Tara Dunford, financial consultant for the city of Aberdeen, gave a presentation Wednesday night at the Aberdeen City Council that helps preview next year’s budget.

“This is really the kickoff to the 2025 budget process, it’s a required step for state law,” Dunford said. “We are presenting preliminary revenue projections for the city’s general fund only at this time. This is really a precursor to council’s decision on whether to increase property taxes this year.”

The anticipated reality could lead to an increase in the utility tax.

This is a breakdown of what a few of the line items look like as of now, including their changes.

Property tax

“I am projecting that council would increase taxes the full 1%,” Dunford said. “If you see the actual percentage change, it is 1.1%.”

That 1.1 percent change from the 2024 budget compared to the 2025 budget is $36,869.

“You might ask why that is different,” Dunford said. “It was about $2,500 of new construction in 2024 that we didn’t budget for. That makes the number slightly bigger than 1%.”

Sales tax

Sales tax is the city’s biggest revenue source in the general fund, Dunford said.

“This unfortunately is decreasing,” Dunford said. “So we’re back to almost 2022 levels through August. We’re going to get data to hopefully understand the story behind this a little bit more. But as of right now, we’re projecting the 2025 number to be similar to 2024, so significantly lower than what we budgeted last year.”

Based on the city’s preliminary revenue estimates, the change could be as much as a negative 9.8% change, or $703,745 fewer dollars.

Utility tax

Utility tax revenue is “another item that you’ll see decreasing quite substantially,” Dunford said.

She explained an error there.

“Unfortunately late in the 2024 budget process, we identified an accounting practice that was incorrect,” Dunford said. “Essentially the city had been charging the utility funds twice for certain utility taxes. We identified that and corrected it. It obviously lowered the tax revenue to the general fund quite substantially, so that’s why you’re seeing a big decrease of $549,000 on the utility tax line.”

Grants

“The other substantial decrease to point out is in the grants line,” Dunford said. “We budgeted for a one-time grant reimbursement in 2024 related to a prior capital project that was … a one-time thing so we would not expect it to continue or happen again in 2025.”

Dunford said other revenue sources are staying “pretty steady.”

“You’ll notice interest revenue is going up substantially,” Dunford said. “You look up prior year actuals, that’s due to a couple different factors. One, obviously interest rates are increasing substantially. Two, we moved a substantial portion of the city’s balances to the local government investment pool to gain more interest. And then lastly, council passed a resolution allowing all interest revenue to be credited to the general fund.”

Dunford said the 2025 budget assumes that interest revenue “will be the same as 2024.”

“That may seem odd with interest rates going down, but we do have a big timber sale that should be occurring next year,” Dunford said. “(That) will substantially increase the balance available for investment and should hopefully balance out the decreasing interest rates.”

General fund

“The overall change in general fund revenue is approximately $2.5 million, however, of that, the $1.7 million is the grant revenue that was really one time in nature, and not built in the operating budget,” Dunford said. “So the true shortfall, if you will, on the revenue side is approximately $800,000.”

Dunford explained why that point is important to note.

“We know the city had a deficit budget of approximately $3 million in 2024,” Dunford said. “This $800,000 issue adds to that. So it’s going to be a very, very difficult budget process this year on the revenue side of things.”

Dunford said the city council does not have “a lot of options” when it comes to additional revenue generation in the general fund. But one option would be a utility tax increase.

“That is something I highly recommend council consider doing this year, and implementing effective (Jan. 1) 2025,” Dunford said. “So that we can try to balance this budget and continue to provide the services that are already being provided. This is not being done to increase revenue or add services, but rather simply to maintain at the current level and avoid substantial cuts during this budget process.”

Contact Reporter Matthew N. Wells at matthew.wells@thedailyworld.com.