Clinton to use fund balance to cover tax‑denial shortfall; council and staff warn of future tax increases

Clinton city leaders decided during a Oct. 14 work session to use a portion of the general fund balance to cover a shortfall stemming from a recent tax‑rate denial, with staff instructed to return with budget options and outreach for next year. City Manager Trevor said litigation over the denial would likely fail and that the realistic options were “cutting, delaying, or taking money from the general fund,” and council members largely rejected cutting personnel.

The discussion followed receipt of a formal denial notice; staff said the denial had been dismissed administratively but that appealing would require litigation with low odds of success because of standing issues. The lieutenant governor's office and legal counsel were consulted; staff warned that tax notices go out soon and any legal remedy would not be resolved quickly, creating immediate budget timing constraints.

Department heads and council members urged against cutting personnel. Chief Stoker and Chief Paulson detailed recruitment and retention pressures in police and fire: the police department recently lost three officers and faces long training lead times, and both departments argued that further personnel cuts would worsen service and safety risks. Council members and staff discussed delaying capital projects where feasible; city engineer Bryce and staff warned that some delays could jeopardize grant matches or make future repairs costlier.

Key budget numbers discussed in the meeting included a planned roundabout project with a $400,000 estimated match (the city has $200,000 budgeted in this year’s line item), an annual roads funding shortfall (the city budgets about $1 million per year for roads but staff said the need is closer to $3 million), and a working example that a 7% tax increase would amount to roughly $300 (presented as an illustrative figure). Staff also noted one-time options such as using parts of the capital improvements allocation; council identified a transfer of roughly $465,000 into capital improvements earlier in the year that could be used to cover the current shortfall while the council develops a plan to replenish reserves.

After extended discussion, the council reached consensus direction: staff should not cut personnel now, should use fund balance to cover the shortfall for this fiscal year, and should present a plan during the upcoming budget process outlining how to restore fund balance and whether a property tax or other revenue increase will be needed next year. Several council members said they expect to discuss multi‑year tax increases during the formal budget process; the city manager presented model projections showing that without revenue changes the fund balance could be drawn down over several years.

No formal vote was taken at the work session; the outcome was recorded as council direction to staff. Staff was asked to: (1) prepare a budget package reflecting use of fund balance for the current shortfall; (2) identify capital projects that could be delayed without jeopardizing grants or safety; (3) develop public outreach and options for next year's budget to address medium‑ and long‑term shortfalls.

Council members emphasized communicating the tradeoffs to residents if services are reduced, and several urged the council to plan multi‑year solutions rather than one‑time fixes. The council and staff agreed to revisit the issue during the formal budget sessions beginning in two months.