City revenue sources show signs of weakness; Lodging taxes, building permit fees lower than originally estimated.

Byline: Nick Kotsopoulos

WORCESTER - The downturn in the economy has had a significant affect on some of the city's major revenue sources, forcing city officials to tap into various municipal accounts that have unexpended funds so this year's municipal budget can be brought into balance.

Jarrett Conner, city budget director, said while property tax and motor vehicle tax collections are expected to meet budget estimates for the year, several other local revenue categories are showing signs of weakness.

He said lodging taxes the city collects from local hotels and motels is running $200,000 short of budget estimates for this fiscal year, which ends June 30, while fees generated from building permits are more than $300,000 less than original revenue estimates.

Mr. Connor said the decline in building permit revenue is consistent with decreased economic activity in the nation and region.

The downturn in the economy also has affected the amount of money the city generates in investment income.

Mr. Connor said interest rates for the city's cash are coming in now at or less than a 1 percent return on investment. As a result, he said, the total amount of money the city generates in investment income for this year is expected to be more than $1 million less than original estimates.

The city also is not meeting budget estimates for the revenue generated through the trash-bag fee. Mr. Connor attributed that to the fact that bag use is down while recycling is up.

"Single-stream recycling options are increasing our recycling amounts and reducing the solid waste tonnage," Mr. Connor wrote in a report that goes before the City Council tonight. "This is responsible for some of the budgetary savings that will be realized in the Department of Public Works sanitation budget, offsetting some of this reduced revenue estimated at $400,000."

Aside from local revenue sources, the biggest revenue hit the city has taken this year is a $5.5 million reduction in funding from the state, the result of cuts made by Gov. Deval L. Patrick because of declining state revenues.

On the expenditure side of the budget, the city has to grapple with the over-expended snow-removal account, which ran up a tab of $6.3 million last winter. That is more than 250 percent of what had been allocated for the original snow budget.

Mr. Connor said some of that expense will be eliminated through an anticipated federal reimbursement associated with the December ice storm, but it is anticipated that $3.1 million of that deficit will have to be carried into fiscal 2010.

Other budget over-expenditures city officials have to deal with include:

Veteran's Services expenditures have exceeded the city's original budget estimates by more than $425,000 because of increased demand for service.

Unemployment insurance is under funded by about $376,000, because of the number of employee layoffs this fiscal year.

Union Station requires a transfer of $101,400 to provide additional funding to cover snow removal and parking costs, as well as another $65,600 to address revenue shortfalls associated with the new tenant's delays in the start of restaurant and event activity there.

The Office of Human Resources Labor Relations section needs another $42,000 to cover additional costs associated with extensive collective bargaining efforts during the year, including oversight of layoffs and the affect of the bargaining process.

Recognizing the potential for the revenue shortfalls and budget over-expenditures, Mr. Connor said a variety of measures have been under way to reduce municipal expenditures so this year's budget can be brought into balance.

He said positions were frozen starting as early as last July, and layoffs consistent with the fiscal 2010 budget have already been implemented.

"Over 100 employees have lost their jobs, including 31 police recruits and 15 firefighters," Mr. Connor said. "All (non-salary) expenditures are subject to an enhanced review regime prior to approval, resulting in reduced expenditures where possible."

With a little more than two weeks left to this fiscal year, City Manager Michael V. O'Brien is asking the council to transfer $2.66 million from a variety of municipal accounts as a first step to closing the books on the year.

He said additional transfers will be needed before year's end, but the exact amount of those further adjustments will not be known until the city's activity for the year has closed.