Nevada council faces 2014 budget challenges

Nevada Daily Mail

2014 will be a transition year for the city of Nevada's finances, City Manager JD Kehrman told the Nevada City Council during a budget work session Tuesday evening.

At the end of 2014 the parks sales tax will change to allow that money to be used to pay the operating expenses of that department, instead of going for specified capital improvement projects. This change in the parks sales tax that Nevada voters approved two years ago, will end the $600,000 a year drain on the city's general fund to cover parks department's operating expenses, Kehrman told the council.

"Weaning the parks department off the general fund will change the way the city does business," Kehrman said, adding that it will make it possible to pay for a new public safety building.

That $600,000 will then be available to cover the debt service payment of about $400,000 on the new public safety building, with around $200,000 additional money available for other purposes.

However, with the city's income from its 1 percent sales tax estimated to grow by only 1 percent during 2014 and other revenue sources like franchise taxes and property taxes also showing little or no growth, covering all of the necessary expenses faced by the city in 2014 will be a challenge.

Current projections call for the city to end 2013 with about $500,000 in cash reserves, Kristie Modlin, city treasurer, told the council. And the city will face two interest payments, totaling about $250,000 on the certificates of participation the city sold to finance the new public safety building.

Modlin said that will leave around $250,000 in cash reserves, which is too small for comfort.

Kehrman told the council he sees three options to deal with this problem.

First, which he said he would not recommend, is to make the two interest payments. That will leave the city in the position of not having enough cash in reserve to deal with a large emergency.

Second, is to refund the principal and not have to make any interest payments in 2014 or 2015. Kehrman said this will allow the city's cash reserves to grow to about $800,000 by the end of 2015, which will be getting close to the $1 million reserve fund the city should have.

A third option would be to pay the interest for 2013 out of the $500,000 cash reserve, and refund the principal in 2014. That will leave about $370,000 to cover any unforeseen expenses covered by the general fund.

Kehrman told the council that refunding the principal will cost the city a $5,000 fee and will extend the repayment of the principal by one year.

Following a lengthy discussion the council agreed to follow Kehrman's recommendation and refund the principal and allow the reserve fund to grow.

Kehrman told the council that he will have an ordinance authorizing refunding the principal for the council to consider at its Nov. 5 meeting.

Kehrman told the council that the proposed budget currently has little change in the police department budget from 2013, despite necessity of buying three replacement police cars.

He said the animal control budget drops from $131,623 to $131,198.

The fire department budget increases from $890,000 to $943,000.

Planning and zoning shows a decrease from $129,000 to $118,000, despite the need to update the city's building code. "The city hasn't updated the building codes since 2006. We have to stay within five years tot keep the current ISO rating," Kehrman told the council, adding that a current set of building code books cost several thousand dollars.

The council will hold a second budget workshop in November, with the approval of the 2014 budget in December.