Finance report shows decline in revenues, Sales Tax revenues up

JONESBORO, AR (KAIT) -- Mayor Harold Perrin responded Friday to a report by the Finance Department, which shows some disappointing revenue numbers. Perrin said he will meet with various department heads Monday to discuss a downfall in revenue from construction permits, interest earned on financial reserves, court fines and Advertising and Promotion taxes.

"What I presented to them was a summary of financial situation from January through 2-28-09 for the first 2 months year to date," said Jim Barksdale, Finance Director. "The auditors and the accountants that we brought in both have recognized that we probably have way more accounts than what we need, which has created some of the problems in the past with the reconciliations and made it more difficult, as well as we can reduce the number of funds."

Barksdale said the city has more than 2,000 accounts and several of them can be combined or eliminated, but the worst part of his report is in regards of revenues.

"If you look at the total revenues year to date, (they) were $8.3 million for the city. That's compared to $9.6 million at the same time in 2008. That's a $1.2 million difference," said Barksdale. "I went through and picked out some if the individual line items. There are some significant differences in decline in revenue for the city."

In the report, the city's revenue from electric, plumbing and burial permits are down, as are building permits.

"You can have your budget and your expenditures and appropriations, but if there's no funding or if the funding slows down, you have to slow down on your expenditures," said Barksdale.

Perrin said the numbers don't reflect the local economy, but it does raise concerns for future finances.

"Electrical permits, plumbing, building and HVAC, all of those are down so far year to date. We've collected around 8.5%. Our target after 2 months should be 16.67%," said Barksdale.

"There is definitely something at play here. I think maybe it has more to do with the diversity of the types of businesses we have here in Jonesboro," said Barksdale.

Perrin told Region 8 News Friday that several issues will have to be looked during Monday's meeting. He said the city normally pays out more money than it takes in at the beginning of the year, but other areas, such as privilege licenses, are a warning sign for taxpayers.

"We're down a little bit. Building permits, plumbing license, electrical license are down, which tells me we're slowing down as far as the building is concerned," said Perrin.

That slowdown in building has been evident for construction companies in Jonesboro for the past couple months.

Bob Harrison with H&W Construction said business has been slumping since the start of the year. He said his company usually works 7-8 jobs at a time. Right now, H&W Construction is working 3 jobs.

"I think it just took it a while to catch up with us, but now, I don't think it's going to last very long here," said Harrison.

"We had a lot of nice custom homes that carried us through the year last year. When those ran out, then it was hard. Things really slowed down," said Harrison. "All you have to do is drive around Jonesboro and see the lack of homes being built now compared to what they were, but it's beginning to speed up again."

Harrison said he signed 2 contracts last week worth an estimated $900,000. One is for a custom home valued at $400,000 and the remaining $500,000 is for a restaurant being built in downtown Jonesboro.

"I have gotten more prospects in the last 4 weeks than 'I've had in months, so I'm excited. I think this is going to be the best year we've had since 2005," said Harrison.

Harrison said 2005 was one of the best years he's experienced in his 43 years of construction. Home prices were skyrocketing and there were plenty of buyers. Once the economy started to decline, home values did as well.

"My business dropped from 2005 to 2006 but it's been the same amount, same volume amount every year," said Harrison.

Harrison said the Jonesboro area seems immune to the financial disaster other parts of the country have faced.

"You can find a lot of homes in foreclosure in Jonesboro, but nothing like we've experienced in the other part of the United States," said Harrison. "Jonesboro has always been an oasis sort of, as far as the market is concerned, as far as the economy is concerned, because we've just haven't felt anything like this since the 80's."

Perrin said Jonesboro hasn't experienced the same economic difficulties as other parts of the country for a couple of key reasons.

According to the U.S. Department of Labor, the Jonesboro metropolitan area has an unemployment rate of 6.6%, which is considerably lower than the nation's average of 8.5%. In Arkansas, the unemployment rate is 6.4%. The national average is expected to exceed 10.0% before the end of 2009.

