If the City of Douglas wants to keep from laying off additional employees or have forced unpaid furloughs, it is going to have to focus on generating  revenue.

While much of the public’s focus on the City of Douglas budget may have been the cutting of expenditures (laying off two high-profile employees), the big problem lies  in the lack of revenue coming from the state and through local sales taxes.

“We only budgeted revenues at one percent higher than last year, but are really being hurt by state cuts,” said City Manager Curtis Shook.

Project revenue in 2009-10 is only $10,449,637, about four percent or $471,161 less than budgeted last year.

The biggest part of that deficit is coming from sales tax, down $204,154, and state taxes, down $138,116.

The projected shortfall in 2010-11 is expected to be nearly double that amount at $918,000, according to figures from the City Finance Department.

The shortfall is from projected decrease in revenues of $775,000 and an increase in expenses of $143,000.

The biggest decrease in reveue will be State Shared Revenues (Income Tax) at $550,000; City Sales Tax, $100,000; and Other State Shared Revenue, $90,000.

“We are not in panic mode, but the time to act is now if we want to limit our revenue losses,” Shook said.

“One positive is that cash follow has remained steady.”

What can the city do

While there isn’t much the City of Douglas can do about recouping the State Shared Revenue losses, it has begun to attack the collection of city sales taxes.

“The big problem is sales taxes. We are down not only because spending may be less, but there are many unlicensed and licensed businesses operating in Douglas who are simply not paying their taxes,” Shook said.

It is believed that up to 100 businesses are not paying taxes and that unpaid city sales taxes may amount to between $8,000 and $10,000 monthly.

Finance Director Jorge Trevino said that he believes the city can collect at least 75 percent of those unpaid and delinquent taxes, which would amount to between $72,000 to $90,000 annually in new sales taxes or about 45 percent of the current shortfall.

“When we hired an outside collection agency we were made aware of certain items, including the severe leakage of local sales tax,” Shook said.

“While the Model Tax Code allows us to go back and collect back sales taxes, at this point we are more concerned about compliance.”

Shook said the city council will also review a proposal to have the city collect its own sales taxes instead of having it filter through the Department of Revenue and Treasurer’s Office.

“As the state has progressed through this economic downturn, the time it takes to get our sales tax money from the state is becoming longer and longer. There is now a two-month delay in getting that money in our coffers. Its not just the length of time it takes to get here but the possible loss of interest that could be earned during those two months.

“Other state community leaders have been quoted saying they know the state has been keeping the money longer and longer.

“Collecting our own sales tax will increase our cash flow exponentially and allow us to better control those problem businesses that are not paying.”

The city is also worried that if the state’s economic woes become greater, it may take longer and longer to get its funds, or they may receive an “IOU” for the money collected.

“People need to remember that the delinquent  business sale tax money is not the city’s money it is the taxpayer’s money. Those businesses not paying  their fair share needs to realize, they are impacting their neighbors, relatives and others .”

Construction

Shook also pointed out that just because someone sees activity in the community in the way of construction doesn’t mean the city is flush with cash.

“Many of those projects are available to us because of grants made available to the city. But those grants have specific purposes, specific timelines sand meet specific needs,” Shook said.

For example:

√ Road Construction on 20th and 21st Street is made possible through a Community Development Block Grant, and not General Fund expenditures.

√  Improvements at city hall are through a GADA grant.

√ Funds used to build and maintain the building which houses the ACCT Call Center was made available through a .03 cent sale tax increase for that specific purpose.

√ Purchase and projected renovations at the old Phelps Dodge Building on G Avenue was made available through a grant and low interest loan. No general funds were expended.