The city’s finance commissioner said Monday he expects a $2.5 million shortfall in the city’s 2009 budget because of the unexpected loss of video lottery terminal revenue and sales tax revenue.
The city had budgeted $1.8 million in this year’s budget in revenue from the video lottery terminals (VLTs) at Saratoga Gaming and Raceway on Nelson Avenue.
The state, however, used a new poverty-based revenue-sharing formula in its current budget that stripped the city of this anticipated money.
Finance Commissioner Kenneth Ivins said after a budget workshop Monday morning that he also expects a significant drop in sales tax revenue based on the reduced amount of revenue the city received in the first quarter of this year.
Ivins said the city received about $500,000 less than anticipated in sales tax revenue during the quarter between January and March.
The City Council will hold budget workshops May 18 and May 19 to discuss the problem. The council could take action as early as the May 19 meeting, Ivins said.
The city adopted a 2009 budget last fall that included no tax rate increase for city residents.
Ivins said if nothing is done about a budget deficit that could be anywhere between $2.5 million and $3.5 million this year, city taxpayers could be facing a 20 percent tax increase in 2010.
“This shortfall could result in a 20 percent increase unless other alternatives can be found,” Ivins said.
Ivins said his best estimate of the budget shortfall is $2.5 million, but this depends on how the economy performs and how much tax revenue is generated during this year’s tourism and racing season in the city.
“It depends on the economy and gas prices,” Ivins said. “If gas prices go up there will be more money.” The city gets tax revenue from gas sales.
The City Council is considering a variety of cost-cutting measures, including paid parking downtown.
“We have to figure something out. We have no choice,” Ivins said about cutting the city budget.
The city has approximately $3 million in a budget surplus fund. This amount is considered millions of dollars lower than it should be and city officials are reluctant to use it to balance the 2009 budget.
Other alternatives include cutting spending in the city’s various departments as well as possible layoffs, offering early retirements and requiring city employees to take unpaid furloughs.
Ivins said revenue-generating options such as paid parking in some of the city-owned lots would be another way to balance the budget.
More from The Daily Gazette: