Loss of 1/2 Sales Tax Worries Sunset Hills Finance Board

During a recent Finance Board meeting, Sunset Hills's volunteer and elected residents heard from auditors that last year the city was well-managed and financially solvent with a $6.3 million budget, and $6.9 million in revenue.

However, costs for services appeared to have crept up, for example, while investment income was down over the past year by nearly a third.

Also, like many cities who can point to huge drops in investment income since the 2008 stock market crash, Sunset Hills is in the hole on paying into employee pension funds due to legal limits on annual contributions. 

"We're a half million (dollars) behind," said finance board member Mike Fitzgerald, Thursday. "If we shut down today, we're looking at a $516,000 liability."

City officials said they have the funds, but must contribute to the pension in phases because of regulations.

Alderman Tom Hrastich, also a city finance board member, said the money would come out of the general fund to pay it off. He didn't see prospects for a quick turnaround of the economy that would change that.

City Finance Officer  said the city has 10-12 retirees right now.

Pension funds typically are invested to generate interest income for an ongoing pool of funds to be drawn on as employees become eligible. 

Looking at future budgets, of primary concern for the five-member board is the 2016 sunset (or expiration) of a half-cent sales tax for the city's Capital Projects Fund. According to the 2010 audit, the measure appears to bring in about $860,000 a year to city coffers.

Additionally, a half-cent sales tax passed in 2007 as Proposition P, will expire by 2027. Prop P generates about $1 million a year in revenue, according to the 2010 audit, for the Parks and Stormwater fund.

Board member Mike Sawicky seemed to speak to a dire scenario in which the city was down nearly $2 million in revenue when both sales taxes expired, losing a third of a $6.3 million budget.

However, Michele Graham, auditor from Botz, Deal & Co., explained that cities overall got used to living off sales tax revenue when the economy was flush—and kept property their taxes low.

"It's a problem now," Graham said. "Trending downward with the sales tax, that's what everyone is worrying about."

Finance Board member, Kerry Borawski, said she was looking to "rein in" spending on Parks and Recreation this coming year, after the city built an $8 million Community Center and refurbished the city pool.

Borawski said city departments were coming in with an already "inflated base" budget from prior years, and looking to add on to that.

"I think we've gotten out of hand," Sawicky said, agreeing with Borawski. Sawicky raised the question of hiring-out grass mowing of city property to private companies, to save on costs. No one had data on costs.

However, Borawski said: "I think it's a healthy question to ask: Do we need someone to watch the grass grow?"

She encouraged the board to stick to priorities in spending on public safety and public works for the 2012 budget. The next meeting is early September and always open to the public.

Editor note: An earlier version of this article mistakenly described the city's capital projects fund sale tax as less than it is, in the headline. It's a half-cent sales tax.

For a copy of the 2010 Sunset Hills audit, contact officials.

Finance Board members include Chairman/Alderman Tom Hrastich, Alderwoman Pat Fribis, Mike Fitzgerald, Mike Sawicky, Kerry Borawski, City Finance Officer Laura Rider. Alderman Frank Hardy also participated, and Mrs. F. Hardy, a CPA.