Pulaski Town Council debates budget preparations

Pulaski Town Council debates budget preparations

While the current COVID-19 crisis is playing havoc with some local governments’ efforts to plan a budget for the upcoming fiscal year, members of Pulaski Town Council don’t want that to delay discussions on potential belt tightening.

At their meeting Tuesday, attended by only a couple citizens and broadcast over Facebook, council approved a timeline for meetings and public hearings regarding both the current year’s budget and the spending plan for next fiscal year.

At their May 6 legislative meeting, council will hold three public hearings – one regarding proposed amendments to the current year’s budget, one for a proposed 3 percent water rate increase and a third for the draft budget proposed for the next fiscal year which begins July 1.

At a second scheduled meeting, on June 2, council will formally set water and sewer rates and adopt the budget for next year – a budget Town Manager Shawn Utt referred to as a “bookmark budget.”

Due to the COVID-19 crisis, the town is expecting revenue declines especially in the area of meals tax and sales tax revenue.

Utt told council a recent study done for the Virginia Municipal League by Old Dominion University warned local governments like Pulaski to expect revenue declines of between three and four percent due to business shutdowns because of COVID-19.

Utt said he prepared his 2020-21 “bookmark” budget proposal with a five percent “buffer” to account for the expected declines in revenue.

Utt said his budget proposal keeps all employees for the next fiscal year that the town has now.

In July, Utt said he is hopeful the town will have a better handle on revenue figures, and the new budget can be adjusted.

Utt recommended scheduling the public hearings, with an eye toward approving the budget proposal at the June meeting as usual and making adjustments later on.

That recommendation, however, didn’t sit well with at least a couple members of council still stinging from the revelation several weeks ago from an auditor’s findings that the town’s financial picture coming out of the 2018-19 fiscal year was much worse than council knew.

The 2018-19 budget, council learned, suffered from a mixture of overspending, shortfalls in projected revenues, mistakes and an audit process that was disrupted when the town’s “pre-audit” consultant pulled out of the work, forcing the town to find a new consultant and getting them up to speed in a short time.

The end result was the town’s unassigned fund balance as of June 30, 2019 stood at 8.32 percent – compared to 15.34 percent a year earlier.

The findings set off a string of actions by Utt including a hiring freeze and a halt to all non-essential spending.  For their part, council ordered “extreme belt tightening” in the preparation of the 2020-21 budget.

With that in mind, Councilman Joseph Goodman led the protest against Utt’s recommendation to move forward with the budget and adjust it later.

“I know we’re concerned about the budget and how things are going with COVID-19, but what concerns me is we are proposing to fix (the town’s financial issues) by not doing capital spending. I’ve always complained about kicking the can down the road and putting capital projects off for another year,” he said.

“I don’t think the solution is kicking the can,” Goodman said. “The cuts we’re proposing here are all the low hanging fruit. Positions that are already vacant. There’s no work here that shows me we’re making a real conservative cut. We’re also not even talking about the fact that we owe our reserves a substantial amount of money. I had proposed you come back to us with an $8.7 million budget and this is $8.8 million. I think we’re still $120,000 over budget. It’s too optimistic.”

Goodman advocated having “tough discussions” about further belt tightening now instead of waiting until later in the summer or even the fall, should the COVID-19 shutdowns drag on.

Utt responded that his proposal is a “bookmark” budget and that he and council would have to have “those larger discussions” about further belt tightening later.

“Not having answers today or next week or next month … I don’t know if those discussions are going to be worth anything until we have a better idea of the full effect,” Utt said.

Vice Mayor Greg East responded that the town’s budget uncertainty due to COVID-19 involves revenues, not necessarily expenses.

“That’s where we need to look for savings. Mr. Goodman says $120,000. I would suggest even more,” East said.

Goodman responded that $120,000 is a “minimum.”

“We really need to fix what we’ve been doing with reserves and what happened as a result of the last fiscal year,” Goodman stated.

Goodman added everyone had said the town’s financial issues won’t be fixed by tax increases.

“It will have to be through belt tightening and more conservative budgeting, and I don’t think we’re conservative enough yet,” he said.

East agreed.

“I don’t believe holding off to the summer months is the right thing to do. We need to have the hard conversations now and set ourselves up for when this (virus) passes, and we can adjust our revenues up,” he said.

Mayor David Clark urged moving forward now on Utt’s budget and adjusting later.

“We’ve (he and Utt) spent countless hours on conference calls and talking with local governments in this part of the country. We’ve requested information from all the experts at VML,” Clark said.

Noting there is nothing wrong with getting expenses in line, Clark said everyone is pointing to the fact that there are so many unknowns that “anything we do now budget-wise will be changed.”

“The strongest recommendation everyone’s making is to quit working on the budget. Get a budget in place – have it on the books – knowing we will be able to go back and adjust it. And not create a bunch of meetings that we need to drag people out to, and not create a problem that will turn around and be just the opposite next month,” Clark reasoned.

Clark said even the state had put its budget on hold.

“So much is evolving. We can have all the discussions you want, but we need to get on schedule to get the budget approved and get it out there, whatever it is. Get the public hearings done in a timely manner and make that happen. If for no other reason than for the preservation of the process. No one here doesn’t think the hard work still needs to be done,” he said.

Goodman said he understood, but noted council and staff “knew going into the budget work that we had some serious fundamental problems with how the budget had been done before, and there needs to be some substantial cuts in order to make up for it.”

“As Councilman (Lane) Penn rightly pointed out, we have not been putting money into reserves, but we’ve been really good at spending it,” Goodman said.

Goodman added he knew there are questions about revenue and everything is going to change, “but there’s nothing wrong with pushing up our sleeves and trying to figure out where these cuts are going to come from to help us long-term.”

Goodman continued that revenues for the town have been increasing slowly because “we’re not recruiting businesses like council has asked for time and time again.”

“We have programs that need additional funding and we have projects needing to be done from the can being kicked down the road for decades,” he said.

Noting the current filter plant repairs and upcoming boundary adjustment, Goodman said council will have to shrink government a bit to figure out how to do these things and pay the bills without asking the taxpayers for more money.

“If revenues go up then we can figure out what we can invest in or what goes into reserves or what programs we can fund,” Goodman added.

East noted that council and staff still have time on the budget.

“The budget deadlines haven’t changed. We can still discuss it. Rubber stamping a budget is a bad idea,” he added.

Councilman Brooks Dawson said shrinking the size of the budget is a “necessary discussion.”

He added that discussing shrinking the size of the budget “should be on every meeting agenda until these issues are resolved.”

Utt pointed out he had already made some big cuts within his budget proposal.

He said the amendments to the current year’s budget, if approved, puts the town at a $10.4 million budget.

“I started work on next year’s budget at $9.6 million and I cut down to $8.8 million. I feel like we’ve cut a pretty good amount and accomplished the desire to fix the problems from 2018-19. I guess I’m at a loss on what additional cuts we need to look at without affecting levels of service,” Utt said.

“I guess the discussion we need to have is what level of service are you willing to do away with or start affecting,” Utt added.

Dawson agreed that is a discussion council needs to have.

“I think we can go down one road and get the budget on the books, and still discuss what to do (on further cuts),” he said.

East boiled it down to a simple question.

“What are the things we are paying for that don’t reach the people we serve,” he said. “That spending is what we need to look at.”

“We have to look at this as conservatively as we can. We can’t have a repeat of last year,” he added.

It was decided that council members will meet individually with Utt to discuss potential further belt tightening in next year’s budget.  Then the full council will meet again on the subject in a couple weeks prior to the May 6 meeting.