St. Petersburg will face some hard decisions on the city budget for the fiscal year that starts Oct. 1, several city council members said during a workshop Tuesday.
Revenue that funds city services, including revenue collected from sales taxes and user fees, is likely to drop because of the Covid-19 crisis, although the exact impact of those potential declines is unknown at this time, city administrators said.
City council member Darden Rice urged caution and suggested that proposed pay hikes for some city workers be put on hold while the city faces an uncertain future.
“I think we’re going to need to trim this budget. I think we’re going to need to use reserve money to help out our citizens. I think this is an inappropriate time for general wage increases,” Rice said.
The council got its first look at the preliminary operating budget for Fiscal Year 2021 on Tuesday, during an online meeting of the council meeting as a committee of the whole. The operating budget is separate from the $120 million capital improvements plan for FY 2021 that council members reviewed last month.
Both the capital improvements plan and the operating budget are drafts, constructed before the pandemic hit, Mayor Rick Kriseman told council members. Those drafts are likely to change before Kriseman presents a recommendation for a balanced budget in July.
The preliminary budget has a $5.5 million gap, with a projected $294 million in revenue and $299.5 million in expenses.
“We know revenue will be affected but we don’t know the magnitude at this time. Because of this the department budgets presented today may change by the time the final budget is approved,” Liz Makofske, budget director, told the council.
The preliminary budget sets aside $500,000 for reserves. City Council chair Ed Montanari called for raising that amount, and several council members said they agreed with that request.
“We have this rainy day fund and it’s raining,” Rice said.
Taxes make up about 70 percent of the proposed revenue, with user fees, fines, licenses and permits and other charges contributing the rest of the revenue.
One question the council focused on was ad valorem taxes, or property taxes. Property taxes are projected to increase 6.5 percent for FY 2021. Pinellas County Property Appraiser Mike Twitty is comfortable with that projection, Assistant City Administrator Tom Greene told the council, and Council member Brandi Gabbard, who is a Realtor, agreed, saying that any decline in property tax values historically does not show up until a year or two after a crisis.
“We don’t know yet where we will end up in the housing market,” Gabbard said. “People are holding on their values. They are not starting to panic sell their properties. They are continuing to hold and wait and see what will happen with the market.”
To avoid a downturn in property taxes going forward, Gabbard said, the city should focus on programs to avoid mortgage foreclosures and rental evictions.
Although the city may be able to count on stable property taxes for the upcoming fiscal year, the scenario could be different for FY 2022, Rice said.
“That means we need to make hard decisions now, not postpone difficult decisions,” Rice said.
Despite challenges, Kriseman said his administration wants to maintain some priorities in the upcoming fiscal year.
Public safety is the top priority, he said. About 51 percent of the preliminary budget is designated for the police and fire rescue departments. That includes funding for hiring new police officers, increasing the number of sworn personnel from 562 to 600. The city funded 13 new positions in the current year and has applied for a federal grant to help pay for the remaining 25 officers, Kriseman said.
Another priority is affordable housing. The FY 2021 budget includes $600,000 to provide funding for affordable and workforce housing; the capital improvements plan includes $7 million over five years for land acquisitions for affordable housing.
Here are the total planned expenses at this time.
The city has scheduled a budget open house at 6 p.m. May 18 in a virtual format. Click here for more information on that open house.
Kriseman is scheduled to present a balanced budget recommendation to the city council by July 15, with two public hearings on Sept. 3 and Sept. 17 before final adoption by the city council.