The FY 2014 Budget for the city of Cleveland includes an estimated 6 cent property tax increase for the state-mandated reappraisal and an 18.51 cent increase approved by the City Council.
The state will certify the new tax rate sometime this month after all appeals are finished and that will determine exactly how much the rate will jump.
The certified tax rate ensures the city receives the same property tax revenue as the previous year based upon the new appraisal. However, the new budget includes an additional 18.51 cent property tax increase for operations to maintain the current level of services provided to residents and to pay the debt service for capital projects.
The current property tax rate is $1.49 per $100 of assessed value. If the certified tax rate increases 6 cents, the tax rate would rise to $1.55. With the 18.51 cent increase, the city new tax rate could be $1.7351 per $100 of assessed value. It would be the first property tax increase since tax year 2005. Voters approved a referendum to raise the sales tax in 2009.
The 490-page document does not include an increase in the monthly sanitation fee of $6.95 or an increase in any other fees.
The budget includes revenues and expenditures necessary to maintain, and in some areas, improve current levels of municipal services.
The total budget, including all city and Cleveland Utility funds, equals $227.620 million, a 3.9 percent decrease from the FY2013 budget, primarily due to capital projects completed in 2013.
The budget overview shows major priorities include capital projects funded from the 2009 local sales tax referendum. The city’s portion of the sales tax is expected to generate $2.529 million. The proceeds may be used only for capital improvement projects, which totals to $3.835 million, leaving a balance of $16,724.
The 2012 budget funded the city's share of the Local Interstate Connector project at the new APD 40 Interchange and the work is expected to be completed in 2013 or in the spring of 2014. The city and county have each contributed $1.875 million. The state will fund $3.750 million. LIC South should open the southeast quadrant of APD 40 and Interstate 75 Exit 20 to retail development and Spring Branch Industrial Park. LIC North gains access to the northeast quadrant. LIC North and South were recently named Cherokee Gateway North and Cherokee Gateway South.
In addition, state and federal funds will improve Exit 20 and construct a new APD 40 Interchange to be completed in 2015.
The city operates with 32 separate funds. Each fund is a separate accounting entity with assets, liabilities, equity, revenues and expenditures. While the city administers 27 funds, Cleveland City Schools administers two funds: the School General Fund and the School Food Service Fund. The Library Board administers the Library Fund and Cleveland Utilities administers two funds: the Electric Fund and the Water/Wastewater Fund.
Cleveland City Schools will receive a $5.120 million transfer of operating money from the General Fund. In addition, a transfer from the General Fund to the Debt Service Fund will cover long-term debt incurred by the school system. The total transfer from the General Fund for schools is $7.529 million, which is $5,300 more than the previous fiscal year. Since 1998, it has been the policy of the City Council to increase school operating funding by an amount with growth in tax revenues; however, that has not been possible due to the economy and loss of the $1.8 million fire contract with Bradley County, which expires June 30.
The Library Fund receives a transfer of money from the General Fund, with an equal appropriation from Bradley County. The next budget includes $608,100 from the city, which represents a $40,000 increase. The increase is contingent upon Bradley County also funding an additional $40,000.
Cleveland Utilities' budgets are classified as Enterprise Fund Service Plans that fluctuate depending upon the usage of utilities. Usage might be affected by market or weather conditions.
Cleveland Utilities receives no transfers of money from the General Fund because the utilities operate solely from their charges for service. CU included a 5 percent rate increase for water and for its wastewater operation for FY 2014. There is no rate change for electricity in the next fiscal year, unless TVA increases its rate.
Staff used several assumptions in preparing the new budget. The major assumptions were:
- The state-mandated reappraisal calculation which guarantees cities and counties the same revenues as they received the previous year will require an estimated 6 cent property tax increase for city taxpayers.
- An 18.51 cent property tax increase to fund the current level of services and pay the debt service on several capital projects.
- No increase in the residential sanitation fee.
- Property tax revenue growth of approximately 1 percent over the FY 2012 audited amount.
- Local sales tax budgeted at .5 percent above FY 2012s audited amount.
- State sales tax budgeted at 4 percent above FY 2012s audited amount.
- State income tax budgeted at 13 percent below FY 2012s audited amount.
- 5 percent franchise fee on the gas franchise and the cable television franchise.
- Bradley County will not pay the city for fire suppression services for the city's fringe area. This compares to $911,100 received from the county in the previous fiscal year for the fire contract.
