The Terre Haute City Council held a special call meeting last Thursday to discuss the city's budget deficit. The city has been in the red since the state legislature instituted a property tax cap several years ago. Despite the decline in property tax revenues, city expenditures remained constant or increased.
Terre Haute took out a tax anticipation loan to make up for the shortfall several years ago. Last year, Mayor Bennett proposed moving $3 million from the city's rainy day fund to pay the loan back and avoid the interest charges. The council denied the request. They believed that the rainy day funds were intended to be used in more severe circumstances.
Because the special call meeting took place during a sunshine session, no votes were taken. The debt debate became heated during the course of the two-hour plus meeting.
“The situation is bleaker than I thought,” Todd Mullican told the council. He also expressed skepticism about the current projections coming from Scott Walker. Walker is a consultant the council hired last year to help them deal with the city's finances. Later, he added, “If the council continues on its current path, it will have to make some difficult decisions.”
Neil Garrison compared Terre Haute's fiscal problems to a leaky ship. He put the blame on the mayor and the city council for allowing the situation to continue.
Todd Nation warned that market forces are already causing the city's creditors to increase the interest rate on its tax anticipation loan.
According to Norman Loudermilk, the city uses an 18-month budget cycle. The city receives property tax disbursements in June, even though it spends money it has not received during the first half of the year. Loudermilk warned that cutting the budget would have negative employment consequences, although he acknowledged that cuts may be necessary.
No one wanted to cut official city employees, but the council questioned whether or not the city needed to maintain the services of a budget consultant. Last year, the city voted to hire Scott Walker in the hopes that he could facilitate communication between the mayor's office and the city council. At least one council member called Walker's numbers confusing.
Terre Haute is not the only city to face financial difficulties. Detroit struggles to maintain solvency, and several smaller cities made national headlines last year. Stockton, CA declared bankruptcy. Scranton, PA paid all city workers, including the mayor, minimum wage until it could make up its budget shortfalls. Terre Haute continues to pay its debts, according to Mayor Bennett.
The council discussed a property dispute during the regular sunshine meeting. The dispute involves an alley between a residential property and the Dollar General on 25th and Hulman.