Politicians have gotten into the habit of releasing bad news in what journalists refer to as the “Friday afternoon dump,” but at 4:40 this afternoon Louisville Mayor Greg Fischer held a press conference at which he delivered some reasonably good news to the citizens and taxpayers of Louisville Metro: We have balanced this year’s budget, without raising taxes.
A $3.5 million settlement from Insight Communications regarding its franchise with Louisville Metro Government — along with nearly $6.8 million in cuts across city departments and related agencies — will balance the current fiscal year budget, said Mayor Fischer. The City’s current fiscal year ends June 30, 2012, and Kentucky state law requires municipalities to operate under a balanced budget.
The Insight agreement was reached Thursday night after months of engagement, and the Mayor immediately directed the money to be applied to the city’s $12 million deficit. “The timing of this settlement is fortunate, keeping the city from having to take significant measures to reduce services to close the deficit,” Fischer said. “However, it’s only one-time money, and we still must address our long-term structural imbalance in which expenses are far outpacing revenues.”
The Insight agreement ends negotiations over the expired franchise, allowing the cable franchise to be transferred to Time Warner. The mayor’s budget-reduction plan avoids employee layoffs, but eliminates nine positions which are vacant.
Half of the $12 million deficit will be derived from city departments, some of which have been restricting spending and operating below budget. Those restrictions were placed on departments and on capital projects following last year’s budget process because the mayor was concerned that revenues wouldn’t grow as anticipated.
Fischer said he will now move forward on approved capital projects, because of the Insight settlement. Final revenues for the current fiscal year are expected to be $496 million versus the original projection of $504 million. The primary cause for the shortfall is the occupational tax revenue.
“Our occupational tax revenue is growing from the prior year, but not as fast as anticipated. There are clear signs that we are coming out of the recession, but the growth in revenues is not keeping pace with expenses,” according to the City’s Chief Financial officer, Steve Rowland.
Some departments, including Police and Public Works, have saved money this fiscal year in part due to a mild winter (and thus no need for snow removal) and the cheaper price of gas earlier this year.
“We have been concerned about the degree of economic recovery through the fiscal year, and I congratulate our managers who have been frugally spending their budgets,” Fischer said. “Through sound fiscal management by department directors, we were able to overcome the deficit without directly affecting people or services. Nearly every agency helped share the pain, and we were able to make reductions without mandating across-the-board cuts.”
About half of the $6 million from city departments —from Metro Parks to the Mayor’s Office to Metro Corrections — has the added benefit of helping partially offset next year’s deficit. That’s because the cuts are structural in nature, meaning some department’s new fiscal year budget, which starts July 1, will be based on the reduced budget from this year.
For example, the Mayor’s Office will contribute $72,000 to close this fiscal year and its new base budget for fiscal year 2013, which starts July 1, also will be reduced by the same amount. This represents a 2.5 percent annual cut.
In addition, the mayor announced that he would give up his $41,000 annual discretionary account in the current year and next fiscal year. The mayor’s budget reduction plan asks the Louisville Metro Council to also contribute, by reducing its budget by $142,000 this year and the about same next year. This represents a 2.5 percent annual cut.
The nearly $3 million in structural cuts “means we are taking steps in the right direction,” Fischer said. “Those cuts will allow the city to close roughly 15 percent of our structural deficit.” The structural cuts will be difficult, forcing department directors to make critical decisions in the coming months as they prepare their fiscal year 2013 budget, which the Mayor will present to the Metro Council in late May.
The budget reductions announced today also apply to related agencies which receive city dollars. Greater Louisville Inc. will see its contribution cut by $50,000 this year and the Waterfront Development Corp by $24,000.
The budget plan also includes:
- Taking $1.6 million from the city’s Vehicle Replacement Fund, a savings account used to purchase police cars, fire trucks and other vehicles;
- Delaying the March police recruit class until late June. That saves about $688,000 in the current fiscal year, but will have little or no impact on public safety.