City reports $1.1M budget deficit

Published 11:54 am Saturday, September 1, 2018

The City of Franklin finished out the 2017-2018 fiscal year in June with a general fund budget deficit of approximately $1.1 million.

According to Tracy Gregory, the city’s interim finance director, the city had originally anticipated finishing out the fiscal year with a $508,000 budget deficit, but as a result of council-approved budget amendments throughout the fiscal year that required funding above available revenues, this figure increased to an anticipated $1.38 million deficit. The city did, however, end up receiving unexpected revenue in the amount of approximately $180,000 from the sale of real estate and savings of approximately $130,000 from a technology project where funds for which were not spent as initially planned during the budgeting process, which is why the deficit ended up being $1.1 million.

Gregory said that in addition to the originally projected $508,000 deficit, two of the main expenses the city encountered throughout the 2017-2018 fiscal year that contributed to the $1.1 million deficit were the purchase of a new E911 generator in September 2017, which cost the city approximately $205,000, and a transfer of approximately $356,000 to cover a Capital Project Fund deficit identified in its fiscal year 2016-2017 audit.

The city covered the resulting deficit and balanced its year-end budget by appropriating approximately $1.382 million throughout the fiscal year from its unassigned general fund balance, which it treats like a savings account for when expenses exceed available revenue.

“A budget has to be flexible to meet unexpected expenses,” Gregory said. “That is why there are reserves, which meet needs of the City when unexpected things happen or revenue does not come to the City as anticipated when the budget was prepared.”

This will be the third consecutive fiscal year that the city has finished with a general fund budget deficit. According to Gregory, the last time the city finished a fiscal year with a surplus was the end of fiscal year 2014-2015. The surplus was in the amount of $177,563 and was added back into the city’s reserves. In fiscal year 2015-2016 the city reported a budget deficit of $306,700 and in 2016-2017, a deficit of $187,449.

Despite the recurring trend of finishing out a fiscal year with a general fund budget deficit, interim deputy city manager H. Taylor Williams IV cautioned that it would not be accurate to say that the city does not bring in enough revenue to cover expenses.

“Budgeting is a process that has many moving parts,” Williams said. “The first moving part is to try to guess what will be the revenues available for expenditure in the next budgeting period. There are recognized revenue streams from past experience. But it must be considered in the process of trying to predict revenues that some streams will be less than expected and some streams will be more than expected, and some streams will be from sources totally unexpected

“Once these moving parts have been totaled, we begin to work on expenditures. During the budgeting process, departments will have absolute needs that will be calculated, and then there will be expenditures that will be ‘wants,’ which sometimes are capital expenditures… As reported at the last Council meeting, the City has a reserve fund balance in excess of the minimum provided in City financial policies. That means the City has the ability to cover any shortfall in revenue streams.

“The other consideration is the monthly reporting of income and expenses. The City is constantly looking at its overall financial situation to be sure it does not overspend its revenues. If unexpected expenses do occur, the Council has the ability to draw on its reserve fund balance to offset the unexpected expenditures.”