The council that sits around this table in January is going to have some real hard decisions moving forward in the four years they're going to be facing. — Alderman Bill Durrence
AMID what by many measures is a historic national and local economic boom, the City of Savannah is — incredibly — facing a serious budget crisis within the next year or two.
Despite record-high tourism, record-high port activity, and a frenzy of development in some areas, City Council was warned in a workshop last week that “The revenue base is not growing as fast as the expenditure base,” in the words of City Budget Director Melissa Carter.
If the national slowdown they anticipate happens in the next couple of years, “In 2021 we’re going to see a lot of adjustments we’ve made on both sides, revenues and expenditures, come home to roost,” Carter said ominously.
New Interim City Manager Pat Monahan has his hands full coping with the economic picture left behind in the wake of Rob Hernandez’s departure earlier this summer.
(Ironically, leave payouts to Hernandez and other recent high-level departing officials have added to the budget challenges.)
While currently there are no plans to raise City property taxes for the second time in two years, Alderman Bill Durrence said at some point the City will face a reckoning.
“We are not keeping up with the way our expenses are growing.... We’re going to have to identify ways that we can cut what things cost us, or we’re going to have to identify some kind of new revenue, because what we’ve got right now from what I’ve seen is not sustainable,” Durrence said.
“I don’t want us four or five years from now to have to be coming in here looking for a 16 or 18 mill rate,” he said, as opposed to the current sub-14 property tax millage, itself over twice the amount of nearby municipalities.
(To be fair, the City plans a rollback of the millage rate next week down to 12.86, in accordance with state law to avoid a de facto tax increase.)
Future labor costs form a large part of the future challenge facing the City. There are over 300 current vacancies in the public safety/public works area alone, as the City finds itself in the same boat as the local food/beverage and hospitality industries in having a hard time filling positions.
Any attempt to fully staff current City positions at anywhere near competitive salary levels will be an enormous budgetary challenge moving forward.
Monahan boiled down the basic issue facing Savannah’s budget to “Slow growth” — meaning not in development, but in slow growth of tax revenue.
Amazingly, City property tax revenue only increased by a mere $700,000 over the past year.
Sound shocking given the amount of residential turnover we’ve seen the past few years? Monahan says that’s one of the “unintended consequences” of the county-wide Stephens/Day homestead exemption, which freezes property taxes at the purchase price.
“That’s why it’s necessary to talk about maintenance” on SPLOST projects, he said, “to take some of the pressure off of the General Fund. Because the General Fund is not growing... We see all this construction going on in the community, but the General Fund doesn’t reflect that in terms of new growth.”
(SPLOST funds, currently the City’s second-highest revenue stream, are limited by state law to capital and infrastructure costs, not maintenance or staffing.)
While there was no talk of resurrecting the defunct and hated Fire Fee, there is at least the hint of serious talk about somehow getting SCAD to pony up the equivalent of property taxes, likely in the form of PILOT (Payments In Lieu of Tax).
While the huge amount of property in City limits off the tax rolls might be our biggest elephant in the room, I wouldn’t hold my breath on that one if I were you.
The only truly robust area of tax revenue seems to be sales taxes, in the form of standard City sales tax, the one percent Special Purpose Local Option Sales Tax (SPLOST), and the hotel/motel tax, which largely goes back into funding local tourism marketing.
But sales taxes are hardly a panacea. They are the most regressive of taxes, disproportionately impacting the working poor.
They are also the most volatile form of tax. A recession would drive down tourism, currently a huge driver of local sales taxes.
On the heels of the budget workshop, the City has also finalized its project list for the next round of SPLOST, the seventh installment of the tax since its inception here in the 1980s.
While there is a renewed focus on infrastructure -- the original intent of SPLOST -- tourism related projects already begun still have to be seen through to fruition.
For example, two suggested SPLOST expenditures totalling nearly $15 million would go to pay for the seemingly endless Broughton “streetscaping.”
Savannah will get about 40 percent of countywide revenue from SPLOST VII, assuming it’s approved by voters in November.
Alderman Tony Thomas echoed a growing complaint about the SPLOST process.
“It’s our faults — it’s the elected bodies’ faults — because we got away from the heavy-duty projects that SPLOST was intended for,” Thomas said.
“I can tell you exactly where it happened. It was in SPLOST III... They did polling and it showed that SPLOST was in trouble. And in order to get neighborhood support, they went out and sprinkled these neighborhood projects into SPLOST to pass it,” Thomas said.
It will all be up to you again this November, as you vote up or down on SPLOST VII, and on who will be gathered around the budget table for the next four years.