The Manhattan City Commission discussed the proposed 2019 budget at their meeting in City Hall Tuesday. The new budget amounts $155 million total, a $6.7 million increase from 2018.
Despite the increase, multiple city revenue sources are falling short of projections. Sales tax is one of the sources coming up short, expected to fall $100,000 to $150,000 below projected numbers for 2018.
“We used to grow very, very exponentially every year in sales tax growth — we’re just not experiencing that right now and we don’t intend to in 2019,” Manhattan Assistant Director of Finance Hillary Badger told the commission. “Five months into the year and we haven’t seen anything to indicate otherwise.”
Sales tax is a vital source of revenue for the city and provides 43 percent of the $30 million general fund budget.
“We are very very reliant on sales tax, we always have been,” Deputy City Manager Jason Hilgers said. “That is what our general operating fund is relying on every month.”
The city is also seeing a decrease over the last couple years in building permits and related revenue. 2018 revenue from building permits is currently at $180,000, slightly behind 2017’s pace that totaled $380,000. In 2016 that amount totaled $610,000.
“We’re not seeing a rapid growth in permits and when we look budget to actual were seeing that we need to adjust for some of that,” Badger said.
Manhattan is also experiencing declining revenue from municipal court fines and franchise fees as well as from property taxes on the municipal court and fire department.
“2018 is not being too kind to us based on where we were in ’16 and ’17,” Hilgers said. “We’re hitting a little bit of a trough and were adjusting to that internally, [but]its hard to adjust to that and say we’re going to be back up in 2019.”
The commission went on to talk about a proposed increase in property taxes by $2.2 million total that would cover for any revenue decreases and other increased expenditures. That would raise the city tax bill for the owner of a residence that was worth 200 thousand dollars in 2018 by $91 in 2019, or $7.58 monthly. The bill on commercial buildings with a property value of 2 million dollars in 2018 will rise $1976 for 2019, or $165 monthly.
But that’s where they’ll soon run into problems. Director of Finance Bernie Hayen said due to the state’s property tax lid law, the city can only raise property taxes in line with a state-set Consumer Price Index – essentially the rate of inflation. The C.P.I. is calculated based on inflation numbers in the state for the prior five years. Though the city can override the limit with a popular vote, this has happened successfully only twice.
“Now you can begin to see some of the difficulties behind the tax lid because now we’re looking at a C.P.I. difference of only a little less than ten thousand dollars in additional property taxes that can be levied,” Hayden told the commission.
There are some exceptions on the property tax lid, such as for taxes raised to cover increased law enforcement costs, disaster costs, court judgments or legal costs. But Hayen said the 2019 budget is already within 50 thousand dollars of the tax lid. After adding the about 10 thousand dollar C.P.I. increase, that leaves the city with only a 60 thousand dollar increase to property taxes possible for 2020. Meanwhile, city expenditures are projected to rise by nearly $1 million or more each year.
Despite the concerns, Hayen was optimistic about Manhattan’s monetary future.
“This is just a lull, and we’re going to be growing again and you can see that at the NBAF site,” he said. “I know that the better days of Manhattan are ahead of us.”
Even so, he advised commissioners look for another way to bring in money to the city and keep property taxes down.
Commissioner Usha Reddi said they need to find a way to bring in more businesses to help with their stagnating or declining revenues.
“We have to work with the chamber [of commerce]and with K-State to get more businesses in — I can’t see any other way to do this,” Reddi said. “If businesses come in then property valuations go up and that will take care of some of the dents instead of just falling back on the people who have lived here for 20, 30, 40 years and constantly going back to them for that money.”
Reddi said they’ll have to look at ways to get a handle on costs as well.
“We really have to look at cutting back a little bit on our expenses — being a little more frugal, being more cautious, counting pennies in some instances,” she said.
Commissioner Wynn Butler agreed, saying he knows there is some waste that can be rooted out.
“If you go into each department, there’s a travel budget and I know we can pinch a few pennies out of there,” Butler said. “The commission alone last year spent $10,000 on travel and I know we can shave some of that off if we’re serious about saving a few dollars.”
But one area city staff did not want to see cut was personnel, which takes up two thirds of the general fund budget.
“We haven’t really looked at decreasing salaries or taking away [cost of living adjustments]and I take great pride in that because that’s one of the main areas for any agency [to cut from],” Reddi said. “They eventually get them back, but you don’t make it up.”
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