Carrollton is planning a 2% increase in its budget next year while also facing a revenue shortfall due to the coronavirus pandemic.

The $28.5 million FY21 operating fund proposal was unveiled Thursday afternoon by Carrollton Finance Director Jim Triplett during a virtual city council work session. The budget proposal increases the general fund budget by $567,536 over the current $28 million operations.

The proposed water fund is $18.1 million, which includes infrastructure upgrades to the city’s filter and wastewater plants as well as to the water and sewer lines. Water sales revenue makes up nearly half of this fund at $8.8 million, and sewer sales make up $5.5 million (30%) of the revenue.

City officials anticipate a 14% increase in the sanitation fund to $6.3 million. Most of this increase involves a 3% salary adjustment and a $50,000 increase in landfill expenses due to a rate increase by Carroll County.

Triplett said there is the possibility the city will have to increase its sanitation rates, but added that the rate schedules are being worked on.

City officials are also expecting to increase inter-fund operating transfers by 36% to $4.1 million. Transfers are made from the city’s other funds to supplement the operating budget whenever necessary, Triplett said. He added this is because city staff is taking a “conservative approach” to revenue projections as facilities begin to reopen amid the pandemic.

“We view this as a worst-case scenario and have high confidence that our actual revenue numbers will be better than projected,” City Manager Tim Grizzard said in a memo circulated to council members. “However, out of an abundance of caution, we feel it incumbent to approach our revenue model for the new fiscal year in this matter.”

This revenue projection assumes the current millage rate of 4.60 mills, according to Grizzard’s memo, and Triplett said he does not expect a rate increase next year.

The police department is getting $8.5 million, 30% of the proposal, while fire service is getting $6 million. This is a $500,000 increase from FY20 for the police, but the fire department is expected to receive the same amount.

The city’s recreation and cultural arts departments are receiving $6.4 million, $1 million more than last year, but Triplett said these budgets are combined and both have only increased by $50,000.

A hearing on the total $52.9 million budget proposal is scheduled for June 1 before the financial plan is adopted by the mayor and city council on July 13.

The city is expecting a hotel and motel sales tax revenue shortfall of 15% and officials are proposing $700,000 for this fund, down from the $820,000 from the 2020 fiscal year. The city charges an 8% hotel-motel tax to visitors.

“This decrease is attributable to the effects of the COVID-19 pandemic,” the memo said. “We are taking a conservative approach in projecting this revenue and are confident this projection will be met or exceeded as our local hotel and motel sector resumes normal operations.”

But Triplett said he is confident that once the pandemic ends, the hotel and motel tax revenue will be back to normal.

Meanwhile, the automobile tax revenue will be down significantly from $250,000 to $50,000 and the sales tax revenue is expected to experience a $200,000 decrease to $4.4 million from $4.6 million. The automobile sales tax collection is not related to the coronavirus, Triplett said, but to how the state allocates this revenue to her municipalities.

However, Triplett is anticipating a 7% increase in real estate taxes to $4.1 million from $3.8 million. Grizzard added the city budgeted this money during the 2020 fiscal year because of the delay in tax digest figures in the budget process. Real estate taxes account for 17% of the general fund, while the sales tax revenue is 15% of the budget.

Grizzard wrote the budget “attempts to address the needs of the city” while recognizing the many unknowns as the economy reopens and businesses resume operations.