The city budget has been updated for fiscal year 2012 and it is balanced, but next fiscal year the Borough Assembly will face a $5 million shortfall that will likely affect public services. Administrators expect an additional shortfall of $2.2 million in fiscal year 2014.
That news was delivered to the Assembly’s Finance Committee Wednesday by City Manager Rod Swope and Finance Director Craig Duncan.
“When I say we’re in good shape and good financial health, I mean good financial health,” Swope said. “That doesn’t mean we have excess money, that means our revenues match our expenses.”
Swope said adjustments have been made on both sides, and Mother Nature helped a little.
A really light snowfall this winter means there was savings in the snow removal budget.
The new Dimond Park Aquatic Center is opening later than anticipated, also saving in staffing and operational costs. The city also will have additional funds that were designated to the schools, since the amount budgeted is more than the maximum amount allowed. Heating and gas costs also are down, Swope said, because of the “tightening of belts of staff.”
Swope is also keeping an eye on a fiscal future that likely will bring a loss of federal grant funds the city has been successful in using past years due to discussions taking place in the Legislature. Those include highway funds and justice funds. Also a factor is the city’s revenue streams, of which 80 percent comes from property and sales taxes and investment yields, he said.
Swope said both those areas been heavily impacted by the recession, which hasn’t rebounded as quickly as had been anticipated. Sales taxes are down — although there was a 4 percent increase over last year. Swope said that increase may sound good, but it’s 19 percent below what was anticipated.
Property tax revenue has been flat, which Swope said is primarily due to the Kensington Mine and the power facility. If it hadn’t been for the development and growth in those projects, the city wouldn’t have come out even. In fact, the mine development category was the only property tax revenue area that increased in 2011.
Investments are also down due to the instability in the markets.
Swope said the mill levy will remain at 9.26 percent. It has remained at that level for at least the past six years.
“We have been able to sustain general government and operations, I think that’s everyone’s credit,” he said.
The future is going to be more of a challenge.
Swope said the city projects a shortfall of $5 million in FY13 and another shortfall of $2.2 million in FY14 due to those discontinued federal and state grant funds and a slow economic recovery.
Swope said since 80 percent of the city’s budget is in personnel, the biggest impact will be there. He said the standard practice for the past year or so has been to closely evaluate each vacated position. Swope said the city has been reducing positions through attrition where it can.
“One of the things several of us have been concerned about for several years, do we have enough in our accounts for an emergency situation in case our revenues dry up on us?” asked Mayor Bruce Botelho.
Swope said he city does — to an extent. He said he views government like a business in that it’s prudent to plan ahead.
“Businesses have the ability to operate for 3-6 months in the event things go really bad,” Swope said. “I don’t think government should be any different. We’ve got to be able to … if oil dries out and state cant figure it out, we’ve got to be able to sustain ourselves for a period of time.”
In 1990, a group was formed to determine what amount of funds should be set aside in reserves to do that. That recommendation was $10 million. Swope said with inflation, today that should be somewhere between $15 million and $20 million.
The Assembly’s directive to city staff is to keep reserves at $10 million. Swope said they had reached that goal, but given that the city faced a significant deficit last year it chose to dip into that cash source, which leaves the reserves at $7.2 million.
Swope said the Assembly also initiated an Emergency Fund, which has $4 million, however that fund is to be used for an event of a disaster at the airport, or if a cruise ship smashes into the docks, or a number of similar scenarios.
He said he gets a lot of complaints from people, claiming the city is rich and has all that money to use.
“It’s almost one of those things where you’re damned if you do, damned if you don’t,” Swope said. “What they don’t accept is that it’s very important to have a reserve account there for other purposes.”
In addition to being able to simply operate in the event revenues fail to materialize as normal, or during and after a disaster, cities are also rated for bonding and financing on their overall financial health and municipal reserves.
Assemblyman Bob Doll asked Swope to keep track of the positions that are going away through attrition. He said there will be a point where the Assembly should be involved in the decisions and discussions of cutting positions.
Swope said he feels the city budget is pretty tight and doesn’t really see any area to cut that won’t affect people. He said that is a decision that he wouldn’t make himself, and would at most bring recommendations to the Assembly.
Duncan also discussed the budget, which with all city operations including the hospital and enterprise funds is $312 million. Of the core city portion of that, the budget is $85 million, $25 million of which goes to the school district. The hospital budget accounts for $101 million of the total budget.
For a look at the entire FY12 updated budget see: www.juneau.org/financeftp/budget.php.
• Contact reporter Sarah Day at 523-2279 or at email@example.com.