For three consecutive months, Oklahoma City saw a drop in sales tax receipts over the same months last year - a first for Forbes' "recession-proof" city. Mayor Mick Cornett says he is disappointed and unsure how the city will plan its 2010 budget with these numbers.

"This is the time of year when your budget forecasters need to have some degree of certainty about the amount of revenue that's going to be coming into the city so that we can properly budget the hundreds of millions of dollars, literally, that we expect to be coming into this city," Cornett says. "I'm concerned about it."

Budget Director Craig Freeman introduced a proposed 2009-2010 fiscal year budget at the May 5 City Council meeting. Council is scheduled to vote on the budget at its June 16 meeting. The budget will become effective July 1.

Despite the city's three-month year-over-year sales tax decline, "we still, overall for the year, have 3% growth, so sales tax is actually more than what it was last year," Freeman said. "The growth wasn't as strong as it was last year, but we're actually receiving more sales tax this year than we did last year."

For the past several years, the city has contracted with economist Mark Snead to model its projections, as it did this year. The total proposed FY 2010 budget is $839.6 million, with the general fund budget of $350.4 million. This budget includes 4,455 permanent full-time positions. The total FY 2009 budget was $787.5 million, and the general fund budget that year was $347.8 million.

Freeman says cumulative growth currently is at 3.13% for the year.

"We're a little below our target, less than 1% right now of what our projections were for this fiscal year," he says. "We're expecting the next couple of months to be declines also. And we're expecting to finish the year a little bit below 2% growth on sales tax.

"Then, next year, we're projecting 2.9% growth," he says. "We believe it's optimistic, and it's based on the projections we got working with Dr. Snead. The two factors that he said would be real determiners for us are the price of natural gas and the price of oil."

Freeman says that for this reason, the city built some "flexibility" in the budget to allow for adjustments in the event sales tax suffers from a further drop in oil and natural gas prices.

WHAT IT ALL MEANS
In a message to Cornett and City Council members, City Manager Jim Couch explained how revenue growth had slowed this year and, beginning in January, sales tax revenue - "our largest revenue source" - slowed significantly.

"Projections for FY 2010 anticipate slight revenue growth," Couch says. "This, along with an increase in expenditures to continue current service levels, has limited the city's ability to increase services and required reductions in some areas. Positions are being eliminated in several service areas, and positions funded through federal grants and utility fees have been added in other service areas to keep the total city staffing at the same level as FY 2009."

Cornett says he acknowledges the current continual slowdown.

"I've been warned and told to continue to expect this throughout the first half of 2009, and then at some point, it will right itself," he says. "But we're still slowing down and we've seen this now, really, through December, January, February and March."

Cornett says the city will be fine this fiscal year, ending June 30, since getting off to a solid start. The fiscal year's first few months showed 7% above year-to-year revenues.

"Even though we've slowed down, we're going to get through June OK, without any significant elimination of programs or services or people," he says. "But we need this to level out and start an ascension so we can get some idea of what revenue will look like in 2010. Right now, we think we're going to forecast a year-to-year growth for 2010's budget, but sales tax is a significant part of that equation, and I don't feel like we've got a good handle on it right now."

At the same time, Cornett says the city is gauging community support for a potential MAPS 3 initiative.

"We're trying to determine in an economic time of where the economy may be slowing down, are people more likely to want to invest in the future or would they rather have a break in the tax," Cornett says.

The slowdown, he says, also is evident in the bids the city is receiving to build the schools under the MAPS for Kids project.

"We're getting better prices, which shows that the private sector's a little bit hungrier than they've been in the past, which allows us to build a little more and a little bit more solid construction projects," he says. "But it also shows that there's not enough private sector money going into construction."

Still, he believes all will be well when more retail and construction projects get underway, as many commercial projects have stalled.

"We look at the amount of construction coming down on I-40 and the Devon tower and retail opportunities that are coming in both the west and north parts of the city, there's every reason to be optimistic about our revenue growth coming out of this," Cornett says.

Those projects to which Cornett refers - in the western and northern parts of the city - include Tuscana, Quail Springs Ranch and The Outlet Shoppes at Oklahoma City.

With regard to these projects being set back, he says, "It's not necessarily our market or the developer, it's the retailers. It's just hard to find national retailers right now that will consider growth."