“Workshop” was perhaps the wrong word to describe Friday
morning’s gathering of City Council members and city department
heads.
“Workshop” was perhaps the wrong word to describe Friday morning’s gathering of City Council members and city department heads. “Audience” might be a better description since the staff talked and council listened. The subject was the 2003-04 city budget and the question was how to close the $3.7 million gap between income and outgo.
Afterward hearing presentations by each department head, the city treasurer and city manager, council discussed borrowing instead of spending down city reserves and they began to consider alternative sources of revenue.
City Manager Ed Tewes set the tone of budget stress early on but suggested that, by lowering costs and using a limited amount of reserve funds – $1.9 million – a five-year budget plan “would bring the city budget in for a soft land or glide slope,” Tewes said, moving into airplane terminology.
“This budget does not meet the community’s needs but it does match the lowered revenue needed to support services,” he said. Tewes pointed out that the city has little control over revenue – no locally imposed tax base (such as a utility tax) and is affected by revenue directly related to the soured economy and “state takeaways.”
“This is the worst state budget in recent history,” Tewes said.
Tewes detailed four budget challenges: declining revenues, uncontrollable cost increases, new facilities and programs needing support and the ever-present threat of state “take-aways” in which the state keeps funds the city normally receives.
“The city lost $900,000 in sales tax revenue alone,” he said, during the past year, because of the economic downturn. If the state takes more funds or refuses to continue filling the city’s Vehicle License Fee gap – which it has done as promised since lowering the fee during boom times – the picture would be worse.
Revenues were down in almost all categories, he told the council.
Uncertainties from unresolved budget cuts and the possibility that the state can take away some city revenues, caused a bleak – but not black – city outlook, buoyed as the budget is by a healthy reserve fund.
“We must plan for losing money to the state but must not scream ‘the sky is falling – yet,’” said Councilman Greg Sellers, looking on the bright side.
Cost are up in several significant spots, especially in retirement benefits for public safety employees. In 2002-03, the amount spent was zero – since city investments sustained the amount – in 2003-04 such benefits will cost the city 6 percent, and 22 percent in 2004-05, Tewes estimated.
However, a $10.6 million reserve fund, saved over the past decade can be used to protect the public from significant service cuts and city employees from lay offs, he said. Past city councils, he said, learned to underspend as a result of the traumatic budget crisis in the early ‘90s that caused police and fire fighters to be laid off and the Recreation Department to be completely disbanded.
Some $1.4 million of the $10.6 million reserve fund will be used when the Fire Master Plan is implemented in the future – not in 2003-04. The money would be used to build a third fire station and expand current fire service.
The proposed budget includes no salary increases or new staff, though the council will begin negotiating its employee contracts after Wednesday’s council meeting. It is not known whether or not employees will forego increases – as have employees in some other cities – if the alternative is staff cuts.
The other side of the salary picture – doing more with less – was outlined by Sellers.
“We’re asking more of staff,” he said. “We need to be cognizant of that.”
City Treasurer Mike Roorda – he is an elected official as is the council – reported activity by the Finance and Audit Committee, which suggested lowering the council-set policy of retaining 40 percent reserves to 25 percent.
The lower amount would free up more active funds to meet expenses but would use up the reserve cushion that allows for Tewes’ ‘soft landing’.
If the 25 percent reserve were adopted and used, Roorda said, the reserve fund, at the end of the five year plan would be $1,024.112 in the red.
“When the 40 percent reserve was established,” he said, “the economy was strong and sales taxes were good. Now they are not so good.”
The answer to the revenue/expenditure gap, Roorda said, could lie in deferring maintenance, in finding new sources of revenue and expanding the tax base – bringing new sales tax generators to town. Revenue sources could include parcel, police and fire taxes.
Councilman Steve Tate was out of town.
