Commission approves budget changes

Friday, April 3, 2020

During a work session held prior to the Fort Scott City Commission’s regular meeting Tuesday, Director of Finance Susan Bancroft talked to commissioners and other city staff about recommended changes to the 2020 budget due to uncertainties about revenues moving forward amid the COVID-19 pandemic.

The meetings were available to the public by telephone or through a YouTube livestream.

Bancroft said she has been analyzing the city’s budget the last two months.

“I have some concerns about the 2020 budget,” she said. “I want to make sure we’re looking at it very carefully, then we had the COVID epidemic. I would like to discuss what I think needs to be accomplished with a budget cut, as well as potential further budget cuts due to COVID-19.”

During their regular meeting, commissioners ultimately approved cutting the city’s general fund budget from $7.9 million to $7.3 million and internally, city departments will look at holding spending at a level of $6.2 million.

“The budget will be cut to $7.3 million and internally, departments will make an effort to hold spending at the $6.2 million level until we know what our revenues coming in will be,” Bancroft said during the work session, adding city officials will reorganize “how we are spending those dollars.”

In the city’s total expenditures for the current year, “we had a budget of $7.9 million in the general fund, and a cash balance of $55,956.

“You should technically have three months of operating cash carryover in the event revenues don’t come in as planned. So right off the bat, I knew that was not a very healthy cash carryover. So, as I was redoing the budget, there were areas I was cutting, and one area that was cut the most is a transfer from the general fund to the special highway fund.”

Bancroft went over the city’s adopted budget for 2020, as well as her recommended changes which commissioners approved during their regular meeting.

Bancroft said there is “supposed to be $850,000 transferred from the general fund to the special highway fund, but we’re not able to do that in order to have a healthy cash carryover.” Bancroft said she reduced the transfer to $500,000.

“I was able to, in the debt service fund, we had some cash carryover in that fund. I was able to reduce some expenses that we have to pay for debt service out of the general fund,” she said, adding the original budgeted transfer to the special highway fund is “not sustainable. That fund cannot handle that much. It’s not possible to do that or you will run the risk of not being able to operate. It ate up all the reserves to do that.”

Bancroft provided a 20-year recap of the city’s property tax levied, assessed valuation and mill levies. In 2009, assessed valuations began to decline, she said.

“That continues on and comes back up in 2013, then continues to go down again,” she said. “In 2020, it gets back up close to the same assessed valuation we had in 2010. It’s important for people to understand, with the mill levy going up, in order for us to maintain a flat expenditure, and in order for the mill levy to stay flat, it’s gone up. It can be confusing.”

Bancroft said property tax levied operates the city’s general, debt service and library funds. She said assessed valuation “drives the mill levy.

“In 2009, our assessed valuation was $47 million, so one mill generates $47,000,” she said. “As assessed valuation goes down, the mill levy goes up so you can still get the same amount of property tax levied. There may be years assessed valuation goes up and the mill levy goes down. Property tax is generated off the mill levy. It generates the amount of property tax we need to get to function in those few funds.”

Bancroft said there was a “huge jump” in expenses from 2015 to 2016 as “several funds were collapsed into the general fund.

“One of those was the economic development fund at half a mill, so that half a mill went into the general fund. It’s no longer a levied fund by itself, so you would have seen that levy go up,” she said. “Also, the public safety fund, at two mills, collapsed into the general fund.”

Bancroft also said a half-cent sales tax, which went into effect in 2011 for construction of the Fort Scott Aquatic Center and improvements to Buck Run Community Center, “used to be a fund of its own.

“In 2019, revenues came in at $49,000 and that’s a concern. That could be various things,” she said. “I feel like that is an area we need to be watching. A $10,000 drop concerns me. We need to look at and review some of the fees we’re charging.”

Budgeted expenses and revenues for Woodland Hills Golf Course have “increased significantly. The current budget for the golf course is $400,000, with projected revenues of $189,000.

“They started selling product out of the clubhouse. We probably need to evaluate that.”

The average annual revenues for Buck Run Community Center are about $45,000, which Bancroft said are about the same each year. Bancroft explained the difference between BRCC and the Fort Scott Recreation Commission, which are two different entities.

“Buck Run is owned by the city of Fort Scott. The Fort Scott Recreation Commission is part of USD 234,” she said. “They run all operations out of the city facility at Buck Run. The city has an agreement with the recreation commission they will run Buck Run for us, and we pay them a certain amount of dollars every year to run the facility and all the programs. The city pays for the operation of the facility, to run the programs and janitorial services. The recreation commission does all their levying through the school district because they have a larger tax base under the school district than with the city. It was split out several years ago so they could take advantage of that and support city and county residents.”

