The city budget is on track, which is good news compared to the last budget cycle where the city had to tap into reserves to save jobs and programs.
City Manager Rod Swope updated the city finance committee Wednesday on how the two-year budget outlook is now that third quarter information is in
Swope said the state and federal revenues anticipated are expected to remain as projected.
The interest earned on investments is down $600,000 for this fiscal year, and Swope anticipates the same shortfall in FY 2012. Interest rates weren't as high as expected, he said. Of the $80 million city budget, most of that goes in and out of the city books. During that transition of receiving revenue and paying out expenses, the city earns interest.
Another area that saw a deficit in revenue is property tax. Swope said it's 2.5 percent less than projected, which equates to $1 million. He said property values haven't rebounded to the extent they projected, but instead remained stagnant.
Sales tax revenue overall was up 0.5 percent more than projected, which accounts for $400,000. Swope was surprised by that considering tourism sales this summer were 10 percent lower than projected - the city anticipated sales to be 12 percent lower than last year and instead they were down 22 percent.
One upside to tax revenue is the increase of local purchases - specifically gasoline and hotel stays. That revenue was 3 percent higher than expected.
Finance director Craig Duncan showed a graph with per-quarter trends from FY 2007 through FY 2011's projections. He said the trend is now a drop in tourism sales tax revenues.
"Our local economy is actually improving," he said of non third-quarter tax revenues. "(The drop) is a result of tourists coming in and not spending as much as they have in the past."
In addition, FY 2010 books have been closed and there is a fund balance of $600,000 in savings from departments and $843,000 of additional interest on income in FY 2010 that wasn't expected. Swope said it basically turned out to be a wash.
"The message is, we're not looking at major reductions, cuts or layoffs at this time, but we are holding the line tight," he said. "Fiscal years 2013 and 14 (don't) look quite so rosy."
Swope said significant deficits are likely in FY 2013 and 2014. Duncan said that's because state and federal revenues are either decreasing or being discontinued starting those years. The net shortfall projected into FY 2013 as things stand now will be $4.8 million. In FY 2014 that shortfall lessens to $2.9 million.
"That's all the more reason for us to hold the line and be as tight as we can," he said. "It's really hard to predict with any certainty what things are going to look like 3-4 years out, but it's an important strategy to use."
Assemblyman Bob Doll was hopeful the FY 2013-2014 budget could be achieved without a draw on the "rainy day" fund.
Swope said when he drafts a budget it is balanced, which may include cuts. He said if the Assembly gives direction to use rainy day funds over cuts, that's their prerogative.
"When I look at the budget, I think we've got to take some steps now to address that," he said. "It's hard for me to take drastic steps now to address a guesstimate of what things might look like three to four years from now. Nonetheless, I don't think we can ignore it."
Doll said he felt the upcoming forecast is more optimistic than two years ago.
Contact reporter Sarah Day at 523-2279 or at sarah.day@ juneauempire.com.
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