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BLOG: Five things to know as council prepares for new budget

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Oklahoma City’s financial situation is a good news, bad news deal.

Low oil prices are likely to continue impacting the city and its large energy companies, and there is also a high level of uncertainty about what the future might hold. Add in the fact that revenue growth is not on pace to match increasing expenses, and the city council will have some tough decisions to make as it prepares the next budget.

“The bottom line is there is not going to be a lot of room for growth in the budget and at this point I can’t tell you what that will mean,” City Manager Jim Couch told the city council during a Tuesday morning budget workshop.

The good news for the city is overall employment, wages and private development are on an upwards trend.

City staff will present a Fiscal Year 2016 budget to the council in early May for adoption a few months later. The council met Tuesday to hear economic presentations as it prepares to create a new budget. Here are 5 financial facts to know about the city.

1) Energy is big, government is bigger

Russell Evans of Oklahoma City University’s Steven C. Agee Economic Research and Policy Institute told the council volatility in the energy sector is having an impact on the city. With nearly 5 percent of all jobs in the region directly connected to the energy sector, declines in oil prices are a reason for concern, Evans said. However, the city’s largest employment sector is the government with nearly 20 percent of all employees working for the state or federal government.

“When we hear the state talking about continuing to layoff employees and the federal government talking about the same thing ... we could be looking at a pretty big hit,” said Ward 4 Councilman Pete White.

Evans told the council he tracked private employment trends but did not have any insight into the future of public sector employment.

2) The good part of low oil

While drops in oil prices are hurting oil and gas companies based in Oklahoma City and the region, Evans said it can be a positive for other sectors.

The manufacturing and construction sectors could benefit from lower oil prices that drive down costs. However, that might not be the case for construction projects for energy companies and other developments.

“Anything that is consumer driven, like restaurants and hospitality, those will benefit as individual income is freed up because of lower gas prices,” Evans said. “We certainly expect to see some discretionary income spill over into [tourism] and other areas because of the low prices.”

3) Not fully recovered

While Oklahoma City weathered the 2008 recession relatively well compared to most other cities, it did experience decreases in revenue. The city projects that if the recession had never happened, tax revenue would be $15 million higher today.

4) Mind the gap

Forecasting to 2020, the city faces a $31.7 million shortfall due to increasing costs and new projects coming online, including a new streetcar system, convention center and downtown park.

However, the city will have to balance its budget each year and that means reductions in some spending areas will have to be made over the next few years to avoid the gap in revenue and expenditures.

5) An extra day

A leap year next year adds an extra day to the city calendar, resulting in an increase of $900,000 in expenses.

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