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NewslettersRainy day fund can't stop the perfect storm
It's raining -- financiallyspeaking -- in Beaufort.
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So it follows that now is the right time for the city to use its "rainy day" fund, as Beaufort's mayor-elect Billy Keyserling keeps suggesting.
But dipping into that fund would not mean the city could cure all its troubles with the stroke of pen.
For starters, not much of the $7.2 million in the reserve fund is available. If the city keeps five months worth of operating expenses in the fund, which it should, that leaves only about $1.6 million in play.
Then comes the decision on how the $1.6 million could or should be used. Top city staffers say it is available only for one-time costs. City manager Scott Dadson said that would not include a recurring bill, such as the large annual debt payments that will kick in next year to pay for the new municipal complex under construction at the intersection of Ribaut Road and Boundary Street.
But that bond debt is precisely why the reserve fund looks so inviting. The debt payment is going to hit property owners hard in the 2010 city budget that takes effect next July. Estimates on the additional taxes on a $200,000 owner-occupied home have ranged in a long-running public discussion from roughly $145 to $170. It will bring a property tax hike of 20 percent to 40 percent, depending on whom you listen to.
With the annual debt payment at about $1.2 million, no wonder the reserve fund looks like a perfect fit.
Other municipalities are tapping reserves. Charleston Mayor Joe Riley proposed last week a 2009 city budget that uses about $2 million from its $18 million reserve fund, which it tries to keep for emergencies, such as a hurricane. Riley made the proposal because Charleston's revenues -- like Beaufort's -- are down sharply. He suggests using the reserve to avoid layoffs and a tax increase in a flat budget. And he has told city department heads to count on 2010 being a "very tough year."
Beaufort already has made mid-year cuts to its operating budget -- a budget that did not increase property taxes, cut two positions and represented a 2 percent spending reduction from the previous year.
Dadson cut 6 percent from that budget in late October when he announced a hiring freeze and said the city would postpone some capital projects and the purchase of new equipment and vehicles. He also said at the time that the city staff would seek to reduce the budget by another 5 percent.
This comes as income from property taxes, hospitality taxes, and fees from business licenses and construction permits is falling. Dadson called that combination the "perfect storm."
If this isn't a rainy day, we'll never see one.
But in times like these, how is a reserve fund to be replenished if it is tapped?
Would using it to pay debt have a negative impact on the city's bond rating?
No matter what is decided on the "rainy day" fund, it can't be looked upon as the fountain of youth. It is a finite source.
The City Council must be clear on its priorities, and we'd like to see police and fire protection at the top of the list.
And everybody needs to move beyond second-guessing the debt for the municipal complex. It's a done deal. It is indeed a large debt and it comes at a harsh time. But it cannot be wished away. Growth in the tax base was counted on to help relieve the debt burden, and we have faith that the tax base will rebound.
Beaufort is left with very little wiggle room. It must wisely examine the use of every penny, and that includes the "rainy day" fund.
@Nyx.CommentBody@