The Juneau Assembly is poised on June 5 to make an unprecedented withdrawal of more than $4.5 million from the City's Emergency Budget Reserve account.
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The Emergency Budget Reserve was approved by the voters in 1990 as part of the authorization of a sales tax measure. The purpose of the reserve was to fund "unanticipated future budget shortfalls." It took foresight and vision to provide future assemblies with a tool to "avoid severe economic downturn" without being forced to lay off employees or cut essential services.
No large withdrawal from the fund has been contemplated until now, when the Assembly finds itself short of money to award the bid for the new high school.
The lowest bid came in 23 percent over the estimate, prompting a scramble to find more money. Money is being pulled from school projects, interest earnings, city sales tax funded projects, and since that's not enough, the Emergency Budget Reserve.
This is not small change. For example, the $9 million shortfall exceeds the total construction budget of the police station. The Emergency Budget Reserve should not be tapped for a long-planned capital project. It was never the purpose of the fund to paper over project-cost overruns.
After Monday night, there will likely be only $2.5 million left in the reserve.
The new high school project has a history of being promoted to the voters as one thing, then being changed into another. Recall the earlier $63 million dollar school project was stopped by the voters in May 2004. A smaller project, at $54 million, was then presented to the voters in October and they approved it. Now that $54 million dollar project exceeds $65 million and will grow by millions more, far exceeding the project the voters turned down in 2004.
In addition, critical parts of the project have been shuffled out of sight, like the $3.5 million Riverside Drive signal and road improvements, which are essential for the school to open. To fund this, other city capital projects will likely be cut to free up money for the high school. And someday soon we'll be hearing about an additional $5 million for the auditorium and track improvements.
A well-planned project includes money for unforeseen but necessary expenses. In an effort to shoehorn this project within the available money, its contingency fund has been reduced below original projections.
The Assembly is scraping the bottom of the barrel to fund this one project.
Don't count on tax relief; this project will continue to consume tax dollars. Even while a mill rate reduction is discussed for the current budget, a plan to increase your property tax is in the wind.
To repay the Emergency Budget Reserve and other overages, you may be asked to authorize an increase in your property taxes to fund yet more general obligation bonds for the high school.
But you'll be asked to approve the debt after the money is committed and the school construction contract has been signed.
The Assembly knows that to go to the voters now would risk getting an answer they don't want to hear; and it would mean rebidding the project. So the likely plan will be to ask the voters for forgiveness later rather than to ask for permission now.
As time goes on, the need for the new high school diminishes with the declining enrollment in the school system. Remember when they told us we'd have more than 2,100 students in high school by 2006? Now even the estimates for 2008 fall short of that old prediction, which was a primary argument for the new high school.
So far, nothing has turned out as we've been told. Costs are higher, essential project components are tossed out, estimates are consistently too low, and the taxpayer won't have a say until it's too late to demand accountability.
The Assembly should resist the temptation to use budget reserves.
Voters should approve debt before it is incurred.
All we can do now is attend the appropriation hearing on June 5 and remember to vote in the next Assembly election.
Dave Palmer was the Juneau city manager for seven years. He retired in 2002.