Despite proposed spending cuts, 2011 deficit still exists

November 23, 2009
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Business owners will be given an opportunity next week to tell city leaders what services they want from the city, what tax increases they want or don’t want, and what the city needs to do to restructure the corporate side of city government.

One of the city’s nine community budget meetings has been set aside for them, and it takes place Dec. 1 from 3:30-5 p.m. in the Yankee Clipper Library at 2025 Leonard St. NE. City Manager Greg Sundstrom has said he is counting on the business community to help lead the city out of its darkest time in recent history, as a $27.4 million deficit plagues the 2011 general operating fund that will go into effect July 1.

The job losses, revenue enhancements and department reductions that Sundstrom revealed Nov. 10 will eliminate much of next year’s shortfall — roughly $16 million worth. But that still leaves about an $11 million gap. And as Sundstrom and most business owners know, a budget deficit is a moving target that can change on a monthly basis.

While the business crowd will have its turn next week, city commissioners will be asked to reconstruct the revenue side of the general fund soon. Sundstrom wants commissioners to lower the personal exemption on the city income tax return from $750 to $600. He estimated the reduction would give the fund an additional $400,000 each year, and that it would raise taxes for a resident by $1.95 and for a nonresident who works in the city by 98 cents for each exemption taken.

Sundstrom also said he wants to sell the Government Center parking ramp below Calder Plaza to Parking Services, the city’s parking system. He estimated the general fund would receive another $1 million per year from the sale.

Although the details of the sale hadn’t been put together when the Business Journal spoke with Parking Services Director Pam Ritsema, she said she thought the asking price would be about $20 million and that her department would likely pay the city $2 million a year for 10 years.

“We would have a debt payment for 10 years. We’ve got a lot of projects coming up, so it’s going to be tight for a few years,” said Ritsema.

One of the department’s projects is a $10 million ramp that is set to open in mid-January as part of the Thirty-Eight development being built by Locus Development at Commerce Avenue and Weston Street SE. Another new ramp is part of the Gallery on Fulton project at Division Avenue and Fulton Street, which should open late next year.

In 2011, Parking Services is expected to have bond payments of $1.1 million and a capital outlay of $635,000. Those figures don’t include the expected debt the department will be servicing for the Government Center ramp. Ritsema said told parking commissioners that she wants to have the sale’s details for them to review in a few weeks.

All the revenue from the Government Center ramp has gone to the general fund; the city collected $1.86 million from that facility last year. Parking Services spent $672,963 last year to operate and maintain the ramp. Based on those figures, the ramp generated a surplus of nearly $1.2 million in 2008, or about $800,000 short of covering the expected annual debt service that Parking Services will carry from the sale for 10 years.

The Government Center ramp isn’t completely paid for either; about 3.5 years worth of debt service remains on the structure.

Of the $16 million in deficit relief that Sundstrom is counting on for 2011, more than $7 million is expected to come from letting 119 employees go Dec. 31, with 113 of those being furloughed paid through the general operating fund. A federal grant saved the jobs of six police officers and dropped the total number to be laid off from 125 to 119.

City CFO Scott Buhrer told the Business Journal that the average cost to the city this year of a general fund employee is $96,159, which includes base pay, benefits, overtime and other premiums like pensions, FICA, and, for some, a uniform allowance. For workers paid through other funds, the per-cost average this year is $82,029.

“The citywide average is $92,430 for the total cost of an employee,” said Buhrer in an e-mail.

Sundstrom first revealed how many employees would be let go and what restructuring efforts he, his staff and city commissioners would take Nov. 6 at the annual meeting of the Downtown Alliance. At that gathering, held in the Amway Grand Plaza Hotel and largely attended by business owners, Sundstrom said he had three goals he wants the city to achieve through the restructuring:

**Instill better customer service among the staff.

**Bust the city’s own bureaucracy to make quicker decisions. “We can’t be held back by the process. We need to be more MacGyver-like,” he said of the former TV action hero, Angus MacGyver.

**Become more transparent. “Then you will become more critical of us,” he said, “and we’ll become better.”

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