PORTERDALE - A combination of cost-cutting and borrowing may solve Porterdale's budget woes for another year, giving the city time to explore other options for the future.
City Manager Tom Fox had told City Council members earlier this month that the city's $108,000 budget gap for 2010 would mean either cutting services or increasing the millage rate. At a work session Thursday night, Fox presented another solution involving cost savings already in the works and the possibility of taking out a tax anticipation note, or TAN, if it becomes necessary to get the city through the 2010 budget year.
If the city does borrow money against future tax collections and the city's financial position does not improve in 2010, the council could be faced with increasing the property tax millage next August. In the meantime, the city will ask its attorney to explore the possibility of enacting local legislation to provide for a municipal homestead exemption for homeowners and senior citizens. Some City Council members have been reluctant to consider a property tax increase that would affect owner-occupied properties. Seventy percent of residences in Porterdale are renter-occupied.
Fox recommended that the council approve the plan to borrow funds, if necessary, rather than make further cuts in personnel and expenditures. Fox pointed out in a presentation to the council that the city has already laid off a code enforcement officer and Public Works Department field supervisor, left another Public Works position unfilled, reduced employee hours, reduced overtime hours, reduced other departmental expenditures and sold reserve sewage treatment capacity to the Newton County Water and Sewerage Authority in order to get through the 2009 budget year. According to Fox, further reducing employee hours or implementing furloughs or layoffs would put the town at risk of "reducing services to an unacceptable level."
Fox said the city could take out a TAN in June and repay the loan in December. By law, a TAN cannot exceed 75 percent of the city's tax revenues and must be repaid within 12 months.
"I think we've got a workable solution without having to make any cuts and without having to affect employees in a negative manner," he said.
Some council members and city officials expressed optimism that a TAN might not be needed if the economy improves in 2010.
"If something happens, if we have some development or somebody builds, we might not have to borrow at all," Councilman Robert Foxworth said.
Councilwoman Arline Chapman said the city stands to receive a windfall in 2012 when the Porterdale Loft apartments are converted to condos. At that time, the loft units will be sold and the city will be paid a $2,791 sewer tap fee per unit sold. According to Chapman, the Porterdale Lofts developer anticipates that 60 percent of the units will be sold in 2012, generating $226,076 in sewer tap fees. If all 135 units are sold, the city will receive $376,794 in sewer tap fees.
"This isn't one of these deals we have to bargain with the county for or bargain with (developer) Walter Davis for ... it's a done deal," Chapman said.
"I'm totally opposed to anything we do to affect the city employees," Chapman added. "I definitely support the local homestead exemption. It will take care of people living in their homes and senior citizens."
According to Vicki Lambert, director of the Local Government Services Division of the state Department of Revenue, Porterdale could have local enabling legislation passed for the homestead exemption in the 2010 session of the General Assembly. That legislation would also require voter approval, most likely in the November 2010 election, she said. The exemption, if approved, would not take effect until 2011.
Alice Queen can be reached at firstname.lastname@example.org.