City Council on Tuesday denied Mayor Tom Henry's administration any tax increase to help fund the 2013 budget, opting instead to cut spending and dip into cash reserves to make up the difference.
Concluding a 3 1/2-hour marathon session, the panel voted 6-3 in favor of a proposal by Councilman John Crawford, R-at large, to freeze the city's overall property tax collections at the current level of about $106 million, rejecting a 2.8 percent increase on most properties.
“I think we can hold off one more year while the economy is still so fragile,” Crawford said, arguing that the worst thing the city could do would be to ask more of taxpayers.
By rejecting the tax increase, council members also left the budget with a deficit of about $6 million – a reality that will force the city to cut spending and tap some of its cash savings. To that end, council approved more than $1 million in spending cuts Tuesday, most with bipartisan support.
But Crawford's plan also will rely on about $3 million of interest produced by the city's $75 million “Legacy” fund – created from the lease and sale of the old City Light utility – and roughly $1.8 million from the cash reserves.
The mayor's budget had originally called for property tax collections to go up by a little less than 6 percent, to about $112 million. But Henry – facing pressure from council Republicans – had agreed Monday to cut that increase in half by tapping the Legacy interest.
“I think any day we can go without raising taxes is a good day,” said Councilman Geoff Paddock, D-5th, the only Democrat to join five Republicans in blocking the tax increase. “I appreciate the bipartisanship.”
Paddock noted that the cash reserves would drop from $13.8 million to about $12 million – or 8.5 percent of the $140 million property tax-supported budget. That level of savings is consistent with historical levels but less than the 10 percent benchmark pushed by administration officials.
As a rule of thumb, officials have said the city should maintain reserves equal to 10 percent of its operating budget. Anything less, and it becomes harder to deal with emergencies or unplanned costs, said city Controller Pat Roller.
“We'll have to go back and re-evaluate where we are,” Roller said. “It will be very difficult to get any appropriations in 2013 for unforeseen expenses.”