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Bad budgeting bites back

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Posted: Monday, August 10, 2009 12:00 pm | Updated: 8:09 am, Thu Aug 16, 2012.

By Matt Goodman

Killeen Daily Herald

NOLANVILLE – The past two months have taken a toll on the city's financial structure.

Nolanville's success is contingent upon the city living within its means and applying its revenue sources responsibly to specific line items in the yearly budget.

Maintaining that balance is a problem that can be traced as far back as a city forum conducted in April 2005, when the late Councilman Cecil Carroll Jr. warned city officials of irresponsible spending.

"I will continue to vote against it," he said then.

But in the late summer months of 2008, when the fiscal year 2008-09 budget was approved, was when the city began its current downward spiral. The city's financial crisis peaked in July after city officials announced that Nolanville would operate on a skeleton crew until it could get its finances in order.

"I told the council right from the start that you've got troubles here," said Jeff Looney, who was hired for three months as the interim city manager. "You don't have the money you think you have."

Looney, who was hired to bring stability to a spending pattern that was anything but, took a look at this year's budget and gasped. He said that it minimized expense costs and maximized potential revenues, which can trigger budget problems when unexpected expenses arise and when revenues drop.

"They weren't looking at the economy at that time," he said. "It doesn't seem like they had a clue as to what the expenses would be for the city."

The city's property tax revenue, which accounts for about two-thirds of Nolanville's overall revenue, climbed higher each year after 2004. Major housing developments such as gated community Bella Charca, in which construction started in 2004 and is filled with homes worth a high six-figures each, helped shoot its property tax rate and its taxable values up, meaning more money for the city.

Between 2004 and 2008, the city's property tax revenue more than tripled from $188,786 in 2004 to $669,942 in 2008.

"We were so captivated by having a little money when Carolyn (Sterling, former mayor) was there, that we spent all our money," Councilman Wayne Hamilton said.

'A very workable budget'

The summer months have become budget season for a city since Texas law mandates that a budget must be passed by Sept. 30.

Former City Secretary Felecia Duson and former City Treasurer Vicky Brown wrote the fiscal year 2008-09 budget. They brought the budget to then-mayor James Cox and went over it line-by-line with him. Neither Duson nor Brown could be reached for comment by press time.

"We went over it piece by piece until I understood what was going on with the city budget," Cox told the Herald on Wednesday. "The council got a chance to look at it. It was a workable budget at that time, a very workable budget."

After the budget was presented, the council approved it. Current Mayor Emma McCullough, who served as mayor pro tem at that time, said she thought it was "over-inflated," but the council was urged to approve it and amend later.

"I think this council has amended a few things here at the tail end, but that's kind of like shutting the barn door after the horse is out," McCullough said.

In May, about three-quarters of the way through the fiscal year, the city published a revenue and expense sheet that detailed how well the city adhered to spending within its planned expenses, as well as showing how accurate the expected revenue counts were.

Actual court revenue sat at $172,164.24, which would be difficult to expect to meet the budgeted $248,580 by year's end. Public works revenue only chalked up $3,663 over nine months, which set a pace to make $4,884 by the end of the fiscal year. That's about half of the $8,895 that was budgeted for the entire year.

Sales tax revenue severely shadowed the budgeted amount: It only climbed to $89,776.36 by May. It was budgeted to bring in $187,050 total.

Permit revenue was the biggest offender. Going by the budget, the city expected to have $114,720 by year's end. But by May, it had only brought in $19,561.55.

The city did surpass its expected $11,196 in "other revenue," bringing in $41,960.61 three-quarters of the way through the year. But McCullough wasn't sure where that miscellaneous revenue came from.

"Just look at it," Looney said. "When you're spending out more than you're taking in, you've got a big problem."

Overspending, unexpected expenses

Nolanville's expenses are tough to nail. The city found itself in a number of legal disputes throughout the year, shooting its legal fees up to $76,569.34 instead of its budgeted $30,000. By August, an official said, that number has increased to $90,000, tripling its budgeted amount.

The city chose to widen 10th Street in June 2008, figuring the $1.7 million bid included engineering costs, but it quickly found it didn't. This transformed into another abrupt city expense. The project grew to add sidewalks to the street's east side, about an $80,000 upgrade that the Killeen Independent School District helped partially fund, McCullough said.

Cox said that before he resigned in October for health reasons, he was speaking with Texas Department of Transportation officials to get them to pay for the sidewalks. When he resigned, nobody followed up on the potential deal. McCullough said Thursday that she had never heard of the TxDOT deal.

The city also failed to apply for an extra half-cent of sales tax revenue during the year. McCullough said council members didn't realize they had to apply to the state for the extra money, so Nolanville missed out on extra cash.

But on top of the confusion and extra expenses, the city's spending was not always in line with what was budgeted.

Administration costs through May had exceeded the entire year's budgeted amount by about $8,000. The city had to repair its community center through the year, thus spending about $1,500 more than what was budgeted.

The court department – already taking a hit from its revenue not living up to expectations – had exceeded its budget by about $16,000 three-quarters of the way through.

Payroll expenses about doubled their costs by May, as they ate up $101,364.77. They were budgeted at $45,881.

Emergency medical services, police, fire and public works departments were the only city services to abide by their budgeted amounts.

Coincidentally, these were the three areas that had employees cut. The fire department had its contract renegotiated, which fire officials expect will finish with them having to cover their own utilities while the city pays for fuel.

Over-budgeting?

But while the police department spending followed its budget, Looney said that it was budgeted too high to begin with.

"The police department was doing a good job of managing their money … it wasn't a problem on their part," he said. "There just wasn't enough money to do the bare minimum."

The police department had the most budgeted: $412,212. For 2008, the city received about $670,000 in property taxes.

Looney said that once property taxes are taken into consideration – the largest source of city revenue – no city service should take up that much of it. It was too high to begin with.

The entire $1.4 million budget was too high for the city to keep up with, Looney said. During a recent City Council meeting, he told the council that it didn't have enough money to pay him past his three-month contract.

"Really, it's a sad situation with that," he said. "They needed an administrator, but they really can't afford one, and how do we help them?"

Contact Matt Goodman at mgoodman@dhnews.com or (254) 501-7550.

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