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Kingsport sales tax collections down 10% vs. estimates


KINGSPORT — Kingsport’s sales tax collections for the first six months of the fiscal year are down nearly 10 percent from original estimates — nearly $770,000 less than expected, city officials said this week.

Kingsport collected nearly $7.2 million in sales taxes from July 2009 to December 2009 but had projected collecting $7.96 million, thus leaving more than a $768,000 shortfall. Compared to the first six months of the 2009 fiscal year, collections this fiscal year are down just over $500,000.

Sales tax collections make up approximately 22 percent of the city’s yearly revenue.

City officials have projected sales tax collections for the entire fiscal year will be down $1.26 million — from $15.3 million to $14 million. In addition, city officials are saying the general fund will have a shortfall of $1.8 million to $2.1 million by the end of the fiscal year.

Sales taxes make up the bulk of this amount, but other shortfalls come from state-shared revenues, investments and fewer building permit fees due to reduced construction activity, said City Manager John Campbell.

At the beginning of the fiscal year, Campbell said he directed all city departments to be prepared to hold back 3.5 percent of their budgets in light of the economy and in case of revenue shortfalls. This holdback amounts to around $2 million.

Campbell said this holdback should be enough to cover the revenue shortfall next year.

“We have actually been managing this from the front end just after the (2010) budget was passed by the board. During the fall we had to take a percent, then later another percent. The fourth month out appeared to be less of a loss, but the next month (sales tax collections) came back, and they were not better,” Campbell said. “Our staff has been working very hard the last three or four months on this situation, and barring any major tragedy in the U.S. economy, we feel like we’re handling the situation right now, but I’m sure it can change.”

Campbell added Kingsport has 21 full-time and seven or eight part-time positions on hold and not being filled, which would help offset the revenue shortfall. Campbell said bonded projects such as the aquatic center, the MeadowView expansion and V.O. Dobbins Community Center expansion could not be considered for suspension. However, some purchases may be put off until after July 1 — the beginning of the next fiscal year.

“Equipment you could put on hold, but projects are more difficult because you’ve gone to the bond market and told them what you’re going to do with the money. A lot of those projects are multi-year anyway,” Campbell said.

During a BMA work session Monday afternoon, Alderman Ken Marsh said now is the time for a factual discussion of city finances, both now and next year.

“There are key things the city manager and staff need to realize. This is not going to bounce back to where things are wonderful two or three years down the road. We need to think about eliminating positions and redeploying talent to must-fills than nice-fills. Not firings or layoffs, but eliminating positions,” Marsh said. “And I am not sympathetic to raising taxes or fees next year. That’s not the thing to do at this point.”

Mayor Dennis Phillips challenged Campbell to draft a list of purchases for the BMA to consider suspending without affecting the safety and welfare of the citizens.

“Now is not panic time, but it is time to be concerned,” Phillips said. “If we don’t do something, it would really create a problem down the road. If we don’t make tough decisions now, they’ll be made for us.

“Good decisions on our part is the best thing to do right now.”

The BMA plans to discuss the city budget in two weeks at its next work session. Phillips said he does not think a property tax increase would be considered for next year.

Marsh said Monday afternoon Kingsport faces a $3.5 million to $4.5 million shortfall next fiscal year.

Campbell said city officials were trying to figure out where Marsh got those numbers.

“I have no idea where he got that number,” Campbell said.

Following Tuesday’s BMA meeting, Marsh said those figures include excess costs within the city and revenue shortfalls in the general fund, water and sewer fund, and other sources such as the $500,000 less in interest earnings for the city.

“The budget situation is in hand. Revenues are down and expenses are not always controllable. The city manager and staff has got a challenging time ahead to put together a balanced budget for next year,” Marsh said. “Management in these times is the key ingredient, and I look to the city manager and staff to exercise their best management.”

Campbell said Monday afternoon the city does not see a problem with the city’s enterprise funds, such as water and sewer.

“I feel like everything looks all right in those funds,” Campbell said.

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This entry was posted on Thursday, February 18th, 2010 and is filed under Business News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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