ANDERSON — City officials will have to come up with some creative options to see the city out of a projected $8.2 million budget shortfall by the end of 2010, Board of Works Chairman Greg Graham said.

The shortfall was discovered after Indianapolis-based financial adviser H.J. Umbaugh & Associates completed a report that showed the city would be short nearly five times more money at the end of 2010 than officials originally had thought.

The city will be short about $3 million at the end of 2009, Graham said, but before the Umbaugh report, officials had come up with a way for the city budget to be in the black by the end of the year after finding another $620,000 in budget cuts.

“Our numbers indicated that we had managed (budget deficits caused by statewide property tax caps) pretty well,” Graham said.

City officials met Monday to discuss how to handle the increased budget deficit. Graham said first they would try to meet with the Indiana Department of Local Government Finance to seek its suggestions.

Original estimates of how much the city would lose with the tax caps were done by Legislative Services Agency, which works with the state’s General Assembly. City financial consultant Jim Steele said LSA’s numbers had assumed a statewide increase in assessed valuation, but in some counties, such as Madison, assessed valuation fell.

The city’s assessed valuation fell 25 percent from 2008 to 2009, and the county’s fell 19 percent, Steele said.

“It’s the state’s numbers that were off here,” Graham said. “Our area is not growing. I don’t know how they could not know that. We think we’ve done what we needed to do. (We’re going to ask the state) what do you suggest now?”

Although Graham said it likely would take a state legislative action to bring Anderson out of its projected deficits, city officials will look at all options to bring the budget in balance.

One suggestion has been to reintroduce an establishment of a local option income tax, a measure that the City Council approved last year but was voted down by other political entities in the county.

“We thought the COIT (actually LOIT) was necessary a year ago,” Graham said. “We’ll talk with other cities and towns, see where they are, see what they think. They have a similar situation as we do.”

Mayor Kris Ockomon said even if the City Council was ready to move forward with a local option income tax, he wasn’t yet sure if enough cities and towns or the County Council would approve it.

“I don’t know that that’s going to pass,” he said.

Passing a local option income tax wouldn’t make up for the entire $8.2 deficit by the end of 2010, however. Graham said city officials could look at selling assets or, in the worst case, borrowing money from the utilities budget.

The city could ask to be considered a distressed area, which would exempt it from some of the tax caps; however, Steele said that process is difficult.

Traditional methods of saving money might not work with this large a projected deficit, Ockomon said.

“There’s not really a way to lay our way off or cut programs enough to fix it,” he said.

It has been estimated that the city would have to lay off about 25 workers to save $1 million; the numbers it would have to lay off to fix the $8.2 million deficit would be crippling.

“You’d have to shut the place down,” Graham said.

In the meantime, city officials will continue to explore all the options for cutting the deficit before the end of next year while still trying to attract growth.

“We have got to move the city forward,” Graham said. “If you’re standing still, you’re falling behind.”



Contact Aleasha Sandley: 640-4805, aleasha.sandley@heraldbulletin.com.



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What’s next?

City officials will have a public informational session on the county option income tax 5 p.m. Sept. 24 in the City Building.