Balancing the Budget
Introduction
Revenue Breakdown
Expenditures
Breakdown
General Fund
Breakdown
The Sales Tax
Decline
January Reductions
Introduction
Balancing the budget at the City of Tulsa is not much different
than balancing a budget at home. The money going out must not
exceed the money coming in. State law requires the City of Tulsa to
have a balanced budget.
But unlike most household budgets, revenues into the city come
from multiple sources.
The City of Tulsa gets more than half of its funding (amount)
from several major sources including five local taxes: sales tax,
use tax, franchise tax/right-of-way user fees from utility
companies, hotel/motel tax, and ad valorem tax.
The largest source of revenue for the City is sales taxes
collected on goods and services in the city of Tulsa.
Other revenue sources include user fees from airport charges,
and utility services - water, sewer, refuse and stormwater.
Customers are charged for the cost of the services. The City also
obtains revenue from business licenses and permits related to
development, culture and recreation facilities, municipal court
fines, cell phone and emergency medical service (EMSA) fees,
interest earnings, federal grants and shared revenue from state
government.
More than 70 percent of the general revenues fund come from the
2 cent sales tax collected on goods and services in the city
limits. A third penny pays for capital improvement projects which
are specifically approved by voters in citywide elections held five
to six years apart. The most recent third penny extension was
approved as part of the Fix Our Streets package in 2008. According
to City ordinance, collections from the third penny must be used
for the approved projects exclusively and may not be transferred
for general operations to balance the City's operating budget.
The most familiar sources of City of Tulsa capital improvement
funding - those voted upon - are the General Obligation Bond Issues
(2005)
and extensions of the Third Penny Sales Tax (2001
|
2006 | 2008 Fix Our
Streets). These sources are used exclusively to construct
capital improvements like roads, bridges, sanitary sewer
improvements, flood control projects, and other critical needs
identified by citizens, the Mayor and Council.
Revenue Breakdown
Of the total budget, 54 percent of the city revenues go into the
general fund, while 46 percent of the City revenues flow into
enterprise funds.
The general fund is the primary fund from which money to provide
all City services is drawn. Over 70 percent of this fund comes from
taxes, primarily sales tax. Other sources include licenses &
permits, intergovernmental revenue, culture and recreation and
miscellaneous revenues.
The other major source of City funding comes from fees charged
for utility, airport and emergency services. These enterprise funds
are primarily comprised of Public Works utilities.
The chart to the left illustrates the numerous sources of
revenue that comprise the general and enterprise funds. (Click
chart for larger view)
Expenditures Breakdown
Revenues from the general and enterprise funds are distributed
to multiple departments and authorities to cover equipment,
supplies, technology, salaries, and benefits.
Public Works, Public Safety, and Social & Economic
Development receive funds from both the general and enterprise
funds to cover their expenditures.
Public Safety accounts for over 60 percent of the general fund
expenditures. Public works accounts for over 80 percent of
enterprise expenditures.
The chart to the right illustrates the distribution of funds to
cover each department and authorities' expenditures.(Click chart
for larger view)
General Fund Breakdown
The city's general fund is allocated to 25 City departments for
personnel salaries, wages, benefits and materials and supplies.
Nearly 60 percent of the general fund is used for public safety
services provided by the police and fire departments. The remaining
43 percent of the general fund is divided between 23 departments
and authorities.
The Sales
Tax Decline
The city is seeing continued and unprecedented declines in sales
tax. Sales tax collections have declined to historic levels month
after month for the last 10 months. We've had to adjust our revenue
projections twice since the creation of the FY 2010 budget because
of the continued downturn in the economy.
Prior to budget
approval on July 1, 2009, the original general fund budget for
Fiscal Year 2009/2010 had been reduced by $12 million from the
previous year, eliminating 96 positions and decreasing expenditures
of sales tax by $10 million. At the same time, the Mayor set
triggers for the coming months, that is, sales tax and use tax
revenue amounts and percentages that, when received, would indicate
expenditures must be reduced in order to maintain a balanced
budget. Those reductions were made in October, 2009.
