Springfield City Council will vote on an annual operating budget that is approaching half a billion dollars at its June 5 meeting.
The proposed budget for fiscal 2024, which runs July 1-June 30, 2024, represents an increase of 11.4% over the current fiscal year. Budget resources total $495,690,888.
A hearing was held at the May 22 regular council meeting, with David Holtmann, the city’s director of finance, presenting the budget that had been prepared by City Manager Jason Gage and submitted to council on April 28.
“We are now approaching a half a billion dollars in total,” Holtmann said. “We have increased our budget by almost $51 million since fiscal 2023.”
The city charter requires the city manager to submit a balanced budget, which Holtmann described as a zero-sum game, with any expenditure requiring a corresponding appropriation.
Holtmann said priorities informing the proposed budget are employee recruitment and retention, public safety, fiscal sustainability and quality of place.
He said 62% of new general fund revenues, or $5.1 million, are earmarked for salary increases for city staff, and the budget adds five full-time equivalent staff positions to be distributed across Building Development Services, Planning and Development, Economic Vitality and Information Services. The city currently has 1,910 employees and last year reported a staff count of 2,303, according to Springfield Business Journal list research.
Following pandemic reductions enacted in March 2020, the proposed budget restores additional funding of self-insurance funds, including liability insurance and workers’ compensation. The city has used an actuarial study to enhance contributions into those funds in order to build up healthy reserves, Holtmann said.
Level property tax-funded projects and bond projects will proceed as expected, with projects being monitored for higher costs due to increases in construction costs.
“We’ve issued our second set of bonds for level property tax and are getting started on those projects as we promised in the original ballot,” Holtmann said.
The largest portion of projected city revenue will come from sales and use taxes, which amount to $181 million, or 36.5% of the proposed budget. Charges and fees are expected to make up $128 million, or 25.8%. No other single revenue source tops 10% of the pie.
The general fund represents 22.2% of proposed expenditures, or about $110 million, and covers costs associated with Police, Fire, Planning and Development, Public Works and other departments.
Holtmann said the budget categories remain relatively stable year to year. Special revenue funds, including the Springfield Art Museum, emergency communications, police/fire pension, public health and parks, make up 31.5% of the proposed budget, and enterprise funds, including the airport, clean water services, solid waste and golf, are 26.2%. Grant funds make up 4.6% of the budget.
Holtmann said the city has a light debt load and maintains the second-highest bond rating for municipal governments at Aa1.
“We work very strongly to retain our council-established rainy-day fund at 20% of operating revenue,” he said.
Fiscal 2022 revenue ended 14.2% above budget from sales tax and payment in lieu of taxes, Holtmann said, and the projection for fiscal 2023 is that the city will end the year with revenue at 9.3% above budget.
American Rescue Plan Act Funds received by the city were not factored into the budget, he noted.
Holtmann said sales tax revenue continues to be strong.
“While sales tax revenue continues to remain strong, we are being conservative moving into next year with a small growth of around 2% projected in our sales tax,” he said.
The city held four budget workshops with council in preparation for the public hearing at the May 22 meeting.
Additionally, the city offers transparency via a budget home page featuring an overview from Budget Manager Teresa Allen, who describes via video message how to navigate the budget pages of the city’s website.
Each department has a page on the site with its 2020-21 and 2021-22 actual budgets, their current budget-in-progress for 2022-23, and their proposed budget for 2023-24. The department pages, located at SpringfieldMo.gov/310/The-Citys-Budget, include a pie chart with an overview of planned expenditures, and this may be clicked on for more detail.
During the discussion of the budget bill, Councilmember Abe McGull noted costs are always on the rise.
“The cost of running a city goes up anywhere between 8% to 10% every year,” he said. “We have been blessed to have really good economic times, but that will not hold true in the future, will it?”
Holtmann agreed that less growth is anticipated.
“I don’t think we’ll see the double-digit growth that we’ve seen over the last two to three years after the initial beginning of the pandemic,” Holtmann replied. “These last few years have been exceptional.”
Councilmember Monica Horton inquired about the amount of carryover anticipated, and Holtmann noted on the books with the balanced budget approach, formal carryover is zero, but functionally, there will likely be some leftover funds.
“I think we’re in the neighborhood of $6 million to $8 million of revenue ahead of our current fiscal ’23 budget projections,” Holtmann said. “We grew our base by 10%, so we’re building our budget with anticipating the total revenue we’re going to bring in for the current year plus a small percentage for additional growth.”
The budget year is closed out in September or October, and council will be approached regarding how to expend any carryover at that time, Holtmann said.
City manager’s overview
Gage presented the budget to council on April 28. In a letter accompanying it, he noted it is a collaborative process with input from every department and from the city’s leadership team.
“The city is a complex and functionally diverse organization,” Gage stated. “I believe this budget addresses many, but certainly not all, of the city’s most pressing operational needs.”
He noted the city was awarded over $120 million in COVID-19 federal funds, and the impact has been unprecedented from a budget perspective, with a significant balance of those funds yet to be expended. Stimulus funds to individuals and businesses resulted in greater sales and use tax revenue than originally projected, he said, and the trend has continued.
A third of the city’s budget is dependent on sales tax, and annual growth is typically in the 3%-4% range. In fiscal 2023, sales and use tax exceeded budget projections by over 10%. Slower growth is anticipated for the rest of the current fiscal year, Gage noted.
He noted that Moody’s Investor Service, which issued the city’s Aa1 rating, cautioned the city about some challenges, including its dependence on sales tax and its below-average resident income. U.S. Census Bureau’s data shows median household earnings in 2021 of $39,991 per year in Springfield, well below the state’s median household income of $61,043.
Gage noted inflationary pressures, higher interest rates and geopolitical concerns will impact retail sales, though growth is projected to remain positive at 2% over the projected year end.
“City staff will continue to emphasize the future diversification of our revenue base, in accordance with City Council direction, to reasonably offset this economic sensitivity,” he said.
He noted the staff believes the budget will allow Springfield to continue to prosper as a community.
“The city continues to be financially sound and prudent in our mission to serve our citizens, and we have earned the reputation of being a good steward of our community’s tax dollars,” he said.
Springfield Business Journal’s 2023 Trusted Advisers event honors 20 businesspeople.