The Norman Transcript

April 16, 2014

General fund continues to decline as expenses exceed anticipated revenues

By Joy Hampton
The Norman Transcript

NORMAN — Norman’s expenses will again outstrip projected revenue in the current budget before the city council.

The budget for the fiscal year that starts in July and ends June 30, 2015, projects $210,982,020 in total revenues and $213,436,778 in total expenditures. Most of the difference is in the general fund. Budgeted general fund revenues are projected at $73 million, while general fund expenditures are targeting $75 million.

“We still have a gap between expenditures and revenue,” Norman City Finance Director Anthony Francisco said. “We have some money in a savings account that is called a fund balance, but understand that if you continue to draw on your savings account, someday you won’t have a savings account.”

The general fund balance is a cumulative carry-over from previous years when the city had money left over. Francisco said a concentrated effort to “take bites of the apple” in narrowing the gap between revenue and expenses is working. The gap has narrowed in recent years after nearly a decade of spending down the general fund balance.

“I appreciate all the work that has gone into closing this gap,” Mayor Cindy Rosenthal said.

The city made it through the recession years by implementing lean government policies on hiring, and some staff positions were eliminated after those persons left or retired. Expenses that could be cut were cut.

“We’re a small organization for a city our size,” Francisco said.

The estimated beginning fund balance for FYE 2015 is just more than $3 million, while the estimated ending fund balance — based on the proposed budget — is about $2 million.

There is good news. While the general fund balance has decreased, the Rainy Day Fund — a reserve set up for emergencies — has increased.

Ward 3 City Council member Robert Castleberry has made it his mission to urge the city to quit spending the general fund balance.

“We had to spend some of it (the general fund) to get through lean times,” Castleberry said, “but we’re to the point where we can’t do that anymore.”

About 58 percent of the general fund revenue is comprised of sales and use tax. Castleberry said because cities operate on sales tax, the general fund needs to be healthy enough to serve as a savings account.

Capital funds are different, he said, because that money is earmarked for projects and should be spent.

To close the gap, the city council will consider three options: continued prudent financial management, implementing a storm water utility fee and/or paying off the University North Park TIF apportionment obligations.

The city has not completed all of the projects as outlined in the TIF agreement, and the other stakeholders would have to sign off on an early exit.

The city is budgeting for a projected 4.2 percent growth in sales tax for the coming fiscal year.

“The budget document is a lot of things,” Francisco said. “It presents the financial plan of the city, but it also communicates a lot of other things. Everything the city does is discussed in this city budget.”

Francisco and his staff looks at historic financial trends and future trends in making up the budget, which is basically an informed guess on what the coming year will bring.

It’s never an exact science. Building trends are an important indicator of economic health.

“Our local building sector has been pretty good the last year or two,” Francisco said.

There was an increase last year in the number of building permits, but less of an increase in the dollar value of those permits.

Another source of revenue is franchise fees, which make up about 10 percent of the general fund revenues, but those fees can be unpredictable.

“Our franchise fees are really impacted by the weather,” Francisco said.

Electric and gas companies pay franchise fees. Last summer was mild, resulting in low electric franchise fees. When winter hit, some of that money was made up through gas franchise fees because of uncommonly cold temperatures.

City Manager Steve Lewis said Norman is faring better than the nation but, in general, is following the same trends.

“What we’re seeing in Norman is what we’re seeing in cities across the country,” Lewis said.

Those trends include greater dependence on local revenue, such as sales tax and services, because of cutbacks in state and federal aid.

“There’s just not as much governmental aid as there were in previous years,” Lewis said.

Other trends in city government include more contracting of services such as Norman’s new contract for vehicle parts for the city fleet.

Technology has ushered in a shift away from a manufacturing base to a more service-based economy.

As policymakers, the city council will study the budget and drill down into the details in the coming weeks. Any changes will be presented as formal amendments at a city council meeting when the council adopts the budget.

Council members will look at the city’s enterprise funds (water and wastewater utilities) budget at the study session April 29. On May 6, the council will examine the capital funds budget.

If needed, final details will be discussed at a study session June 3, and the budget will be considered for adoption June 10.

Joy Hampton



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