Recession concerns add new twist to budget talks

By Leah Shaffer

The city budget operates on a two-year budget cycle – last year’s budget work laid the foundation for what is typically a cut-and-dried second year of that budget cycle. But, as Tuesday’s City Council meeting revealed, no city budget is cut in stone, especially during times of economic hardship.

Last year’s city budget planning included vigorous debate as to how and where to cut spending.

 The budget that emerged reduced the Capital Improvement Plan levy, reduced two employee positions to half-time and ultimately reined in levy increases.

City Finance Manager Sue Kotchevar gave a presentation on the 2009 budget as part of the city’s Truth-in-Taxation hearing. In the City Council meeting that followed, two council members asked for new budget options that further reduce the 2009 levy.

By the next meeting, set for Dec. 16, City Council members will be reviewing at least three different versions of the budget: the current proposed budget (in which the levy increases 3.4 percent), one that would partially reduce the tax levy further, and one which would include no increase to the levy.

The idea of a flat budget came from the city’s Budget Advisory Commission (BAC) during a previous City Council workshop. The BAC offered a recommendation to cut the 2009 budget to 2008 levels, or approximately $2 million, “in light of the current fiscal environment.”

According to BAC Chair Don Uram, the main responsibility for the BAC this year was to review the city’s Capital Improvement Plan (see sidebar).

But, that “doesn’t preclude us from reviewing the 2009 budget.”Uram said the important thing was to recognize what’s happening in the economy. The BAC recommendation was based on trying to reduce the impact of tax increases, “atleast in the short term.”

The BAC offered no specific recommendation as to how to cut the $2 million.

 “We did not make any specific recommendations for a lot of different reasons,” Uram added.

Uram said, in his opinion, department managers know where to reduce their budgets better than virtually anybody does.

“I think we’re going to leave a lot of it up to them, if that’s the direction they were given.”

The next City Council meeting, to be held Dec. 16, will determine what budget comes to pass.

The proposed budget

As noted in the staff presentation, the outcome of the proposed 2008 budget is to maintain services to the city’s 65,000 residents and 2,500 businesses.

The impact that property owners of the median value home would see from the city portion of their taxes includes a 2.5 percent increase or an increase of $27 on the property tax bill. The tax increase for the median apartment building is 3.8 percent and .9 percent for commercial buildings.

Factoring in the total property tax increase (which includes the tax impact from county and school district taxes), the median value home faces a 2.1 percent increase, or an increase of $89. The city tax impact makes up 25 percent of the total tax bill for the median value home.The total city budget is going up from $40,848,133 to $42,811,155, or 4.8 percent.

In response to what was recommended by the BAC, City Manager Scott Neal had offered a number of budget options to council members.

During Tuesday’s meeting, Council member Brad Aho expressed a preference for a plan which would include a zero levy increase. To keep the levy at zero, the city has a number of options. One option would include transferring $550,000 from the Budget Stabilization Fund to the General Fund along with reducing expenses in the general fund by cutting into the maintenance budget, IT operations, capital budget and personnel costs. All told, the changes would allow the city to reduce the property tax levy by $1,100,000.

“I do like the option of a balanced approach,” Aho said, speaking about the plan to cut from the general fund while also transferring funds into it.

Council member Jon Duckstad also appeared to support that option.

“We can’t ignore all the changes that have taken place,” he said, speaking about how the economy has changed since the budget was set in 2008.

 Council member Kathy Nelson asked to see a fourth option which did not cut as much. Council Member Sherry Butcher expressed preference for the current proposed budget. She noted that there is a philosophical reason not to keep tapping into the other funds.

She noted that the city has always had a policy of “incremental changes” and that they “don’t use one-time money for operations.”

In a budget recommendations and alternatives report, City Manager Scott Neal recommended adopting the proposed 2009 budget but also acknowledged the concerns brought up by the economy.

“I agree that a desire to make sure that local government budget decisions are sensitive to the sudden and harsh economic changes that are impacting our residents is an honorable position for any City Council member,” he wrote.

But, he also notes in the report that the total levy increase of 3.4 percent as proposed under the 2009 budget is “significantly below our state levy limit; below the projected rate of inflation; and below most, if not all, of our peer cities.”   

Budget Advisory Commission puts focus this year on Capital Improvement Plan

Last year was a marathon year for the newly formed Budget Advisory Commission. Tasked with taking on the city budgeting process, the group had to play a lot of catch-up. Chair Don Uram estimated they met twice a week for three or four hours each time. This year, things have slowed down and the BAC has typically met once a month, for about two hours, he said. Looking at city finances is what the BAC does, but this year, members approached it from another angle by taking a close look at the 2009-2013 Capital Improvement Plan.

The BAC recently shared their response to that plan with City Council members. As part of looking at the Capital Improvement Plan or (CIP), the commission members met with city staff from a variety of city departments who have budgeted projects that fall under the CIP. With each meeting the BAC sought to answer four main questions about the projects including:

* “Were the projects adequately described?

* “Was the need for the projects justified? Where appropriate, is there a systematic method for identifying projects and costs? Was the condition of current assets including the projected need for repair or replacement and the likely demand for the improvement considered?

* “What is the funding outlook for these projects?

* “Does the BAC have any recommendations in this area including any budgetary and operational changes? What are the recommendations and why?”

According to Uram, a lot of the BAC’s questions related to the timing of certain expenditures. They also had a lot of questions related to timing for park and recreation projects.

Uram noted that his overall observation and the overall observation of the commission as well was that staff generally did a pretty good job at justifying and describing their projects.

 “Overall, it was good.”