Sales tax revenues for the third quarter of the calendar year dropped more drastically than expected, and in revised budget forecasts, Juneau faces a shortfall of about $8 million by the end of 2012, city finance director Craig Duncan told the Juneau Assembly Wednesday night.
That shortfall will likely mean staffing cuts. It will also likely mean the city will have to make the use of some of the money in its $9.3 million "rainy day" fund.
Sales tax revenue is down about 12 percent compared to the third quarter of 2008.
Of that, Duncan said 5 percent of the total drop is due to a decrease in local sales, 5 percent to a decrease in tourism sales, and 1.5 percent to a decrease in revenue from fuel.
"We've seen a significant decline in sales tax revenue - substantially less than we had anticipated when we put our budget together," said city manager Rod Swope.
Duncan projected sales tax revenues will begin picking up in the 2011 fiscal year, which begins July 1, 2010.
Property tax revenue is projected to remain fairly flat but better than expected, due in large part to revenue from Greens Creek mine.
Income from investment interest has declined.
The city also is anticipating $920,000 in federal stimulus money, which should arrive in a month or so, Duncan said.
Swope said starting in March, the city began cutting down on overtime, asking that unfilled jobs be kept vacant as long as possible, conserving energy, curtailing travel and making internal department cuts.
Due in large part to savings measures implemented, the city anticipates a $2.4 million carryover from the 2009 fiscal year.
Those cuts also will result in savings of $840,000 during the next 2½ years.
Swope said the city's most recent financial projections indicate that more cuts are coming.
"We're going to have to come up with $8 million through a combination of added cuts and reductions and revenue increases," he said.
Seventy-five percent of the city's expenditures are toward staff, whether bus drivers, teachers or office managers.
"When we start talking about budget reductions, literally it has to go back to staff, because there are no other sources (to draw from)" said Duncan.
Mayor Bruce Botelho said the city will most likely have to dip into its $9.3 million "rainy day fund," and expressed concern about large budget gaps past 2012, given the city's "heavy reliance" on state funds and a projected decline in state oil production.
"We're going to get swept up in some forces beyond our local control," he said. "We're going to be faced with a chronic problem of matching our revenues with our expenditures.... I'm very concerned that this is going to be a long-term problem."
One good thing is that the city is addressing the matter early on, said Finance Committee Chair David Stone.
"We are meeting way in advance of when we normally would on the budget, but we all know that we have some serious shortfalls ahead of us," he said.
The committee plans to meet again on January 13 and to provide instruction to Swope at that point.
Contact reporterMary Catharine Martin at email@example.com or 523-2276.
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