Lexington's city government faces another year of belt tightening, with virtually no increase in general fund revenue for the second year in a row, finance director Bill O'Mara told the Urban County Council on Thursday.
Revenue is projected at $269.5 million for fiscal year 2011, an estimated increase of 0.7 percent from 2010 revenue, O'Mara said.
The major reason for the dismal outlook is the city's stagnant payroll tax, plus flat permit and license fees, which together bring in 81 percent of the city's revenue.
Payroll is projected to increase just 0.05 percent in 2011 compared with 2010; growth in manufacturing, construction and service sector jobs is expected to be slow.
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The health-care sector is expected to grow, which should benefit the city. "Lexington is a regional health-care center," O'Mara said.
Proceeds from the net profit tax will go up 3.8 percent, he said.
The financial projections are included in Mayor Jim Newberry's proposed budget for fiscal year 2011 that begins July 1. Next, the council will review the budget, probably make some changes, and ratify the budget by mid-June.
"This is going to be a slow and gradual recovery," O'Mara said. He pointed to forecasts from University of Kentucky economic advisors who do not see the economy picking up until the second half of 2011.
The unemployment picture will be even slower to improve, O'Mara said. Businesses will first expand the hours of their current employees, cancel furloughs and grant raises before hiring new employees.
The city anticipates gaining $500,000 from aggressively going after businesses that are delinquent in paying their net profit taxes. It also expects an increase of $187,000 from increased golf and aquatic fees, plus $585,000 from the federal government for housing federal prisoners.
The city is in the midst of compiling a list of surplus property that it hopes to sell for $4 million.
The sober revenue picture means the city will focus on providing basic services first and foremost, said Linda Rumpke, commissioner of finance and administration. "We have to step back and say, 'What are the basics that this urban county government must provide to the citizens of Fayette County?'" she said. That includes adequate police and fire protection, "and just running the day-to-day operations of city government."
The mayor proposed no cuts to those "critical care, basic needs agencies like the Salvation Army and the Hope Center," she said. But the city is looking at such cost-saving measures as expanding efficiencies it has gained through technology, and holding onto to city-owned cars longer. The city will save money by training more police and fire recruits, which will cut down on overtime expenses for others on the force when they graduate and are full-time employees, Rumpke said.