Ocean View’s Long Range Financial Planning Committee voted 6-1 on Tuesday to approve an alternative version of the proposed 2007 budget about three weeks before it will have to make a budgetary recommendation to town council.
The top-down alternative presented by Roy Thomas would rely on limiting growth of the town’s three departments in the next six years, as well as a 15 percent tax increase and strong transfer tax revenues, to balance the budget by 2012.
In his presentation, Thomas noted that the town’s spending in 2007 — according to the most recent budgetary plan before the alternative — would exceed its revenues by $1.2 million. That number would rise to about $1.3 million in the 2008 fiscal year, and in six years, the town would have spent $5 million more than it had received, according to the Feb. 10 plan. That would leave less than $100,000 in the town’s reserves and cause a much more significant rise in taxes.
“This is a problem,” Thomas said. “In the business world, this is a going-out-of-business plan.”
According to Thomas’ plan, the town would still spend about $900,000 more than it received in 2007, but that number would slowly taper until the town reaches a balanced budget with the help of the tax increase in 2012.
Thomas said that the town would still spend about $2.5 million more than it plans to receive in the next six years, but that would be a step in the right direction. Plan B would also leave $2.5 million in the town’s reserves in 2012.
“The town of Ocean View must find a way to get to a balanced budget,” Thomas said. “We are not the federal government.”
Finance committee members showed support for the top-down, plan although they said a few numbers would have to be changed before they made a recommendation to town council in March.
Bill Wichmann, a town councilman and member of the committee, was the only member to vote against the proposed plan, saying he was in favor of an immediate tax hike to support next year’s budget.
“People didn’t come here to see how cheaply they can live,” Wichmann said. “I’m used to being in the government business where we worry about next year. I’m concerned what we do in 2007. I don’t mind raising taxes.”
Thomas, who is also the president of the Bear Trap Home Owners Association, disagreed strongly with Wichmann, and instead proposed to rely on responsible spending in the three departments’ operational budgets to close the gap on rising deficits in the town.
After 2007, according to Plan B, the town would only allow the public safety budget to rise by 3 percent each year, using an inflation rate of just more than 3 percent.
In 2005, that budget increased by 13 percent, after increasing by 24 percent in 2004 and 26 percent in 2003. The new plan wouldn’t allow for any new hires until at least 2012.
“It’s going to be real different,” said Kenneth McLaughlin, Ocean View’s chief of police. “Substantial cuts would have to be made. Anything is possible but it would be very tough.”
Since the police department has grown at a much faster pace than the town’s other two departments — administrative and public works — in the last six years, Plan B would allow those two to grow at a bit faster rate in the next six.
Thomas presented a 5 percent increase, starting next year, for Public Works and a 6 percent increase starting at the same time for general and administrative spending. It’s likely that neither of those departments would be able to make any new hires, either, until 2012 — outside of a seasonal, summer employee for Public Works.
But that’s not the part of the plan that worried Thomas and his fellow committee members. The town’s income would still, from 2007 to 2012, rely heavily on transfer tax revenues, which have plummeted in recent months and remain a tremendous source of concern and uncertainty.
Plan B would expect the town to receive about $558,000 from the tax in the 2007 fiscal year, $633,000 in 2008, $717,000 in 2009 and continuing to increase until it reaches about $1.1 million in 2012. According to the plan, transfer taxes would go from making up 29 percent of the town’s revenue in 2007 to 40 percent in 2012, which would again make the transfer tax the biggest revenue source in the town.
Real taxes would only make up 36 percent of the town’s revenues in 2012, according to Plan B.
“That’s the scary part of it,” Thomas said. “We have no readily available revenue sources that could replace transfer taxes. If the transfer taxes would go away, town residents would face two options.”
Those options, Thomas said, would be between a significant tax hike and a significant cut in services. Although she is probably the most skeptical among town officials on the unreliable transfer tax revenues, Ocean View Town Manager Kathy Roth supported Thomas’ top-down budgetary plan.
“You never know what’s going to happen in the future,” Roth said. ‘But we need to look into the future. We need to operate a balanced budget.”