For the first time in 20 years, the city of Madison will end the year with a budget deficit.
According to Madison City Comptroller Dean Brasser, the city is expected to have overspent their revenue by $3.6 million.
Brasser said the deficit is not a result of overspending.
“A lot of the deficit doesn’t come from excess spending, but rather from revenues that have not come in as high as we were budgeting,” Brasser said.
According to Brasser, the three main revenue sources that are lower than expected are interest income, which is expected to be below budget by $2.5 million, room taxes available to the general fund, which are expected to be below budget by $1.1 million and building permit revenue, expected to be below budget by $700,000.
Brasser attributed the revenue shortfall to the overall decrease in interest rates in the market.
“That affects the amount of income the city receives on its investments,” Brasser said.
Spokesperson for Mayor Dave Cieslewicz Rachel Strauch-Nelson said while the deficit was significant, it has been projected for several months and the city has been planning for the shortfall.
“We will have to draw from our fund balance … to make the budget whole,” Strauch-Nelson said. “So we will be whole at the end of the year.”
The money to balance the budget will come out of Madison’s fund balance, which acts as a backup cash source for the city.
Brasser said the fund was available for emergencies and potential budget difficulties.
“This is exactly the kind of circumstance where we do end up using a share of that,” Brasser said.
He added the fund currently contains around $29.5 million, which is around 15 percent of the city’s annual operating expenses. After money is withdrawn to balance the budget, around $26 million will remain — only 12 to 13 percent of the budget.
According to Strauch-Nelson, the fund is a main reason Madison has a AAA bond rating — the highest possible financial rating for a municipality. The goal for the fund is to keep it above 15 percent of the city budget.
Brasser said he hopes the city will have a positive fund balance next year, which will allow the fund to be replenished.
“It’s important that we have that fund because as we predicted, we’re going to have to draw from it,” Brasser said. “Most years we actually end up with more revenue and less expenses than we’ve budgeted for.”
Both Brasser and Strauch-Nelson said they were optimistic about the coming year’s budget.
According to Brasser, the recently passed 2010 budget was created knowing the city’s revenue would be down. The 2010 budget plans to take no money from the backup fund and does not plan on using any excess reserves from the current year.
“We’re always in the process of trying to project where we are relative to our budget,” Brasser said. “As we’ve put together next year’s budget, we’ve of course taken [lower revenue] into consideration.”