Bancroft said the new gym at Buck Run is an expense split between the city and USD 234.

“Any expenses in the new gym, we track those and any revenue made off pop machines and things like that, that revenue is dedicated and we split the expenses,” she said.

Bancroft said she removed capital expenditures from the budgets for the Fort Scott police and fire departments.

Bancroft told the Tribune that some line items and departments “were cut and some were increased.

“I would like to think of it more as the funds were reorganized,” she said. “The largest change came from reducing the transfer from the general fund to the special streets and highway fund and including transfers from the utility funds to keep operations going in the event of a shortfall.”

Bancroft said when building a budget, “especially in the general fund, you have to build it a certain way.

“All of our reserve dollars are built into a line item, rather than a reserve line, if they’re needed for next year for a carryover,” she said. “Otherwise if you don’t have that carryover, you immediately have to raise taxes, and I don’t think any of us want to do that.”

The revisions cut the city’s budget down “so we have a $921,000 healthy cash carryover, so our general fund budget goes from $7.9 to $7.3 million That’s right in line with where we’ve been,” she said.

Aside from the transfer into the special highway fund, Bancroft also recommend transfers from the water and sewer funds.

“The scheduled transfer from the water fund is $250,000 and $150,000 from the sewer fund,” she told the Tribune. “This transfer has been scheduled for years. The general fund is dependent on these transfers in order to keep property taxes at the same level and also continue programs the general fund supports.”

“We need the ability to make a transfer in the event we don’t get our county distribution in time,” she said during the work session.

She said commissioners may want to have a discussion to consider options if the city does not receive its distribution from the county by June.

“We need funds to support the general fund,” she said. “We can also look for ways to cut so we don’t have to rely so heavily on transfers.”

The city’s economic development fund is “very specific in what it can do,” Bancroft said.

“It’s intended to help promote business and industry in Fort Scott,” she said, adding cash carryovers in that fund are about $30,000 less than expected.

“We need to cut that budget for 2020. It was $162,000 and needs to be about $150,000,” she said.

The E-911 fund had a “better than expected cash carryover,” so Bancroft recommended a budget amendment to increase that fund from $135,000 to $140,000 “to allow for those extra dollars to be expended.” A budget amendment gives city leaders the authority to spend the money if needed.

“It’s just based on cash carryovers. It’s used for our dispatch services,” she said.

The cash carryover in the Convention and Visitor’s Bureau fund “came in less than expected,” Bancroft said. She recommended a reduction as “we are not seeing tourism right now” due to the COVID-19 pandemic.

“It’s necessary to do a 30 percent reduction,” she said, adding her recommendation is a $130,000 budget and “just hold those dollars.

“If revenues start to look better then we can release some of those funds to be spent,” she said. “The tourism director is having troubles this year going places to promote Fort Scott.”

Regarding the special streets and highway fund, Bancroft said there is $430,000 budgeted for capital projects, and costs of about $495,000 “for just basic operations in that fund. There is about $430,000 available to do some kind of street program this year. I’m not recommending any cuts, just business as usual.”

Bancroft said there are two votes regarding sales taxes coming up in 2020 and 2021.

“It’s important the community understands that come 2021, we are going to be in a different environment,” she said. “The first is a county sales tax which currently states those dollars are used for public services. That will be on the ballot this fall. All of those dollars from that sales tax are being used in our general fund. There is also the half-cent sales tax for Buck Run and the pool which rolls off in 2021. We would like to have that passed for another 10 years. We’re building a program for infrastructure for our streets and to help with public health.”

City Manager Dave Martin talked about the possibility of transforming the former Mercy Hospital building into a “medical mall” after Mercy donated the building and $1 million to the county in February. Both Ascension Via Christi and the Community Health Center of Southeast Kansas had planned to build separate facilities on the Mercy property. Martin said he is not sure how the plan for a health care mall will be affected due to COVID-19.

“It’s important to have that half-cent sales tax available for health care,” he said.

Commissioner Kevin “Skitch” Allen asked if the half-cent sales tax is extended, “could there be a percentage toward streets and a percentage toward medical?

“The county assumed the position to take over the hospital at this time,” he said. “I want it in black and white where the money is going to go and make sure it stays there. I want to make sure it goes to that and that solely.”

Commissioner Pete Allen said the city “has not received street improvements the citizens voted for” in the late 1980s.

