The City of Albany is losing significant amounts of revenue under the current worldwide economic recession. City officials decided to cut budget to deal with the problem Monday.
Housing sales in the city are declining rapidly. 25 housing properties were sold in July, 12 were sold in August, and only 6 were sold in September. The City used to gain an average of $100,000 each month in property transfer tax in previous years. But it got less than $40,000 in September.
The City’s total property transfer tax went down by more than 60 percent during the first quarter of the 2008-2009 fiscal year (from July to September), compared with the same period of the previous fiscal year.“October and November is expected to be poor too,” said Charlie Adams, Director of Finance Department of Albany. “The trend is bad.”
Adams projected that the total property transfer tax in the current fiscal year will be about $300,000 under budget, according to a recent report he submitted to the City Council. The budgeted amount was about $1.2 million.
The City had attempted to raise the tax rate for more revenue, but failed to get voters’ approval in the recent election.
Sales tax, another significant revenue item for the City, is projected to be half a million less than the previous fiscal year, dropping from around 2.5 million to 2 million.
However, it didn’t show similar downfall as the property transfer tax in the first quarter. Instead, it slightly went up by about $12,000. Adams declined to explain the specific reasons for the increase.
Another revenue item that could swing the budget of the City is investment earnings. The City invested $600,000 in Caltrust Fund in January 2008. It has not yet seen the benefits, due to the current financial turmoil. Instead, the market value of this investment had decreased by $42,000 by the end of September, according to a recent staff report.
The yield of its investment in Local Agency Investment Fund is declining as well, dropping from 5.23 percent a year ago to 2.77 percent in recent months.
“The markets remain volatile at this time and yields earned by the City are certain to remain depressed through the end of the calendar year,” said City Treasurer Kim Denton in the report. “The City has not experienced loss of invested principal, but such losses could occur.”
The risks prompted the City to project that its investment earnings would be about $90,000 under the budget it set in the summer.
The City would also suffer a loss in vehicle license fees allocated by the state, as car purchases are decreasing statewide.
To deal with the fiscal challenges, the City administrators decided to cut $122,000 in budgeted expenditure, asking most departments of the City to share a portion of the budget cut. (Click here to see the details) . The City Council unanimously approved the proposal at a regular meeting on Monday.
Several residents said at the meeting that the City should cut the funding for the $600,000 waterfront visioning project as well.
“That’s a really bad use of city money, particularly at this time,” said Bob Outis, a resident who has been opposing the project.
His view was echoed by Caryl O’Keefe, another Albany resident. O’Keefe said that she understood the City is cutting expenditures to “spread the pain around and minimize it”.
“But I think you are going to go through this exercise a couple of times. It will get harder and harder. It’s better to look at something you have more discretion, ” she said.
Margie Marks, a member of the Social and Economic Justice Commission, disagreed. She said that Fern Tiger, the consultant hired by the City to implement the project, is helping to bring the community together through her work.
“I think we need to look at the moral health of the community as well as the financial health of it, ” she said. “Given the animosity I’ve seen and heard in this community, I think what she’s doing is vital to our community, and continuing that is extremely important. “
Artile by Linda (Linjun) Fan.