PORTERDALE -- Less-than-expected revenue collections and a shrinking tax digest have Porterdale officials facing the same difficult decision as many other governments -- raise taxes, cut services or both.
City Manager Bob Thomson presented a grim financial picture to the City Council at a work session Thursday night. The bottom line, Thomson said, is that the city will need to borrow $150,000 in a tax anticipation note to cover expenses for the remainder of the year, as well as make expense cuts totaling $9,816 per month, in addition to increasing the millage rate by 4 mills in order to end the year in the black.
The proposed cuts would be achieved by closing the City Hall Annex in the Porterdale Lofts complex as well as furloughing full-time employees four hours per week and eliminating two full-time positions -- one in the Police Department and one in Public Works.
"The revenue is basically not coming in as it had for the 12 months of 2010," said Thomson. "It's down significantly in 2011."
Thomson and City Clerk Judy Johnson presented documentation showing that the average monthly cost to operate the town is $65,027, while average monthly revenue collections total $30,856, not including property tax revenue that is collected at the end of the year. The town has a current outstanding debt of $64,266.
Compounding the city's financial woes is a tax digest that is shrinking as property values decline. The council decided Thursday night to call for a review of the appraised values of some properties in the town. It was noted that some homes are valued at as little as $5,000, some buildable lots at $100, and some other undeveloped land is valued at zero.
The 2011 tax digest is down 19 percent and the 2010 digest decreased 27 percent. A five-year history and 2011 estimate of the Porterdale tax digest showed that the net maintenance and operation digest had decreased from $23.8 million in 2005 to $17 million in 2010.
The projected digest for 2011 is $13.7 million. The town's $10,000 homestead exemption approved last year is expected to create a $1.3 million decrease in the tax digest for 2011.
The shrinking digest means that the City Council will have to set a rollback millage rate of 4 additional mills in order to collect current levels of property tax revenue.
If the city wants to collect enough revenue to continue operations without the budget cuts proposed Thursday night, the millage would have to be increased another 6 mills.
Porterdale's current millage is 17.518. A rollback rate of 4 mills would bring the millage rate to 21.518. The additional 6 mills, which would generate about $63,000 in needed revenue, would put the total millage at 27.518.
In the past, the town could rely on transfers from the Water and Sewer Fund to support other operations. Those transfers are no longer available since the fund no longer has a reserve.
Other revenues, such as local option sales taxes and fines and forfeitures are also down. LOST revenue is down $50,000 from 2007 collections, and fines and forfeitures are 40 percent less than budgeted for 2011.
Several council members expressed their reluctance to cut the police force, fearing that public safety will suffer if a police officer position is eliminated.
Though she said she opposed eliminating a police officer position, Councilwoman Linda Finger said she would not vote for a tax increase. For the other two elected officials who are up for re-election in November, Finger offered some advice if the city increases taxes.
"I think we need to find three good candidates and expect not to be re-elected," she said.
Those up for re-election this fall include Finger, Councilman Robert Foxworth and Mayor Bobby Hamby.
The council will hold its next work session on June 28, 6:30 p.m., at City Hall.