BY CHUCK VANDENBERG
FORT MADISON – The Fort Madison City Council spent about two hours after Tuesday’s regular council meeting grinding out ways to possibly begin to rebuild the city’s general operating fund.
City Manager David Varley indicated at the meeting that the city’s working capital will be so low going into the next fiscal year that it may not cover a month’s worth of operations.
Varley said the city has capital projects they can look at cutting back on but then it falls on operations.
“We’ve got capital projects and then once we get past that, then you have to look at operations and people, and no one wants to hear that,” he said.
Councilman Matt Mohrfeld suggested the city look at pulling the capital improvement projects at Riverview Park, including the Amtrak Depot and the improvement costs for prepping a dock for the potential of Viking Cruise lines. He said those costs could be bonded and then the city could pay those back over time and not hit the budget so hard in one fiscal year’s general fund.
“I don’t like to borrow money,” Varley said. “But if we did do it, we should do it very short term and it might be best to borrow it from the Highway 61 fund and then pay ourselves back. It would be a little cheaper that way as we could save on interest and bonding costs.”
Mohrfeld said he liked that idea, or even working with local banks to secure a short-term loan with a good rate.
Another idea kicked around included instituting a 3% franchise fee on city utilities. Councilman Bob Morawitz said a franchise fee isn’t fair to the low income people because they don’t have the resources to keep those rates down.
Varley said the franchise fee would eliminate the Local Option Sales Tax.
“If we did it, it would have to be one percent less because we can’t levy both taxes,” Varley said. “If we do a franchise fee, the Local Option Sales Tax has to go away.”
City Finance director Peggy Steffensmeier said the franchise tax would have to be proposed at 2 percent, if the local sales tax were to still be collected.
Another idea was to eliminate the city’s revolving loan fund that was set up as an incentive to encourage business growth in the city. The fund has about $176,000 in it, and the maximum loans available are $25,000.
“In that fund there is $176,000 sitting there and it was established by council so it would take council approval to get it back and I’m recommending we grab that money back. It’s with Southeast Iowa Regional Planning (Commission), and we, for the time being, shut that program down because of it’s infrequent use,” Mayor Brad Randolph said. “Then take the lion’s share or all of that money and restrict it back for beautification and nuisance abatement.”
Varley said he would like to rebuild the general fund’s working capital to a minimum of $800,000, but said it may be four or five years. He said a strong budget would have working capital of closer to $1.2 million to help with sudden drops in revenues or emergencies.
One of the problems the city is facing is a sharp drop in sales tax revenues. He said the city revenues from the Local Options Sales Tax, which is administered and distributed by the state, dropped about $300,000 this year.
Mohrfeld asked if the state provided any information as to the specifics of the drop. Varley and Steffensmeier both said the state was not forthcoming with specifics about what sector of the economy is suffering, so the city can’t point to where the problems are.
Morawitz also suggested the city may look at eliminating the 3-year tax abatements on improvements to property within the city.
“It was a incentive for people to do the work, but I think they’re going to do the work anyway. When I’m doing a remodel I’m not going, ‘Let’s see what kind of tax abatement can I get if I do this’, I’m thinking, ‘I’ve got this project to do and I’m going to do it’.”
The city will have another budget strategy session in February before having to certify the budget to the county and state.