City Budget Develops $2 Million Hole

They thought they planned conservatively, projecting almost no growth in income in 2008, but city budget staff is now learning the plan was not conservative enough.

When Savannah City Leaders approved their budget back in November, staff told them the economy was in for rough times. They projected very modest growth and proposed a budget that was only 1% more than 2007. They were right to be worried, but they apparently should have been even more worried.

Today Chris Morrill, the Assistant City Manager in charge of the budget, explained just how bad things have become. “It looks like now we will end the year more than a million behind on sales tax directly related to the recession.”

According to the Georgia Revenue Department sales tax figures, significantly fewer people ate out, bought cars or furnished their home compared to last year. Savannah sales tax collection for the second quarter is off $330,650 compared to the same period in 2007.

While sales tax collections are down, the city’s expenses are on the rise. “As you are experiencing in your own home budget,” Morrill explains, “we're seeing increases in our gasoline and diesel fuel costs, probably about another million dollars in increasing expenses.”

The city is currently looking for ways to use less fuel in all departments. The Fire Department is already turning off all vehicles, except the trucks pumping water, at fire scenes. Other gas saving measures are being considered but Morrill says that won’t help the overall picture much. With the reduction in revenue and the increase in expense he says, “We're looking at about a 2 million dollar hit on the 08 budget.”

The bad financial news leaves leaders between a rock and a hard place when it comes to balancing the budget. They can cut $2 million in city services or they can leave the property tax rate at last year’s level and forgo another tax decrease.

Leaders want to cut taxes. They have be able to cut the city tax rate almost every year since 1996. Despite the financial situation, some still want to reduce the rate this time too, even if just a tenth of a mill. Mayor Otis Johnson and others say that is not prudent.

Johnson favors the alternative. If they leave the millage rate at 12.5 mills, they will collect $1.9 million in additional revenue due mainly to the increased value of new development and some higher property assessments.

That plan would almost cover the shortfall and homeowners with Stephens/Day Homestead protection would pay about what they paid last year in city property taxes. Commercial property, rentals and other non owner-occupied property would see an increase or decrease solely based on the most recent assessment.

You can have your say on all this at three public hearings. The first is coming up on July 31st at 2pm at City Hall at the north end of Bull Street.