City's fiscal challenge: Rising cost and decline in revenue
WILLMAR -- The combination of rising cost and falling revenue is presenting a challenge to city officials as they begin work on the annual budget preparation process. But the challenge is not insurmountable, says City Administrator Michael Schmit.
He usually asks city department directors in April of any given year to start working on their budgets. However, they had held off up to this point because they hadn't known how Gov. Tim Pa-wlenty's unallotment to the bud-get would affect Local Government Aid, which makes up 22.1 percent of revenue in this year's $20.8 million budget.
"Now we know those numbers,'' Schmit said.
The total unallotment for the city in 2009 is $269,043. The total for 2010 is projected to be $620,785.
Schmit said the department directors were asked to do the best they can "to knock these numbers down'' to reflect the LGA cuts.
"I told the department directors I want their recommendations back to me by July 17, at which time I will sit down with the mayor and we'll try to figure out how we're going to put the final touches on the 2010 budget,'' said Schmit. "We have to look at everything.''
That probably includes another year of reduced vehicle replacements and fewer capital projects. Also, the city is in the midst of a hiring freeze and Schmit doesn't know if a couple of new openings will be filled. He said employment contracts will expire at the end of the year and traditionally there have been wage adjustments.
He said insurance and workers' compensation costs are going up while LGA is going down.
"The cost of doing business seems to keep rising and revenues seem to keep decreasing, so it's presenting a challenge, but I don't think it's an insurmountable challenge. I think that we'll be able to come up with a reasonable program for 2010,'' he said.
The Finance Committee reported on 2009 and 2010 LGA unallotments during the City Council meeting Monday night.