City faces record shortfall
As Lincoln City Council members were given a five-year budget forecast Wednesday, Mayor Coleen Seng summarized the situation as she left the budget meeting by remarking, "We're in trouble."
The upshot is that the city projects an $8.7 million budget deficit next year. Lincoln Budget Officer Steve Hubka said that's the largest budget gap in Lincoln's history, in terms of both dollars and percentage of the total budget.
"That's a serious gap no matter how you look at it," Hubka said during Wednesday's budget meeting, which gave council members their first look at the city's financial picture and kicked off an eight-month budget-crafting process.
The projected deficit is due largely to lagging sales tax revenue — which funds 44 percent of the city's operating budget — and a 218 percent increase in the capital improvements line item to finance such big-ticket items as the Antelope Valley project and the revitalization of 48th and O streets.
Now it's up to the mayor and council to decide how to close that gap — either by cutting spending or raising revenue, most likely through a property tax increase.
The forecast was based on current spending plus possible additions, including more police officers and firefighters, to arrive at a projected $139.3 million budget, an almost 12 percent increase over current spending. The additions suggested by city departments are scaled back from previous years, Hubka said.
"It is clear from the forecast that, as we warned last year, the city will need to control spending or face the consequences of deep cuts if the revenues do not keep pace with the growth of the community," Seng said in a statement. "This will be a year of tough choices, difficult cuts and lean spending."
Seng said she will direct city departments to begin looking for savings.
However, it's not as if the city is broke. Lincoln still has strong financial reserves for a city its size, considerable bonding capacity and an excellent bond rating.
Aside from spending cuts, the most viable source of more revenue is probably property taxes. Property taxes fund 28 percent of the budget, and over the past decade the city property tax rate has been reduced 42 percent, from 51 cents per $100 of assessed value in 1991 to 29.5 cents now.
Voters' rejection of a $75 million bond issue to finance street repairs only worsened the situation, which Seng said she literally cried over. Public Works & Utilities Director Allan Abbott said the city's street construction fund should have a minimum balance of $8 million "or we are really starting to live dangerously," but the city's current $21 million balance is expected to drop to $7.4 million in July and plunge to $748,000 by August.
So by about March, the city likely will begin deciding month-to-month whether to delay the letting of bids for street projects to ensure there's enough cash in hand to pay for them.
"We're talking about the ability to write the checks," Abbott said. "We're not broke, but we don't have a heck of a lot of money to move forward with."
Unless something changes, the city likely will have a series of months where there are no bid lettings, he said, which will not sit well with local contractors looking for work. He's recommending the city cut back the resurfacing of residential roads next year from $2 million to $1 million.
While the city is trying to get the state to revise the gas tax formula so Lincoln captures a larger share of funds, council members said the city may have to look at increasing the tax it collects from gasoline retailers and use the funds generated as a revenue source for a bond issue.
"I'm not real wild about going back to the voters for a bond issue," Councilman Ken Svoboda said.
Outside the budget meeting, Councilman Glenn Friendt said he wasn't entirely surprised by the budget forecast, given the "subtle warnings" last year, when projects — and pain — were put off. However, of the five budgets he's seen since being elected, he said, "I've never seen anything like this."
He said the council is under tremendous pressure to make short-sighted fixes, kowtow to special interest groups and live up to political pronouncements — and to put off issues rather than make bold decisions to live within its budget.
"Eventually the piper has to be paid, and we're at that point," Friendt said.
Councilman Jonathan Cook said it's a tough budget but that's to be expected when the city has so many expensive projects under way. Council members talked about the possibility of alternative funding sources for such projects as Antelope Valley.
In addition, the city has 11 bond issues to consider putting on the ballot over the next five years.
"The forecast shows many community needs, and departments are requesting numerous bond votes over the five-year period," Seng said in her statement. "That is a clear sign of the backlog of needs that accumulate in a growing city. The real question is what we as a community can afford."
Friendt, who does not plan to run for re-election in May, said the difficult budget picture may have one positive aspect: "The challenges are so great it's going to require the City Council to work together" to find solutions.
"This budget's going to require bolder thinking," he said, "than just nibbling around the edges."
