TERRE HAUTE —
Terre Haute Mayor Duke Bennett and other city officials have been fielding questions from worried city employees, city council members and taxpayers since the Tribune-Star reported last weekend that the city’s critical general fund cash balance was around $41,000.
In a July 3 interview with the Tribune-Star, City Controller Leslie Ellis estimated the June 30 general fund cash balance was approximately the same as a year earlier, when it was a little less than $41,000.
However, the true June 30, 2013 cash balance, calculated early this week, is significantly greater, new figures from the controller show.
The general fund, which pays for much of the day-to-day operations of the city government, had a balance on June 30 of $378,037, the figures show.
That’s still low compared to the general fund budget of $33 million, but it marks a steady improvement over the past two years, Bennett said in a follow-up interview with Ellis on Thursday in City Hall.
As the mayor noted, on June 30, 2011, the general fund cash balance was actually a negative number, -$441,983 and a year later was $40,516. Looked at that way, the general fund balance has improved more than $800,000 in two years, he said.
“At least we’re trending the right way,” Bennett said.
Still, it costs about $2.75 million per month to cover the city’s general fund expenses, so even $380,000 would not cover more than a few days, leaving the question: How will the city cover its remaining 2013 expenses before receiving its second, big property tax payment in December?
Non-property tax revenue
Controller Ellis, speaking Thursday evening, addressed that question.
The rest of the money for this year will come from the numerous non-property tax sources of revenue that also feed the general fund, the controller said. That revenue reaches the city at different points during the calendar year, some quarterly, some monthly, etc., she said.
Those sources of revenue include county income taxes, a payment “in lieu of taxes” from the wastewater treatment plant, cigarette taxes, state casino revenue and more. Taken together, those sources should carry the city through the end of the year, Ellis said. However, the controller added, if there would be a shortfall before the next property tax disbursement, it can also be covered by an advance on that December disbursement.
The county government – which handles all of the property tax money for the county – typically receives the property tax disbursement several weeks before writing checks to the various government entities in the county. However, once that money comes in, it’s possible for the city to get a portion of the total disbursement a few weeks early, city and county officials have said.
For example, before taking the lion’s share of its June property tax payment this year, the city asked the county for – and received – a portion of its June, 2013 disbursement. That advance was $4.7 million of a total payment to the general fund of $11.6 million. The advance came a few weeks before the rest of the disbursement was given to the city, according to figures provided by the Auditor’s office.
It’s not uncommon for cities or school corporations to ask for part of their property tax money early, said Jim Bramble, Vigo County treasurer and a former county auditor, who spoke to the Tribune-Star earlier this month. When he served as county auditor, it happened regularly, he said.
Tax anticipation loan
Another source of funding for the general fund is a $5 million “tax anticipation” loan, which the city has taken for each of the past two years. Such loans are simply advances on property tax revenue due to the city at the end of the year, Bennett noted. Borrowing the money, which involves interest payments of about $50,000, helps preserve between 100 and 120 city jobs, he said.
The $5 million tax anticipation loans have been made necessary by lost revenue as a result of the state’s tax caps, Bennett said, adding he hopes to eliminate the need for them after this year.
If the tax caps were eliminated for just one year, the mayor said, the City of Terre Haute could put $5 million in its general fund and put another $4 million in the Rainy Day Fund. “Just one year,” Bennett repeated, “then, they could turn [the caps] back on the next year.”
Furthermore, Bennett noted, the general fund is important, but it is not the only indicator of the city’s revenue. Looked at more broadly, the city on June 30 had a total of more than $41 million in all of its various bank accounts, he said.
However, Bennett quickly added, that doesn’t help the general fund balance, nor does it mean the city is stashing money away it could otherwise be spending. The city has about 80 different line items in its budget and nearly all of them are restricted in some way, meaning their dollars can only be used for specific things, such as economic development, capital projects, police and fire pensions, tax increment financing projects, the engineering department or the city’s golf courses.
City and county
Another point Bennett wanted to make in light of last weekend’s article was that the city and the county have been affected differently by the tax caps.
As reported last week, the June 30 cash balance for the Vigo County government in 2012 was $23 million, more than half of their total budget for the year, raising the question: How can the county government have such a healthy cash balance while the city is struggling?
For one thing, the county’s elected leadership took a lot of “proactive” steps around 2008 when the caps were announced, said Tim Seprodi, county auditor. Those steps included a hiring freeze, wage freezes, an employee “buyout” and a “spousal carve out,” under which any county employee whose spouse was covered by an insurance plan from another employer had to be dropped from the county’s insurance plan.
“It was very hard,” Seprodi said. “Kudos to the county employees who picked up the extra work without extra pay.”
But another answer is clearly the impact of the caps on the city versus the county.
The City of Terre Haute has lost just shy of $30 million in property tax revenue in the past four years compared with about $14 million for the Vigo County government, according to figures provided by the city and county respectively.
Furthermore, the city has also cut jobs since the caps took effect, Bennett said. Since taking office, the city’s workforce has been reduced by about 52 positions, Bennett said. “We’re to the bone,” he said.
The city and county each employ approximately 550 to 600 people, depending upon the time of year. Each tend to employ more people during the summer months.
Reporter Arthur Foulkes can be reached at 812-231-4232 or email@example.com
Check it out
In 2012, the Terre Haute general fund received (not including tax anticipation loans or temporary, internal fund transfers):
• $19.3 million in property taxes
• $3.6 million in county income taxes
• $161,000 in alcohol excise taxes
• $360,000 in state casino payments
• $43,968 in cigarette taxes
• $351,631 in financial institution taxes
• $1.1 million in motor vehicle/aircraft excise taxes
• $1.4 million in property tax replacement credits
Source: Indiana Department of Local Government Finance