City leadership came together on Tuesday morning to hear about budget concerns for the coming year, with a local economist urging caution and agility in the face of a potential downturn.
The Budget Workshop opened with City of Oklahoma City Finance Director Brent Bryant giving a presentation on financial trends inside and outside Oklahoma City. While internal and external indicators mostly showed positive trends, some of those trends weren’t as sharp as one might hope.
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Unemployment, for example, is at 2.95% in Oklahoma City, but that number includes persons who are underemployed for economic reasons, such as a lack of median or high wage positions. The weekly average wage for private-sector jobs in Oklahoma City is $763, adjusted for inflation. That’s less than $20/hour. Keep in mind that that is the average wage. The weekly wage for a full-time position at minimum wage is $290.
Other indicators include hotel room nights sold (11,747 on a given night), private development plans, and drilling activity. While the number of active drilling rigs is 91, crude production has gone up, signaling a spike in the efficiency of operating oil operations.
Bryant went on to describe some internal indicators of our city’s financial health.
He told city leaders that revenue per capita has held stable over the last four years and increased somewhat last year to the inflation-adjusted figure of $1,980.
The revenue accuracy number has trended downward, however. That number approximates how close general fund collections are to the budget’s predictions. Last year there was a 2.56% difference. Meanwhile, the city has diversified revenue streams by adding a use tax and receiving sales taxes on goods sold online.
Dr. Russell Evans, Economist with the Meinders School of Business at Oklahoma City University, gave an overview of the economic outlook for the 2020 fiscal year. Just before Dr. Evans began, an announcement came over the loudspeaker saying that the fire alarms were being tested. Dr. Evans said that perhaps that would be appropriate theme music for his presentation.
His presentation suggested that he expects what he referred to as a “contraction” in the coming year. While he wouldn’t go so far as to say we should brace for a recession, he did say that the opinion of economists and the opinion of executives don’t seem to match up entirely on the issue.
Evans said that while the Oklahoma Energy Index anticipates a slight decrease, it doesn’t account for potential disturbances from disaster or the volatility an event like the spread of coronavirus could cause the energy sector.
Ultimately, according to Evans, this year could be the story of Oklahoma’s independence from the energy industry and Oklahoma City’s independence from the state.
City Financial Issues
To close out the meeting, Doug Dowler, Budget Director for the City of Oklahoma City, gave a presentation on financial issues facing departments in coming years and highlighted six issues among them.
First Americans Museum is set to open, finally, in the spring of 2021. The initial cost will be offset by the Chickasaw Nation, but the City will be required to take over financial operations at a rate of $2 million per year as of FY 2024.
Long term water capital will be an ongoing budget concern. $824 million has already been budgeted for the building of the 2nd Atoka pipeline, set to be completed by FY 2025. The wastewater utility regulatory compliance package includes $110 million for upgrades and to increase capacity to meet growth demands. The solid waste utility recycling program will require $3.8 million per year to provide new and replacement carts to customers as well as to maintain equipment.
Public transportation improvements discussed include enhancing existing services with signal prioritization and automated safety systems and further implementation of transit plans like service to the airport and expanded service elsewhere.
A clear challenge to future budgets is facility capital maintenance costs. MAPS use tax was used for capital maintenance but has been depleted according to the city’s report.
Employee recruitment and maintenance of that workforce is an ongoing concern, as is the ever-growing need for money for benefits as the workforce ages. Currently, the city’s expected payout liability is $420 million in excess of the budget over the life of the beneficiaries.
This was the first of five meetings before the city council adopts a budget for the 2021 Fiscal Year.
On May 5, a proposed budget will be submitted to the Mayor and Council for public hearing. May 19, will be the second public hearing in City Council. The third public hearing will be on June 2 before the City Council. And finally, on June 9, the Council is expected to adopt that budget in time for it to take effect on July 1, 2020.
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