“That money has been used for other things,” he said. “Millions of dollars have gone into that fund, but look at our streets. We have not gotten the street improvements we were promised.

“The half-cent sales tax is not right either. That’s like robbing Peter to pay Paul. The pool tax is not a street tax. There’s a critical shortage of income for our streets. Sooner or later we’re going to have to get things straight. I don’t think you’ll get the citizens to vote for that sales tax unless we do something with the streets. It’s a disgrace to the city of Fort Scott … we can’t go back, but we can start from here and make it right.”

Kevin Allen said he thinks there are several improvements that can be made locally “at minimal cost.” He said inmates at the Bourbon County Law Enforcement Center “can do a lot of clean-up work.”

For the city’s water and wastewater funds, Bancroft proposed that all capital outlay projects be “pooled into a fund,” and commissioners will set priority for projects for the year.

“I’m recommending a 10 percent cut in those budgets,” she said. “It will be harder in the treatment plans because chemicals cost money in those plants.”

For the stormwater utility, Bancroft said there is a “very healthy cash reserve” of $850,000 in that fund.

“So I would ask for a budget amendment to give us authority to spend those dollars and transfer those dollars into a capital improvements fund to plan for some of those projects. That will be in a department by itself. Commissioners will set priority of projects.”

Bancroft said the city’s adopted debt service budget “is inflated,” showing expenditures of $2.4 million 2020.

“Really, it’s only at $2.1 million,” she said. “We inflated that budget a little bit, which allows us to have some cash reserves. This year, it’s giving some relief in the general fund. The next two years, we can use debt service money that is in cash reserves to keep the debt service transfer from the general fund to the debt service fund.”

Bancroft said the city is looking at a potential 15 percent reduction in property tax, and “if that happens, we could not have as much of a reserve in the general fund. We will monitor that from month to month. It’s important to transfer money from our utility funds in the event we don’t get the county distribution in time.”

She said impacts to the budget will likely be seen in the third and fourth quarter of 2020, and the first quarter of 2021.

“Hopefully our revenues will come in better than expected. We are going to be proactive,” she said, adding city officials will get a list of proposed cuts from each department. “And we may go to other departments and ask if they can cut deeper. Can we truly spend that much money on capital outlay? We’re leaving it in place for infrastructure projects currently.”

“As a city, we’re going to look at line items and see what we can do to reach that amount,” Martin said. “We’re getting ready if COVID-19 affects us the way people are projecting.”

During their regular meeting, commissioners approved the recommended changes in the 2020 budget. Pete Allen abstained from the vote. Commissioners Kevin Allen, Jolynne Mitchell, Randy Nichols and Watts voted in favor.

“We will move forward as a group with the intent of departments internally cutting budgets 15 percent and utilities cutting 10 percent,” Bancroft said. “We’re unsure of what revenues are going to do. We may be forced to use reserves to operate. I ask you to consider making the proposed reductions, and internally we will try and cut another 15 percent out of those budgets and hold it until we know where we’re at.”

Bancroft said savings could be seen through less travel, and “maybe we don’t replace uniforms this year.” She said there could also be a reduction in utility costs and savings in energy costs.

“I think the city and county could join hands for shared services during this time to save money,” Kevin Allen said.

Pete Allen said he would like for commissioners to make a decision for the “commission as a whole or for individually appointed people to talk to the county commission about combining efforts of the city and county to make this work.

“We need to get on a basis where we’re going to survive this virus deal,” he said. “There are lots of things we can do equipment-wise, and work-wise.”

Pete Allen recommended commissioners “go to the county, set up a timeframe, attend their meeting and present some ideas and work with the county to see if we can get a program going to help on some of our problems.”

Kevin Allen said he could contact the county Wednesday. He said the city could partner with the county to share resources.

“I will talk to county leaders and get a meeting set up. The public can attend, maybe an evening meeting,” he said.

In talking about money for infrastructure needs, Bancroft said the city has budgets in restricted use that “can only be used for a certain purpose.” In the variable use budget, there is a total of $14.9 million.

“We have a little more discretionary use in decision making,” she said, adding “75 percent of our dollars are spent on people, prior and future capital outlay. That leaves 25 percent to basically get commodities and supplies and contractual supplies for all city departments.”

Bancroft said there is about $2.5 million to spend on projects in 2020.

“We have that much money for 2020 infrastructure projects,” she said. “Even though it’s coming from those departments, it’s the commission discretion how to use them. If we pool these dollars, we have more power to do these things.”

She said city officials are setting priorities for the next five years and researching projects costs and how to fund them.