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An increasing cost of doing business coupled with decreasing town revenues caused Catawba leaders to rethink the way the town operates for the upcoming fiscal year.
Catawba hasn't seen revenues exceed expenditures since 2007, leaving the town with a budget trending toward a $200,000 gap between revenues and expenses.
That gap won't be closed in one year, town manager Brian Barnett told Catawba Town Council during a budget workshop Feb. 15. The town, however, can start closing the gap year by year with reduced operating and capital costs.
"What we need to try to focus on is getting everything balanced in the middle," Barnett said. "It's a lot harder to drop off expenses and add revenue in one year."
Barnett said the town dipped into its fund balance to balance the budget in years past, which is a trend that can't continue. Barnett joined Catawba staff in November after council hired him to replace former town manager Jonathan Kanipe, who left in July to take another job.
Reports of budget trouble surfaced with interim town manager Eric Davis, who said the town needed to close a budget gap of about $280,000.
Barnett has since calmed the town's fears, saying the financial situation isn't dire, and Davis was looking at a worst-case scenario.
There are some aspects of Catawba's finances that need to be addressed in the next fiscal year's budget, which is why Barnett gave council members a budget presentation titled "No Bells and Whistles."
"We still have a lot of work to do," Catawba Mayor Vance Readling said.
"We're not out of the woods yet, but I think we're on the right track."
Catawba's revenue peaked in 2006 at about $925,000. Revenue decreased again in 2008, after the recession hit the United States and county governments everywhere.
Catawba saw revenue losses in sales tax, investment earnings and permits and fees, which is typical of a recession, Barnett said.
Investment earning decreased from about $70,000 in 2007 to slightly less than $10,000 in 2010, according to Barnett's budget presentation. Sales tax also took a hit, decreasing from about $165,000 in 2008 to about $135,000 in 2010.
And because revenues decreased, town departments must rethink how and what they spend their money on.
Barnett compared the town's budget to a household budget. If the head of the household is bringing in less money, then the entire household must rethink its expenses.
"It's a steady cost of doing business," Barnett said. "I wouldn't say one (department) is a problem. Departments don't go beyond the fenced-in area. The fenced-in area was too big to start with."
Barnett advised council members to avoid using the fund balance for operations costs and use capital reserve fund for capital costs.
Ideally, Barnett hopes the town will stay within a revenue-expenditure range of about $800,000, which means increasing revenue while decreasing expenses.
"It's always better to budget conservatively or bring in more revenue," Barnett said. "There's nothing wrong with that."
Although the budget process isn't over, Readling said he is optimistic about Catawba's ability to get its finances under control.
"We've still got some trimming to do, unfortunately, but we'll get it done," Readling said.