Cape Girardeau's budget worse than anticipated with $661,000 shortfall

Cape Girardeau's budget woes are worse than anticipated at a March council retreat and the city could end the current year with little or no money in the bank, members of the Cape Girardeau City Council heard Monday evening during a study session on spending.

As a result, the council is being asked to find $200,000 to replenish operating reserves as well as cover a $661,000 shortfall in revenue. Interim city manager Ken Eftink offered several ideas on how to find the money. Eftink's 10-page list of $495,000 in budget cuts ranges from items as small as saving $15 by canceling a membership with Sam's Club to as big as saving $87,500 by leaving two vacant police officer jobs unfilled.

When the council met in March, finance director John Richbourg said the best scenario for the year was that sales tax revenue doesn't fall any further and that Commander Premier Aircraft pays in full its annual lease obligation. If those things happen, he said the city would end the year with $285,000 on hand.

On Monday, Richbourg said sales tax revenue has continued to fall and the lease payment from Commander is questionable. In that scenario, the city could end the year with a depleted operating reserve.

The operating reserve is separate from the city's charter-mandated emergency fund, which currently holds about $3.2 million.

ELIZABETH DODD ~ edodd@semissourian.comJohn Richbourg Cape Girardeau Director of Finance.Taken April 2009

Along with making cuts, council members were told that the budget they will be presented next month will include fee increases for water, trash and sewer service as well as additional gross receipts taxes, also called franchise tax, on city water and sewer bills.

The tax changes will generate $295,000. The fee increases will allow city administrative offices to charge part of their budget to the sewer, water and trash funds in a way that reflects the time spent on those departments.

The city fiscal year ends June 30. The budget under discussion will pay for city services through June 30, 2010.

As they dug into the details, council members questioned why they must find money to replace the reserves in a budget that is already strained by the impact of a national recession. Eftink and Richbourg are asking that members not only find $200,000 for reserves in the coming year but in each of the next five years to put the reserve back near $1 million. In each year since fiscal 2004, council members have approved spending from the reserve that has seen it fall from a high of $1.4 million.

"Do you use this budget as a springboard to that?" Ward 6 Councilwoman Marcia Ritter said.

"We have to try to shoot for $200,000 this year just to have the ability to operate," Eftink replied.

One reason to build in a cushion, Richbourg told the council, is that his spending plan for the coming year anticipates that sales tax revenue will not continue to decline. This year's collections so far are 1.3 percent below those at the same point in last year's budget.

"I would be lying to you if I said I had a comfort level with the projections, but I think it is fairly conservative," he said.

As they discussed the spending plan, council members raised questions about other places where budgets could be cut or revenue could be found. Ward 1 Councilman John Voss noted that his employer, Procter & Gamble, is monitoring overtime closely, and he asked if the city could cut back. Overtime should fund only critical, not discretionary, activities, he said.

"We need to monitor it closely and make judicious decisions," Voss said. "I am not saying that is not being done, but these are difficult times."

Police officers earned $318,000 in overtime in the most recent year and the firefighters were paid $186,000, Richbourg said.

Police chief Carl Kinnison said half of police overtime is for officers working on holidays and a large portion is reimbursed for officers assigned to special events.

Ward 3 Councilwoman Debra Tracy said the city needs to re-evaluate its participation in the back-to-school sales tax holiday. Told that the holiday costs the city from $26,000 to $50,000 a year, Tracy said it needs a close look. "Not everyone benefits from that but everyone is going to pay more for sewer and water," she said.

The council will study the budget more next month as it prepares for public hearings in June.

rkeller@semissourian.com

388-3642

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Pertinent address:

401 Independence St., Cape Girardeau, Mo.