When San Antonio Budget Director Peter Zanoni decided last year to move the 2009 city budget process up a month, it was simply a courtesy to give City Council a little more time to ponder the numbers. He had no idea how crucial those extra few weeks would be. After all, recent history has been pretty kind to the City on the budget front.
Fifteen years have passed since the Council raised property taxes, yet the City has been able to boost funding for high-priority items such as police and fire departments and street improvements. This year, the City was able to add $40 million to its budget with no evident strain. This period of carefree spending was a reflection of the city’s robust economic growth, which is finally beginning to show some ill effects from a sluggish national economy.
As a result, SA will likely feel the pinch in fiscal 2009, which begins on October 1. Zanoni’s office projects a nearly $14-million budget shortfall for 2009, with a more worrisome $58-million shortfall projected for fiscal 2010. Budget projections for the following three years (which, admittedly, are based on some sketchy, long-range economic forecasts) all hover in the $60-million range.
At this point, it’s hard to see where the cuts will come. On May 13, the Council held a “budget retreat,” where council members identified their priorities for 2009. The responses were predictable. The Council wanted enhanced public safety, infrastructure, and neighborhood integrity, but it’s anyone’s guess how they plan to fund them.
“The truth is, if we have a little better economy than we have estimated — and we’ve kind of taken a dim view because of the downturn nationally — you won’t even have a shortfall at all. It’ll just go away,” says Mayor Phil Hardberger.
He says that the projected 2009 deficit could be addressed in a number of ways that would not dramatically affect the city, such as reducing additions to the City’s reserve, which currently stands at eight percent of the annual budget. Hardberger also suggests that the city could temporarily slow down its very aggressive road-maintenance program or its effort to pave local alleys.
The General Fund is the heart of the City's budget, funded by property taxes, sales taxes, CPS proceeds, and license permits. The City's 2008 budget of $2 billion allowed for $852 million in General Fund expenditures, with more than $290 million earmarked for the police department and $203 million for the fire department.
A $14-million shortfall will barely exceed one percent of this year's General Fund, but Zanoni suggests that the Council has to plan ahead for 2010 or it could be facing a major crisis a year from now.
“As we go through this budget, we’re going to be looking for things that will have a recurring impact, year two,” Zanoni says. “That’ll save us not just this year, but the year after.” Zanoni adds that preferable candidates for recurring-impact cuts would be items “that benefit a targeted population,” such as adult-recreation programs.
Hardberger agrees that the 2010 projection “could be a more serious issue,” but says he does not foresee any tax increases for San Antonio in the near future. “The truth is, property taxes are very high,” he says. “I would not favor raising property taxes anymore in the city of San Antonio. There really is no way to go, practically, for more money, so we have to depend upon the growth of our economy to fuel any additional expenses in budgets.”
A frequently overlooked part of the budget process is the fact that while the majority of property-tax revenue goes to the City’s General Fund, a substantial portion is funneled into a Debt Service Fund, to pay off the principal and interest on city debt. This year, approximately 37 percent of property-tax revenue went into debt-service. With that in mind, an obvious solution to the projected 2009 shortfall would be to shift property-tax revenue from the Debt Service Fund to the General Fund. Only one problem: San Antonio locked itself into a $550-million bond program last year with ambitious projects such as the much-hailed Voelcker Park acquisition and development. So moving money
from debt service would be akin to plugging one hole of a leaky boat by opening another leak.
“We have looked at that in years past, but with the issuance of this recent bond program, and the fact that the Council has a desire to continue this trend for big bond programs, it’s unlikely we would shift any money from the debt-service side,”
On June 18, the budget office will make what Zanoni calls an “informational presentation” to the Council, and that’s when the hard decisions will have to be considered. From Zanoni’s perspective, however, San Antonio remains fortunate compared to the budget quandaries faced by other major
cities this year.
“Our shortfall is manageable,” he says. “In Atlanta, Georgia, they’ve had serious cuts in their budget: $80 million. Phoenix, Arizona, had some huge cuts: $70-$80 million, mid-year. They realized revenues were taking a dive early on, so they had to do mid-year reductions. But we have a pretty robust, diversified economy, so that’s helped us a lot. We do have a shortfall for the first time in several years, but it’s not that bad.” •
Fiscal Year 2008 General Fund budget priorities:
$290.1 million - Police Department
$231.9 million - Libraries, health, municipal courts, animal care, etc.
$203.1 million - Fire Department
$71.8 million - Public Works
$55.6 million - Parks & Recreation