Norman's city budget shortfall is now forecasted to $5 million to cover a revenue shortfall for the current and next fiscal year, City of Norman Finance Director Anthony Francisco told the finance committee Thursday night.
He characterized the city's financial position as "dire" now that a legal challenge had been "foisted upon them."
"This is not a problem that can be kicked down the curb, finance committee, fiduciaries for the city," Francisco said. "Please, this is serious."
By the end of the fiscal year, Francisco predicted the city would end its balance in the general revenue fund with a balance of $760,000. The city's fiscal year ends June 30.
"On an $83 million budget that is an unacceptably low fund balance," Francisco said. "That's less than 1%."
The city adopted its budget for fiscal year 2019-20 based on plans to end sales tax contributions as of June 30, 2019. The council had been negotiating with developers in the University North Park TIF district but not did pass an amended agreement until Nov. 26, 2019.
However, a petition to challenge the ordinance and subsequent protest to the petition places the city back to its 2006 original agreement. The city cannot repeal the new agreement, City Attorney Kathryn Walker said.
Francisco forecasted a budget shortfall nearly two years ago if the TIF allocations continued to fund the agreed upon $54.7 million allocation, of which $29 million has been funded since 2006. With the agreement on hold, the city is obligated to honor the original plan and will have reached the total $54.7 million by January or February 2021, Francisco said.
The city has faced falling revenue in several areas including a $900,000 drop in franchise fees such as Cox cable and OG&E. Francisco said Norman is experiencing a building industry slump that also resulted in less fee revenues.
Francisco presented a series of budget cuts in the general revenue fund without cutting city staff or furloughing employees.
His plan cut a variety of services such as mosquito control program, fuel supply, mowing contractors, outside legal services and even funds set aside for natural disasters.
"Let's hope that we don't have a tornado," Fransico said. "We haven't spent that...so we could save $786,000 in this year's budget."
Francisco strongly urged finance committee members to avoid using rainy day funds which have to be paid back within three years to that fund.
His proposal would save $2.5 million, half of what the city needs to recover.
"This is my best shot but I'm wide open," he said.
There was some hope among committee members that the sale of city-owned property could solve the crisis until TIF allocations max out next year. Norman Regional is prepared to purchase property in the Porter Avenue campus if the city agrees to build a new senior center on the lot. It is appraised at $5 million, City Manager Darrel Pyle said.
Pyle discouraged using one-time funds for a continuous revenue problem. Francisco said the sale could be 10 months away while financial decisions must be made to address the shortfall now.
Francisco said he had urged city council members before to consider "weaning" off sales tax revenue for projects that could be funded through general obligation bonds such as capital improvements. At the time when the city council first considered ending TIF allocations, Francisco suggested charging storm water utility fees which would have raised $3 million.
The council ultimately decided to roll the dice with a renegotiated TIF agreement.
"We've got real big problems now and not enough time to solve them," Francisco said.
City Attorney Kathryn Walker told the committee that because of the petition and protest it was unclear when the legal challenge would be settled, but if the petition succeeded in court the public could not vote on the ballot until May 2022 according to the Oklahoma Local Development Act.
Cynthia Rogers, who signed the petition her husband Stephen Ellis filed last month, said it was unfair to blame the petition for the city's budget problems.
"The council voted on the budget without having this resolved, so whose fault is that?" she said. "The council had other options of how to stop the increment. They looked at 10 (options). They went down a path which led them into being hijacked into a bad deal."
She took exception to the election date, which the petition requested as a special election in April 2020, a deadline that is now passed with the protest challenge.
"So maybe the protesters withdraw their challenge," she said. "Why don't they withdraw their protest?"
The finance committee has set a public hearing on the budget and proposed cuts from 4:30 to 6:30 p.m. Monday, Jan. 27.
Mindy Ragan Wood