Council Nixes Millage Hike
Decision Means City Needs To Cut $1 Million From Tentative 2008 Budget
Last updated Tuesday, October 30, 2007 9:15 PM CDT in News
By Dug Begley
THE MORNING NEWS
FAYETTEVILLE -- Property tax rates in Fayetteville will stay right where they are. At least the city's portion.
The Fayetteville City Council on Tuesday denied a proposed 0.9 mill hike in property taxes by a 5-3 vote. Council members opted to keep the city's 1.3 mill rate in place, brushing aside a plan by Mayor Dan Coody and his staff that Coody argued was needed to keep the city moving forward.
Council members Nancy Allen, Kyle Cook, Bobby Ferrell, Lioneld Jordan and Shirley Lucas voted to keep taxes steady. They argued the city needs to keep taxes low and might need to cut spending before going to taxpayers for more money.
Allen said the council needs to show residents they are being fiscally responsible.
"I think there is a feeling for whatever reason that we are not being good stewards of their money," Allen said.
Lucas said taking more time to consider the city's fiscal future is a good thing. She said the council needs to watch revenue closely before raising taxes on homeowners. She said she understood budget cuts might reduce services and wages increases promised to city employees.
"Now is a time when things aren't so good and we may have to cut back a little bit," Lucas said.
The proposed 0.9 mill increase would have kept Fayetteville as the lowest total rate in Northwest Arkansas, compared to other cities.
Finance Director Paul Becker recommended the proposal to make up an anticipated $2.3 million shortfall in the city's 2008 budget. The 0.9 mill hike would have raised $995,000, Becker said. The rest of the shortfall would be made up by restructuring how much money goes to operations from the city's 1 percent sales tax.
Now that $1 million will have to be recouped through cuts to city department budgets, Coody and Becker said.
Alderwoman Brenda Thiel joined Adella Gray and Robert Rhoads in voting for the increase. Thiel said the city needs to protect the level of service it provides.
"What's going to be very sad about this is the things we are going to end up cutting," she said.
Trimming nearly $1 million from the city budget will certainly reduce services, Thiel said. The city is facing declines in sales tax collections and eventually millage must be increased, she added. Doing it now rather than later might soften the blow, Thiel explained.
"We probably should have passed more the last time we raised millage," she said.
The council approved the city's 1.3 mill rate for operations in 2005, after originally setting a 2 mill rate.
Becker said work on the budget will start soon, though council discussions are not scheduled yet.
Council members agreed denying the millage will mean hard choices on the city's budget. One option is to enforce a hiring freeze, which could save money based on Becker's projections. He cautioned the council to not rely on those figures.
No one can guess how many city employees will leave their job, Becker said. He also noted 63 percent of the employee turnover the city commonly faces comes from the police and fire department. Public safety is one department council members said they do not want to reduce staff.
Another option to make up the shortfall is to spend some of Fayetteville's reserve funds, Becker said. The city should have $7.8 million in reserves at the end of the year, down from $9.4 million in January, he said. The city must keep $5.3 million in reserve, Becker said, giving them $2.5 million to spend.
Coody warned council members the decision could get tougher in future years.
"The responsible thing to do is bite the bullet and do this," the mayor said.
Cook said in voting against the millage hike he thought cutting the budget and taking a hard look at city finances might be a good thing. He said he agreed with Coody that the city needs to rethink its finances, but disagreed on whether more taxes is the answer.
"I think we have to look at everything," Cook said.
Cuts are possible, Cook said, just as new economic development programs are needed. He said he has no illusions of what putting the 2008 budget together will entail.
"It's going to be a painful process," Cook said.
BY THE NUMBERS
Sales Tax Tumbling
Fayetteville Finance Director Paul Becker updated the council on Fayetteville's floundering sales tax collections. Compared to the budget the city is $1.36 million below expectations. Cities in Benton County meanwhile continue to experience sales tax growth. Collections of the 1 percent sales tax in August for the four large cities in Northwest Arkansas.
City 2006 2007 Percentage change
Bentonville $544,854 $574,031 +5.4
Fayetteville $1.37 million $1.34 million -2.1
Rogers $849,165 $999,947 +17.8
Springdale $1.07 million $1.01 million -6.1
Source: Fayetteville Finance Division
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