any budget changes could be adopted over a period of several years.

mbliss@semissourian.com

(573) 388-3641