Crestwood officials are urging the Board of Aldermen to start discussing how the city should address a continued decline in sales-tax revenue over the next five years and, eventually, a projected depletion of reserves.
The first draft of the 2011 city budget recently was presented to the Ways and Means Committee by City Administrator Jim Eckrich and department heads. A board budget work session tentatively is scheduled Tuesday, Nov. 9.
As proposed, Crestwood again will dip into reserves next year to balance the budget, according to Eckrich.
The city in 2011 is projecting revenues of $11,564,307 and expenditures of $11,828,553 across all three major funds, resulting in a negative balance of $264,246, according to the first draft of the budget.
The city is projected to end 2010 with expenditures exceeding revenues by $138,021, Eckrich wrote in his budget message. With the use of $264,246 in cash to balance next year’s budget, Crestwood’s overall fund balance would fall to roughly $2.06 million by the end of 2011, according to the budget draft.
Eckrich projects a $1.9 million balance in the general fund on Jan. 1 and a $1,485,503 balance on Dec. 31, 2011.
The 2011 general-fund budget anticipates revenues of $8,175,476 and expenditures of $8,089,973. It includes a $500,000 transfer to the park and stormwater fund to help make roughly $1.06 million in principal and interest payments on certificates of participation for the city’s aquatic center.
No additional personnel or pay increases for city employees are budgeted for 2011 given the city’s financial outlook in coming years, Eckrich wrote, though he added the budget includes a 15-percent increase in health insurance costs. The Civil Service Board is considering a pay plan for employees, and Eckrich believes the mayor and aldermen should “discuss how and when the city will begin addressing the issue of employee compensation.”
“Something has to be done regarding employee pay in order to improve morale within the employee work force and prevent the migration of the city’s best employees to other organizations,” Eckrich wrote.
A balance of $300,000 is projected for the capital-improvement fund on Jan. 1 and a $400,342 balance is estimated for Dec. 31, 2011.
The 2011 capital-improvement fund budget projects revenues of $1,581,786 and $1,181,444 in expenditures next year. Besides sales taxes, grants totaling roughly $617,000 for the construction of the Whitecliff Park Service Bridge and the design of improvements to Spellman Avenue are listed as 2011 capital-improvement revenue.
A $300,000 transfer from the capital-improvement fund to the park and stormwater fund is budgeted, which like the general fund transfer will help make the scheduled 2011 aquatic center COP payments.
While the total transfers of $800,000 to the park and stormwater fund could have come solely from the general fund, Eckrich told the Ways and Means Committee last week he did not want to further reduce the general fund’s cash balance.
Major 2011 capital-improvement expenditures include: $80,000 placed into savings for a fire truck; $128,504 for police needs, including three vehicles; $55,000 for information systems needs; $120,000 for the city-funded part of the Whitecliff Service Bridge construction; $34,400 for the city-funded part of the design of Spellman Avenue improvements; $80,000 for in-house concrete street improvements; $21,000 for building maintenance and $73,340 for public works vehicles and equipment.
While Public Works Director Dzenana Mruckovski requested $357,000 for mill and overlay work on 13 streets in 2011, Eckrich did not recommend any money for these projects. He told the Ways and Means Committee last week he reduced the mill and overlay budget so the $300,000 transfer could be made to the park and stormwater fund for the COP payments.
Eckrich projects a Jan. 1 park and stormwater fund balance of $125,000 and a Dec. 31, 2011 balance of $174,909.
The 2011 park and stormwater fund budget projects $1,666,545 in revenues and $2,416,636 in expenditures. No major projects are budgeted in this fund in 2011.
Once the park and stormwater fund makes the 2011 aquatic center debt payment — using the combined $800,000 from the general and capital improvement funds — the city “will be free from this tremendous annual debt” because roughly $850,000 of the 2012 COP payment of about $1.06 million is being held in escrow, Eckrich wrote in the budget.
“However, at that point the park and stormwater fund will be in substantial debt to the other two funds and will have to begin repaying those funds in 2013,” he wrote.
A repayment schedule included in the 2011 budget shows the park and stormwater fund repaying the general and capital-improvement funds $160,000 in 2013, $10,000 in 2014 and $15,000 in 2015.
“Essentially even though the aquatic center is going to be paid off in 2013, at that point if our sales taxes continue to decline it doesn’t really free up any money. Because right now we’re borrowing $800,000 from other funds to make our payments,” Eckrich told the Ways and Means Committee. “So as the sales tax continues to decline, it declines to the point that it’s a wash, and now the fund’s just being used to operate the community center and the aquatic center.”
While the proposed 2011 budget shows the use of $264,246 in cash reserves, Eckrich’s projected five-year plan predicts those reserves will dwindle if revenues don’t increase. That five-year plan, which is based on a 2-percent annual cost increase and department heads’ individual five-year plans, forecasts a sharp decline in the city’s total cash across all three major funds: $2.06 million in 2011, $1.3 million in 2012, $360,801 in 2013, a negative $968,426 in 2014 and a negative $2.7 million.
“You can see that if we don’t take action, the city’s going to be out of money essentially at the end of 2013,” Eckrich said last week.
Besides a continued decline in sales-tax revenue, the sharp drop in fund balance is due to the impending end of the Proposition S property tax, Eckrich said.
Aldermen earlier this year voted to cease collection of Prop S — a 20-cent tax-rate increase voters approved in April 2006 — after 2011. While the Prop S ballot language stated the tax could be collected through 2012, aldermen disagreed on whether the tax fulfilled its purpose this year by paying off a $2.87 million note from Royal Banks of Missouri, or if it should be continued to rebuild general-fund reserves.
Eckrich said last week a continuation of Prop S could buy the city some time before it depletes its cash because it would enjoy an additional $500,000 or so in revenue.
“That would get us comfortably through 2012, whereas if we don’t assess it, we have to take some action prior to 2012 to avoid the issue in 2013,” he said, and later added, “At some point we as a city are going to have to make a decision as to: OK is this the board’s firm decision on Prop S? If it is, then we need to move on from that and begin to plan on how we make modifications for 2012 to ensure that we don’t give away all this cash that we’ve accumulated and be back to a line of credit in 2013.”
Those “modifications,” one former alderman recently told the board, shouldn’t be more cuts.
In response to a Sept. 28 report from Friends of Animal Control and Rescue, which recently secured donations of materials for a new roof and siding at the Whitecliff Park animal shelter, former Ward 3 Alderman Gregg Roby said, “It’s an embarrassment to the city that we have to rely upon businesses to provide materials donated because this city can’t afford to keep up its services. I don’t know where it’s going to stop.
“You’ve eliminated money from the budgets for street repairs. Our streets are starting to deteriorate. Come by the front of my residence and look at the slabs out there that are being patched with asphalt and concrete to close up gaps that are a foot wide. And this continues. We’ve got to do something in this city, and I don’t know what it’s going to come to.”
Roby contended Proposition L, a 65-cent tax-rate increase for Lindbergh Schools on the Nov. 2 ballot, will make it difficult for Crestwood to pass any future tax increases of its own.
“If (Prop L) passes, citizens in Crestwood are going to pay a tremendous amount in additional dollars, and I got news for you: You are not going to get another penny out of the citizens in this city. That 65 cents goes in, you’ll not get a dime,” Roby told the board. “So my comment is I think this board needs to take a good, hard look at what you’re going to do over the next five, six, seven years to generate enough revenue to keep this city going …
“People are not in good financial condition, and this city is not in good financial condition. But we seem to try to solve all of our problems by continually cutting those services that the citizens of this city depend upon. And it’s got to stop. I mean, I’ve served up here. It can’t continue.”