FARMINGTON — The next few months could usher in the early stages of an economic recovery for this city or continued stagnation.

For Farmington's City Council only one fact is clear — creating a budget for the next fiscal year will be no easy task.

A presentation on the city's finances delivered during a Tuesday morning work session revealed little promise for a recovery. The city's gross receipts tax revenue is $898,000, or 3.6 percent, below budget for the current fiscal, according to the financial report.

Gross receipts taxes — similar to a sales tax but charged on businesses or other service providers — provide the city with 67.5 percent of its general fund revenue.

The numbers released in the report only account for tax revenue through November for a fiscal year that begins in July.

The current economic crisis is the worst the city has faced in the last 25-30 years, but administration and other staff have been able to manage the downturn, said City Manager Rob Mayes. That has been done through holding off on some purchases and not filling some staff positions when people leave, he said.

"If (revenue) stays within this 3 to 4 percent range, we can manage it," he said.

The past five years have brought surpluses in spite of difficult economic times. But that may change.

"The challenge will be next year's budget," Mayes said. "I don't want to overreact and cut.



Mayor Tommy Roberts echoed Mayes' comments after the meeting, adding that the city should be in good shape if the downturn in tax revenue bottoms out at 3.2 percent to 3.5 percent below budget.

"I would not foresee the need for layoffs or furloughs," Roberts said. "At this stage, I don't think anyone's anticipating revenue falling so much in the next six months that we would have to use those measures."

Councilman Jason Sandel was less than optimistic about the city's revenue stream, and pointed out it is likely consumers did not spend as much over the holidays as they did last year.

"It's been an extraordinarily difficult winter," he said. "Quite frankly, I'm scared. I'm not getting the sense that we're being honest with ourselves."

The only sector providing the city with a substantial increase in revenue is construction, which went up by 28 percent, Sandel said.

Sandel requested information on which construction projects within city limits would continue into the next fiscal year.

"We need to know," he said. "Right now, it's kind of the only thing saving our grapes."

The city's largest source of gross receipts tax revenue, retail trade, fell by 4 percent or $431,000, according to the report. Even more distressing for Sandel was that tax collections on oil and gas work within the city fell by 39 percent, or $603,000.

"We've done a great job over the past five years," Sandel said, "but now we have no more options."

Whether city officials have to consider more extreme measures remains to be seen, but Mayes says he has been preparing for the worst.

The city now has $910,000 in surplus cash available in an emergency, according to the report. In addition, $4.1 million was recently transferred into a city fund that can be used for one-time projects.

Late last year, Mayes had the city's department heads outline contingency plans to deal with 3 percent, 5 percent and 7 percent cuts in tax revenue.

"My department heads and I are prepared to manage (the situation) as the data comes in," he said. "I want to be balanced without overreacting too soon, but there's no fat left in this budget. The next round will be difficult."

Roberts, in the mean time, is keeping a cautiously optimistic outlook.

"We're all concerned about the future," he said, "but we've been able to increase our cash reserves without cuts in pay, personnel, and we've maintained services and programs. I have a high level of confidence in our management team. I believe that Farmington would serve as a great model for other (city and county governments) throughout the state in the way that we develop our budget."