The town of Signal Mountain is avoiding a tax increase despite a revenue shortfall of nearly $700,000 in its budget for next fiscal year by dipping into its fund balance, or "rainy day fund."
The council passed the fiscal year 2024 budget, with revenues of about $7.1 million and expenditures of around $7.8 million, at its May 8 meeting. The next fiscal year begins July 1.
Most of the excess expenditure is going toward a salary increase for employees.
Although that is a recurring expenditure, this year's budget includes about $1 million in capital projects — all one-time expenditures.
Among them is an allocation of $672,000 to the town's vehicle replacement plan. Contributions to that plan had remained stagnant for several years, resulting in its underfunding, Vice Mayor Elizabeth Baker said by phone.
(READ MORE: Signal Mountain eyes cuts to fire protection, other services)
The council does not plan to reduce services or fire employees to cut costs, she said. Department heads and town administrators have reduced expenditures in other ways, mostly through identifying inefficiencies.
The town is eliminating its Parks and Recreation Department, which is being replaced by a facilities maintenance department. Parks and Recreation staff already were dedicating most of their time to facilities maintenance, with only 13% of duties involving recreation program management, Baker said.
The baseball, basketball, softball and other sports leagues were already managed by separate organizations rather than by the town, she said.
The town is adding a position that will serve as a support person at Town Hall for the various community and recreation programs that have priority use of town facilities, she said.
Council members also discussed creating memorandums of understanding with other ancillary services, such as the Signal Mountain Playhouse, to spell out expectations regarding facility maintenance.
(READ MORE: Oldest resident of Tennessee set to turn 112 in Signal Mountain)
"It's just for clarity and for purposes of planning," Baker said at the budget workshop.
Town staff used a different method to draft this year's budget, basing allocations on actual expenditures over several years rather than estimates.
For example, some departments were allocating funds for office supplies or "professional services" and only using 10% of the allocated funds, with the remainder going into the fund balance.
Other inefficiencies, such as contracting with more than one provider for employee cellphone service, were discovered and corrected, resulting in further savings, Baker said by phone.
"We've over budgeted for two years, which kind of pays for this," Mayor Charles Poss said at the budget work session, in reference to the salary increases.
(READ MORE: Vicki Anderson to step down from Signal Mountain Town Council)
That over budgeting added about $2 million to the fund balance over the past two years, he said.
"When we had the tax increase two years ago, what I consistently heard on the phone and email and whatever communication method from citizens was not a single person didn't want to pay our staff correctly," Councilman Andrew Gardner said at the budget work session, as to why he is in favor of funding the salary increases. "The reality is, on a recurring basis, we're taking on $700,000, and it's needed."
He suggested that half the cost of the salary increases be paid for through the fund balance and the other half through efficiencies.
Specifically, he suggested the town raise taxes in the form of an enterprise fund for garbage and leaf pickup.
"It's transparent; it tells people what they're paying for that particular service, and they can compare that and evaluate us as an organization on how efficient we are compared to if they had to go pay Waste Connections or somebody to do it, and I think they'll find that we're a pretty good value," Gardner said.
Baker said at the work session she disagreed with leaving half of staff pay unfunded, and Councilman Clay Crumbliss agreed.
"When it comes to something as important as our employees' salaries, then we should know exactly where that money is coming from," Crumbliss said. "My ask would be that we continue to really, really look for those efficiencies and savings and continue to assess our policies and procedures and continue to assess our organizational structure on an ongoing basis."
There will be a public hearing and second vote on the budget at the next council meeting May 22.
Contact Emily Crisman at ecrisman@timesfreepress.com or 423-757-6508.