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Budget crisis long time coming

Vince Lemus, Spokane's equal employment and contract compliance officer, learned last week he will lose his job to city budget cuts.
 (Colin Mulvany / The Spokesman-Review)
Vince Lemus, Spokane's equal employment and contract compliance officer, learned last week he will lose his job to city budget cuts. (Colin Mulvany / The Spokesman-Review)

It’s a basic math problem, but a big one for the city: Costs are going up, and revenues are stalled.

The city is facing $10 million to $12 million in cuts next year to meet a revenue forecast of $116 million for police, fire, parks, libraries, streets and other tax-funded services.

Here are the chief reasons for the trouble:

“ Labor costs will increase by $5 million next year.

“ Health care costs for city employees will be up 19 percent next year, for a $1.2 million hit on the general tax fund.

“ Voter-approved tax reductions stripped $4 million a year in vehicle taxes starting in 2000. Property tax limits imposed in 2002 have checked revenue growth there.

“ At the same time, a national economic slowdown curtailed sales tax collections.

“All of these things have had their impact,” said Chief Financial Officer Gavin Cooley.

Dozens of police officers and scores of firefighters could lose their jobs. Branch libraries may close along with one or more neighborhood fire stations. Funding for senior centers and community centers may be reduced. Lower-profile services such as the city’s equal employment opportunity office are being eliminated.

At least 100 employees – and likely more – are expected to lose their jobs Dec. 31, just a few months after 28 jobs were eliminated Sept. 1.

Barring a tax increase, the city simply won’t have enough money to pay what it costs to keep operating the way it was at the start of 2004.

Looking back over recent years, with a recession, the decline in taxes and the higher costs for labor, Cooley said, “It’s a pretty predictable outcome …” Earlier this year, he said it was a perfect budget storm.

Efforts were made to trim the budget in 2000 and 2002, but labor talks stalled on several fronts when then-Mayor John Powers held the line on salary increases and taxes. At the same time, health benefits did not change.

As City Hall considers which services to cut, ideas for solving the problem are already surfacing. They include a cost-cutting reorganization of municipal court and new taxes.

Even so, it’s virtually certain that residents next year will find fewer police personnel to respond to calls, particularly for nonviolent offenses. Fire and medical responses will likely take longer. Lines could be deep at libraries, and there will be fewer days each week in which residents can check out books. Recreation programs within the city parks department are expected to suffer.

Citizens will get a chance to weigh in as the City Council prepares for a budget vote, probably in December. Its work will continue over the next six to eight weeks. At the same time, the independent parks and library boards will be setting budgets for their services.

Some employees have already been notified they will lose their jobs.

Vince Lemus, the city’s equal employment and contract compliance officer, learned Thursday that he is being laid off from his $48,000-a-year job after nearly seven years at City Hall. His duties are being transferred to the human resources department, he said.

“My job will not survive the budget cuts. I’m gone,” Lemus said.

He said he wants the public to understand that he sees workers at City Hall as being committed to their jobs. “You can ask city employees, and a majority will tell you they put their heart and soul into city government,” he said.

Joe Cavanaugh, president of Local 270 non-uniformed workers, said, “There is blood on the floor everywhere.”

History of cuts

This isn’t the first time in recent years that City Hall has seen budget cuts. The tax revolt that began in 1999 led to the loss of 30 positions in 2000 and 50 positions in 2002. The 2000 cuts would have been worse had it not been for a 4 percent increase in the property tax levy that year. State voters limited that option in a 2001 initiative law. Any property tax increase bigger than 1 percent a year must go to voters for approval.

Mayor Jim West said earlier decisions set the city on course for today’s cuts.

West took office with several labor contracts up in the air. He agreed to a deal with the Spokane Police Guild that provided a cumulative 9 percent salary increase from 2002 to 2004, but the city had been under the threat of binding arbitration in which it may well have been forced to pay more, officials said.

Firefighters are seeking binding arbitration on a contract negotiation dating back to the start of 2003.

Under state law, uniformed services are not allowed to strike. In exchange, they are eligible for binding arbitration, in which the two sides state their cases and a neutral third party makes a final decision. In the past, arbitrators have pegged wages for police and firefighters to those of comparable cities on the West Side.

Members of Local 270 have tentatively settled a contract that would give them a 15 percent salary increase by the end of 2006, in exchange for paying a higher share of health costs. The salary increases are being phased in over the next two years, meaning the cost to the general fund will gradually increase.

The Managerial and Professional Association agreed on a contract in September that gives its members salary increases of 2.7 percent this year and 2.5 percent next year, with both increases coming in biannual increments.

“For the last six years, you’ve had increasingly low morale at City Hall,” West said. “I believe you’ve got to be fair with people.”

West said he is asking employees to assume a greater share of health care expenses next year through increases in co-payments and deductibles.

In addition to salaries and health care, the city is expected to pay $1 million more next year to hold prisoners in jail. Also, a $15 million street improvement bond approved by the City Council last year will add $1.6 million in bond payments.

Budget cuts already have been announced in the parks department and libraries. West is expected to unveil the rest of the general fund cuts Tuesday.

West’s budget recommendation, which will go before the City Council in November, was written after city officials took input from citizens on their priorities, and then applied those priorities to a menu of services.

City Hall critics remain skeptical about the fairness of the budget.

“Is there anybody accountable down there?” asked John Talbott, the former mayor who is a longtime critic of city spending.

He said West should be saying “no” to salary increases and slashing the number of managers, and then cutting salaries of the managers who are kept.

“That’s not going to get you re-elected, but it’s managing the resources,” Talbott said.

Currently, the mayor, fire chief, police chief and library director all make about $110,000 a year.

The list goes on

There are other problems plaguing the budget. The protracted fight over the River Park Square parking garage is expected to cost the city $800,000 next year if the federal legal case over the garage goes to trial as scheduled in January. Community development programs financed separately through a federal grant program also are being curtailed because of the parking garage dispute.

The Spokane Police Department no longer has federal grant money that was used to hire additional officers during the Clinton administration.

The city has few options for raising taxes. West said he will ask for a modest increase in the property tax levy, which would be allowed under the 1 percent levy limit, but that is only worth about $1.5 million.

Voters in September approved a small sales-tax increase for criminal justice costs, but that, too, is worth only about $1.5 million to the city.

The tax on city utilities is currently 17 percent of ratepayers’ monthly bills. Officials say it is already so high that it would be difficult to increase it.

Former City Councilman Steve Eugster said one answer might be to implement a local-option business-and-occupation tax, which is collected in most of the larger cities in Washington.

But the B&O tax has long been opposed in Spokane, in part because it hurts marginally profitable businesses because the tax is collected on gross receipts. A local-option B&O would put Spokane businesses at a disadvantage when competing with those in Spokane Valley and Idaho.

“The reality is the city simply has to utilize its B&O tax capability to raise revenue,” Eugster said. But he wants to combine that with a city initiative law he is sponsoring to limit city utility tax collections to 9 percent of monthly bills.

CFO Cooley said a B&O tax would “suck business right out of the city.”

West and Eugster both call for a reorganization of Municipal Court, which is now operated under contract with the county’s District Court. That could not happen until 2007 under the contract, West said.

Councilman Brad Stark has called for eliminating at least one vacant management position in the parks department, and another office position.

Other cost-saving ideas involve hiring private contractors to mow neighborhood parks and taking greater advantage of volunteer workers.

But the problem still comes down to the math. Tax revenue is not increasing at the same rate as costs.

“Cities are having a tough time now,” Cooley told the City Council this month.

Local 270’s Cavanaugh explained it this way: “To give the services that are needed for the community is expensive.”