City staff gave Council members an overview of how the 2011-12 budget’s projected revenues were stacking up with expenditures this week, based on proposed department budget proposals — it reflects a $400,000 shortfall for a revenue-neutral budget.

A revenue-neutral budget would be reflected in a tax rate at $0.38 per $100 valuation, which would be down from the city’s current tax rate of $0.41. City manager John Connet noted that the shortfall would be nearly cut in half if the tax rate remained the same, but mayor Lew Starling said leaving the tax rate alone would essentially amount to a tax hike with the 2011 revaluation.

A break from the traditional budget process, the overview given by city staff during the planning session was lauded by some city officials and admonished by others, who said a complete budget with specific departmentalized line items needed to be examined and discussed before choosing to go in any direction.

City staff did say the entire budget should be ready for Council next week. The board is expected to meet during a budget workshop Tuesday.

In a brief presentation to Council, assistant city manager Shawn Purvis said the city has come down 7 percent in its operating costs each of the past two years, or in excess of $1 million. This year, the city was looking at approximately $8.56 in expenses compared to $8.16 in revenue.

Purvis said sales tax should be up around $100,000 to $1.43 million, about 10 percent over the estimated $1.35 million. Sampson has experienced much higher sales tax revenues than the 3 percent statewide average. That said, other revenues remained stagnant.

“We could keep the rate of 41 cents and we would take it where we would go out and balance your budget,” said Connet. “I would recommend leaving the rate where it is now and have $200,000 (to go) to balance the budget.”

Councilman Steve Stefanovich asked if water and sewer rates were being proposed to be increased, as they have been in budgets past. Staff said they would not.

“We’ve offset not getting a whole lot of sales tax revenue with increasing fees,” said Purvis. “With the reval, we would be proposing to leave the fees alone and to offset that with property tax.”

Starling said the proposal represented a disconnect between the city’s two funds, the General Fund and the Water and Sewer Fund.

“That’s inconsistent with what we’ve been told,” said the mayor. “The reason we’ve raised the Water and Sewer fund is when we inherited it, it was in poor shape. We’re not talking apples to apples.”

Stefanovich said the impact would be the same.

“From the customer standpoint, the dollars coming out of his pocket, the net effect on his pocketbook is $36,” said Stefanovich.

Using a tax formula, that $36 is based on the typical city homeowners property value of $120,000. A 3 cent difference between the current $0.41 tax rate and the $0.38 revenue neutral rate would mean $10 more per $100,000, or $12 more annually for each cent on the $120,000. That translates to $36 a year for a 3 cents rise, or $3 per month.

“We kind of felt that where the water and sewer rates were, we felt we could make it work with what the rates are now,” said Purvis. “Within the General Fund, to do some of the things we’re wanting to do, the tax rate is the quickest way to offset that.”

Purvis said he has been meeting with every department head this week, something city staff did regularly when departments were putting together their budgets.

“I asked every single department head to start from scratch, treat every line item like it was a new line item,” noted Purvis. “

“Would you consider staying at 41 cents, and what are your priorities?” Connet asked Council.

Alluding to the 7 percent decrease in operation costs each of the last two budgets, Councilman Neal Strickland said he would like to see an exercise where city staff presented a budget that reflected an 8 to 10 percent decrease.

“It won’t work Councilman,” public works director Jeff Vreugdenhil said.

“You say it won’t work, but Johnston County’s school system just cut 120 jobs,” said Starling. “The state is talking about a 12 percent reduction. What I would recommend is come to Council with a budget that has a 1 percent tax cut, or an even tax cut.”

“It’s still tight out here,” added mayor pro tem Maxine Harris.

Starling pointed to the $8.5 million in expenditures.

“We don’t know what that is,” he said. “You’re coming to us with a big number and saying we’re going to need a tax increase. I don’t know how you can come to us and ask us for a tax increase and not tell us what’s in it. I think we need a long presentation. This is not sufficient.”

Connet said the overview was meant solely for that purpose, with each departmental budget, and every line item, scheduled to be presented to Council as early as next week.

“We were trying to get a general feel, and trying to make it a little succinct,” the city manager said.

“Typically you don’t see this until the first budget comes out,” added Purvis. “This is more information than you get by this point.”

Starling said there needed to be options given to Council.

“What we need to have is options to look at,” he said. “Revenue neutral or one penny on both sides.”

Stefanovich said he appreciated the preliminary presentation.

“I appreciate this high overview,” the councilman said. “We’ve done a whole heck of a lot better job than the state’s done. I appreciate seeing this. Last year, I wouldn’t have known that.”

“I don’t necessarily disagree with you Steve, but we’ve had no growth whatsoever,” said Starling, alluding to Census figures that showed a population rise of just 39 in the last decade, from 8,600 in 2000 to 8,639 in 2010.

“We have grown our services and we collect no more money,” Stefanovich chimed back. “Sooner or later, we’ve got to get to a place where we have to have operating equipment. Somewhere, we have to take in additional revenue.”

Starling took issue with the equipment needs, using the police department as an example.

“We’ve got more police cars today than we’ve ever had, newer cars than we’ve ever had,” said Starling. “Steve, I’m not saying that’s wrong, I’m saying 26 cars, most brand new cars, and they take them home and want more.”

On the overview, Stefanovich asked Purvis to tick the boxes of line items to the side, proposed but not designated for funding. Based on a tax rate of $0.38, the magic number needed to close the gap raised from $400,000 to $700,000.

“We’re $700,000 short if everyone got everything they needed,” Stefanovich noted.

The mayor said now was the time to examine every budget item as thoroughly as its ever been examined. Stefanovich agreed, but said there was a limit before service takes a hit.

“You can’t cut but so far before services begin to suffer and our citizens have come to expect a high quality of service,” said Stefanovich.

Staff said they would plan on preparing a revenue neutral budget, one up 2 percent from neutral and another down 3 percent from neutral, so Council could mull over their options.

“That will give Council an idea of what we’re looking at,” said Starling.

Chris Berendt can be reached at 910-592-8137, ext. 121, or by email at sicrime@heartlandpublications.com.