City gets lesson in fiscal fitness

Spokane Valley City Manager Dave Mercier on Tuesday answered public allegations of profligate spending with a presentation dubbed “City Finance 101.”

The primer seemed aimed more at backers of a disincorporation drive than at the City Council members Mercier addressed.

Council members jumped in occasionally to reinforce a point or to make their own assertions of fiscal responsibility.

Regarding charges that the municipal budget has grown exponentially since the city was incorporated in 2003, Mercier pointed to grants the city has received and money it has set aside.

Almost one-third of the budget is a form of savings, Mercier said. He said 32.8 percent of this year’s $110.9 million budget – in all categories – is a cash carryover from last year of nearly $36.4 million.

The overall budget – including individual funds for street construction and other special projects – calls for $33.4 million to be left over at the end of the year, compared with $2.9 million at the end of 2004.

In the general fund, for day-to-day operations, Mercier said he expects about $13.2 million to be left over at the end of the year. That’s 26.8 percent of this year’s budgeted expenditures.

“A minimum healthy balance by many measures is 15 percent of the general fund budget,” Mercier said.

In addition, he said the city has established other reserve funds, such as a $5.4 million “service level stabilization fund.”

“We don’t have to borrow to pay our bills (while) waiting for taxes to come in,” Mercier said.

With annual debt service around $700,000, the city has only “nibbled” at its bonding capacity, Mercier said.

His objective is to keep the ship of state on an even keel in fair weather and foul, avoiding service cuts, layoffs and other emergency course corrections.

Six-year plans show a balanced city budget through 2012, and probably through 2014 if voters re-authorize a countywide sales tax for public safety this fall, Mercier said.

He said city officials build reserves by not expecting to spend all of the money the City Council appropriates.

“Sometimes we’re wrong,” Mercier said. “In the first three or four years of building the winter reserve fund, we didn’t think we were going to have to spend any of that and it simply carried over into the next year. But we’ve had a rude awakening in the last two years.”

The fund has been emptied in each of the past two years to cover higher-than-expected snow-plowing costs.

After cash carryovers, capital expenditures are the largest part of the budget, Mercier said. They account for 25.3 percent of this year’s adopted budget.

In large measure, the city’s capital expenditures reflect grants the city receives from the state and federal governments. Only about one-fourth of the outlay comes from city tax receipts because the city gets $2.84 in grants for every dollar of its own money, Mercier said.

He said the city could stretch its money even more with better street maintenance, citing a study that shows a dollar of routine maintenance can save $8 in repairs.

The council implemented a 6 percent telephone tax in August to raise part of the estimated $8 million-a-year maintenance shortfall, but Mercier said it’s too soon to know whether the tax will deliver the $3 million a year it was projected to generate. He said city officials are still working to get cooperation from some phone companies.

“Some folks are alarmed that we’re spending as much money as we are on capital projects, but it’s really a pretty good return for the citizens,” Mercier said. “It really is the return of those dollars that they pay to other echelons of government.”

The bad news, he said, is that the city is having trouble coming up with local money to match all the grants it has lined up. The real estate excise tax has been a prime source, but the recession has shriveled the collection from about $200,000 a month to about $50,000, Mercier said.

The city also teams up with other governments on road work, such as an ongoing project with the Washington Department of Transportation to relieve traffic congestion on Pines Road north of Interstate 90. Working with Spokane County repave streets entirely after sewer construction has “brought some fabulous road conditions in many neighborhoods,” Mercier said

State regulations sometimes create confusion by requiring grant money to be transferred from one budget category to another, Mercier said.

“That might look like a double count,” he said. “What we’re doing is following the prescription of state accounting policies.”

Spokane Valley’s largest source of general fund income is from the sales tax, but the city gets relatively little of the 8.7 percent tax residents and shoppers from other areas pay at local businesses. The city collects only one cent on each dollar spent, and has to share 15 percent of the take with Spokane County, Mercier said.

Similarly, he said the city’s share of the property taxes paid by Spokane Valley residents is relatively small.

In the city’s most populous tax code area, Mercier said the Central Valley School District gets 33 percent of property tax receipts, the independent Spokane Valley Fire District gets 24 percent, the state school fund gets 16 percent and Spokane Valley gets 13 percent. Spokane County follows with 10 percent, and the Spokane County Library District gets 4 percent.

For the owner of an average $164,325 home, the city’s property tax rate of approximately $1.50 per $1,000 of assessed value results in a $20.54-a-month bill.