- No increase budgeted for health or dental insurances.
- City employees will receive a 3.5 percent cost-of-living adjustment. Cleveland Utilities funded a 1 percent COLA and 3.5 percent merit raise. City schools funded a 2 percent COLA and a step increase for their employees.
- The FY2014 Budget restores funding for additional personnel previously unfunded because of the economy and loss of the fire contract with Bradley County. The positions are for a property maintenance official, two firefighters, six grant police officers, six police officers, Motor Equipment Operator 1, Motor Equipment Operator 3 and a public service worker.
- The Cleveland City Schools system will receive an additional $5,300 from the city for debt service.
- The FY 2014 Budget will increase long-term debt for the new general aviation airport construction cost less the proceeds from the sale of the former airport at Hardwick Field.
The annual debt service payment is budgeted at $370,000. The FY 2014 Budget also increased for the new Spring Branch Industrial Park near Exit 20, which is jointly funded with Bradley County and Cleveland Utilities, and the airport terminal building.
- The Office of Criminal Justice Program Targeted Crime Reduction Grant, which funded two police officers and provided funding for evidence-based programs with the Cleveland Boys & Girls Clubs, Bradley County Juvenile Court and Behavioral Research Institute ends June 30. The city is committed to continuing the collaborative partnerships created during the three-year grant and has budgeted $14,000 to continue the Boys & Girls Clubs’ character-building programs (Positive Action and Life Skills) at two community centers and clubs at the Cleveland Housing Authority.
- The budget will not use any of the $11.9 million unreserved general fund balance.
- The budget will not use any of the city's $2.5 million debt service fund balance.
- Fleet Management will charge $67 per hour for labor, a 30 percent markup on parts, 30 percent markup on contracted services and 20-cents markup on fuel over the actual cost. These fees are for the overall operating expenses incurred by the facility and fleet operation.
- The city will fund $2.5 million in capital projects this fiscal year from the 2009 local option sales tax which funds only capital infrastructure and equipment needs of each department.
- The budget does not include an additional $142,000 requested by the Bradley County 9-1-1 District. The district requested $142,000 from both the city and county to cover its shortfall in the cost of staffing and operating the center.
The State Emergency Communication Board and state comptroller require 9-1-1 centers operate with a balanced budget. The 9-1-1 District has had a shortfall the last three years and the center is now considered "at-risk" by the state.
The 9-1-1 Center submitted an amended balanced budget to the ECB for FY2013. However, since its audit will not be submitted to the ECB until December, the FY 2014 Budget must operate in the black to be considered financially sound.
The City Council will consider additional funding if the Bradley County Commission includes the additional $142,000 in its budget.
Major funding issues
- The budget does not include funding for construction of a new fire station. The city purchased a site for station number six, but construction funds will not be provided until the area develops. The station will be needed in the future in order for the fire department to adequately serve the southern portion of the city, including the Interstate Exit 20 area which will continue to develop. The new station, equipment and personnel will be needed in order to help the city maintain its ISO rating once development occurs.
- Funding for a new Public Works building is not included. Construction of a new Public Works administrative building and facilities for material storage, equipment storage facilities and a new sign shop has been a goal for several years. The new facility, when funded, will be built on existing city property where the city garage and impound lot are located on Fulbright Road.
- Funding for a new elementary school is not included. The city purchased the land, but does not have funding in place for the estimated $13 million for a new elementary school on Georgetown Road.
Bradley County is currently considering several school capital projects including a major renovation of one of its middle schools. Any time Bradley County issues debt for school improvements, the city receives one-third of the proceeds for its school capital projects since the Cleveland City School System educates one-third of the students in Bradley County and city residents pay county taxes, which are used to pay the debt service.
If an elementary school is needed before Bradley County begins its school capital projects, construction of a new elementary school would require a 9.8 cent City property tax increase for the $13 million bond issue.
- City departments prepared a 15-year equipment replacement schedule. Funding would require an additional $1.8 million annually; however, no funding is in place to fully implement the program.
The FY 2014 Sales Tax Capital Project Fund includes $733,000 for annual replacement of equipment, which would provide departments the opportunity to begin an equipment replacement program.
- Another funding issue includes the agreement between the city and county to each invest $2 million in the future veterans home at 1940 Westland Road. Land was donated for the home and design is underway. Construction funding will not be included in the budget until federal funding is secured for the project.