In the latest round of budget reductions required to balance the
budget, Mayor Bartlett asked department leaders to identify a total
of $5-10 million in cost-cutting measures from the general fund.
The general fund is primarily comprised of the 2 cents sales tax
collected on purchases within the city limits. Other revenue that
goes into the general fund includes use taxes on purchases brought
into the city and interest income, franchise fees, grant funding
and other miscellaneous income sources.
State law established the funding of municipalities in Oklahoma
and any effort to diversify funding would have to be made by the
state legislature. The City of Tulsa is considering its legislative
options in an effort to discontinue its heavy reliance on sales
taxes. The 10-month trend of sales tax collection declines is
unprecedented in the city's history.
Monthly Declines of 11% to 14%
The City of Tulsa has reported 10 consecutive months of sales
tax collection declines, including seven months of declines
averaging at least 11.25 percent. As a result, the City of Tulsa
faces a $10 million shortfall in revenues and must reduce
expenditures to balance the budget, as required by state law.
The Oklahoma Tax Commission notified the City on Jan. 7, 2010,
that December sales tax collections were $16,978,329, a decline of
11.4 percent from 2008. December 2008 tax receipts totaled
$19,170,192. The decline followed two consecutive months of 14
percent declines in the sales tax reported in October and
November.
- In December, November sales tax collections totaled $15,794,465
million, a 14.5 percent drop below the previous year, and 4.9
percent below budget estimate for the month.
- In November the revenue check of $15,145,911 for October was
14.2 percent down from the 2008 numbers or $2.5 million less.
- In October, the September sales tax receipts totaled
$16,201,499. Use tax receipts totaled $1,105,924, which was
$395,076 lower than projections.
- September City of Tulsa collections showed sales tax receipts
for August at a decrease of 10.43 percent from September 2008.
- First quarter year-to-date sales tax collections were
$49,988,565, which was 9.02 percent below 2008, when the first
quarter collections equaled $54,945,669. Year-to-date use tax
amounts showed a 6.49 percent decline.
- During July and August, budget projections were close to the
actual amounts of sales tax revenue received. July sales and use
tax distribution showed a 10.73 percent reduction from the same
period in 2008, but closely reflected the revised budgeted revenue
estimates. Revenue from use taxes paid on purchases by businesses
was up 4.28 percent over 2008. August tax revenues were 5.79
percent below revenues for the same period
last year.
October Reductions
By October, the significant declines in revenue triggered
additional action. Sales tax revenue projections for the fiscal
year ending June 30, 2010, were revised downward by another $3
million. Across the board, departmental budgets were reduced by 2.5
percent, resulting in a reduction of expenses by $6 million to
match the declining revenues. Police and Fire Departments
eliminated spring academies, and delayed equipment purchases to
reduce expenditures. Layoffs were made in many departments
throughout the city, and vacant positions remain unfilled. (18 of
21 police officers who were laid off were rehired almost
immediately due to a federal grant.)
It was hoped that after this series of cuts, no more reductions
would be necessary. All city departments made significant cuts in
equipment ownership and usage, virtually eliminating training paid
for by the general fund. Throughout the process, department
management worked to minimize the reduction of services and the
abolishment of positions.
Balancing the
Budget: $10 Million in Expense Reductions by January
31
Mayor Bartlett received proposals from department leaders with
reductions in materials and supplies and workforce. The plan would
result in a workforce reduction of 144 non-sworn positions, 135
police officers and 130 firefighters. The contracts with the police
and fire bargaining units limit the Mayor's ability to impose
reductions without agreements from the union membership.
As an alternative, Mayor Bartlett has asked the unions to
consider reducing salaries and incentive pay items in order to
continue to provide the current level of services to citizens of
Tulsa. The Fire Department began a reorganization in this current
fiscal year that has benefits and reductions in management
personnel that will go into effect in Fiscal Year 2011. The Police
Department has submitted a plan that also provides some management
reorganization ideas for additional long-term savings.
Whether the next step is workforce reductions or compensation
decreases, reductions should be implemented by the end of January
in order to avoid additional costs and balance the budget by June
30.
