City of Greer Finance Q&A

  1.  What action did City Council take on February 9?
  2.  Do Greer residents pay more in taxes than anyone else?
  3.  What role have the state and counties played?
  4.  Why is the city experiencing financial challenges?
  5.  Why does the city need a reserve fund?
  6.  Hasn’t the city built up a reserve fund? 
  7.  How large should the reserve fund be?
  8.  What has the city done to cut expenses?
  9.  What else can be cut?
10.  What’s the difference between user fees and a tax?
11.  Is the new municipal complex to blame?
12. Can I get a third-party's view of the situation?




What action did City Council take on February 9?

Council was presented with six ordinances that addressed raising millage and implementing a garbage fee.  The total impact from those actions could have amounted to an additional $191 per year for the owner/occupier of a $100,000 home in the city during the next tax year.  Through amendments, council reduced that overall impact to $95 per year for the same owner/occupier.

Council also passed a resolution to reduce the city's operating budget by an additional $300,000 for the 2010-11 fiscal year.

A complete recap of the actions taken by City Council may be found here.

At its February 23 meeting, City Council passed three ordinances on second reading:

1.  A uniform citywide fee of $75 per property parcel to create Enterptise Fund. to assist with covering the costs of certain public works operational and project expenses. The fee is intended to cover at least 40% of the costs to operate the city's Public Services department.

2.  A three mill tax increase to all property.

3.  A restricted two mil tax increase to all property to help replenish the city's reserve fund.

Council passed a resolution on February 9 that will reduce next year’s operating budget by $300,000.

Do Greer residents pay more in taxes than anyone else?

No.  The Greenville News has created confusion by twice printing the flat statement that Greer has the highest tax rate in Greenville County without any additional clarification.  While it is a true statement, comparing tax rates in different cities is not the same as comparing dollars paid.  In our area, the average resident of Greenville, Spartanburg, Woodruff, and Chesnee would gladly trade their annual property taxes and fees with the average resident of Greer.  It may also surprise you to learn that the average annual property taxes and fees in Cowpens and Campobello are within $50 of Greer's.  Statewide, Greer residents pay less than other high-service cities such as Anderson, Rock Hill, Conway, Myrtle Beach, Sumter, North Charleston, and North Augusta.  And some cities rely heavily on utility bills to generate income that allows them to have a lower tax rate, but their residents pay more when all taxes and fees are combined.




What role have the state and counties played?

The national recession has had the single greatest impact on the city's finances.  However, the State of South Carolina and Greenville and Spartanburg counties have also been impacted -- and their actions have seriously impacted the city.  Whether through cuts to traditional revenue streams or implementing fees, those governments have forced the city to subsidize expenses while absorbing the loss of revenue.

Greenville County implemented tipping fees -- charges per ton for trash dumped at the Twin Chimneys Landfill -- that will double over the next two fiscal years when they cost the city an estimated $90,000 per year.  Spartanburg's tipping fees cost an estimated $44,000 annually.  The state has already cut $97,000 from its aid to subdivisions and additional cuts from that funding source are expected.  The city pays as much as $10,000 per month to the Greenville County Detention Center and loses more than $200,000 through court costs, fines, and forfeitures

More than $800,000 annually can be attributed to cuts in revenue, items and programs for which the city is not reimbursed, and pass-through costs from the state and counties.




Why is the city experiencing financial challenges?

At the current rate of 92.8 mils, city property taxes actually pay for less than half of the services that city residents enjoy. If the city were to balance its budget strictly on property taxes, it would require 213 mils — while leaving no revenue to contribute to a reserve fund. Since the city’s most recent millage increase during the 2001 fiscal year, residential, commercial, and industrial growth has provided sufficient revenue to supplement city expenses and to add to the reserve fund without another tax increase.

Growth has slowed dramatically during the extended national recession. Other revenue stream reductions, such as funding from the State of South Carolina, have also affected the city’s budget.  The severity and duration of the current recession has not only forced the city to substantially cut expenses, but also to draw more extensively than expected from the city’s reserve fund to help balance the budget.

Why does the city need a reserve fund?

The reserve allows the city to deal with crises that require expending funds beyond what is budgeted. Natural disasters (ice storms, flooding), “acts of god” (roof collapse, property damage) or economic factors (recession, business closures) are all unexpected circumstances that must be addressed usually with substantial expenditures of funds.

The task of developing and executing the city’s annual budget is similar to balancing a home budget on a much larger scale. The challenge is to balance revenue and expenses while building a savings account for difficult times. The loss of revenue has led to cuts in expenses and a decrease in the city’s reserve fund — its savings account for difficult times.





Hasn’t the city built up a reserve fund?

After depleting its reserve fund in the 1990s, the city instituted sound fiscal management practices and began rebuilding that fund, while also budgeting for an increasing demand for services. Through the 2007-08 fiscal year, the reserve fund was built up using excess business license fees, construction permit fees, and other fees collected beyond what was budgeted.





How large should the reserve fund be?

Fiscally responsible practices dictate that a local government’s reserve fund should equal 25% to 35% of the annual budget. Given the city’s $18 million budget, that equates to between $4.5 million and $6.3 million.






What has the city done to cut expenses?

Cutting expenses has been the only strategy employed to date. Recognizing the decline in revenues two years ago, the city implemented drastic measures to reduce expenses and lessen the impact to the reserve fund. That plan included cuts to services, including personnel. The city’s operating budget has been reduced by more than $2 million over the past two fiscal years and city departments have continued to work diligently to keep expenses under budget and to limit fund balance transfers. Departments tightened their belts and kept expenses nearly $1 million under budget during the 2008-09 fiscal year — a move that helped avoid a potentially disastrous fund balance.





What else can be cut?

The city is a service industry. Additional cuts to the budget would mean even deeper cuts to programs and services. Since July 1, 2008, the city has reduced its workforce by 22 employees. That equates to a loss of 44,000 annual service hours and a 10.75% cut to the city's full-time equivalent (FTE) workforce in the following areas:

DEPARTMENT	% CHANGE IN FTE
Administrative Service	- 20.58
Parks and Recreation	- 18.33
Municipal Court	- 13.33
Public Services	- 11.11
Police	-   9.09
Building & Development Standards	-   7.69
Fire	-   7.14