Mayor Steve Bach has proposed a 2012 city budget that forecasts an increase of less than 1 percent in spending and eliminates 37.5 vacant positions to save $3.7 million in salaries.
The $224.6 million general-fund budget anticipates sales and use tax collections will decline by 0.5 percent amid a slowing local economy; sales and use taxes generate more than half of all revenue for the budget.
The budget adds $440,000 to the city’s fund balance, or reserves to accelerate the just-finished paving of the Pikes Peak Highway as required under a lawsuit settlement.
That contribution and the level of reserves are likely to generate the most debate as City Council goes through the budget during the next two months, Council President Scott Hente said Tuesday. Council has scheduled a series of work sessions on the budget Oct. 18-20, a formal public hearing Oct. 27 and two markup sessions Nov. 3.
“Is this the time to put even more money into our reserve account or address significant shortfalls? We will be looking at that over the next month,” Hente said. “Right now the reserve fund is in the best shape in the 8½ years I have been on council. How much more do we put into reserves?”
The budget is the first proposed by Bach, who was elected as the city’s first “strong” mayor in May. Since budget preparations had begun before he took office in June, the budget doesn’t include the “zero-based” method he wants to use starting in 2013 that will require that all expenses be justified every year.
“The city uses three models to forecast sales and use tax revenue. Given the results of those models and the consensus that the recovery is faltering, we believe a conservative projection is the appropriate strategy,” Bach said in a news release issued by his office Tuesday.
The city will re-evaluate its financial position after March 31, when final spending and revenue figures for 2011 are available. If the city’s financial models “suggest that revenues will exceed the forecast upon which this budget is based, then additional services could be considered for funding.”
The budget includes an eight-year financial outlook prepared by city staff that shows the city will begin running a deficit in 2015 and exhaust its reserves by 2019, mostly as a result of escalating health care and pension costs. The outlook assumes city revenue will increase slightly next year and 2 percent annually after that.
Bach said he wants to hire a consultant to study city compensation practices and come up with a “fiscally responsible” salary plan, and he plans to lobby the city’s legislative delegation to support “more sustainable pension funding practices,” including changing how much employees contribute to their pensions.
Also included in the budget:
• A requirement that employees pay 20 percent of the health insurance premiums starting in 2012, up from 14 percent this year. That will save the city $742,000, but it still will spend $1.03 million more on its 80 percent share of those premiums.
• The city will spend $325,933 to water neighborhood parks, but won’t be able to buy as much water since the temporary “water conservation” rate Colorado Springs Utilities now charges the city expires Dec. 31. Hente said he has talked with several council members and Utilities CEO Jerry Forte about “doing something” to keep water costs down.
• The budget includes no raises for city employees and eliminates 11 open positions in public works, 9.5 in police, six in fire, four in Parks, Recreation and Cultural Services, four in finance and three in other city operations, totaling 37.5 positions. Eliminating the positions saves the city $2.66 million and the budget said the city expects to save another $1.12 million by making its operations more efficient.
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