The Overland Park City Council will have major decisions ahead to keep spending in line with big drops in revenues. But City Manager Bill Ebel believes it can be done without increasing the tax rate.
Ebel proposed keeping the mill levy steady at 13.557 and no increase in the stormwater utility fee for the 2021 budget. But the budget he proposed to a council committee Monday called for the city to spend down its reserve funds to meet operating expenses – something it hasn’t done since the last recession.
Elected officials will also have to take a look at whether or how to fund arboretum buildings projects and the fence bordering the Westlinks golf course. Both those items have been controversial in the past.
Revenue drops from pandemic pose big challenges
The 2021 budget is fraught with complex problems stemming from drastic drops in revenue related to the pandemic shutdown. Right now the city is in “structural deficit” mode, meaning the revenues coming in won’t pay for expenses, he said. Ebel said he expects that to continue into 2021.
Sales tax, for instance, is projected to decrease by about 15% from last year, for a shortfall of $25 million, he said. Hotel room tax revenue is also down considerably following the cessation of travel. And for the first time in its 18-year history, the Overland Park Convention Center is operating at a loss, Ebel said.
Reserve funds will be used for essential services
City officials had planned to use the reserve fund for capital improvements, but now will spend it on essential services and maintenance.
Ebel’s budget proposal calls for an overall total of $298.9 million, which is 2% less than last year’s budget. However the part that funds the day-to-day city expenses would increase 2.2% to $129.7 million over the current year, mainly due to increases in public safety expenses.
The proposed budget would add a mental health co-responder to the police department, a crisis intervention team police officer, plus three firefighters and three captains and equipment for the new Fire Station 48. But some other city positions, a few of them already vacant, would be cut to bring the total full-time equivalent increase to 2.2.
Meanwhile total budgeted revenues are expected to decrease by 3.6% over the current budget year, even with a 5.9% increase in property valuation.
Hope for help from CARES Act
An influx of federal money from the Coronavirus Aid, Relief and Economic Security (CARES) Act could help, but it’s not clear that cities will ever be able to use CARES money for lost revenue. The law is written now to only cover coronavirus-related expenses such as protective gear, although there has been some discussion of changing that. “If that does occur then obviously we’d be in a much better state,” Ebel said.
But Ebel said CARES money could be spent on hazard pay for first responders, an idea that has been put forward by Councilmembers Faris Farassati and Scott Hamblin and supported by the police union. Ebel said city staff has been in contact with the county on that question. The money would come through the county.
Ebel also envisioned deferring some building projects in the five-year capital improvement plan. The capital improvement plan has been revised downward since first proposed in January, to $192.2 million.
To accomplish that, all public art was removed and construction of a police training building was deferred to 2026. In addition the arboretum visitor center, which was supposed to begin construction this year, was moved back a year and phase two, which includes the controversial amphitheater, was pushed back beyond the five-year time frame. Construction at Strang Park would also be delayed until 2021 and Farmers’ Market reconstruction would also be moved from 2022 to 2023.
The proposed maintenance budget of $115 million represents an $8.5 million decrease from the previous plan. Notable decreases are in playground and parking lot reconstruction and energy conservation upgrades for public buildings.
Ebel said the city council will face decisions on aging facilities, bike and hiking trails, the arboretum and the Westlinks golf course fence, which has been a point of contention between the city and the abutting neighborhood for years.
He also acknowledged, on questioning from Farassati, that it may be time for the city to begin thinking about whether it should remain as dependent on sales tax revenue as it now is.
The heavy dependence on sales tax, which “was a great strategy for the first 50 years of the city needs to be relooked and reviewed and discussed for what’s best for the next 50 years,” he said, noting that this has been a topic with previous city councils.
Ebel’s proposal is an early step in the budget process. Committees will discuss it in the coming two months, culminating in a public hearing Aug. 3 and adoption of a final budget Aug. 17.