Instead of making spending cuts to all city programs to deal with an estimated $3 million shortfall in the coming year's budget, Grand Island officials are closely evaluating all 350 city services to make selective adjustments.
"It's the antithesis of across the board cuts," City Administrator Jeff Pederson said of the city's ongoing Program Prioritization process.
Across the board cuts are "indiscriminate and can hurt important programs and actually retain less important or inefficient type programs," Pederson told the Grand Island Rotary Club on Tuesday.
The city is evaluating its general fund programs, which cost about $39 million a year, because that's where the bulk of the funding shortfall has come, Pederson said.
The city's overall $170 million budget comprises mostly enterprise operations such as the utilities, water and sewer that are paid for by ratepayers, not taxpayers. There is not shortfall in the ratepayer-funded services.
"This crisis that we're in is really driven more by the revenue issue than it is the expenditure issue, but we recognize it must be addressed from both angles," Pederson said.
Pederson said the city lowered its reliance on property taxes and shifted that to the more volatile sales tax, which has contributed to a decline in revenues.
After voters approved the one-cent sales tax in 1989, property tax receipts dropped by $1.5 million. The new sales tax raised $4 million a year -- a net gain of $2.5 million, but that gain has been largely consumed by special projects that cost about $2.2 million every year, he said.
"A fairly serious financial/fiscal challenge that the city faces has been coming about over a number of years," Pederson said. "The City of Grand Island has done a pretty good job of managing the expenditure side."
The number of city employees per 1,000 population is at the same level now as it was ten years ago. There also haven't been a number of program additions or expansions, Pederson said.
But the project debt load and the decline in sales tax revenues have created the budget gap that will likely result in significant cuts next year.
"A 10 percent cut on the local level will get into some substance," Pederson said.
But the city wants to support its most important core functions of the city. That why Mayor Margaret Hornady, the 10-member city council and city department directors defined four primary functions last year. They were safe community; stewardship of the environment; quality of life; and strategic, sustainable and maintained development.
Department directors then scored the city's services and programs -- and are in the process of rescoring them now.
Those functions deemed most important -- called Quartile 1 functions -- will receive full funding and may even see a funding increase. The functions of lesser importance --in Quartiles 2, 3 and 4, respectively, will receive less funding. Those that are least important may be cut entirely or outsourced.
"This isn't just how to cut, it's an informed process of how to allocate our resources," Pederson said.
Although the city council has been presented the impact of addressing the shortfall exclusively through a property tax increase or entirely through spending cuts, Pederson said neither extreme is likely.
"It won't be addressed by one side or the other -- I don't think the city council is going to raise taxes 12 mills or lay off 65 employees," Pederson said.
The solution will come through a compromise and the Program Prioritization process will form the basis to thoughtfully make good decisions and be able to explain those funding decisions, he said.
By Tracy Overstreet
tracy.overstreet@theindependent.com
Published: Tuesday, March 16, 2010 10:23 PM CDT
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