After previous years of dipping into the city's reserves to balance annual budgets, North Little Rock is projecting funds to be put back into its savings next year, mainly because of a new, voter-approved sales tax increase, according to the city's 2018 proposed budget.
North Little Rock voters passed a 1 percentage-point increase in the city's sales tax during an August special election, raising the tax from 1 percent to 2 percent. The total sales tax charged in North Little Rock, counting state and Pulaski County taxes, will be 9.5 percent once the new tax kicks in Jan. 1.
A public hearing on the $66.21 million budget will be at 5 p.m. Monday, before the City Council's regular meeting at 6 p.m. A draft of the budget is available on the city website, nlr.ar.gov under the government tab.
The 2017 general fund budget approved a year ago was $66.36 million.
"The 2018 budget is actually smaller than the 2017 budget," Mayor Joe Smith said in an interview last week. "One reason is we're still very prudent with the taxpayers' money. We're able to fund most all vehicles requested. We gave Chief [Mike] Davis all the police cars he wanted and we gave Chief [Gerald] Tucker all the firetrucks he wanted."
When speaking for the tax increase at more than 40 gatherings over the summer, Smith kept repeating that if the tax didn't pass, the city would have to make $5 million in reductions, mostly cuts in staff, to balance the 2018 budget.
Instead, the new budget is projected to have a surplus of $3.3 million.
"It turned out exactly like we said," city Communications Director Nathan Hamilton said. "We were able to keep that $5 million and keep expenditures flat and have $3 million left over."
Being prudent with the taxpayers' money, as Smith said, means socking away those extra dollars, not trying to spend it all, he said.
There aren't any staff cuts in the proposed new budget, but there aren't any staff additions to be made next year, either. Employees also won't see raises next year, as they did in each of the past two years, pulling money from city reserves each time to make that happen.
The city's health insurance coverage is projected to increase for the latter part of next year, and the city will absorb a $400,000 hit to continue to pay 100 percent of employees' premiums in lieu of any raises, Smith said. If the city didn't pay that cost, Smith said, employees' out-of-pocket costs for their deductibles would have to be raised from $500 to $1,200 annually.
Another added expenditure for 2018 will be increasing the city's contribution to its pension fund for nonuniformed employees by 1 percentage point, to 10 percent. The city's added cost will be $270,000. Eligible employees will also pay more, with their share rising 1 percentage point, to 5 percent.
The added sales tax revenue "gave us an opportunity to not have to reduce our staff," Smith said. "Employees are 75 percent of our total budget. The only way to save that $5 million would have been to cut staff. With police and fire being our biggest departments, they would have had to take a big hit.
"We're not growing, and I don't want to grow," Smith said. "I want to maintain a full staff in public safety and not have to go into our forward balance [reserves] to have to pay our bills next year."
City Finance Director Karen Scott said department heads kept their budget requests "in line with where they've been in the past," even with the new sales tax revenue coming next year.
"The department heads did what was asked of them," Scott said. "They did not ask for higher budgets. We really approached this year's budget as we did in previous years. When all of this came together, there wasn't a deficit we had to cover. We're thankful for that."
The city's reserve fund was projected during the tax campaign to have dropped from $13 million at the beginning of this year to $9 million by December's end. Because of higher-than-expected revenue and holding down expenditures, Scott said last week, the fund is expected to be back to $13 million by year's end.
"Then there is to be a plus $3.3 million in 2018, if the budget holds," she said.
The Fire Department will have 163 permanent firefighter positions, or 15 more than two years ago, but those aren't new for 2018. The city is going to be able to keep 15 out of 24 firefighters hired since 2015 through a $2.6 million Federal Emergency Management Agency Staffing for Adequate Fire and Emergency Response grant. The city received the grant in 2015, but it was only good for two years.
Without the grant funds, the nine other positions couldn't be filled permanently, which led to letters of hire mistakenly sent in September to nine potential firefighters, Smith said.
"The nine we didn't bring back on board was because we didn't have the grant to pay for them," Smith said. "There was some confusion in getting that message out to Human Resources. Some [applicants] might have had to quit their jobs to come to work for us for 90 days, when we would have had to let them go, and that wouldn't have been fair to them."
One-half percentage point of the new city sales tax is permanent to help the city meet its annual operations needs. The remaining half percent is for five years and is dedicated for a new police headquarters, fire station upgrades and improvements to streets and drainage systems.
The city's current 1 percent sales tax is on track to bring in $16.9 million by this year's end and $16.93 million in 2018, Scott said.
The new tax to begin Jan. 1 is projected to total $13.82 million for 10 months of 2018. Collected tax revenue is paid to cities by the state, a process that runs about two months behind, meaning the city won't get a full year's worth in 2018. The total is to be divided equally, $6.9 million each, between the general fund half and the capital half of the new tax.
The new sales tax is budgeted to provide $2 million within the city's four wards for streets and drainage improvements, $3.5 million for fire station construction and renovations, and $2.35 million to relocate a new police and court building.
"We kind of did a timeline of how those funds will come in over the five years and how those projects would progress over the five years," Scott said. "So this is Year One."
Metro on 11/12/2017