The Budget Shortfall – Revenue Options

The recent revelation that the City of Tallahassee has a budget shortfall of approximately $7 million for the upcoming fiscal year has started a debate on how to best deal with this issue. Should the city commission raise taxes, cut services, or implement some combination of both?

In this article, Tallahassee Reports looks into one side of this debate by providing information about the various sources of general fund revenues. If the city decides to raise revenue to cover the short fall, the revenue will come from one of these areas.

The Categories

The general fund budget for 2009 was approximately $132 million. The three largest source of revenues were generated from taxes and franchise fees ($57 million), followed by the utility transfer ($36 million), and finally, inter governmental revenue, which includes the 1/2 cent sales tax and revenue sharing with the state of Florida ($16 million).

Listed below are the top sources of revenue (in millions):

Source Amount
Taxes & Franchise Fees $57
Utility Transfer $33
Intergovernmental $16
Other Revenues $9
Charges for Services $7
Licenses & Permits $4
Fines & Forfieture $1

The Taxes and Franchise Fees category includes $35.5 million from the property tax, $9 million from the communication tax, and $12.5 million from the electric, water, and gas tax.

The electric, water, and gas tax raises an interesting question: Is this in addition to the utility transfer of $33 million? A review of a residential electric bill provides no clue due to the lack of line item detail.

If this is indeed the case, then the utility transfer and the utility tax contributes approximately $45 million of the $132 million general fund.

Implications

Understanding how much the various sources of revenues contributes to the general fund gives an indication of the $7.5 million problem facing the city commission.

If raising revenues to cover the shortfall is the path followed by the commission, listed below are the implications of some possible solutions.

Property Taxes
If the commission decided to cover the shortfall with an increase in property taxes, it would take a 20% increase in the current property tax revenue.

Utility Transfer
Increasing the utility transfer would require a 22% increase in the 2009 $33 million transfer.

Across the Board Increase
If this was feasible, it would take a 5% increase across all sources of revenue to cover the shortfall.

Use of Conservation Money
Of the $17 million in the conservation fund, a one time transfer of $7.5 million would cover the short fall without increasing taxes or cutting services.

Next week we will look at the other side of the debate – budget cuts.

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3 Responses to "The Budget Shortfall – Revenue Options"

  1. Avatar
    John Paul Bailey   June 24, 2009 at 12:43 am

    Good report, Thanks JPB

    Reply
  2. Avatar
    Terry Ryan   June 24, 2009 at 9:29 am

    Mag Lab employees indicate they use 15% of the City’s electric resources on a very regular basis. Are they paying their fair share of the electric utility bill or are local citizens subsidizing?

    Reply
  3. Avatar
    taxpayer   June 24, 2009 at 2:26 pm

    Can you provide any background on the “Communications Tax”?

    Reply

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