The Geneseo City Council met in special session Friday June 12, to try once again to pass the Budget for the six month period of July to December, 2020.
Jo Hollenkamp, City Administrator, spoke regarding the necessity to begin "Impact Bargaining" with the city's unions. Under the proposed budget, even if the lockdown had not depressed the revenue stream, the previously negotiated raises would have the City in deficit spending. When questioned on where the figures came from, Hollenkamp cited that the figure was the best estimate given to the office from several reliable retail sources.
Mayor Sean Johnson had been in conversation with car dealerships, who informed him that this period was worse than after 9/11. Cars just are not being sold, and the associated sales tax is not being received.
Administrator Hollenkamp also pointed out that during the lockdown time frame, schools, The Community Center, restaurants, bars, and many public buildings were closed, which also impacted the revenue coming from City electric. This is further compounded by the fact the City is still spending more than it is taking in.
To illustrate the difference in why the previous administrations, and this one, are so far apart on the state of the City, Hollenkamp asked Paula Meyer of Dixon to look at the ways the finances for the City had been presented. Meyer holds a Masters in Accounting from NIU, and spent 5 years in public accounting, specializing in auditing. She had become the Director of Finance for the City of Dixon in the period after the Rita Crundwell embezzlement, and currently serves as the Lee County Treasurer.
"You have requested my take on the difference between Fund Balance and Reserves available for annual operations. Cash, which is a component of the Fund Balance, is the Reserve available for annual operations. The Fund Balance is the total value of the fund. Many assets included in Fund Balance are not liquid and therefore are not available to provide working capital. Although these assets have value, they are not liquid and therefore cannot be used to pay expenses such as salaries and repairs or purchase new equipment. If electric services were to cease, these assets could then be sold and used to pay off debt and pension liabilities." pointed out Meyer.
Meyer also noted that the Electric Department's reserve of cash is decreasing annually, because revenues have not kept up with increasing costs., debt and equipment replacement.
The current administration only looks at the Cash Balances when budgeting. As it was explained, by City Administrator, Hollenkamp, "You would not sell your car to buy groceries. Of course you will use the cash in your checkbook." When the current Finance Manager talks about Finances, the figures used are the Checking account balances, since you can't spend a bucket truck unless you sell it first. And you may need it to generate revenue.
Mayor Johnson noted, that "Even if we had last year's revenues, the City would still be in trouble, with the regular depletion of cash balances. "
Alderman Bob James stated that "We didn't get here yesterday. I would love to see a lower amount of deficit. We will have to look at foregoing raises and taking furlough days. It will help keep employees working."
The Mayor noted that "We have been borrowing from the funds for years, and spending on projects. There has been no replenishment. It should come as no surprise that we are in this situation."
Another observation that the Mayor made was regarding the virus, "The good news will be that nothing happens, and the economy rebounds, the bad news would be if there is a second wave, and austerity measures come back." Johnson advocated cost control measures at this time. "But at the end of the day, we need to find new revenue sources."
The Council ultimately unanimously approved the Budget 8-0 the way it was presented, with the 40% shortfall in revenues, and no raises to City employees. As revenues come in, those figures will be considered, and the budget will be brought up to real time.
Jo Ann Hollenkamp was approved to participate in Impact Bargaining with the City's unions. A sale of surplus City property may be in the works. A hard look at having employees contribute to their health insurance will need to happen.
Mayor Johnson stated " Everyone is going to get a hit, citizens with a utility hike, city employees, everyone. No employee did anything wrong, but we will all have to sacrifice for the good of the whole. We are all in this together."