City approves $1.5 million deficit budget
By Neal A. Shipman
Farmer Editor
Caught in the proverbial Catch-22 of how to keep up with the demands associated with energy development and yet keep a balanced budget, the Watford City City Council decided that budgeting to spend more money than it will take in was the best course of action for them to take.
The result. A deficit budget of $1.5 million, the largest deficit budget ever approved by the Watford City City Council.
The city council, at its Oct. 4 meeting, approved a final 2011 expenditure budget of $3,657,772, which is a 74 percent increase, from the 2010 budget of $2,104,621.
“The city expects all sources of revenues, excluding the water, sewer and garbage revenue, to be $2,247,958 in 2011,” stated Trish Skoglund, Watford City city auditor. “That is a 48 percent increase of our revenue total of $1,523,476 in 2010.”
While the city is projecting a significant deficit, that does not mean that the city will end up having a $1.5 million shortfall by the end of the fiscal year.
“All of the projects that we wanted to do in the 2011 fiscal year are included in the approved budget,” stated Lowell Cutshaw, city administrator. “Obviously, we will not be able to do all of them and we provided the council with the options that they can take to reduce the expenditures. It will ultimately be their decision.
According to Cutshaw, the major projects that were approved in the 2011 budget included providing $300,000 toward the new wellness center, $400,000 for the chip sealing of city streets, $175,000 for expansion of the city’s bike path and $250,000 for new city signs. In addition, the budget includes $454,000 to prepay the bond payments associated with the construction of the city’s new Main Street.
The other significant increase in the city’s budget was providing for an across-the-board five percent salary increase for city employees and the hiring of four new city workers.
“Because of the increased workload associated with the increased energy impact on the community, the budget includes the hiring of two new police officers, one new public works employee and a building inspector,” stated Cutshaw. “The budget for these four new employees is approximately $250,000, which includes salary and benefits.”
While coming up with the expenditure side of the budget may have been the easy part for the city council, matching revenues to expenditures was not as easy.
In the 2010 budget, the city’s total levy amounted to $237,016, while it is requesting levies of $1,995,929 for 2011.
“Basically, we are maxed out when it comes to every one of our authorized mill levies,” states Skoglund. “We may see a slight increase in receipts because of higher property valuations, but we are not going to receive anywhere near what we’ve budgeted.”
So where is the city going to look for more money if they can’t get it from city property taxes?
Neither Skoglund nor Cutshaw knows. They only can look at past sources of funds and acknowledge that they aren’t probably going to see any significant increases in state or federal funds.
“The city is capped at $1.04 million in oil and gas revenue receipts,” stated Skoglund. “In addition we received $151,500 in Highway Distribution Funds, $220,000 in City Sales Tax and $125,000 in Public Domain Funds, as well as another $500,000 in other funding sources.”
Part of Watford City’s financial problems, according to Cutshaw, is that the city is trying to do too much.
“We all want to do more, but we have to face the reality of how much money we have,” states Cutshaw.
Even Brent Sanford, Watford City mayor agrees that the city is trying to do too much.
“There’s a lot happening in Watford City in the way of development right now,” states Sanford. “That’s why we are asking the State Legislature to take the cap off the amount of oil and gas receipts that the city can receive. We just aren’t getting enough oil and gas funds to meet the demands that we have nor is the city getting enough money from the Energy Impact Fund.”
While it will take legislative action to change the amount of oil and gas funds the city receives, Sanford says he doesn’t believe that all of the projects approved in the final budget will be done.
“We have to chip seal our streets,” states Sanford. “But in reality most of the rest of the projects such as the signs and bike paths are optional and need to be reevaluated. Likewise, I don’t know if we can commit funds to the prepayment of our bonds when we have the impacts that we are seeing.”
And according to Justin Voll, chairman of the city’s Ways, Means and Finance Committee which oversees the city budget, the city’s new budget reflects the council’s optimism that more oil and gas funds are going to be made available to energy impacted cities.
“We have a budget that has expenditures that we knew couldn’t be funded unless we received more gas and oil revenues from the State Legislature,” states Voll. “We’re not going to spend the money unless we have it. But we wanted to be one step ahead in getting these projects done if the Legislature sees our needs and lifts the caps on the oil and gas revenues that the city can receive.”