Budget deficit fueled by expenses, debt

Brett Berntsen
City of Bloomfield City Manger Eric Strahl and Bloomfield Mayor Scott Eckstein attend a special budget meeting on Tuesdayat the Bloomfield City Hall.

FARMINGTON – Although Bloomfield officials have singled out a drop in gross receipts tax revenue as the main reason behind the city's impending budget shortfall, a surge in expenses has also contributed.

For the past three fiscal years, the cost of operations and personnel services for the parks, finance and administration departments have consistently exceeded budget thresholds. Increases have occurred in areas such as legal fees, cell phone plans and salaries. Combined with a drop in tax revenue due to the struggling oil and gas industry, Bloomfield now faces a projected budget shortfall of $826,000 for the next fiscal year.

Officials say the numbers are reflective of larger economic factors.

“I don’t see any additional spending that we are doing,” Mayor Scott Eckstein said. “Costs have just gone up."

Eckstein said inflation and rising health care costs are responsible for the shortfall.

The personnel budget for the finance department rose by $116,000 between fiscal years 2014 and 2016, including a $66,673 increase in salaries. Administration salaries also saw a $40,000-hike during the same period of time.

Compounding the rising expenses and accounting for most of the deficit, said Finance Director Brad Ellsworth, was a drop in gross receipts taxes, which are based on the revenues of businesses operating within a city. Speaking at a special budget meeting on Monday, Ellsworth said dismal market projections for the oil and gas industry indicate the city will receive $1.3 million dollars less in revenue than it did two years ago.

Moreover, Ellsworth said one third of the money the city does receive is dedicated to paying off outstanding debt. A majority of these payments go toward loans the city took out before the 2008 financial crisis, in order to build a new police station and to remodel City Hall.

“We can look back and say the city shouldn’t have gone into debt,” Ellsworth said at the meeting. “But hindsight is 20-20.”

The city currently has a total of about $18 million in outstanding loans.

In addition to gross receipts taxes, other revenue sources for the city have also decreased recently.

In the budget, court fines were expected to generate $255,000 during fiscal year 2015, however the actual amount was about $129,000. During fiscal year 2014, the city also fell about $177,500 short of what it expected to earn in charges for services.

City Manager Eric Strahl said that disparity was due to Bloomfield's annexation of 6,775 acres of largely industrial land. Companies in the area had previously paid the city $300,000 to provide law enforcement and emergency services for the area. Those payments ended after the annexation, but Strahl said that the city has broken even through an increase in property taxes. He said the city should receive $330,000 in property taxes levied on the area this fiscal year.

Ellsworth stressed that the extra land has not placed a burden on the city, and it’s not the reason for the deficit. He said the additional responsibilities the city acquired are mostly limited to road maintenance.  

Strahl said that, so far, the city has cut $360,000 from its budget in areas such as employee health benefits, cell phone plans and coffee services, however the difficult decisions still remain. The city Council on Monday directed staff to make up the remaining deficit through mandatory furloughs. Officials will present a revised budget that includes specifics of the plan at the next city council meeting on July 26.

“We’re looking at all the scenarios,” Ellsworth said.  “Right now it’s up in the air.”

Brett Berntsen covers government for The Daily Times. He can be reached at 505-564-4606.