The City’s Budget: Frequently-asked questions -- and answers
Where does the city get its money?
Most of the city’s general fund revenue, nearly 81 percent, comes from two sources. The first is the occupational tax – a tax on employee wages and net business profits in Louisville. The other is the property tax on real estate, such as homes and businesses and personal property including vehicles. Other sources of funds for Louisville Metro Government include grants from the state and federal government and various fees such as building permits and pet licenses. To see a chart of where the city’s money comes from, click here.
How large is the city’s budget?
The current spending plan for city government for the 2012-2013 fiscal year that began July 1 totals $513 million in general fund dollars.
How is the city’s budget structured?
There are two main parts to the city’s budget, or spending plan. The operating budget provides money for running city departments and services - it pays for the day-to-day spending. Think of it as the part of your household budget that pays for groceries and monthly bills.
The capital budget provides money for things like playgrounds, sidewalks, road paving. It covers major investments such as buildings, the city’s computer and phone systems, and major maintenance of roofs, furnaces and other basic physical needs. In your home, the capital budget would be money you set aside to replace your roof and buy a new car.
Bonds are often used to help the city cover a major capital expense, such as a new building. It’s similar to how you might use a mortgage to buy a new home and pay for it over a period of many years.
What’s the single biggest item in the city budget?
About two-thirds of the city operating budget goes to personnel costs – the salaries, benefits and other compensation we provide to our approximately 6,000 city employees.
What city department or services get the biggest slice of the pie?
More than half of the city’s general fund spending is for public safety. This includes the Louisville Metro Police Department, Louisville Division of Fire, EMS, Metro Corrections and more. To see a chart of how the city spends your money, click here.
What is the average salary and benefits of Louisville Metro government employees?
Last year, taxpayers spent an average of $55,666 in salary and benefits for each civilian city employee.
The average cost for what’s known as sworn personnel, such as police and firefighters, is considerably higher – $90,933 on average for police officers and $93,296 for firefighters
Why do problems with the national economy hurt the city’s budget and the city’s ability to provide services?
If jobs are cut, salaries reduced, or a company's net profits are down – the impact shows up quickly. The city receives less occupational tax revenue.
In March 2009, for example, the state said Louisville had a 10.1 percent unemployment rate. That compares with 6 percent a year earlier. That translates to 6,600 fewer people working and getting paychecks.
If workers take pay cuts or unpaid furloughs to help during these tough times, our tax revenue drops with their income.
Another major source of city funding is property taxes. The amount of money the city receives from that source has slowed in growth as well, due to the declining value of real estate such as homes, and personal property such as cars and trucks. For example, some people are putting off replacing their old car with a new one, so the property taxes they pay on the older vehicle are not as high as those for a newer model.
How much money is in the city’s unreserved fund balance? Can those funds be used to help during tight budget times?
The most recent audited numbers show the city’s unreserved fund balance at $87.9 million. It includes the rainy day fund balance of $65.4 million and another $22.5 million in funds that have been restricted for specific uses. Those restricted funds include the Metro Council’s Neighborhood Development Funds, dollars to match state and federal grants and money reserved for payments for on-going construction projects. Using these funds for the shortfall would not be a responsible approach and, in some cases, would violate laws and contracts.
I’ve heard about the city’s “rainy day” fund? How much money is in there, and can’t that be used to help pay for services and projects, especially when you’re having budget problems?
The rainy day fund is a reserve of dollars that is held back for use only in an extreme emergency. Recently the fund contained about $65 million. This amount is equal to 13 percent of the city’s budget, or enough money to pay the city’s bills for about six weeks.
Maintaining the rainy day fund is critical to keeping the high credit rating that allows the city to borrow money for important projects at lower costs than most cities;
Why can’t you use bond funds to help during tight budget times?
The city borrows money by selling bonds only for long-term capital projects. It’s not appropriate –- and in many cases, not allowed by law -- to use borrowed funds to pay operating expenses. Doing so would be like taking out a second mortgage on your home to pay your electric bill or restaurant tab.