Continuing from last week’s meeting that was postponed due to a conflict with Ch. 12 after 7 p.m., the City budget presentation will be made during the regular City Council meeting, which begins an hour early due to a lengthy agenda.

First, a proclamation was passed in honor of "Police Week," May 13-19. A resolution announcing the retirement of Nix, an exemplary police dog, was also passed. Nix will live out his retirement with his handler, Jock Coleman. Police Memorial Day is on Tuesday, May 15. The ceremony is brief, and is worth attending.

Next, Council approved an amendment of the FY2007 Appropriations Ordinance increasing the general purpose school fund, by $557,868 as additional federal and state revenues were received and approved by the Board of Education. It didn’t cost the City another cent, but the rules require Council approval of any change in the gross amount of the schools budget. The funds were earmarked for specific expenditures (about $300k for one-time staff bonuses from the state, and the remainder was for federal grants tied to specific projects).

Following up from the recessed work session last week, Jim O’Connor presented the City’s proposed FY08 budget. The tax rate would increase from $2.55 to $2.62 — a seven-cent rise. Seventeen cents’ worth of city department requests were denied. Appropriations to nonprofits remain flat from last year.

Each cent on the property tax rate generates approximately $70,000.

Local sales tax collections are declining, which puts pressure on the property tax rate. Like the schools, the City is using a significant sum from their fund balance. The growth shown in the property tax revenue bar represents both growth in property value as well as the proposed seven cents tax increase.

The largest single expenditure is to the schools, followed by police, fire, and debt service; next are recreation and parks, public works, administration, solid waste, library, capital maintenance, street maintenance, community development, grants, and economic diversification.

Cost increases come from energy and materials costs, insurance (medical budgeted to go up 10%), and a proposed 3% pay adjustment ($360,000).

The City proposes to add 29.82 positions in the FY08 budget.

Steve Jenkins reminded us that the "Major Policy Guidelines" specifies that the tax rate goal shall be $2.55 for FY08. By holding to those guidelines, the schools’ request adds $563,000+, with an impact of 7 cents on the tax rate — $1.75 per month for the average homeowner. Knoxville, Humboldt, and Memphis remain above us in tax rate, and would continue to be above us even if the tax rate increases seven cents.

David Bradshaw asks John Smith, Chairman of the Board of Education, if we have a response to the long-term estimates requested last week. Smith asked that Karen Gagliano, the Schools Director of Business and Support Services, provide the response.

Over the past seven years, the schools have requested an average of 8.3% annually (which was not granted). The increase goes to 19.6% if we incorporate the amount of fund balance used over that period. However, those numbers are using the current state funding model, and as everyone realizes by now, the Governor has proposed significant funding increases and other projects such as Crestpointe.

After this year, there will be less than $1M in the fund balance available to use. Hopefully though, the other revenue sources will materialize before we get to the FY10 budget where an anticipated 19% increase might be requested.

Lou Dunlap asks why the Chamber of Commerce does not receive the same percentage increases as, for example, the Convention & Visitors Bureau; O’Connor responds that the Chamber is a negotiated contract rather than a City department, and there are specific performance milestones (e.g., specific increases in both property and sales tax collections).

Steve Jenkins showed a chart illustrating the expected tax increases if the City departments’ and schools’ requests are funded (with no significant growth in revenue), indicating a seven cent increase this year, 40 cents next year, 42 cents for FY10. Those numbers assume NO GROWTH in sales tax collections — the picture should current efforts like Crestpointe fail.

The strategic plan assumed growth in the property tax rate beginning next year, but not these kinds of increases. Obviously, the strategic plan also assumed growth in revenues which have not materialized.

Mosby asks what kind of sales tax growth is needed to offset these increases; Jenkins responds that a 1% increase in sales taxes represents about $70,000 in revenue, which means that a 1% increase in sales tax collections saves a penny on the property tax rate. Jenkins further states that the problem can only resolved through simultaneous growth in sales and property tax revenues, because too much reliance on one or the other tends to stifle growth.

Discussion ensued between O’Connor and Jenkins about the cost/benefit of new homes — there are costs such as solid waste collection associated, but additional households also represent additional disposable income for sales tax collections.

There were also questions about the senior citizens’ property tax freeze now working its way through the Legislature (which is optional for local governments to adopt).

Jane Miller asks what would happen if the schools request is funded, but we then receive a "windfall" from the State. John Smith explained that he is prepared to call a work session so that we can be informed about the impact if the measure is passed. If that is the case, we would have to call a meeting to adjust the budget. There are too many unknowns at this point, not the least of which are potential strings attached that would dictate specifically how the money could be spent.

