Last week’s City Council pre–meeting workshop covered quite a bit of territory and took quite a bit of time, clocking in at just over three hours.
The central topic included a lengthy presentation by the City’s Chief Financial Officer Dick Evans, who outlined the state of the City’s finances, including an update on the pension fund.
Rumors had been circulating the City was on the verge of insolvency, and questions about the pension fund had been raised spontaneously during hearings about the City Manager hiring process earlier in the year.
“We must confront these with the facts,” Mayor Johnson stated before the presentation began, instructing Public Information Officer Bret Bell to air re–broadcasts of the workshop during good time slots on the City’s television channel in hopes of dispelling some of the rumors.
Beginning with a review of local economic indicators, Evans cited data from a recent Armstrong–sponsored study showing the effects of the recession had finally bottomed out and had begun to show signs of improvement. However, he cautioned that growth would be slow.
The results of several other indicators also seemed positive. Unemployment in the Savannah Metro Area was lower than the rates for the state or the nation, and had been declining for multiple consecutive quarters. While unemployment is improving, it remains double the 2004 rate.
One particular bright spot for the City is several forms of tax revenue, which are showing steady signs of improvement.
Sales tax revenue collection has leveled off, remaining above the 2001–03 levels, but below the peak in 2006. Additionally, Hotel/Motel tax revenue, a good indicator of tourism volume, has been steadily increasing since its low point in 2009 and now matches its pre–recession peak.
Overall, revenue collection in the first quarter of 2011 is $1.3 million higher than in the first quarter of 2010. And if the pace continues, the City could end up with a surplus at the end of the year. The looming issue with the budget will be property taxes.
Foreclosure activity in the City and County remains about steady, with an average of 200–300 homes being foreclosed upon per month. Because state law changed in 2009 requiring municipalities to calculate foreclosure sales into the value of the tax digest, the number of foreclosures could remain an issue for City revenue, part of which is collected from property taxes.
Property tax assessments are carried out by the County’s Board of Assessors, and the new tax digest is expected to be published in the latter part of June. When the City created the current year’s budget, they planned on the digest declining four percent in total value.
If values drop lower, it could create a deficit for the current year, similar to the situation last summer when Council was forced to raise the millage rate a half percent in order to help close a deficit created by steeper than expected declines in the tax digest.
During his presentation, Evans also presented a range of fiscal data for 2010, explaining that even with the millage rate increase, the City’s General Fund revenue was $1.18 million below expected levels. However, the City’s expenses were $1.64 million under budget for the year, which created a net surplus of $460,000.
The pension, although still reeling from investment losses suffered during the stock market plunge in 2008, appears to be recovering and is in no immediate trouble.
The heavy losses incurred during the market crash at the onset of the recession have contributed to an unfunded actuarial liability of about $54 million, which means that the amount in the fund fell behind schedule to meet projected future obligations.
Evans, however, stressed that it would be a mistake to extrapolate short–term data over the long term, highlighting better than expected returns on investment assets in the past year as well as the possibility of increasing the City’s contributions to the fund annually or potentially reducing projected benefits at some point in the future.
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