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Recession reduces city's revenues

By Steve Welker | The News Herald

Published: November 5, 2009

Morganton, NC - The continuing national recession hit the local municipal government hard in 2008-09.
Almost every other city-operated business-type activity lost money. The Morganton municipal government's own revenues from sales taxes and investment interest were lower than feared.
The city's total net assets (the amount by which its assets exceed its liabilities) decreased $5.95 million from the previous year to $116.6 million — a 7 percent drop from five years ago.
If expenses continue to outpace revenues, "tough measures will have to be taken," warned independent auditor Eric Bowman, who delivered the audit report at the Morganton City Council's meeting Monday. He said the city council's only option could be higher property taxes.
The annual audit shows the electric fund alone lost $2.5 million, primarily due to higher unit rates for purchasing power and revenues that were $1.93 million lower than budget.
Water sales were $200,000 short of budget and that department had other losses in revenue, but a $396,000 reduction in expenses limited the fund's total loss to about $24,000.
Similarly, sewer revenues plunged $284,000 below budget. Expense reductions totalling about $171,000 couldn't prevent the department from posting a $286,000 net loss at the end of the fiscal year.
CoMPAS Cable revenues were $434,000 below budget — Internet revenues came in $36,600 lower than expected, cable TV service brought in nearly $240,000 less and ad sales dropped by more than 50 percent to $73,000 — but expense reductions resulted in a slight, $16,440 increase in CoMPAS Cable's net assets.
Overall, the municipal business-type activities decreased the city's net assets by about $2.3 million.
Lower sales-tax revenue and interest earnings and higher operating expenses, despite cost controls in every department, resulted in a net $3.64 million drop in governmental assets.
Bowman said that in his opinion the city administration in 2008-09 did just about all it could to cut expenses, including putting employees on unpaid furloughs.
The city partly compensated for dwindling revenues by tapping the fund balance (its savings account).
If the local economy doesn't improve this year, one of the city council's only alternatives will be to take money out of the fund balance again. That will put the city in a perilous position, Bowman warned, because the fund balance normally covers unanticipated major expenses.
Siphoning money from the fund balance is only a one-year stopgap solution, he added.
The city council's other option is to increase property taxes — what Bowman called a terrible choice to consider when the city and the entire region are suffering from high unemployment.
However, he said, another few years of such losses in government assets would be devastating in terms of the city's ability to provide its citizens with services.