City: Reserve funds depleted
Five years ago, the city of Brewton began dipping into its reserve funds to help pay the bills and pay employees— to the point that, according to city officials, the once healthy fund has been nearly depleted.
Mayor Yank Lovelace and City Clerk John Angel said that is one of the main reasons a 1-cent sales tax increase is needed. City council members are expected to vote on the proposal Tuesday.
In 2007, the city had about $900,000 in its reserve fund, Lovelace said. That fund now has less than $100,000. In addition, the city is facing the prospect of a sewer project that could cost at least half a million dollars.
“We are at a point where we have to rebuild our reserve funds,” Lovelace said. “We are looking at our expenses and making adjustments where we can. The only other way to go is to cut expenses and services. We will either stay the same or move backwards — and nobody wants that.”
A 1-cent sales tax increase could raise about $1.5 million in a year, Angel said.
Lovelace said that with the 2013 budget talks beginning over the next few weeks, the city will get a better picture of what can be done with the additional revenue from the tax.
“We will be going through the budget process soon and we’ll examine every department,” Lovelace said. “Until we see where we are on the budget, it’s hard to see how long it will take for the additional revenue to rebuild our reserve funds.”
City Clerk John Angel said building reserves is the best way for the city to have a fund in place to pay for needed projects and emergencies.
“We have been using our reserve funds for the past five years,” Angel said. “We basically have no reserve left. That’s why we have stopped all projects of the city. We’re going into our sixth year of using those reserves and there just isn’t anything left. We can’t afford to continue this way.”
While the city has had some projects over the past five years — including a major sewer project on Belleville Avenue — they have been paid for with grant funds.
Lovelace said paving, economic development and quality of life were all wish list items he heard on the campaign trail as he made a bid for the mayor’s seat.
“Everyone was to improve our quality of life and move forward with economic development,” Lovelace said. “Everything costs money — money we don’t have. Right now we have no grants and if we do get grants, the matching amounts are increasing all the time. We have numerous projects we want to move on, but we have to get our reserve funds in place first.”
The proposed 1-cent increase in sales tax would be used to boost the general fund and begin to rebuild those reserves, Angel said.
“We just have to get healthy again in our general fund,” Angel said. “We like to have at least six months reserve in the bank to take care of our accounts payable just in case something bad happens.”
Angel said to this point, layoffs have been avoided but it is something that could happen if funds don’t come in.
“We haven’t been getting as much revenue from sales taxes as we have in the past,” Angel said. “When one-third of what you do get goes to the schools, it’s hard to rebuild those reserves.”
The 3-cent city sales tax currently in place is divided among the schools and the city with 2 cents going to the city’s general fund and 1 cent to the schools.
“This ripple of the economy began for us in about mid-2007,” Angel said. “Nobody expected this to last this long. We just have to do something. If we fail, the schools fail. It’s something we need to do.”
Some area merchants said they don’t believe the increase in sales tax will have a large impact on their sales.
Sherry Davenport, owner of Bonehead Boots, said the additional 1 cent will amount to a nearly unnoticeable increase in costs for customers.
“It’s not going to make that big a difference for us,” Davenport said. “We don’t sell big-ticket items so it’s only going to add a little bit to the cost.”
Davenport said since neighboring cities already have a larger sales tax in place, the increase would fall into line for customers.
“East Brewton and Atmore are already at 9 percent,” Davenport said. “I just wonder what the city plans to do with the extra money long term.”
A bigger price tag will also mean a bigger tax burden for consumers. That’s a fact that Mike Hart, owner of Badcock Furniture and More, is taking into consideration for his customers.
“Business has already fallen off some due to the economy,” Hart said. “Because of that, I’m concerned about what it will mean for our customers.”
Hart also said that while paying more in taxes isn’t something anyone would want, he did say he believes it is necessary to keep the city moving.
“If we have to pay 9 percent sales tax, then we have to pay it,” Hart said. “I certainly don’t want to have to do that, but if it means the citizens can continue to receive fire and police services, then I can understand the increase.”
Andrew Clark, co-owner of Weaver’s Fashion and Fine Jewelry, said the increase is just putting the city in line with other cities around the state.
“We have a lower sales tax here than a lot of other place that people tend to shop,” Clark said. “In this economy, we have been borrowing from ourselves and it’s time to put some of those reserves back. We should be thankful that we are at a place that we are able to raise the tax in a way that won’t really hurt anybody. It’s just one percent of one dollar. When we lived in Montgomery, they had a 10 percent sales tax and that was just normal and it’s just what we lived with and accepted. I don’t think 9 percent is too much. It’s certainly not the ceiling of where it could be.”
Council members could make their decision on the sales tax increase Tuesday when they convene for their regular meeting at Brewton City Hall beginning at 4:30 p.m. The meeting is open to the public.