The Terre Haute City Council held a special meeting Thursday evening to go over a five-year plan for the city budget.
The plan was developed by municipal financial advisor Umbaugh and Associates. Partner Paige Sansone presented the plan to the council at the meeting.
The plan includes an analysis of financial data for the city from 2014, 2015 and 2016, and lists possible changes for 2018 that could reduce an $8 million dollar deficit carried over from previous years.
The city received a state order earlier this year to eliminate that deficit by the end of the year. While the five-year plan doesn't include a way to completely eliminate the overspending, it does include options for how to reduce it by 2018 and to eliminate it completely by 2021.
Sansone walked city councilmembers through a 30-page document detailing the budget plan.
According to Sansone, revenue for the city has decreased over the past few years, but city spending hasn't actually increased that much.
Read the complete budget proposal here. See the executive summary portion of the proposal below:
Story continues after document.
Property Tax Caps
Property tax caps, or circuit breakers, are frequently cited by city officials as the cause for the deficit, rather than overspending. They went into full effect into 2010, limiting the amount of money the city could collect from property owners in the area.
But the city didn't have to include them on revenue and expenditure forms until last year, which officials say has had a negative impact on the annual budgets.
Sansone agrees, and says the impact of those property tax caps could actually worsen by 2021.
Possible Solution: Re-Allocate Funds
"The reason we're here is because of those circuit breaker losses," she says.
The budget plan mainly prioritizes a reallocation of expenses from areas operating at a deficit, such as the general fund, to funds that have surpluses, such as the Economic Development Income Tax, or EDIT fund.
Council President Karrum Nasser expressed uncertainty at the EDIT fund being used toward operating costs of the city, but Sansone says it's common in municipalities impacted heavily by property tax caps like Terre Haute has been.
"They're looking at every possible option," Sansone says, "And there just isn't any other source of revenue."
Money from the police and fire pension funds, currently operating at a surplus, could also be reallocated to the general fund to reduce overspending.
Other Options: Raise Taxes, Establish Fire Territory
Beyond reallocation of funds, the budget plan offered a few more options for reducing the deficit.
The first option is for the city to establish a municipal "wheel" tax, which would generate about $1.4 million for road improvements.
While that money wouldn't directly decrease the deficit in the general fund, Sansone says it would free up some of the property tax revenue currently used for road and infrastructure developments, and that money could then be used in other areas in need of funding.
The second option is for the Vigo County Council to increase local income taxes to raise revenue. That issue is not impacted by the decisions of the city council.
The third option Sansone discussed at the meeting was the establishment of a fire territory. She says it could save the city $1.3 million, which could help reduce the deficit.
Other options to reduce the deficit are included in the plan, but were not discussed at the meeting.
Main Goal: Reduce Deficit, Build Up Cash Reserve
While the city's "rainy days" fund will be depleted by the plan, Sansone says over time the city could build up enough in the general fund to build it back up. She says the goal of the plan is to reduce the deficit and to begin building up a cash reserve for the city.
While Mayor Duke Bennett says he's satisfied with the five-year plan, he says change is unavoidable.
"This plan will change," Bennett told councilmembers. "They always do, based on revenue flow."
But he says the changes will likely be narrowing down the details of the budget, rather than any dramatic shifts.
Bennett says this plan offers a realistic way to reduce the deficit.
"We'll get to about $4 million officially off the deficit, and by extending that loan, it'll take us into the year with a positive balance on our general fund," Bennett says, "which will be really good when we do our audit and everything else."
Tension Mounting: Mayor Bennett Clashes With City Council
Mayor Bennett and city council members have clashed over issues surrounding the deficit in the past. While the city received the state order to reduce spending in February, council members didn't find out about the order until August.
But council member Earl Elliott says city administrators and Umbaugh employees have communicated clearly with the council during the development of this plan.
"I think the cooperation is as good as it's been. I do have access to the Umbaugh folks, several of them," Elliott says. "When I email them, they do respond, or they tell me they should respond, and they do with the questions, promptly and sometimes late at night, though I do feel bad about that."
The mayor and city council discussed some specifics of the five-year plan, but nothing will be decided until later this year. Of the options for raising revenue offered in Sansone's overview, there was one in particular that didn't have much support.
Both Bennett and Elliott stated they didn't think new taxes on residents were necessary to eliminate the deficit, despite the options included in the plan from Umbaugh and Associates.
"I'm not going to bring any other taxes that the city council can approve, taxes or fees, because we have enough from that perspective," Bennett says.
Elliott also says he would prefer not to instate a new municipal wheel tax. He says he thinks it could be possible with the five-year plan presented Thursday.
"Right now I'm gonna say yes," he says. "But that may be a hopeful yes."
The council is required to approve a budget by the end of December. But Bennett says they'll probably have one figured out by November.
Elliott says the next step in instating the plan is refinement.
"The next step, I think, is to fine tune it based on some comments that were made today," Elliott says. "And then eventually, we will have a number of the resolutions and actions to take to adopt a lot of those pieces."
The city has had a balanced budget for the last two years, and has reduced the deficit from its peak of about $9 million in 2015.
The meeting this week was not open for public comment, but the council told meeting attendees that there would be an opportunity at the next meeting on Sept. 14.
The Vigo County Council will also meet to discuss its plans for the 2018 annual budget on Sept. 12.
