The city of Durham’s 2010-2011 fiscal year’s budget will likely shift gears from focusing on cutting costs to increasing revenue.
At this stage of the budget process, having completed two preliminary meetings with the City Council and remaining in conversation with citizens during his “Coffee with Council” sessions, City Manager Tom Bonfield said it is too early to determine which programs will be cut, but noted that the city will need to prioritize its services to close its nearly $13 million budget gap.
“We are in better shape than last year, when we faced a $40 million budget gap,” Bonfield said. “But we have fewer and fewer options to cut without having significant consequences.”
The city will work toward decreasing expenditures before looking to increase revenues. Nonetheless, property taxes are expected to increase, as they make up the largest source of income that can be changed without special legislation.
Increasing the tax rate by 5.8 cents per $100 of assessed property value would make up for the entire deficit, and represent a nearly 11 percent increase over current rates, The (Durham) Herald-Sun reported Feb. 27.
City Council member Eugene Brown said the city may have to compromise with a tax increase of 4 cents.
“Each penny would represent $2.1 to $2.2 million in revenue,” Brown said. “And $8 million will be used to simply service the existing bonds.”
In 2005 and 2007, voters approved city bond referendums for approximately $130 million in borrowing. This money was pledged from property taxes and will have to be figured into the fiscal budget, Bonfield said.
“[This fiscal year] some of the debt will have to come online,” Bonfield said. “It was always the case that it would happen.”
Without a tax increase, the city would exceed its current debt-service cost level—the percent of the budget that is devoted to paying debt. The debt ratio is currently set at 15 percent, which is generally considered the advisable limit.
Despite the sizable budget gap, Mayor Bill Bell introduced the possibility of a $20 million bond initiative to service the remaining unsurfaced roads over a three-year period at the City Council’s second budget retreat Feb. 26.
“We sent out a survey that asked what were the city’s priorities,” Bell said. “The need that came up as number one is to resurface our streets. With the last two bond initiatives, we will have resurfaced half the streets in two years.”
One of the ways the proposed bond will be paid off is through property taxes, which would further increase the debt-ratio, Bell said. He noted that if this bond becomes a viable option, voters would have to take these consequences into consideration.
Brown said he would be reluctant to support any new initiatives, wanting the city to focus instead on protecting core services, such as public safety.
“We are losing too many police officers to other communities,” he said. “Our training is very good, but we are [effectively] training them for other communities. We need to make their pay comparable.”
Brown said, however, that he would not support pay raises for other city employees.
“I don’t know any other city that can do it during these times,” he said, referring to a possible raise in city employee wages. “It’s not an easy task, believe me. But we were elected to make the hard decisions.”
A pay for performance plan would reward city employees for exceptional job performance with raises and bonuses. Bonfield said that whether the plan is feasible remains to be seen, but he added that the council wanted to look for as many ways to compensate employees as possible.
The deadline for city departments to present their budgets is Friday. Bonfield and the department of Budget and Management Services will spend the next few weeks going over the recommendations, and will present a draft of the budget to the City Council in May. The Council will then have the opportunity to make counter recommendations.
“Once we have [Bonfield and Budget and Management Services’] perspective, we will be in a better situation to make decisions,” Bell said.
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