Karen Gagliano explained that of the proposal received to date. While we would receive additional funding for teacher salaries, ELL and at-risk students, we would lose the Cost Differential Factor which has benefited Oak Ridge. The new formula would be substantially more simple, so that normal people could understand it.

We have received no information yet on reporting requirements.

Lou Dunlap asks if we have any idea when the Legislature will act on these proposals, but all we know is that it is expected to be within this Legislative session (ending in late May or early June). Jim O’Connor says that Jim Hackworth told him today that the initial allotment is expected to be fairly large… but no one knows exactly when or how much.

Mosby asks if this year’s school budget is balanced, or if there are "black holes" in there. Karen explains that she had to do a BEP estimate before any of the current proposals emerged.

David Bradshaw reminded the public that City Council does not make line adjustments to the schools budget, but can do so with the City budget. The floor was opened for citizen comment.

Citizen comments are summarized here.

ABBATIELLO’S DIATRIBE

Abbatiello opened by putting up a spreadsheet showing the Oak Ridge Schools’ finances from 1996 to present, repeating his outright lie that the school board has “refused” to answer his questions.

“We will face a difficult time tomorrow without the schools sharing the responsibility for constraining spending.” He then proceeded to allege that Oak Ridge Schools are overstaffed, by showing the decline in student population against the increase in schools staff. However, these numbers have not been affirmed by the school system.

Oddly enough, his timeline would seem to show a correlation between the implementation of the strategic plan and the flattening of the sales tax.

THE VOTE:

The ordinance to fix the tax rate at $2.62 (a seven cent increase) was moved and seconded, reflecting the full request of the school system and the City budget as presented). David Bradshaw added that the Council has some flexibility in the timing of the second reading, but tax cards do go out June 1.

Abbatiello asks to have his list of questions and request for answers included in the permanent record.

Lou Dunlap asks Steve Jenkins to plug in a 10-cent tax increase, with five cents to the schools and five to the City. This would reduce the schools’ transfer by $140,000, and increase the City’s allocation by $350,000.. Funds on the City side would be allocated to the list of unfunded requests, which would be prioritized.

Jane Miller asks if this would make the tax rate $2.65. She then asked what would happen if we increased taxes by 14 cents (which would add $490,000 to the City budget, fully funding the schools). "I think we should worry about this year this year, and the out years when we get there."

Audience members wonder in whispers if this is a way to blame a 14-cent tax increase on the schools…

Abbatiello contends that the strategic plan has worked; Ms. Dunlap answers that it has resulted in growth, but not growth in revenue.

If the rate increase planned for next year (by the rate of government compensation increase, or something like that) were implemented this year, it would result in about a ten-cent increase.

Note to Daco: I’m not on Central Time… I feel like I’m reliving last year. But in just a few weeks, we’ll all be in the trendiest new acronym time: Post Leonard Abbatiello Years (PLAY).

Beehan notes that next year, we need to start this process much earlier. I agree. The problem is, like this year, we often don’t have the numbers we need — enrollment, state revenues and mandates like the "wellness coordinator" this year — to provide the kind of firm numbers needed for accurate planning.

Jane Miller expresses her highest regard for the school, it’s principals, teachers, coaches, and employees… but how will she vote?

Bradshaw: my preference is to tweak our policy and keep it in place until we have time to review it. If we move up the implementation of a 10-cent tax increase this year, what does that do to the model in the out years? What does that do in terms of growth rates and taxes?

Beehan: a plan is a plan, but if we see the need for adjustments, we can make them.

Abbatiello rambles on, summarizing that "DOE doesn’t pay its fair share."

Bradshaw’s big question is whether the estimated growth rate in city funding, combined with the Governor’s planned increases, are those two things combined enough to meet the schools anticipated needs? John Smith responds that we will certainly attempt to answer the at question, given the limits of what we know.

The motion on the floor is to set the tax rate incorporating a seven-cent increase. Lou Dunlap moves to amend by reducing the schools’ request by $140,000 and increasing the city’s allocation by $350,000, resulting in a ten cent tax increase, effectively moving the policy up one year by this proposed tax increase that was originally scheduled for 2009. Jackie Bernard clarifies that the guideline cannot be amended in the same motion as the appropriations ordinance, so the motion reverts to a simple 10-cent tax increase divided equally between the city and the schools.

Jim O’Connor clarifies that the additional city revenue would go to unfunded priorities such as street resurfacing and other items on the list.

Mosby proposes a proportional split rather than an equal split, given that the schools’ overall budget is such a large portion of the city budget.

Go ahead. VOTE.

ON THE AMENDMENT: passes unanimously. Now, the amended ordinance is to adopt a tax rate of $2.65.

The ordinance passes unanimously. The second reading is scheduled for two weeks from tonight.