The largest number of job losses were in construction, transportation and utilities. Nearly 7,000 jobs have been slashed in Arkansas since the start of the year. Jonesboro has the 81st lowest unemployment rate out of 372 metropolitan areas in the nation.

Diversity in the labor force is one reason Perrin said the city hasn't been impacted as much as other locations.

"The key to this is we have a diversification of our total labor force. Our industry is diversified. A lot of our good growth has come from ASU schools and universities. Also it's come from our medical community and it's also come from a diversification of our industry," said Perrin. "If we didn't have that diversified base, that one thing like some cities may depend on say, steel or some may depend on automotive, if they have something happen to that industry and they have a problem, then that community really suffers."

"The next 2 or 3 months is really going to be a good indicator to me where we're going to be in this economy, but I think the economy is still strong in Jonesboro. There's no question about that. I think there are some areas that are facing what you call a bubble type deal, but nothing like, I think, other parts of the state of Arkansas," said Perrin.

Perrin said he'll have to look at possible cutbacks at Monday's meeting.

"We, here at the city of Jonesboro, are going to have to make some adjustments for that. What that means is we're going to have to cut back on some expenses that we were going to plan to do for '09, and that's just a business decision anybody has got to do in business," said Perrin.

According to the city of Jonesboro's web-site, it takes just over $200,000 to run the city each day. Perrin said those operating expenses will be evaluated.

"If those are things we can control on a day to day basis, on a weekly basis, then we need in good stewardships of you're taxpayers money, we need to look at that and see if we can reduce expenses, and if we can, where do we reduce expenses?"

Aside from the status of the city's immediate financial outlook, Perrin said the future of the city appears bright. The addition of new industries to the Jonesboro area should help bring more jobs to northeast Arkansas.

"In the last few months, we've gotten 2 new industries that are going to employ 1,000 people when they're all said and done and I think it's all a thing of the mind. I think it's how the people are thinking. If they're thinking that things are bad, then they're going to be bad. But when they read in the paper that new industry is coming here, we tell people from outside the state when we're visiting with them about what's happening in Jonesboro, they can't believe it," said Harrison.

"I think the addition of Nordex is going to be great for the city of Jonesboro just like all the other industries, but they anticipate adding 700 jobs to our labor, and that won't occur overnight, but they're going to start hiring very soon, and I think an industry like that will probably have people, suppliers and things like that, because of the types of units they're building and things of that nature, they may want to be close to Nordex, and if I'm correct in that, that means we may, from Nordex, be getting other industries that would come and take a look at Jonesboro and hopefully would locate here," said Perrin.

Perrin cited President Obama's American Recovery and Reinvestment Act of 2009, which provided millions of dollars in shovel-ready projects to the city. The President ran his campaign during 2008 on changing the country's energy grid and finding new sources of power for the infrastructure. Perrin said the addition of Nordex should help the city's work force in that respect.

"We've always got to look at ways of being more efficient, and with an economy like this, sometimes you've got to do more with less and any good manager would ask you to do that," said Perrin.

Barksdale said the brightest spot on Thursday's report was in sales tax revenue. He said revenues from the sales tax are up 2.9%, or $129,000.

"I've been waiting for over 8 months now for the sales tax revenue to start going down since we hear so much about the national economy, and that's just not the case with the sales tax revenue. It continues to go up. It's up 2.9% over this time last year. Even the state turnback revenues are up slightly," said Barksdale. "They're continuing to spend and buy, and we have such a great economy here locally. I think that diversity helps slow that down, however, there are some areas, like I mentioned, line items that have caused that $1.2 million fallback."

Harrison said, while the nation faces problems on an enormous scale, northeast Arkansas seems to be better off than it was in the 1980's.

"When interest rates got up to 20-21% Josh, it was just unbelievable. Because when that happened, everything just died and I'll never forget. I was building churches and schools then and the last school that I bid in northeast Arkansas, there were 20 general contractors that bid the job. The only way you'd get it is to make a mistake. I've never seen anything like that. It just completely killed everything when the interest rate was that high," said Harrison. "It' s been good for the last 20 years. It's just gone up a little bit every year. and you just don't find that in all parts of the country."