Council directed City Manager Rob Mayes to use a combination of spending cuts and city cash reserves to close the $6.5 million budget deficit as he prepares his proposed budget for presentation on May 7.
Friday morning's presentation arose out of what city officials are calling an extraordinary budget year.
Historically, the city manager has prepared his recommended budget without formal feedback from city council, said Mayor Tommy Roberts. This budget year, however, presented a special set of circumstances: a large deficit and differing opinions from the council on how to address it.
In response to city council direction earlier this month, Mayes prepared a series of five scenarios projecting what the budgeting process could look like. The scenarios included a sweeping $6.5 million in spending cuts, a 0.25 percent tax increase with $2.1 million in cuts and three combinations of spending cuts coupled with using city cash reserves.
"This year, there is such a large gap between (projected revenues and expenditures)," Mayes said in a Wednesday interview. "This is a list of scenarios, illustrations of potential big picture scenarios."
The city has increased its cash reserves from $7.4 million in fiscal year 2008 to $19.79 million in fiscal year 2012, Mayes said.
Each fiscal year runs from the beginning of July in one calendar year to the end of June in the next calendar year. The current fiscal year ends in June.
While the city has been increasing its cash reserves, it has also been cutting its spending, Mayes said.
According to documents included in Friday's presentation, the city's spending dropped from a little more than $53 million in fiscal year 2008 to just under $51 million in fiscal year 2011.
Mayes included statistics on the U.S. Consumer Price Index, a national economic indicator often used to measure inflation. According to the index, the city should have been spending about $57 million in fiscal year 2011 to be on par with inflation.
Today, the city is spending about $2.1 million less than the index, according to Mayes' presentation.
"In real dollars, our spending went down, and we've maintained the same level of services," Mayes said.
Councilman Jason Sandel said that fiscal year 2008 the earliest year included in the budget comparison chart was the highest spending year in Farmington's history.
"If we were to include the previous 10 years, we would see that the ($45 million to $50 million spending) range was what had been sustained throughout the 2000s," Sandel said. "(Fiscal year 2012) is what I consider an extraordinary (spending) year. What I am saying is that there are plenty of businesses in the community that are expected to operate at 2006 revenue levels. To justify an expense in 2012 based on CPI, that isn't what has been going on within this community."
Operating a business and operating a city take different criteria, Mayes said in response.
"Business is about refining yourself in order to maintain a profit margin," he said. "(The city's business) is about maintaining a service level. Ultimately, you'll decide what (service levels) are. It's not a matter of matching up to 2006 levels. It is not a debate with me. It is a (council) direction I'm prepared to follow."
Sandel said that in fiscal year 2011, there were emails sent out from Mayes' office stating that the city's infrastructure, operations and service levels were "OK."
"It's not the same as saying we're OK," Mayes said. "It was OK in the short run, but it was not a sustainable position."
To deal with the budget hardships during fiscal year 2011, the city made a number of spending cuts, including reducing city fleet purchases and upgrading computers.
Revenue for that year was also the highest in city history, Mayes said.
In addition to existing cash reserves, there is a projected $800,000 surplus from this fiscal year, Mayes said. When added to other sources of revenue, he expects to put about $1.5 million more into the reserve fund.
"It's my belief and my conviction that we've done a very good job controlling spending," Mayes said.
Roberts said that he supported basing the budget at this point on a 5 percent revenue reduction, which translates into the $6.5 million figure.
"I'd like not to get too reactive," he said Friday morning. "I think the 5 percent number seems right. I'd like something more clear but know that's not the nature of the game right now."
Greg Yee can be reached at firstname.lastname@example.org; 505-564-4606. Follow him on Twitter @GYeeDT.