Kingsport overcomes unexpected challenges in 24′ budget
The City of Kingsport plans to the end the 2024 fiscal year with a strong rainy-day fund, a manageable debt level and a goal of capturing roughly $1.5 million in cash reserves to fund small one-time capital projects in the coming fiscal year.
All this while facing unexpected financial challenges, including an appraisal ratio which resulted in a significant reduction in the amount of revenue the City receives in property taxes for fiscal year 2024 and a sales tax refunding due to a local entity overpaying sales tax – both of which had a $5.1 million impact on the city’s budget.
“Our budget has taken a couple of unexpected hits this year, but our staff has been able to work through those challenges and made the necessary adjustments to position ourselves to end the fiscal year in a positive position,” said City Manager Chris McCartt. “Kingsport is fortunate to have a strong rainy-day fund; conservative debt management and built in budget flexibility. All of these are necessary for any organization to be able to weather the unexpected budgetary hits Kingsport has had this fiscal year.
“As a result, we find ourselves in a positive position moving into the final months of FY-24.”
An appraisal ratio study is performed every two years per state law and is designed to create equity between personal and real property. This year, the study resulted in a $3.8 million loss to Kingsport’s general fund budget.
In response, the City Manager and the Budget Office restructured the budget to absorb the loss, noting that growth will offset nearly half of the projected $3.8 million loss for the coming year.
The second financial challenge Kingsport dealt with this year happened when a local entity overpaid sales taxes in 2015, 2016 and 2017. As a result, Kingsport is expected to see approximately $1.3 million refunded to the entity by the Tennessee Department of Revenue.
“Refunding’s are not uncommon but rarely are they this significant,” McCartt notes.
Even with these budgetary challenges, Kingsport is projected to end the fiscal year with approximately $27 million in its rainy-day fund and a debt ratio of 6.92%.
Budget adjustments for the remaining fiscal year include holding expenditures and key general fund positions, recapturing excess debt service funds and prioritizing cash-funded projects. By taking these steps, city finance officials believe Kingsport can finish the fiscal year with approximately $1.5 million in cash reserves.
In all, total city revenues for the current fiscal year are expected to be 1.24% higher than the original budget estimates or by approximately $1.18 million.
Kingsport is estimating it will collect nearly $44 million in property taxes for the 2024 fiscal year, along with $23 million in local option sales taxes. Combined, these two revenue sources account for 69% of the city’s total revenue for the fiscal year.
This information was presented to the Board of Mayor and Aldermen during a day-long, strategic planning session held February 23 at city hall. The BMA heard updates from staff on the city’s finances, economic development efforts and budget priorities and challenges for the coming year.
To view the presentations from the strategic planning session, please see below.
Budget – Labor – Capital Improvement Projects – Regional Sales Tax
Customer Information System & Financial Information System
Capital Projects – Economic Development – Library – Bays Mountain
