Mayor Reed proposes first fiscal year budget plan to city council

Updated: Aug. 19, 2020 at 6:02 AM CDT
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MONTGOMERY, Ala. (WSFA) - Montgomery Mayor Steven Reed proposed his first ever Operating and Debt Service Budget to the city council Tuesday.

“This is my first budget and it has been one that has been a tremendous learning experience,” said Reed.

The coronavirus pandemic has had a large impact on the city’s 2020 budget, and is proving to have a large impact on the 2021 budget as well. Reed’s proposed 2021 budget has a dollar value of $242,600,312. That budget is about $17 million less than the current year’s budget, or a cut of around 6.7 percent.

“Although city spending is being reduced by more than $17 million, a little more than six percent, I am confident that this proposed budget will allow the city to move forward on our path to building a better Montgomery,” Reed said.

Reed said the overall revenue shortfall is not projected to be nearly as profound as originally anticipated. The city has been able to weather the storm by cutting departmental budgets by 10 percent as of June 1 through the remainder of the fiscal year.

“I believe that move alone saved us from having to go into our reserves,” the mayor explained.

The city also did not fill any vacant city positions unless they were considered critical.

These measures, along with citizens putting stimulus funds and increased unemployment compensation payments back into the economy, has helped keep the city’s largest revenue stream, sales and use taxes, at a good level.

“The overall increase in this revenue stream over the previous year is still around three percent for the year,” Reed said.

Sales and use taxes make up nearly 45 percent of the current year’s budget. Some revenue streams, however, have not done as well.

“Lodging tax has an overall negative growth rate of approximately 20 percent over last year,” the mayor added. “Also, gasoline tax has a negative growth rate that is a little more than three percent compared to last year.”

Reed said the current projection for the shortfall in revenue is $6 million, or a little more than two percent of the current year’s budget. That’s as long as sales and use taxes remain level for the rest of the fiscal year.

In June, Reed said that if budget cuts had not been made, the city would be looking at a projected shortfall of nearly $18.8 million, as opposed to the now projected $6 million shortfall.

Reed said city departments’ reduced budgets ended in 7.6 percent savings to offset the $6 million in revenue shortfall.

Under the new budget plan, Reed said the city was unable to provide bonuses to city employees.

"However, we didn't furlough, nor did we lay off any employees," Reed said.

Although there was no funding included for employee bonuses, Reed said employees will also not be “burdened with increased health insurance costs in the fiscal year 2021.”

Funding city employee vacancies will also not be affordable.

“When employees resign or retire from the city’s workforce, those positions will not be filled unless they are critical in providing services to citizens of Montgomery,” Reed said.

Through continued budget cuts, Reed said the city will have $6.9 million in savings to offset the revenue shortfall.

Reed also proposed that the city offer Tier one retirement benefits to its Tier two employees.

“This will provide better retirement benefits for current and future employees while at the same time giving the city a tool for recruiting and retaining quality workers for years to come, especially public safety,” Reed said.

The city council will hold a public hearing on Sept. 1 to discuss the new budget plan. A vote is expected to be made at the Sept. 15 meeting.

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