Archive for Thursday, March 26, 2009

Healthy cash balance to help city weather recession

March 26, 2009

While it hasn’t completely escaped the consequences of the recession, the city of De Soto remains in healthy financial shape as preparations start of the 2010 city budget.

De Soto City Administrator Pat Guilfoyle gave a summation of the city’s financial status last Thursday to the De Soto City Council.

In contrast to many Johnson County cities, De Soto’s sales tax collections were steady despite the recession. The city’s year-to-date sales tax collections are down 5 percent but its use tax (a sales tax collected on corporate Internet sales) receipts were up 13 percent.

“Our grand total sales tax collections are essentially flat,” Guilfoyle said.

The city’s collections compares to Johnson County government declines of 8 percent in sales tax and a 22 percent drop in county use tax receipts. That equaled a 10 percent overall drop.

Guilfoyle said also helping the city’s fiscal picture was the frugality of city department heads that allowed the city to end 2008 with a 3 percent increase in its overall fund balance, including $216,000 in additional unencumbered funds in its general fund. That would help the city maintain current service levels without raising the mill levy in difficult times, he said.

As they are nearly everywhere, housing starts are sharply down in De Soto, where only seven single-family homes permits were issued last year and none in 2009 as of March 1. The city issued 49 permits in 2002 and 2003 and issued 33 in 2005 before activity slowed significantly in 2006.

The depressed housing market also contributed to an overall decline in assessed valuation in the past year. The annual report of valuations from the Johnson County Appraiser’s Office issued in late February indicated the city’s assessed valuation declined 2.4 percent in 2008.

But that was less than the 4 percent Johnson County Appraiser Paul Welcome first estimated in January.

The housing slump and decrease in new home starts also will affect development-driven fees such as the water and sewer development fees and the city’s excise tax, Guilfoyle said. That will affect funding for new capital projects in the coming years, he said.

The Kansas Legislature grabbed some dollars formerly passed on to cities as it dealt with the state’s revenue shortfall. For De Soto, that will mean $45,000 in lost revenue, Guilfoyle said, including $15,000 of special highway fund dollars.

The nation’s financial problems will also reduce the amount of interest the city collects from the $2 million electrical utility fund. Interest from the account started with the money the city received for the sale of its electrical distribution system is placed in the city’s general fund.

Guilfoyle said the city budgeted $116,000 in interest from the fund in 2007 and exceeded that figure by $20,000. But last year as the economy soured, the city earned $74,000 in interest.

Information on one last piece of the budget pie, personal property tax, wasn’t available yet. Guilfoyle said he wasn’t anticipating great things from that source.

But the city administrator reiterated that with the solid cash balances, the city was in good shape to weather the current financial storm.

In other action, the council:

• Approved a contract with Douglas Pump not to exceed $28,984 to rehab an unused well south of the Kansas River in the Sunflower well field. The city’s proposed agreement to resolve its lawsuit against the state and Sunflower Redevelopment L.L.C. regarding water rights to the Sunflower well field would give the city exclusive rights to the wells south of the river.

With the rehabilitation of the southern well, the city would stop using and maintaining a well north of the river. Councilwoman Betty Cannon voted against the south well rehabilitation because she said she thought the city should keep using a producing well.

• Approved issuing temporary notes to Commerce Bank for $1.64 million to fund this year’s capital improvement projects. The council also approved selling $1.32 million in general obligation bonds to Edward Jones for last year’s capital improvements.

City financial advisor Jeff White said the city had two bids for both placements, which was good in an environment where many of the traditional big players are no longer in the market and some no longer in business.


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