One of the questions I raised was about the revenue projections. Finkbeiner's estimated 2008 income tax revenue:
"Income Taxes are assumed to grow at 2.5% in 2008 over an estimated 2.6% growth rate for 2007 over the 2006 actual Income Taxes."
I questioned the income tax collections for the first two months of the year in relation to projections. Today, The Blade reports that income tax revenue for 2007 was lower than projected - 2.5% less, in fact.
In 2006, the city collected $168,421,993 in income tax, but gave out refunds totaling $3,704,749. Net collections were $164,717,264.
According to the above statement from Finkbeiner, 2007 projected income tax revenue was supposed to be 2.6% more than in 2006. The 2007 amount was budgeted at $173,967,203 which is actually 5.6% more than what the city got in 2006 - not 2.6%.
The discrepancy is in the refunds. While the city paid out refunds of $3.6 million in 2004, $3.5 million in 2005 and $3.7 million in 2006, there was nothing budgeted for refunds in 2007. They've not included refunds in the 2008 budget either.
By budgeting and referencing ONLY what they collected and ignoring any refunds, the city is over-projecting their actual revenue. And they are basing their spending on this over projection.
Some might say that this is okay, considering that even with actual collections of income tax being less and overtime being more, the city still ended up with about $1 million in carryover. However, hoping that revenues and expenditures will somehow balance out to the good, as they did in 2007, is not proper financial planning.
The city needs to budget for income tax refunds - as they will certainly occur - and budget the spending based upon the net income tax line items, not just upon collections alone.
Which leads us to 2008 and more questions in light of this just-released information about the 2007 collections.
* Does the $169.68 million income tax revenue amount include the refunds issued in 2007? Or is this just the amount collected?
* If the $169.68 million amount is before refunds, what was the net amount?
* Has the city revised their income tax projections for 2008 as a result of this new information - and, if so, how much?
According to several reports about the city council finance committee meeting on Thursday during which these new numbers were released, the city has actually INCREASED their revenue projections to $253,271,089, with the additional money coming from $1.1 million in unclaimed funds which can, by law, be deposited into the general fund, and about $400,000 which is half of the carry-over amount from 2007 (the other half is supposed to go into reserves - or the 'rainy day fund.')
So if this new revenue amount is based upon these two additions to the budget, the city has not reduced its income tax revenue projections. If they budget a 2.5% increase (which is certainly not a guarantee in light of the layoffs and lack of meeting projections in the first two months of the year), will we find ourselves short of income in 2008?
Sadly, the city did not publish a year-to-date actual budget when they published their 2008 projected budget. They list only the 2007 budgeted amounts, so citizens (and council members???) see only what was actually spent in 2006 and what they planned to spend in 2007. If we could see YTD figures as of the date of publication, we'd have a much better understanding of what was being planned for 2008. But perhaps that's the point?
On March 18, I sent an email to John Sherburne, the Finance Director, asking questions about the many assumptions in the 2008. No - I've not yet gotten a response, but it appears that some of the questions were addressed during the finance committee meeting Thursday.
Unfortunately, most citizens interested in the budget weren't at that afternoon committee meeting. And, while city council plans a committee of the whole meeting Monday at 2 p.m., it's not likely that citizens will be able to attend at that time, either. Council plans to vote on the budget during their regular meeting on Tuesday.
During my guest hosting stint for Brian Wilson on WSPD yesterday afternoon, Fred Lefebvre called in and made an excellent suggestion. To challenge city council members to refuse to vote on the budget until all questions are answered - satisfactorily. I agree.
Many council members are livid over just learning that the city has an unclaimed funds account that can be accessed (to the tune of $1.1 million) to help balance the budget. They should demand explanations about how long city administrators have known of the availability of these dollars and when they decided to transfer the monies to the general fund ... and why council wasn't informed of this earlier. They should also demand answers to the 'assumptions' originally made and whether or not the assumptions from November of 2007 are still valid and accurate today.
If you agree, call city council and tell them (419-245-1050). Government is supposed to work for us and they should not be allowed to get away with these types of inconsistencies and obfuscations with our money.