Jefferson City is looking at various cuts as 2013 revenues are expected to fall below projections, a problem that apparently is not new to the city.
At a City Council work session Monday, interim Finance Director Bill Betts said the revenues for 2013 likely will come in nearly $2 million below projections.
"Where did this shortfall come from," Betts said. "We were just wrong on a lot of these projections."
But, as the council found out Monday, the city has been making decisions based on wrong projections for years. Betts said for fiscal year 2012, the city had about $34 million in expenses, but only brought in $32.8 million in revenues.
He said that's because the city had not been budgeting funds to cover matching costs of grant money awarded to city departments; instead, it simply was documenting the grant funds as new revenue, without the accompanying expenses.
"This is terrible news," Betts said. "No one's excited about it."
The shortfall and the realization that the city has been overspending caused concern and frustration among council members who questioned how it was possible that they did not know of these issues before Monday.
Third Ward Councilman Bryan Pope said he didn't understand how the city could end the fiscal year in the minus and not inform the council.
"So we ended 2012 out of balance," Pope said. "And we don't know about it until right now."
Fourth Ward Councilman Bill Luebbert said in his two years on the council, he has not been pleased with the city's existing budget procedures, which are supposed to be changing before the next budget process.
"I have not been satisfied with the budget process," Luebbert said. "This doesn't generate a lot of confidence."
The city's 2013 fiscal year began Nov. 1.
The reason the council was unaware until Monday, City Administrator Nathan Nickolaus said is because of the accounting system used by the city and how it works. But past policies were also a part.
Betts said part of the problems in past budgeting processes was because the accounting staff in the Finance Department apparently were not allowed to be part of the budget process at all. Nickolaus said when he became aware of the policy, he changed it, adding that during the most recent budget process he had to order the accountants to take part despite the former finance director's policy.
"I had no idea," Nickolaus said.
He said past projections were not based on actual numbers but were instead a "shoot from the hip guess." Nickolaus said the city is facing honest numbers, which can be painful, but that they have to wake up from "the fantasy world we were living in."
To deal with the shortfall, Nickolaus proposed a series of budget cuts. They include:
• Not filling any vacant position the rest of the year and offering incentives for early retirement, resulting in an overall 8 percent reduction in workforce.
• City departments are all facing cuts, with the largest coming from the Public Works Department at a little more than $225,000.
• Reducing the city's economic development contract with the Jefferson City Area Chamber of Commerce by $15,000.
"There are no more easy cuts," Nickolaus said. "Every single cut that's on there is painful ... this is very serious."
The council is planning to meet again in open session after the City Council meeting next week to discuss the proposed cuts and potentially approve the plan. Nickolaus said the city needs to move quick, otherwise the figures could change and they could face deeper cuts.
"I would've appreciated knowing a little more about this material in advance," Pope said.
Council members said they wanted more time to go through the information and proposal before coming to a decision. Mayor Eric Struemph said the council would move quickly, but with as much information as possible.
Sales tax figures adjusted
In other business, the council also was presented adjusted figures for sales tax E, which was in effect from 2007 to 2012, and sales tax F, the current city sales tax.
Betts said the city had projected $25 million coming from sales tax E, but that did not come in as expected. He said the alterations will not affect any promises made to the public, but required a shifting of funds to cover projects.
Nickolaus said sales tax E was projected to bring in $5 million per year. But in the best year of the five it lasted, it generated $4.8 million.
As for sales tax F, Betts said the city projected $26 million, or $5.2 million per year, but likely will see only $4.7 million per year, requiring some modifications to the spending plan.