Councilors consider changing budget calendar
By Kathy McCarty
Staff Writer
PRESQUE ISLE — City officials will continue to discuss a proposed change in the city’s budget schedule from a calendar year to a fiscal one when they meet for their regular monthly session on Wednesday, Sept. 4, instead of the first Monday of the month, due to the Labor Day holiday.
City Manager Jim Bennett provided councilors with details during their regular August meeting, then continued the discussion at a workshop held Aug. 26.
In a memo to councilors dated July 30, Bennett explained that a “majority of Maine communities have switched their budgeting year from a calendar year to a July to June year” to align with state and school budget years.
“The number one reason communities make the switch is to improve cash flow, reduce the need to borrow money and implement twice-a-year tax payments,” stated Bennett. “I believe it is in the best interest of the citizens to make the change now. Hence, I am formally recommending that the Council consider making the change this year.”
Bennett indicated switching the year “is not complicated but does require some additional work and advance planning.”
“Communicating with the public often about the change, including all the way up to the actual year of the change, is critical,” he said, noting, “It does offer some advantages and disadvantages. Determination of the difference between the two is often based on individual preferences.
Bennett said his recommendation comes from his personal experience, since he “led two communities in the late 1980s through the same change,” and that his comments come from “the experiences that those communities and I had.”
Councilors opted Aug. 5 to pursue a more in-depth discussion of the topic, with a workshop held Aug. 26.
At the workshop, Bennett said making the changes would align the city’s budget with SAD 1’s and the state’s. The city manager noted if the change were made now, taxpayers would see a slight decrease in taxes the first six months, since county taxes would not be collected for that period (July through December). “This would essentially give a county tax break the first six months,” said Bennett.
In addition, Bennett said the change would affect how the city borrows money to cover cash flow issues.
“Instead of getting 72 percent of our revenue stream in July, August and September, or primarily August, September and October, we’d get it in February, March and April, and again in August, September and October,” said Bennett. Since the city typically receives tax revenue later in the year now, once tax bills go out, money is borrowed, at a low interest rate, to cover the months of lower revenue. The change would divide tax payments into six-month increments, providing increased revenue twice a year — thus reducing the need to borrow as much.
Councilor Dick Engels asked Finance Director Pat Webb “how much work will this be for your office to make this type of change.” Webb said it would “double the work for tax billings twice a year.”
Bennett said it was his understanding the city would “send out one bill with two coupons on it.”
“Traffic for people paying taxes would double,” said Bennett.
Councilor Pete Hallowell noted it would mean “higher rates for taxpayers to borrow on an equity loan — higher than the 1.5 percent the city borrows at.”
“Only in government can you charge someone 3 percent more and call it a savings,” said Hallowell.
Bennett said the first year taxpayers would see, on average, “a $150 savings.”
“I understand this is a one-time savings,” said Councilor Randy Smith, agreeing with Hallowell’s comments. “I have a hard time saying I’m saving money when you have to pay eventually.”
“Taxpayers would be able to gear up for what the school passes along for a budget. There are huge benefits by understanding what the state’s doing and not guessing. You’ll know what you’re dealing with before closing the budget,” said Bennett. “It takes six votes to pass under the city’s charter. I think there’s some real value in putting $150 in a person’s pocket next year. Yeah, it’s one time, but I think it’s some value.”
Under the current system, councilors set the municipal budget by Dec. 31 of each year. Under the proposed change, the budget would be adopted by May each year.
Council Chair Emily Smith questioned the impact a change would have on seasonal businesses.
“Many businesses are seasonal. Putting it (tax payment) out there in spring, it doesn’t matter if you’re small or big, you’re still spinning that wheel — borrow money and hope to get it back at the end of the season. It helps the city’s cash flow but hurts a lot of seasonal businesses. Some don’t have work during winter, then March 15 (the city) has its hand out. There are a lot of seasonal workers, not just farmers, but carpenters, landscapers, etc.,” said Emily Smith.
Councilor Mike Chasse said, “the thing we really need to focus on is will we have a lot to gain aligning with the state and school?”
“Will it be a big enough advantage to take on dealing with this twice a year?” asked Chasse.
Councilor Craig Green indicated he had several clients who had set up annuities to pay their property taxes.
“If payments differ, they’ll have to do something different to pay,” said Green.
“One thing comes back to me over and over again. The original impetus was to align more with the state and school system, so they can’t sneak in under the radar at time of voting. We can advertise the vote. They’ve been strangely silent; something needs to be addressed,” said Green. “We’ve allowed The Star-Herald to be our PR department — haven’t put out much in editorials. We need to do a better job of putting ourselves out there and explaining things and put pressure on the school to do a better job explaining.”
Given the questions, Bennett said “It’s appropriate to take under consideration for 2015.”
“It honestly makes my life easier not to have to do two budgets. But I know how difficult this year will be for employees, citizens, you and everybody. I think I owe it to you and the citizens to bring ideas to you to save,” said Bennett.
Emily Smith said councilors would “take the change under advisement.”
“There may come a time when we think it makes sense. I’m just not convinced yet,” said the council chair.
City Council will meet for their regular monthly meeting at City Hall on Sept. 4, at 6 p.m., with the municipal budget year among proposed topics up for discussion for the evening.
For more information, call 760-2720 or visit online at www.presqueisle.govoffice2.com.