Reach Deena Winter at 473-2642 or dwinter@journalstar.com.
The upshot is that the city projects an $8.7 million budget deficit next year. Lincoln Budget Officer Steve Hubka said that's the largest budget gap in Lincoln's history, in terms of both dollars and percentage of the total budget.
"That's a serious gap no matter how you look at it," Hubka said during Wednesday's budget meeting, which gave council members their first look at the city's financial picture and kicked off an eight-month budget-crafting process.
The projected deficit is due largely to lagging sales tax revenue — which funds 44 percent of the city's operating budget — and a 218 percent increase in the capital improvements line item to finance such big-ticket items as the Antelope Valley project and the revitalization of 48th and O streets.
Now it's up to the mayor and council to decide how to close that gap — either by cutting spending or raising revenue, most likely through a property tax increase.
The forecast was based on current spending plus possible additions, including more police officers and firefighters, to arrive at a projected $139.3 million budget, an almost 12 percent increase over current spending. The additions suggested by city departments are scaled back from previous years, Hubka said.
"It is clear from the forecast that, as we warned last year, the city will need to control spending or face the consequences of deep cuts if the revenues do not keep pace with the growth of the community," Seng said in a statement. "This will be a year of tough choices, difficult cuts and lean spending."
Seng said she will direct city departments to begin looking for savings.
However, it's not as if the city is broke. Lincoln still has strong financial reserves for a city its size, considerable bonding capacity and an excellent bond rating.
Aside from spending cuts, the most viable source of more revenue is probably property taxes. Property taxes fund 28 percent of the budget, and over the past decade the city property tax rate has been reduced 42 percent, from 51 cents per $100 of assessed value in 1991 to 29.5 cents now.
Voters' rejection of a $75 million bond issue to finance street repairs only worsened the situation, which Seng said she literally cried over. Public Works & Utilities Director Allan Abbott said the city's street construction fund should have a minimum balance of $8 million "or we are really starting to live dangerously," but the city's current $21 million balance is expected to drop to $7.4 million in July and plunge to $748,000 by August.
So by about March, the city likely will begin deciding month-to-month whether to delay the letting of bids for street projects to ensure there's enough cash in hand to pay for them.
"We're talking about the ability to write the checks," Abbott said. "We're not broke, but we don't have a heck of a lot of money to move forward with."
Unless something changes, the city likely will have a series of months where there are no bid lettings, he said, which will not sit well with local contractors looking for work. He's recommending the city cut back the resurfacing of residential roads next year from $2 million to $1 million.
While the city is trying to get the state to revise the gas tax formula so Lincoln captures a larger share of funds, council members said the city may have to look at increasing the tax it collects from gasoline retailers and use the funds generated as a revenue source for a bond issue.
"I'm not real wild about going back to the voters for a bond issue," Councilman Ken Svoboda said.
Outside the budget meeting, Councilman Glenn Friendt said he wasn't entirely surprised by the budget forecast, given the "subtle warnings" last year, when projects — and pain — were put off. However, of the five budgets he's seen since being elected, he said, "I've never seen anything like this."
He said the council is under tremendous pressure to make short-sighted fixes, kowtow to special interest groups and live up to political pronouncements — and to put off issues rather than make bold decisions to live within its budget.
"Eventually the piper has to be paid, and we're at that point," Friendt said.
Councilman Jonathan Cook said it's a tough budget but that's to be expected when the city has so many expensive projects under way. Council members talked about the possibility of alternative funding sources for such projects as Antelope Valley.
In addition, the city has 11 bond issues to consider putting on the ballot over the next five years.
"The forecast shows many community needs, and departments are requesting numerous bond votes over the five-year period," Seng said in her statement. "That is a clear sign of the backlog of needs that accumulate in a growing city. The real question is what we as a community can afford."
Friendt, who does not plan to run for re-election in May, said the difficult budget picture may have one positive aspect: "The challenges are so great it's going to require the City Council to work together" to find solutions.
"This budget's going to require bolder thinking," he said, "than just nibbling around the edges."
Reach Deena Winter at 473-2642 or dwinter@journalstar.com.
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