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City ends third quarter in good financial shape

The city published its 2009 third quarter financial report last week, showing that revenue and expenditure numbers were on target for the year. The third quarter ended on Sept. 30.

According to the report, “Given the current economic recession, the general fund ended the third quarter of 2009 in better financial shape than many Puget Sound cities.”

Total actual revenues and expenditures as of Sept. 30, 2009, were below the 75 percent budget threshold. The projected revenue shortfall is $1.25 million, but Finance Director Chip Corder said he does not anticipate needing to tap the city’s $2.34 million “rainy day” reserve. Instead, the city plans to cover the shortfall through expenditure savings and by using the general fund’s $300,000 revenue stabilization reserve.

Revenues:

The city’s general fund revenues made up 71 percent of the budget for the 2009 third quarter, compared with 80 percent of the budget in 2008. The revenue shortfall is attributed to weaker than projected sales tax, utility tax, development fees and investment interest.

Comparing 2009 to 2008, total actual revenues are down by almost $863,000 or 5 percent in the third quarter. This is mostly due to $455,000 in unexpected sales tax receipts in 2008, along with reductions in construction-related sales tax, development fees and investment interest, according to the report.

Expenditures:

Third-quarter general fund expenditures were 70 percent of budget in 2009, compared with 75 percent in 2008.

This is “wholly attributable to position vacancy savings, departmental spending freezes in response to the recession, and departmental efforts to ‘hold the line’ on expenditures,” according to the report.

Salaries — which make up about 52 percent of the general fund budget — were 71 percent of budget in 2009 versus 78 percent in the previous year, due mostly to city position vacancy savings. Benefits were also reduced from 78 percent of budget in 2008 to 71 percent for the same reason.

2009-2010 revenue projection:

At the Sept. 8 City Council meeting, Corder projected a revenue shortfall of $1 million in 2009 and $850,000 in 2010. This revised forecast represents a $750,000 increase in the revenue shortfall projection for the 2009-2010 biennium.

To re-balance the 2009 budget, staff decided to use the city’s $300,000 revenue stabilization reserve to backfill a portion of the $1.25 million projected revenue shortfall.

The full 2009 third quarter budget report can be downloaded from the city Web site’s City Council page, under the Nov. 16 agenda: www.mercergov.org.

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