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Charleston revenue falling short of projections

CHARLESTON, W.Va. -- A budget analysis by City of Charleston Finance Director Joe Estep shows the city's budget turning up about $500,000 short of what was expected, according to City Manager David Molgaard.

A budget amendment was passed at Monday night's City Council meeting that allowed $540,000 of unassigned funds to be transferred to the city's stabilization account, a decision Molgaard described as "prudent" should revenue continue to decline.

Last year, the city chose to use its unassigned funds for across-the-board raises for its employees, Molgaard said

While Estep's budget projections showed an increase in revenue for this fiscal year, the numbers aren't showing through.

"In the face of declining revenue compared to last year and raising the budget this year, we've obviously created a shortfall," Estep said.

In addition to low general revenue, Molgaard said the city's business and occupation tax has brought in fewer funds this year when compared to April through June of 2012.

Estep said it is down about $144,000 by comparison.

"At the same time, it's down $591,000 compared to the current budget," Estep said.

B&O taxes are paid by individuals and entities, which do business in the city, and make up about half the city's $87 million budget, according to Estep.

The amount collected is based on gross revenue, Estep said. If business isn't booming, neither is B&O revenue.

"People aren't spending their money," Molgaard said.

The majority of B&O tax revenue comes from retail, services and contractors sectors, Estep said. The service sector -- professions such as doctors, lawyers and accountants -- brought in $215,000 less revenue than in 2012, contributing to the shortage, according to Estep.

The financial outcome of the B&O tax is difficult to gauge at this point, Estep said.

"Because that's a quarterly, self-reported tax, we're not going to be able to tell how the July, August, September business period went until we collect those taxes," Estep said. "It'll be mid- to late November before I have any feel of what this quarter's going to look like."

Hotel/motel tax revenue in Charleston is also falling short by about $140,000 compared to June through August of last year, according to Estep.

Molgaard said the city is looking to long-term solutions to low revenue issues by continuing "to monitor our revenue situation, but we are also closely looking at our expenditures."

"We know our obligations are going to increase," Molgaard said, making reference to the city's unfunded liability to police and fire pensions. "We're going to have to do business more efficiently and effectively to meet our obligations."

This shortfall in revenue could be temporary, but, for now, the city is playing it safe with its finances, Molgaard said.

"We don't know if it's just a dip that will correct itself or that it will continue," Molgaard said. "Right now, I think we've got enough room in our current budget to absorb this current downturn."

Reach Rachel Molenda at rachel.molenda@wvgazette.com or 304-348-5102.


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