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Reason for caution seen in city budget
(by Sue Reid - April 29, 2009)
Reason for caution seen in city budget
By SUE REID
The City of Solon is still in a strong position, even though it received some bad news about its cash reserves, Councilwoman Susan A. Drucker said at last week's finance committee meeting.
In a report regarding the 2009 capital budget, Finance Director William Weber said the city's general-fund cash balance slipped from $19.7 million at the beginning of the year to $18.5 million. The income-tax collection was 15 percent behind last year's first quarter, amounting to a $1.5 million reduction in collections.
On the up side, Mr. Weber said, April is "looking good so far. There's a week left, and, hopefully, we'll have an upturn. We are already ahead of April last year."
Other than the general state of the economy, Councilman and committee member Lon D. Stolarsky asked Mr. Weber, "Why are we down?"
The withholdings from the employees working in the city is better than last year, but the problem is the net profits, which is the corporate income tax, Mr. Weber said, "and I'd like to leave it at that." He said, "Our taxpayer information is highly confidential."
Councilman and committee member William I. Russo said the city has to look closely at "holding the line," especially with regards to nonessential services. "As we're looking at expenditures going forward, we need to make sure we're focusing on providing essential services," he said. Anything nonessential has to be looked at "hard and close," and it needs to be determined "if we spend the money now or push it out to a later date," he said.
"We're 1.5 million below budget in the first month of the year, and that could be in excess of $4 million by year end. The withholding tax appears to be in line with projections, Mr. Russo said, but the net profits tax is an issue.
"That doesn't surprise me, based on everything I'm hearing from business owners," Mr. Russo said. His concern is that this trend will continue, he said. "I hope I'm wrong."
Mr. Russo said the city has a "nice cushion, but that doesn't mean that we really should not try to hold the line on spending."
He said the city has been fortunate to generate the types of revenues it has over the years, and "now it is a matter of how to best utilize the surplus." Mr. Russo said the negatives of having a surplus is that "there are entities out there that feel it is still business as usual.
"What I don't want people to think that it is there just for the grabbing," Mr. Russo said.
Mrs. Drucker agreed that departments have to hold the line. The finance committee needs to know well in advance the budgetary needs of each department, she said. In the past, certain departments would express needs for things at the end of the year.
"Department heads have to look at their budgets daily and monthly," Mrs. Drucker said. The committee needs a monthly report at each meeting as to what is being spent and prioritize their lists.
"The contingency is not just free money sitting there," Mrs. Drucker said.
Toward the end of the year, departments often say they are under budget, Mrs. Drucker said. "The only reason they are is because they get a last-minute transfer from the contingency fund." Mrs. Drucker said departments know where the numbers are heading.
"If they know they are going to be in trouble in the end of the year, we don't want them coming to us in November and say they need an emergency transfer so they balance out.
"They need to come early to us and make adjustments in their own budget," she said. "I don't want them to think $1.2 million is there, and 'we'll just ask for it later.'"
"The $1.2 million really equates to the general funds's share of the shortfall of income tax receipts," Mr. Weber said. "The shortfall means that there is not at this time cash backing it up, but that doesn't mean there won't be by the end of the year."
"If we continue at this (rate), conceivably we can be in a worse-case scenario at the end of the year," Mr. Russo said.
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