Strapped city crosses fingers for tax revenue improvement

By Jeremy Twitchell

Wednesday, June 17, 2009 | 1:06 p.m.

Henderson’s share of consolidated tax revenues declined for the 25th straight month in March, leaving the city waiting for the April numbers expected to be released next week with bated breath.

The April numbers could be a major turning point in deciding whether the city is able to ride out the economic storm with the budget cuts and adjustments it has made, or whether deeper cuts will be necessary.

“I’m on pins and needles to see the end of this,” Mayor Andy Hafen said.

The 20.9 percent decline from March 2008 to March 2009 was the seventh straight month of double-digit decreases when compared to the same month of the previous year, and was the second-worst decline recorded during the past two years -- topped only by the 22 percent decline from December 2007 to December 2008.

The consolidated tax is a composite of revenue collected from several sources, including sales, cigarette and liquor taxes. The money collected in Clark County from those taxes is divided between local municipalities based on population and local sales receipts, and in the case of Henderson, accounts for about half of the city’s general fund.

To cope with the economic slump, Henderson has thus far imposed a hiring freeze, delayed several construction projects, cut all department budgets (except public safety) by 10 percent, instituted a furlough program, cut annual-cost-of-living increases for most city employees and bought out 104 veteran employees. Together, the efforts are projected to cover the city’s estimated $57 million shortfall in the current year and save many millions more in the coming years.

In anticipation of further revenue declines, the City Council has asked all departments to come up with a three-tier plan to cut their budgets by 5, 10 and 15 percent. Those recommendations have been collected and city officials are expected to begin prioritizing them in the coming weeks.

Council members have expressed hope that it won’t come to program cuts. But if things continue as they have been, cuts may be unavoidable, Hafen said.

“We cannot sustain 20 percent negative sales tax rates,” he said. “If we go another few months with those types of deficits, we really are going to have to take drastic action — maybe beyond what we’ve already outlined in our five-year plan.”

Earlier this year, the Henderson Finance Department projected the decline to begin to slow in January, to minus-20 percent, then slowly improve to minus-18 percent in February and minus-15 percent in March, then improving to minus-6.6 percent in April through June and leveling out at 0 percent by next month.

At the time, the department suggested that those figures were conservative and, hopefully, a worst-case scenario.

January tax revenues improved better than hoped, only falling 17.4 percent, but February and March numbers have been dismal, showing decreases of 20.6 and 20.9, respectively.

Finance Director Steve Hanson is scheduled to provide a comprehensive overview of the city’s financial situation at the July 7 council meeting.