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October 23, 2014

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ECONOMY:

Henderson forced to make more budget cuts

Arthur A. "Andy" Hafen

Arthur A. "Andy" Hafen

Beyond the Sun

Increasingly dismal tax revenues prompted another round of budget cuts in Henderson Tuesday night, barely one month into the current fiscal year.

By a unanimous vote, the council implemented the first level of a three-tier system of budget cuts, deleting vacant positions from the city’s staffing complement and making a number of line-item budget cuts expected to save the city $8.9 million a year for the next five years.

The Police Department, in lieu of making cuts, offered a plan to bring in an additional $1.1 million in revenue a year by housing more inmates from other jurisdictions from the city’s soon-to-be-expanded jail and other means.

The cuts came after consolidated sales tax revenues, which make up roughly one-third of the city’s general fund, declined sharply in May.

Henderson took in $5.8 million, a 21 percent decline from May 2008. The city had anticipated a 15 percent decline.

Finance Director Steve Hanson cautioned that things could still get worse before they get better.

“As far as any bottoming action goes in the consolidated tax, I’m sure we haven’t seen it yet,” Hanson said.

The budget cuts the council approved will delete about 48 positions from the city, which were freed up by the employee buyouts the city offered earlier this year, and cut line item expenditures in several departments.

Mayor Andy Hafen said residents will not see a reduction in services.

“Category 1 budget cuts are cuts we can make without impacting municipal service levels,” he said.

Categories 2 and 3, should they become necessary, are another story. At Category 2, the city will begin to have to cut back services, Hanson said, and at Category 3, it would have to make layoffs.

“I don’t want to stick my head in the sand, but I don’t even want to think about Category 3,” Hafen said.

Councilwoman Debra March echoed the view.

“It’s always difficult to give positions up, but we have to be strategic and thoughtful,” she said. “Fortunately, right now, it’s vacant positions and not occupied positions.”

Hanson also revealed another impact that declining tax revenue will have on the city: police officer positions the city was able to create using a voter-approved quarter-cent sales tax increase won’t be supported by tax revenue at the projected rates of decline.

Unless those officers are moved into general fund positions as other officers retire or quit, the city will have to subsidize the 11 remaining officers being paid by the tax override to the tune of $2.6 million in fiscal year 2012-2013, and that number would go up in following years, Hanson said.

In addition to making the cuts, the council voted to transfer the portion of property tax revenue it normally sets aside for construction projects to cover operating expenses in the general fund. That amount is expected to be between $21 million and $25 million per year over the next five years.

Transferring the money in allows the city to put less stress on its reserve funds, Hanson said, but he cautioned that it should only be used as a temporary crutch.

“That’s the only revenue source we have for funding major capital projects, so I would urge (the council) as policy makers, that as we come out of the recession that you redirect as much of that money as possible back into the municipal facilities fund,” Hanson said.

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