The city of Hailey is trying to discontinue the practice of deficit budgeting for the upcoming 2006-2007 fiscal year.
"We're really spending more than we're earning," Hailey City Clerk Heather Dawson told the City Council Monday.
During the Monday budget workshop, officials got their first official glimpses at the city's proposed $10 million budget, about $400,000 less than last year. The budget actually represents an increase in revenues, however. Last year's budget included $2.2 million for construction of a new water storage tank, and that money is not represented in this year's proposed financial blueprint.
What that means is that revenues are actually up, Dawson said.
This year's budgeting process is notable in Hailey for several additional reasons.
For starters, it is the first year the city is planning to spend local option tax collections, which voters overwhelmingly approved May 23. The collections will begin in July, and revenues, which are estimated to add up to $100,000 by the end of the fiscal year, will be allocated in the 2006-2007 budget.
What the money will be spent on, however, is not yet clear.
"We just know we're going to appropriate $100,000 that we normally wouldn't appropriate," Dawson said.
In future fiscal years, when the option tax is collected year-round, it is predicted to generate about $350,000 in additional city revenues.
Also, as part of an effort to avoid the city's reliance on carryover from previous budget years, increased expenses will be capped at 3 percent across the board. State law prohibits increases of more than 3 percent on property taxes, but other funds have been fair game. That won't be the case in Hailey anymore, Dawson said.
The move is part of the city's effort to do away with deficit budgeting, a practice where a city's operating deficits are paid for with money that was carried over from a previous budget cycle.
Under the changes, proposed by Dawson and outlined in the Monday budget workshop, the city would begin to conform its annual budget development to actual revenue streams.
In notes outlined for the mayor and City Council, Dawson explained that deficit budgeting tends to inflate the budget and creates continued reliance on increasingly higher fund balances and carryover each year. This leads to revenues being understated and expenses being overstated in order to meet the reliance on fund balance.
Hailey's operating revenues have exceeded actual operating expenses in every year since 1997, with the exception of 2004. When new budget practices are in place, Hailey will be able to rely on the actual revenue it receives to set its annual budgets.
"We're to a point where we can function on what we're taking in," Dawson said. "My goal is to stay within our revenues."
Other high points in Hailey's 2006-2007 proposed budget include:
· The city plans to buy a new street sweeper using a grant from the Idaho Department of Transportation. ITD is giving the city 91 percent of a $190,000 purchase. The new street sweeper will replace one of the city's two machines.
· Completion of a traffic study that was begun last October. It's a $115,000 project. Another $25,000 from this year's budget will be required.
· Completion of the Woodside Central Park using matching grant funds. The city will spend $110,000 to finish the park, located at the intersection of Moonlight and Winterhaven drives.
· Completion of design work on a fire station in Woodside. The city spent $70,000 last year and plans to spend another $70,000 this year.
Having gained their first glimpse of the proposed 2006-2007 budget, City Council members expressed early support for the draft.
"It's interesting," said Council member Carol Brown said. "I'm really starting to like this."
