Tuscaloosa Mayor Rolls Out FY21 Budget Recommendations

TUSCALOOSA, AL. — The coming weeks will see Mayor Walt Maddox and the Tuscaloosa City Council begin to hammer out a budget for the upcoming Fiscal Year 2021, with numerous shortfalls planned for due to the ongoing COVID-19 pandemic. Maddox introduced his budget recommendations on Tuesday in an approach he viewed as "conservative."

"No doubt this is the most difficult budget in my career as mayor," he told the council during its regular meeting Tuesday night. The plans will be considered over the next three weeks with the goal of having it on the regular meeting agenda Sept. 22.

In total, the operating budget for the upcoming fiscal year sits at a proposed $226 million, roughly $10 million less than last year's budget passed by the council. The largest portion comes in the general fund at $154 million, followed by $56 million for water and sewer, and $15 million for Elevate Tuscaloosa.

Maddox began by breaking down the general fund budget that will begin the new fiscal year with a balance of just over $49 million. Maddox pointed out the current general fund balance still exceeds the $42.5 million budget balance going into fiscal year 2011, which saw the April 27, 2011 tornado destroy a sizable portion of the city.

"We came out of one crisis, built ourselves stronger and are ready for the next crisis," he said.

As the mayor and city leaders work through the current crisis, they will also be faced with general fund revenue that is predicted to be substantially lower than last year's $164 million, coming in at $154 million for the coming fiscal year.

Going into the new budget year, Maddox said the city's departments were each asked to reduce their operating budgets by 38% for the general fund and 12% for the city's water and sewer fund.

While the mayor said this 38% reduction was ultimately not needed in full, he highlighted that employee optimization plans would result in 23 positions being frozen, while three could be permanently eliminated.

What's more, a hiring freeze will go into effect Oct. 1 and run through March 31, 2021, which is projected to result in $1 million in additional operating savings.

Step raises and raises for cost of living for city employees will also not be budgeted in for the coming fiscal year, Maddox said, but was quick to note city salaries consistently exceed the National Wage Index, with salaries for public safety and exempt employees exceeding inflation by 35%.

In looking at the city's investment for public safety workers, Maddox's budget recommendations call for $395,000 annually to be invested in the Fire and Police Pension fund — a three-year commitment that would see an increased employer contribution of 1%, along with a 0.5% increase for employees.

Police and fire will also see funding set aside for vehicles, equipment and capital projects to the tunes of $1.54 million and $1.6 million, respectively.

Discretionary funds, or money the council has access to and control over, will also take a sizable hit to the tune of about $5.8 million, mainly due to shortfalls in sales and lodging taxes. The council under the proposed budget would begin the year with a discretionary fund budgeted at just under $110 million, compared to $115 million last year, with 62% of that being dedicated to salaries and benefits. This percentage is also up from 58% set aside for salaries and benefits over the last fiscal year.

In total, Maddox said 70% of the city's revenue comes from sources including sales and use taxes, business licenses and lodging taxes, which underscores the local economic impact felt by the COVID-19 pandemic.

"As the economy goes, the city’s budget goes," he said.

Agency funding was also a talking point during the budget presentation, as the city will look to decrease certain agency contracts — other than those with Tuscaloosa County Schools and the Tuscaloosa Tourism and Sports Commission — by 38%. This would include a 38% decrease for PARA on a conditional contract that would see additional funds allocated later.

For the Tuscaloosa Transit Authority, which received a $5.7 million grant as part of the CARES Act, it will have the financial footing to then free up agency funds spent by the city. These measures enacted by the city would then provide a contingency balance of $500,477.

One of the most prominent budget shortfalls can be seen in the city's lodging tax, which was budgeted for $8.6 million in fiscal year 2020, but came in well short at $5.7 million as new budget talks begin.

For the upcoming fiscal year, Maddox's proposal budgets for a little more than $5.5 million collected for the city's lodging tax, due to the ongoing impact had on tourism and traveling as a result of the coronavirus pandemic.

As for the shortfall in sales tax, the city's finance team reported a deficit of roughly $1.7 million, which factored into planning for the upcoming year that is predicted to see about $36.6 million collected for the city's sale tax.

Maddox said this hampers the 2.3% average annual growth in sales tax collections from 2016 to 2019.

Another area that has seen a downturn has been property taxes, with the city budgeting for $18.1 million in FY 2020, but collecting only $17.6 million. This was reflected in the finance team's latest recommendations, budgeting for roughly $17.6 million for the upcoming fiscal year.

Business license collections actually proved to be a consistent piece of last year's budget as the city managed to break even in collections by a narrow margin of $517. For the upcoming fiscal year, business licenses would be budgeted at $20,715,000, which is comparable to last year's budget amount.

Other recommendations by the mayor and the finance team included extending the grace period for water and sewer services until Jan. 1, 2021 to help those impacted financially by the pandemic, but also implementing a 1% rate increase for water and sewer service and a 1.5% increase for rural water authorities.

The increase would translate to an increase of roughly $1.71 for residential water bills. City garbage, however, will not see any increases in rates, the mayor said.

Looking at water and sewer revenues, Maddox said the shortfall isn't necessarily due to the COVID-19 pandemic, but how much rain the area received over the year. For the current fiscal year, that fund fell about $1 million short.

"If we’re in drought years, our revenue looks amazing," Maddox said. "When it's a wet year, we’re at low points."

In terms of revenues for the Elevate Tuscaloosa 1% sales tax, which was implemented in 2019, revenues actually are expected to be higher, with Fiscal Year 2021 budgeted for $20.4 million, compared to $19.5 million collected over the last fiscal year.

"Our budget history is short [for Elevate Tuscaloosa], but it's higher because of use tax," Maddox said. "We’re seeing with pandemic that use tax is building up and increasing."

Maddox the reiterated the goal would be to have the budget on the agenda for the Sept. 22 regular meeting.

"If it's not unanimously approved, it gives us one more week to get it approved," he said.