As the St. Petersburg City Council meets today to consider a tight city budget for 2009-10, it is understandable that some council members would like to find money for a summer jobs program for youths and to restore some city positions cut by Mayor Rick Baker. But they should avoid spending city reserves on recurring expenses. That would only dig the budget hole deeper for the following year, when property taxes and other revenue still will be declining.
Despite enduring dropping revenues and spending cuts like other local governments, St. Petersburg is in better financial shape than cities like Tampa, which is resorting to spending a significant amount of reserves, and Clearwater, which is staring at morepainful spending cuts. The city's tax rate is significantly lower than it was eight years ago, and it is expected to hold steady next year even though property tax revenues are expected to be down $12 million because of declining property values.
There is a misconception that the city is sitting on nearly $300 million in reserves that could be easily tapped to cover recurring costs such as pay raises for nonunion employees, more police officers or parks programs. That is a distortion at best. Many reserve accounts are dedicated for specific uses or earmarked to pay off bonds. There is $84 million from the sale of water rights, but the interest on that money is used to help hold the line on water rates. Another $13 million from a land sale is dedicated to paying for parks. It would be foolish to raid those sorts of accounts and use one-time money to pay for recurring costs of programs that do not even have a connection to the account's intended use.
After adhering to government accounting guidelines for minimum reserve amounts in the general fund, St. Petersburg would have less than $4 million in unencumbered money that could be reasonably spent to expand or continue ongoing programs. That's a long way from nearly $300 million.
There are rare occasions when relying on one-time money for recurring costs might be reasonable. For example, St. Petersburg is using a federal grant to pay for 10 police officers. But the city already is planning to set aside money every year for the day when the grant runs out and the city has to pick up the cost or eliminate the positions. Council member Karl Nurse has a proposal to use some utility tax revenue to help pay for incentives for residents to make their homes more energy efficient, which could make sense.
But it would be prudent to follow the St. Petersburg budget policy that has been in place for years: "As a general rule, operating budgets will be balanced using current year revenues to finance current year expenditures. Minimum fund balances shall not normally be budgeted as a resource to support routine annual operating expenses."
That was sound policy in good times, and it remains a smart approach in bad times for St. Petersburg and other local governments as well.