Technically, the city of Commerce is in the black halfway through its fiscal year. In reality, however, it’s operating $400,000 in the red, thanks to a combination of factors.
Finance Director Steve McKown explained the city’s financial condition at Monday night’s meeting. If he went into a little more detail than usual, it’s because of the tough economic circumstances.
On paper, the city is $173,273 in the black, but McKown said those numbers are misleading.
“Before we celebrate and lower taxes, let’s consider what comprises those numbers,” he told the council.
McKown explained that the city has $580,158 in “restricted” revenues that make the bottom line appear inflated. That includes SPLOST funds ($427,592), confiscated drug money ($138,620) and money for the city library expansion ($13,946) that are unavailable for general operations.
Basically, those funds are being “saved” for future projects. SPLOST and other capital projects are all on hold.
The problem is in operations. Water and sewerage revenue is $130,006 in the red and the natural gas revenue is $343,484, while the Electric Department, though not having a stellar year, is $51,454 in the black.
The gas revenue is the major problem. Although temperatures are cold this week, to date, fall and winter have been warmer than average.
“We will see some improvement, but I do not expect at the end of the year we will have recovered $343,000,” said McKown.
The bottom line also took about a $100,000 hit when Louisiana-Pacific went offline, according to McKown.
In addition, McKown said sales tax revenues, which include SPLOST and the local option sales tax (LOST) are nine percent down from the previous fiscal year.
City Manager Clarence Bryant told the council that the city’s “spending freeze” will continue through the next quarter, and he warned the city council that the loss of gas sales to LP will have a continued effect on the city’s budget the following year. LP used gas year-round, so sales after winter will be down drastically.
“There’s $300,000 that won’t be going to the General Fund,” he said, adding that he would welcome city council input as to how to adjust for that loss.
“Y’all are going to earn your keep in the next budget year,” joked.
The gas fund typically provides $850,000 a year in revenue to the General Fund.
This week’s cold weather was good news for the city’s financial outlook, but it will need a lot more days of low temperatures to recover from what, except for a time in November, has been a warm fall and winter.