As city leadership gathers for the first of several budget-brainstorming sessions today, officials say the goal is to not raise rates or reduce services.

“At this point in the game, I have no intention and there have been no discussions with respect to increasing any rates for water, sewer, trash or anything like that,” Interim City Manager Charlie Cassens said. “It is not our intention to raise rates or fees to offset any revenue shortfall and it is not our intention to balance the budget on the backs of our citizens.”

Cassens and heads of various city departments are expected to meet today and Wednesday to discuss alternative budget cuts, as the city must pare down about $3.8 million by July in order to balance the budget for the next fiscal year. The $3.8 million is equal to about 12 percent of general fund dollars — about $45 million — in the city budget. The general fund dollars are separate from water and sewer rates, which come from enterprise funds, Cassens said.

“Those are both very separate funds,” he said. “The (sewer or water rates) come from the cost of those projects and to pay our debt service, or bills we have to pay back on the loans to build the projects. … The general fund is the cost of operating the city and that is the fund we have to work with in respect to meeting revenue shortfalls.”

Cassens said various ideas and alternatives have previously been discussed and conversations will continue, but any decisions staff comes up with are subject to council approval.

“We already have a set schedule of sewer rates increases, which will increase in April,” Cassens said. “That was previously decided by the council, and nothing (staff is) doing now will affect that. The final actions on all of this will be made by City Council.”

One idea, involving the sewer project and the general fund, caused confusion among some who thought sewer savings would be used to reduce the shortfall, instead of the savings being used to ease rates for residents.

“This is simply not the case,” Cassens said. “If residents’ rates or savings are affected and the numbers show it will be a negative impact (on residents) and on the sewer project, it’s probably not something we’ll recommend.”

Cassens further described the alternative, in writing, this way:

“The concept includes retaining some or all of a $3 million subsidy that the general fund contributes to the sewer project each year. This subsidy was put into place at the beginning of the project for the purpose of lowering the amount of money that would need to be borrowed, thereby lessening the debt service payments and tempering rates. This fund currently holds approximately $20 million and the analysis is to determine how these funds can be maximized to their most beneficial use now that the wastewater expansion project is nearing the final stages. 

“The analysis is not complete, and council will have the final say,” Cassens wrote. “However, I believe the available fund balance may be sufficient to allow the city to meet its financial obligations to its lenders, provide a systematic drawdown to offset debt service, and/or minimize the amount of money that would need to be borrowed to fund the final construction contracts. If any or all of these scenarios is true, I think we can justify keeping that $3 million subsidy in the general fund this year, and use that money to offset operating revenue shortfalls. This, of course, would help the city maintain acceptable levels of service to the community and preserve the jobs of the citizens who provide those vital services.”

While previous city managers have met with each department head individually, Cassens said it was important to host a meeting with every department head present at the same time.

“We are all going to meet together and work as a team, not as individuals, to figure this out, Cassens said. “This is one piece of a very large puzzle we’re putting together. We need to work together to get it right. On July 1, we will begin the 2010-11 fiscal year with a balanced budget. How we make it balanced is the exercise we’re going through now.”

Budget work sessions with City Council are scheduled for May 4 and 18. A tentative budget is expected June 8, with the council scheduled to adopt the final budget on June 22. The budget for the next fiscal year must be approved before July 1.

The city is also awaiting any updates from the state Legislature. The projected $3.8 million in the general fund deficit comes from state shared revenues and city staff is hopeful the state shared revenue won’t be reduced more than that, City Finance Director Gayle Whittle said.

“If state Legislature chooses to sweep all of our state shared revenue, then that’s almost $14 million (or 35 percent of the general fund) that we would lose,” Whittle said. “So the catastrophic scenario would be if the state took all of that.”

Whittle said she agrees with the projected $3.8 million shortfall and does not see the state Legislature cutting the entire fund.

“Do I think (a full $14 million cut) is likely? No,” she said. “Could they sweep some of it? Yes they could, but I think our current projection is probably very accurate.”

You can contact the reporter at nbruttell@havasunews.com