Operating expenses

Running the city of Spokane Valley last year turned out to be cheaper than predicted. Officials from the 14-month-old city touted that as good news last week and said 2003s lower-than-expected expenses will improve its financial forecast. But Spokane County Commissioner John Roskelley warned that if the city continues saving money by cutting services, as he asserted it has, citizens will suffer.

Roskelley is especially concerned about filling potholes, sweeping streets and performing other road repairs, which Spokane County does for Spokane Valley under contract. The city had budgeted $1.7 million for street maintenance last year, but spent less than $900,000.

“Our fear is that the citizens will complain about Spokane County as opposed to complaining about the City Council that is making those decisions,” Roskelley said. “If we can’t maintain those roads at the level Spokane County has in the past, they need to look for a different contractor,” he added later.

Spokane Valley officials have said it’s not that the city reduced service levels. Road maintenance simply ended up costing less than it had estimated.

County-city contracts

The county is the city’s main service provider. The entities has two types of contracts last year: contracts paid with monthly invoices based on actual usage and costs, and contracts paid monthly or quarterly based on an annual estimate.

Under the actual usage contracts, the city can change its orders throughout the year. For example, the city requested less weed control, pavement replacement and crack sealing last year than had been part of the contract, said county engineer Ross Kelly.

The contracts based on estimates include a settle-and-adjust period at the end of the year so that the city and the county can look back and see exactly what work was done and how much it cost. Through that, the entities determine which party owes the other money. That post-2003 period is nearly completed, and so far, out of six contracts worth a total of $900,000, the county owes the city $64,000, according to the county’s administrative services director Marshall Farnell, or $124,000, according to Deputy City Manager Nina Regor. Farnell said he might be unaware of an additional $60,000 owed by the county, but neither he nor three other county officials could say for sure whether the money was owed.

At press time, the city and the county had yet to resolve some issues in three of the nine settle-and-adjust contracts: park maintenance, law enforcement and District Court services. Those contracts are worth a total of almost $8.5 million, so the amount owed by the county could change significantly. Regor said there’s no way, however, that the city could end up owing the county instead.Why the hold up in reconciling the contracts? Regor said the two parties are carefully examining the law enforcement agreement because it’s the city’s largest contract. The park contract was altered midyear, so they’re making sure those changes are reflected in the contract amount. And the two sides have “differing viewpoints on the language” in the District Court agreement, said Regor, who declined to elaborate.

“We’re very close,” she said.

Roskelley said a major sticking point in the law enforcement contract has to do with the Spokane Valley Police Department’s precinct building, at 12710 E. Sprague Ave. The county owns the building, but the city’s police force has occupied it for more than a year rent-free. The two sides have disagreed over maintenance issues, Roskelley said.

“We own the building, and we want the responsibility to be able to say we need a new roof,” he said.

The city will end up paying the county back for past rent once the contract is signed.

City spends 48 percent less

Meanwhile, the actual-usage contracts came in about 48 percent cheaper than the city had predicted. It had budgeted $4.1 million for probation services, street maintenance, engineering and the six other actual-usage contracts, but only spent about $2 million.

A big reason for the differences between estimated and actual contract amounts was a lack of history, Regor said. The contracts covered the city’s first nine months of operation, and neither the county nor the city ever had to calculate the exact costs of some of those services before.

Kelly said a number of factors affected the street-maintenance contract specifically.

The county ended up paying for road maintenance for 40 days more than it had planned to because there was a delay between when the city incorporated, on March 31, 2003, and when tax collections were distributed, he said. Kelly called it a “quirk” in state law.

“During that time we did spring pothole patching, street cleaning (and other maintenance),” he said. “That was a pretty significant amount of money they saved.”

The city saved $100,000 from what was budgeted for snow removal because what fell at the end of 2003 was relatively light, Kelly said. Spokane Valley will pay higher snow removal costs this year to cover the 2004 portion of last winter, he said.

According to Spokane County’s road maintenance records, the city spent $63,000 on pothole patching, versus $155,000 budgeted; $72,000 on street cleaning, versus $225,000 budgeted; $1,900 on weed control, versus $30,000 budgeted; and $8,200 on brush clearing and tree trimming, versus $25,000 budgeted.

Despite those figures, Kelly said Spokane Valley streets are in “pretty good shape,” and he isn’t concerned yet about what county officials call reductions in road maintenance the city made last year.

“As long as you don’t let that go, you might be able to miss one season, but if you go two seasons you could really get into trouble,” he said.

If the city sticks with its 2004 street maintenance plan, the roads should be fine, Kelly said.

“They can call us and say, ‘I’d rather not have you do that right there.’ We’re working under their direction,” he said. “But we do have it budgeted. … I know their intent is to keep the roads in good shape.”

Improved financial forecast

Ken Thompson, the city’s finance and administrative services officer, said the revised contract amounts will help the city’s financial future.

At the end of 2003, the city estimated that its deficit, caused by the cost of starting the new city, was about $3.4 million. It’s closer to $2.4 million now because revenues have picked up, fines are being paid sooner than expected and “we didn’t spend as much on some of those contracts,” he said.

Thompson pointed out that those numbers could change once the three remaining settle-and-adjust contracts are reconciled.

“We still have some big contracts out there that we’re working on,” he said.

In February, Thompson presented the city with a long-term forecast that predicted the city would be collecting $26.9 million in revenues in 2009, but that it would cost $31.1 million to run the city that year. Mercier said the staff will update that forecast later this month using the newer, more accurate fiscal data.

Roskelley said he didn’t think the lower 2003 contract values will force the county to lay off employees. Most road work, for example, is done by seasonal employees, so the county might just need to hire fewer temps this summer, he said.

Mercier said he doesn’t expect the 2004 contracts to be off by as much next year. Those contracts were inked after the city and the county had one round of negotiations under their belts, and the cloudiness surrounding the actual cost of running the city was beginning to clear.

“We felt we would get closer to the mark (in 2004),” Mercier said.