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Sales tax collections fall below city budget estimates

Monday, March 24, 2008 by Austin Monitor

Despite a good month of sales tax collections in January, the city is not on target for its yearly projections—which called for 7.6 percent growth in revenues this year—according to a memo to the Council from city Chief Financial Officer Leslie Browder.


Budget Officer Greg Canally reports that actual sales taxes collections have grown by 4.7 percent for the current fiscal year—meaning the city has $1.4 million less than it expected to have at this time on General Fund obligations.


As a result, department directors are being asked to get permission from their Assistant City Managers before “filling personnel vacancies and making discretionary spending purchases,” Browder’s memo says.


Canally said the decision affects 225 vacancies, about 6 percent of 3,694 positions. Enterprise fund departments such as Austin Energy and the Austin Water Utility are not affected by the downturn.


“Sales tax is one of our really important sources of revenue and it’s a very volatile revenue,” said Mayor Pro Tem Betty Dunkerley, the acknowledged leader on the Council for all things financial. “So the budget staff follows that very closely and when we see that we’re not meeting our targets as we are right now, then we look to see what we can do as far as slowing down purchases…in case the rest of the year remains at the same level.”


“This is a good example of how our staff monitors this important revenue,” Dunkerley said. “So this is very normal for us to be monitoring and for us to be considering some voluntary slowdown in purchases until we know how things are going to be going the rest of the year. We’re on top of it.”


Council Member Brewster McCracken said, “The sales tax figures demonstrate that Austin is not immune to the national economy. Granted, a nearly five percent growth in sales tax revenue per year is still pretty good. But it is less than what was expected and it does demonstrate that we are still affected by what is happening nationally.”


Canally said that the city has received $52.7 million for the first four months of this fiscal year, October-January. Budget writers had projected collections of $54.1 million for those four months.


He hastens to point out that four months does not make a trend. However, financial planners and the City Council are well aware that Austin is bucking a generally bleak national economic picture.


“We’re not doing a hiring freeze but we’re doing something that is one step removed from a hiring freeze,” McCracken noted.


Council Member Sheryl Cole said, If our sales tax revenues decline, we will be forced to deal with the reality of our economic situation I do not think we will impose hiring freezes but we must plan to always balance our budget.


Council Member Jennifer Kim said she did not see anything additional the city needed to do right now. I think we just need to take a wait and see approach on the next few months but I think this is a good step to make sure that we are in good standing in terms of balancing the budget so we don’t have a gap to fill up in the end, in terms of the vacancies.

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