City’s budget shortfall bad, could top $375,000 by 2012
April 30, 2009
By Jim Feehan
Budget director presents City Council with scaled- back estimate for real estate excise tax collections
Because of a dramatic slowdown in commercial and real estate development in Newcastle, some city construction projects have been postponed. The city’s budget manager updated the City Council at its April 7 meeting about the decrease in real estate excise tax collections.
The money collected from the tax goes toward paying for construction projects. Some projects are being pushed back because of the slowdown in real estate excise tax money.
The amphitheater at Lake Boren Park was postponed until 2010 and a secondary access route to the Windtree neighborhood could be moved from 2010 to 2014.
Throughout 2008, real estate excise tax collections were below 2007 levels, said Chris Olson, city budget manager.
“By December, we knew that everything had fallen apart,” Olson told the City Council at its April 7 meeting.
The revenue forecast is important as the council updates the city’s six-year capital improvement and transportation plans. Both are scheduled for adoption in June.
The real estate excise tax is projected to have an ending fund balance of $600,000. Assuming the same expenditures for city construction projects, the real estate excise tax fund will be in the red by $46,000 in 2010 and in the red by $378,000 by 2012.
In the first three months of this year, the city has collected $67,000, about half the amount collected in the first quarter of 2008.
For planning purposes, Olson said the real estate excise tax target number for 2009 should be close to $400,000.
She based the projection on three factors: assuming first quarter trends will persist through 2009, assuming the remaining months of this year return to 2008 levels and combining both assumptions.
The City Council was also briefed on a new possible tax by creating a so-called transportation benefit district.
Cities and counties were given the option to increase car tab fees by $20 without voter approval in 2007 to fund transportation projects and transit. The option was created to give cities and counties a mechanism to recoup some of the money lost when car tab fees were capped at $30 about 10 years ago.
There are about 8,600 licensed motor vehicles in Newcastle. The tax would generate about $172,000 annually.
The City Council took no action, but was presented the tax for possible consideration.
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