Cape Girardeau's city budget, plagued by falling tax revenue and a shrinking operating surplus, can make it through the coming year with accounting changes but needs long-term solutions, the city council was told Friday during its annual retreat.

Overall, the budget is about $600,000 short of the money needed to maintain current levels of service and employment in city government, city finance director John Richbourg told the council. The gap in the city's $23.3 million budget could grow by another $250,000 if sales tax revenue continues to decline at the same rate as the most recent three months, he said.

And increasing salaries, which Mayor Jay Knudtson and other council members said would be important because few raises were given in the current year, could add $150,000 to $286,000 to the gap, depending on the size and timing of the raises.

"We have had too much isolating out departments in the last year," Knudtson said in support of a general pay raise. "We need something that is fair and equitable and across-the-board."

But it is too soon to make any promises, Ward 6 Councilwoman Marcia Ritter said. She pointed to a worst-case scenario from Richbourg that puts the shortfall at more than $1 million. "I don't want us to come out and say we are going to give a 2 percent COLA [cost of living adjustment]."

As revenue fell during the current year, raises included in the budget were canceled. However, behind-the-scenes negotiations over police pay resulted in a 1 percent longevity raise and a 1 percent cost-of-living raise for lower-ranking officers that were not given to other employees. All city workers, police included, received a one-time payment of $600 in December.

The budget discussion Friday, which took place during the annual council retreat at the Osage Community Centre, will set the stage for detailed decisions leading up to the beginning of a new fiscal year July 1.

The biggest source of city revenue is the general sales tax. After recording regular growth earlier this decade, tax receipts rose slightly in the last fiscal year and Richbourg predicts a decline of 1 percent, to $8.6 million, in the current year that ends June 30.

Other sources of revenue have also been disappointing or are expected to underperform compared to past years. The city's franchise tax receipts from AmerenUE utility sales are expected to fall in the coming year, as are grant revenue, airport income and profits on the sale of aviation fuel at the airport. The airport has been hit by lost tenants and operators of the fueling station are not renewing their deal, airport manager Bruce Loy said.

Other areas are less volatile, according to figures provided by Richbourg, but don't represent enough money in the correct accounts to make up the general shortfall.

Money-making ideas

Richbourg offered several ideas that would make money in dedicated accounts available for general spending. The salaries of top city officials could be charged against many accounts, he said, because of the general nature of their duties. Also, Richbourg suggested water and sewer rates could be increased by applying the city's utility gross receipts tax to customer's bills.

A 5 percent tax would cost the average sewer customer 60 cents more each month and add $1.12 to the average water bill, he said.

That idea received a warm reception from the council during discussions, as did a proposal to increase the fee sludge haulers pay to use the city sewer plant. The fee is now $10 a truckload, unchanged for many years, Richbourg said. Haulers pay 7 cents a gallon to dump in St. Louis's Metropolitan Sewer District facilities and a change in the fee could raise as much as $250,000, Richbourg said.

A long-term solution, Richbourg said, includes considering whether to lower the portion of city funds that must be in an emergency reserve. The charter requires 15 percent of general revenue, or about $3.2 million, in the fund. If the percentage were lowered to 12 percent, he said, it would free about $650,000 immediately and result in lower payments after emergencies. The change would require voter approval.

The city budget process promises to be daunting, Knudtson said. "We need to decide which of these things we think are realistic," he said. "We have to collectively make some damn hard decisions."

rkeller@semissourian.com

388-3642

Pertinent address:

1625 N. Kingshighway, Cape Girardeau, Mo.