The City of Danville is in the process of developing a multi-year financial forecasting model with the help of the National Resource Network, which is a federally funded consortium of urban experts from private, nonprofit and academic sectors.
The model, once in place, will be used to guide City Council in making strategic decisions that will put the city on a sustainable fiscal path.
“This process is not merely a cost-savings program aimed at driving the tax rate down to its lowest possible level,” City Manager Ken Larking said. “It is imperative that Danville continue to make investments to encourage growth and prosperity.”
David Eichenthal, executive director of the National Resource Network, agreed, telling City Council at a special work session held last week that “over the long term, the strategy has to be to grow the tax base.”
“If you just try to cut your way out of the problem, you risk an imbalance,” Eichenthal said. “Yes, you have to have a balanced budget, but nobody lives in a city or opens a business in the city just because it has a balanced budget.”
Launched under the auspices of the White House Council on Strong Cities, Strong Communities and backed by the Department of Housing and Urban Development, the National Resource Network is the only federal program that provides comprehensive technical assistance to cities, including guidance on fiscal management.
Eichenthal and his team have been gathering data in Danville over several months to develop a budgeting model tool with a five-year forecast. The group’s final report is expected in June.
Last week, however, Eichenthal gave City Council a preliminary report with a baseline projection that showed Danville has a structural budget deficit that is going to worsen over the next five years unless changes are made.
The report showed a deficit of $6 million in fiscal year 2017, which ended on June 30, 2017. A deficit of $6.3 million is projected for the current budget year ending June 30. A deficit of $3.4 million would be added if the city manager’s proposed budget for the next fiscal year were adopted by City Council.
Reserve funds are used to cover these deficits, but these funds would be depleted in five years, according to the baseline projection.
To reverse the structural deficit that has developed, an annual growth of 3 percent to 4 percent in total tax revenue would be required. Annual growth in revenue is projected to be less than 1 percent over the next five years.
Eichenthal said the budgeting model to be developed by his team will help thread the needle between fiscal challenges and fiscal investments.
“There is not some pile of money in a corner somewhere that will make closing the deficit easy,” Eichenthal said.
Larking said the National Resource Network will provide options for long term savings and revenue enhancements.
“Many of those solutions will take time to implement and may not have an immediate impact on this year’s budget, but will impact future budgets,” Larking said. “Our goal is to positively impact our five-year structural deficit while leaving opportunities for investments in economic growth.”
City Council will continue its budget review process for the next fiscal year at its next meeting on Thursday, May 3. Final adoption must take place no later than June 30. The final budget will serve as a blueprint for city operations from July 1, 2017, through June 30, 2018.