“The alarm bells are sounding,” said a solemn David Nunn, Madison’s City Manager, to the mayor and city council at last Friday’s budget proposal. “I take every request to move taxes up even by one dollar very seriously, but it would be irresponsible of your staff not to tell you what we are seeing and bring it before you and make a recommendation.”
That recommendation from city staff is for the Madison Mayor and City Council to forgo adopting the rollback millage rate and instead, increase the millage rate to generate more revenue in order to counteract a growing shortfall in the city’s budget due to both temporary and permanent expenditure increases.
Karen Stapp, the city’s chief finance officer, presented the proposed Fiscal Year (FY) 2022 budget, coming in at a whopping $18.9 million, a $2.1 million increase from the current fiscal year’s budget.
According to Stapp, the city has a current deficit of more than half a million dollars, and that deficit is on a trajectory to swell to $710,000 under the FY 2022 budget if the city does not raise property taxes.
“This year’s deficit of $528,000 definitely raised my eyebrows,” said Stapp. “And now it is truly concerning that we are seeing it grow to $710,000 next year.”
According to Stapp, despite some revenue increases from funding sources such as SPLOST, TSPLOST, it is not enough to cover the increase in expenditures.
“There have been permanent increases in the general fund. General Fund Revenues have increased by $200,000, but even though revenues have increased, expenditures have increased even more, by $392,000,” said Stapp as an example.
Some of the expenditures include ongoing renovations to Madison’s City Hall, the gas main expansion into Bostwick, and police vehicle purchases.
Nunn pointed to the city’s tax levy history, noting that the city did not take the rollback millage rate in 2010 or 2015. “By that pattern, we are a year late on this,” said Nunn, who urged the council to consider forgoing the rollback rate this year. “It’s easy to get in the habit of staying flat but it’s a dangerous thing to stay artificially flat.”
Currently the city’s millage rate is 5.642. Based on preliminary numbers, the rollback rate is expected to be 5.536, but that could change before July 1. If the city raises the millage rate to generate just an extra $180,000 in property tax revenue to keep the current deficit flat, the millage rate would need to increase 6.18, which would amount to an 11.6 percent increase in the millage rate. However, these are preliminary numbers and property values in the digest could alter how much the city chooses to adjust the millage rate.
“That’s just to keep us where we are,” said Stapp. “That will not erase the entire deficit, but just keep it from growing. The difference needed is $181,000 just to keep us where we are.”
Stapp warned that relying on the city’s fund balance (known as a rainy day fund) would be unwise. The City currently has $1.2 million in its fund balance, but covering the full deficit out of it would deplete the fund by more than half.
Nunn argued that raising the millage rate would amount to a “modest” increase for most property owners. He cited data based on houses worth $400,000.
“Even with a house worth $400,000, you’re looking at 50 bucks. The increase is quite modest overall,” said Nunn.
The Madison Mayor and City Council expressed hesitance over raising property taxes, but also acknowledged it may be inevitable.
“We do not like to see taxes be raised, but we understand sometimes they have,” said Madison Mayor Fred Perriman.
Councilman Rick Blanton acknowledged that relying on the city’s unreserved funds would not be a wise solution in light of the permanent increases to expenditures in the city’s budget.
“That just won’t plug the hole,” said Blanton. “We would just be kicking the can down road if we do that.”
Councilman Eric Joyce asked the council and city staff to explore all other possibilities other than raising property taxes to solve the deficit problem.
“Before I vote for any kind of tax increase, I want to make darn sure there are no other options,” said Joyce. “I want to make sure that the programs we are doing on behalf of the citizens are so important that we need to raise taxes and that we are spending that revenue as efficiently as we can.”
Stapp noted it is up to the mayor and council to decide how to move forward.
“We provided them with the proposed budget and all the possibilities,” said Stapp. “Our job is to give them all the information necessary for them to make responsible financial decisions for the city.”
Nunn reiterated that the growing deficit is a red flag that property taxes need to be adjusted.
“We always watch this number and when we feel like it’s starting to creep up as it has this year, that’s when alarm bells start going off,” said Nunn. “It’s not deafening just yet, but it is enough to bring to your attention. The alarm bell is starting to sound and we would rather bring this up now and do something about it rather than get ourselves in a ditch and have to make even harder choices down the road.”
Nunn defended the city’s fiscal responsibility and use of taxpayer money to provide a high standard of living for its citizens.
“In previous years when the city has had to go up on property taxes...I think it could be justified, I think every dollar can be justified,” said Nunn, who noted people may complain about property taxes but also enjoy services provided by the city. “Also, in the same conversation they might complain about property taxes but they might also ask for their street to be paved or they might compliment the city on how often they come by to pick up limbs and leaves, or if they put a mattress out by the road--well, guess what? It disappears. Or the police department gave good service or the fire department is well equipped. We all know those things, but sometimes there’s a public disconnect. We aren’t just rat-holing this money. Our books are wide open.”
The Madison Mayor and City Council will further discuss the proposed budget at the next regular meeting on Monday, May 10 at 5:30 p.m. The public hearing on the proposed budget will be held on Friday, May 21 at 8:30 a.m. The council will vote on the budget on Monday, June 14 at 5:30 p.m. To tune into Madison Mayor and City Council meetings via live-streaming, visit the city’s website at: www.madisonga.com.