Sales tax figures for the month of March became available this week. The city’s most significant general fund revenue source has been down for seventeen months in a row with only one exception.
Last year, taxable sales reported for Salida were $115.4 million and were down 5.5% compared to 2008. Should we experience another 5% decrease this year, 2010 taxable sales will be below the 2006 level.
For the first quarter of 2010, the city received $52,000, or 5%, less revenue than budgeted. When projected over the full year (and factoring in the seasonality of collections), the city will have $272,000 less to spend for services and capital projects in 2010.
The sales tax shortfall, together with other reduced revenue sources, is prompting city officials to cut approximately $340,000 from the 2010 budget. The savings will come primarily from personnel-related costs, uncommitted community support funds, and reduced spending for capital projects.
At the last city council work session, I presented the elected officials with some options for reducing expenditures. The city council will be asked to approve cuts at their regular meeting on May 18. The council will be faced with difficult decisions about balancing the budget, while continuing to provide the level of services, road maintenance and improvements and other quality of life amenities that residents expect.
Before the 2010 budget was approved last November, staff and council thoroughly reviewed spending levels. Many items considered discretionary were eliminated at that time. Few easy choices remain for further reductions.
However, at this time, no staff reductions are anticipated. Although, the original 2010 budget included a pool for raises, city council is expected to cut these funds and continue the salary freeze currently in place for all personnel. Medical insurance premiums for employees increase on the first of July each year. The percentage increase will be fairly modest this year, a welcome change from the double digit percentage increases that have been absorbed for the past several years. The unexpected medical insurance savings combined with eliminating raises amounts to $92,000 of the needed budget reduction.
Council will also review the capital projects scheduled this year. Both staff and council are very committed to improving Salida’s roads and other public infrastructure. Last year, over twelve miles of city streets were improved. The 2010 budget includes funding to continue addressing the poor condition of our streets. Due to the drop in sales tax revenue, these plans may be slowed somewhat.
Your elected officials and city staff will continue seeking ways to replace declining sales tax revenue and deliver services in the most cost effective manner. We are currently working on a change in the structure of the sales tax, whereby the municipal and county rates would be combined under a county-wide sales tax. The total percentage of sales tax collected in Salida would be unchanged, but the rate in the incorporated parts of Chaffee County would increase for a more consistent rate county-wide.
Please continue supporting local businesses wherever possible. Retail and service establishments along with ranching and agricultural businesses are necessary for this community to retain the character and resilience that has existed for so many years. Although tourism is also important to Salida, this community sustains local businesses and is fundamental our economic viability. Our community and municipal government services depend on a healthy economy.
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