The city of Waco is trying to bridge a projected $2.6 million revenue shortfall in the budget year that ends in September, and bracing for an even tougher year afterward.

The cuts mean no additional staff and almost no raises in the coming year.

But city officials said they hope to avoid the painful remedies that other recession-struck cities are taking: staff and service cuts, and tax hikes.

Waco-McLennan County Library techs Sally Briles (right) and Lavelle Dabney (left) work at the front counter at the downtown central library Friday.
Duane A. Laverty/Waco Tribune-Herald

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City Manager Larry Groth will present a proposed budget to council next month. He said he’s trying to find a way to cover growing expenses, such as fuel costs and pensions, without additional revenue.

“At this point, we’re still trying to find a way to balance our budget,” he said. “We’ve got some revenues not performing as well as they have in the past. It’s a tough balancing act, but we’re going to get there.

“We are much more fortunate than many cities around the nation, and we’ve got to recognize and feel blessed by that.”

The city is projecting that it will end the current fiscal year with $94.2 million in general fund revenue, compared with a budgeted amount of $96.5 million.

The general fund is the tax-supported portion of the budget used for general services, including public safety, streets, administration, libraries and parks, but excluding fee-based services, such as utilities.

The fund has been hit hard this fiscal year. Sales-tax revenues from October to April were down $700,000. City officials who had budgeted for $28.2 million in sales-tax revenue in this fiscal year are now projecting a $1 million shortfall.

They also are projecting a $450,000 shortfall in electricity-franchise fees and a $700,000 shortfall in natural-gas-franchise fees.

Private utility companies have to pay franchise fees to use city rights-of-way, but declining gas prices and new state restrictions have pinched that revenue stream, city budget director June Skerik said.

The city has been able to offset some of its projected $2.6 million shortfall through austerity measures and lower-than-expected fuel and energy costs.

City officials don’t know whether they’ll have to dip into the fund balance to stay in the black in the current year. The fund balance, or rainy-day fund, is equal to at least 15 percent of the budget.

Property-tax woes

In the coming budget year, the city also is facing the prospect of stagnant or declining property taxes for the first time in more than a decade. Property tax accounts for the largest share of general fund revenue and also supports city debt.

The city property-tax base has doubled in the past decade, but that steady growth has stalled recently.

The McLennan County Appraisal District’s preliminary numbers show a 4 percent value increase over last year’s certified rolls.

But once appraisal protest hearings are finished, the actual increase will likely be “between 1 percent and flat,” Chief Appraiser Drew Hahn said.

Scrimping and saving

The city likely will tighten its belt by waiting longer to fill empty positions and asking department heads to scrimp, Groth said.

Groth said he’d hoped to add employees to care for new bond-funded improvements, such as parks and libraries, but that’s probably not in the cards this year.

“Our employees are great, and this is one of those years they’re going to have to do more with less,” Groth said. “I hope our citizens appreciate that.”

Groth also will recommend against employee raises this year, except for those mandated under civil service for public safety.

“Every year we’ve been giving cost-of-living raises, but it doesn’t look good this year,” he said. “We’re scaling back, and we’ll have a very lean budget year, with no increases anywhere to speak of.

“The average citizen is not going to see any significant change in services, but, unfortunately, nothing will be greatly improved.”

The city has been ramping up its public-safety staffing during the past few years, but Groth expects no staffing increases this year.

Necessary spending

Some added expenses are unavoidable, Groth said. In this fiscal year, fuel costs have been nearly $1 below the $3.50 per-gallon estimate in the current budget, a savings that has helped offset sales tax losses by $500,000.

But the city is once again budgeting for $3.50-per-gallon gasoline and diesel in the coming year.

Waco’s financial situation may be tight, but it could be worse. Big cities such as Houston, Dallas and Fort Worth are making deep cuts to offset property-tax and sales-tax declines.

The city of Dallas last year laid off 793 employees, among other measures, to help make up a $190 million deficit. Now the city is facing a $130 million budget gap and is considering tax hikes, across-the-board service cuts and staffing reductions even in public safety.

Dire straits

The fact that cities are even discussing public-safety cuts is an indicator of how dire their financial situation is, said Frank Sturzl, executive director of the Texas Municipal League.

“That’s the last thing citizens want touched,” he said.

Sturzl’s organization in March surveyed its 1,100 members on their financial situations. Half of the respondents said their general fund revenue had declined since the previous year. Half also expected lower revenues in the coming year.

“The financial condition of cities is as bad as it’s been since the mid-1980s, when there was an equally bad recession. But it didn’t last as long as this one,” Sturzl said. “What’s different from other downturns is that, in the past, they hit smaller cities harder. The reverse is true this time.”

In the midsize-city category, the city of Abilene this year has mandated unpaid furloughs for city employees to make up for sales tax losses, and it is projecting a $4 million budget gap in the coming year, according to news reports.

The city of Tyler, population 100,878, is expecting a revenue shortfall of more than $2 million in the current budget year.

Texas ahead of rest

Still, Sturzl said Texas cities are better off than many cities across the nation, partly because they aren’t dependent upon state funding.

Sturzl said Waco is wise to project no growth in sales-tax revenue in the next fiscal year.

Nonetheless, there’s been a glimmer of good news on the sales-tax front. The city’s last sales-tax check in May, reflecting March sales, was up 2.63 percent over the comparable 2009 period.

Groth said Waco consumers help decide what those sales-tax numbers are.

“The message to our citizens is to make sure you buy Waco,” he said. “In the end, it’s all our money.”

jbsmith@wacotrib.com

757-5752

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