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Despite decline in tax revenue, City’s financial condition improves

Franchise fees have helped fill the void left by declining property taxes
Despite shrinking property tax revenue, substantial boosts in franchise fee income and other revenue sources have helped the City of Prineville to grow financially stronger.
   For the first quarter of the 2012 fiscal year, the City has collected about $78,000 more in franchise fees than in last year’s first quarter. They collect those fees from companies that provide Prineville citizens and businesses such goods and services as electricity, cable television, natural gas, and garbage disposal.
   In addition, first quarter property tax collections have increased $16,000 from the previous year and transient lodging tax income came in $11,000 higher.
   “I’m excited about the financial condition of the City,” said Finance Director Liz Schuette. “We are in pretty good shape.”
   Ironically, the financial condition of the City, which takes into account the amount of all City funds, has actually decreased 20 percent during the quarter, from $6,699,023 to $5,661,906. However, those decreases do not reflect the direction the City is headed. Timing of property tax collection, scheduled debt service payments, and expenses associated with the completion of capital improvement projects have contributed to the decline.
   In spite of the short-term picture, Schuette said that the City is still improving its fund balances with the help of franchise fees. In particular, the amount of power consumed by the Facebook data center has resulted in the collection of $200,000 in electrical franchise fees during the first quarter.
   “I really think what the franchise fees are doing for us are helping us maintain our reserve. It is really improving our overall financial situation,” Schuette said. “The idea is not to become so dependent on those funds (franchise fees) until we really know more about what they are going to be and what they mean to the City.”
   Although first quarter property tax collections improved over last year, property tax revenue is projected to fall short of last fiscal year as home values continue to decline. To counter that, the City has tried to budget conservatively and account for the decline.
   “We’re managing our funds’ expenditures based on the revenues,” Schuette said. “We’re managing to maintain fund balance and improve fund balance.”
   The City also continues to benefit from their debt restructure, which took place a year ago, as well as efforts to run City government as efficiently as possible. They have already reduced their workforce during the past few years department heads continually focus on keep expenses down and maximizing the work employees can do.
   “We have a really tight ship,” Schuette noted.
   At the same time, because of the first quarter revenue gains and the fact that the City ended the prior fiscal year with more money than anticipated, Schuette believes that better times are coming.
   “I think in general, things are starting to pick up,” she said.