RECKONING TIME: Memphis City Council members will get an update today on the state of the city’s finances. From left are councilmen Kemp Conrad, Bill Boyd and Harold Collins. -- PHOTO BY LANCE MURPHEY

The hobbled economy has taken a noticeable toll on the city’s financial picture, a Memphis City Council committee will be told later today.

City financial officials plan to make a presentation to the council’s budget committee, spelling out how the one-two punch of a recession and a pullback in consumer spending have eaten into the city’s general revenues and likely will continue to do so. Council members also will be told that a drop in sales tax receipts, interest earnings and related items is being offset by strong property tax collections.

The council’s budget committee meets at 12:30 at City Hall, 125 N. Main St. The full council meets this afternoon at 3:30, and a full agenda of today’s meeting is on Page 10.

Through the end of the city’s current fiscal year, which began in July, its general revenues are expected to come in more than $5 million under budget.

Today’s presentation will blame that drop-off on the recession that’s shellacked housing prices, contributed to a spike in unemployment and kept consumers holding on to any extra cash, according to a draft of the information.

In the near term, the city’s finances look a little better. In the first quarter of the fiscal year, revenue came in $7 million over budget. That surprise was the product of strong property tax collections, which beat expectations by about $10 million.

In the quarter ended Sept. 30, the city had collected a little more than $239 million in property taxes, up from a little more than $229 million during the same period in 2008.

But relying on property tax collections to pick up the slack from other revenue shortfalls masks the extent of the damage to the city’s balance sheet.

It would be more of a surprise if property tax collections had notched less of a gain than they did. Since the city’s first quarter runs through the end of September, that means the city now has collected almost all of its property tax revenue for 2009.

Tax bills for city property owners go out in the summer and become delinquent after Sept. 1.

2009 also was a reappraisal year. So that means despite the inevitable property value challenges that follow the reappraisal process, homeowners who have filed appeals still go ahead and pay taxes on their higher value before their appeals are resolved.

Next year’s property tax collections are likely to tell a different story.

Not only will refunds have to be given to property owners who prepaid their taxes based on higher values, but they’ll also be paying fewer taxes in 2010 because of the lowered values.

The state of the housing market next year also will play a part in the values on which property owners are paying taxes.

If the local housing market has not yet hit bottom and values fall below where they are now, that would give local governments less value to tax – and less revenue to fund their operations.

Meanwhile, all eyes are on the American consumer at the moment, now that the holiday sales period is officially under way.

But city officials are forecasting a slump in revenue for the year, partly driven by consumers holding on to more of their money and generating less sales tax revenue.

The city budget for the fiscal year assumed total revenue of a little more than $617 million. That revenue forecast has been adjusted down to a little more than $611 million.