Higher individual income tax revenues to date are significantly higher this year as compared to the prior two years due to a timing difference, which equates to approximately $900,000. This year the City implemented a lockbox for tax collections so that payments are sent to the bank directly where they are immediately deposited, thus eliminating the April 15th lag in revenue collections experienced in 2007 & 2008.
Local Government Funds are lagging due to reduced State and County tax revenues. The City receives these funds based on a formula, and the reduction is an indication of the current state of the economy.
By reducing the General Fund revenues as of April 30, 2009 by the $900,000 timing difference for income tax, the City is nearly $175,000 lower than this point last year in collections.
However, General Fund expenditures are $340,065 lower as of April 30th than this point this year. The true test this year of remaining under budget is the successful implementation of the automated refuse collection process which began last week.
As mentioned in the April 8th Balanced Budget Update, revenues are the City's greatest uncertainty this year.
This month we received word from the Cuyahoga County Auditor's Office that we will receive a 6% decrease in real property tax revenues in 2010, which as a typical reappraisal year that will not take place, the City would have expected to receive the on average 10% increase.
This reduction equates to approximately $950,000, with an known impact on the General Fund of nearly $500,000. The remaining $450,000 impacts capital and debt service.
With all of the above in play, the remainder of 2009 and 2010 will definitely be a budget challenge. The following is the preliminary 2010 budget process time line:
June 15th - Introduce 2010 Tax Budget to Council. Will include what is known with the 6% property tax revenue decrease and the Finance Department's preliminary high-level projections for 2010 revenue and estimated expenditures
Week of June 29th - Finance Committee meeting to discuss Tax Budget
July 6th - Expected Tax Budget Passage by City Council
Week of July 13th - The Finance Department will have preliminary 2009 year-end expenditure and revenue projections based on mid-year actuals and 2010 budget estimates.
Week of August 3rd - With the July 2009 month-end close, the City will know the 2nd Quarter Estimate Individual Income Tax Revenues to see if there is a decrease. If so, determine how it will impact the remainder of 2009.
Since the City of Lakewood does not have any major industrial or commercial employers, its major source of income tax revenue is from its residents.
The 2nd Quarter Estimate is what residents pay on a quarterly basis of their estimated income for that year. The 2nd quarter estimate receipts are crucial to see how the economy is impacting Lakewood's citizen's since anyone that was laid off or furloughed in late 2008 or 2009 would adjust their estimates that this time.
The City will have also received Property Tax Advances by this date to determine actual collections vs. the County projection / what is budgeted. If these revenues are below the estimate, will need to determine how it will impact the remainder of 2009.
Based on mid-year expenditures to date and year-end projections, plus the known income and property tax revenue as detailed above, determine if any mid-year budget reductions are needed.
The City will also receive 2010 Local Government Fund revenue estimates for the State by this time.
August & September - The City Administration will begin to craft the 2010 Budget Strategy.
October 1 - Purchasing Cut-off. No new purchases can be made after this date.
October-November 15 - The Finance Department will be working on the creation of Nov. 15th Estimate of Expenditures / 2010 Budget Document
November - December - Budget Hearings will take place depending on the status of the union negotiations. All of the City's seven bargaining unit contracts expire on December 31, 2009.
For more information regarding the City of Lakewood's Finances, go to: http://www.onelakewood.com/finance