Spokane Valley City Manager Mike Jackson told the City Council Tuesday that the city has a balanced budget and healthy reserves going into 2012. “Right now I think we are in an enviable position among cities,” he said.
The proposed budget presented Tuesday includes no property tax increase and no increase in employees. Staff was told by the Finance Committee to limit expense increases to 1 percent over 2011 spending, Jackson said. Recurring expenditures will actually drop $164,000 from 2011 levels, he said. “Staff has actually done better than that,” he said. “I think that’s outstanding, considering we haven’t made any reductions.”
But some of the council members had their pencils ready to make reductions. The proposed budget calls for a 2.5 percent pay increase for union and nonunion employees. In years past the city has given nonunion employees the same raises negotiated by the union employees. Last year Councilman Dean Grafos advocated eliminating the annual cost of living pay increase for nonunion employees in 2011. The city saved $40,000 from its $35 million general fund budget when the majority of the council agreed with him.
This year it was Councilwoman Brenda Grassel making the same suggestion. “I don’t think, on the national level, there is a 2.5 percent cost of living adjustment,” she said. Grassel said she thought the Finance Committee had decided that nonunion employees were not supposed to get a raise in 2012.
“Our intent was to look at it from year to year,” said Mayor Tom Towey, who sits on the Finance Committee. He saw numbers in June that indicated there had been an inflation factor of 3.8 percent, said Towey. “Certainly a 2.5 (percent increase) would be justified,” he said.
Grafos said he didn’t agree with a 2.5 percent increase. “I really feel we should stay to a 1 percent increase across the board,” he said. “I think that’s fair to our citizens.”
“The city has always treated the nonrepresented staff the same as the represented staff,” Jackson said. “The idea was to be fair.”
Despite the overall positive outlook, Jackson did sound notes of caution. The city contracts for many services, including law enforcement with Spokane County, and those costs will continue to rise. “We can’t always hold operating costs down to this level,” Jackson said. “It will get a little tougher each year to squeeze reductions out of our general fund.”
The largest contract is law enforcement, which is estimated to cost $22 million in 2012. Every year the city pays an estimated amount for law enforcement, jail services and court services. But the actual cost is tied to how much each service is used, so at the end of each year the county examines the usage amount and determines if the city has to pay more in what is called a “settle and adjust” process.
The county just gave the city the settle and adjust amount for law enforcement in 2010, Jackson said. “It’s a fairly substantial sum,” Jackson said. There have also been several other large settle-and-adjust requests lately. “I’m beginning to become more concerned about our expenses in 2012,” he said.
During a break in the meeting Jackson said that the county is asking for more than $600,000 more than the $21 million they were paid in 2010. The city staff still needs to examine the request to make sure they agree with everything in it, he said.
Councilman Bill Gothmann asked why a $970,000 law enforcement contingency fund in the 2011 budget, which is intended to cover settle-and-adjust payments, was dropped to $53,000 in the 2012 budget. “We’re not budgeting a contingency,” Jackson said. “That’s one of the ways we achieved our budget reductions.”
Jackson said he is proposing a few changes for 2012 in how the budget is organized. Expenses will be broken out into recurring and nonrecurring. He’s also proposing removing the money left over at the end of the year, called the ending fund balance, from the annual budget. It would be replaced by a contingency fund equal to 1 percent of the general fund, or $346,000, to cover unexpected expenses. It would make it harder to spend the ending fund balance, he said. “It can’t be spent unless the council makes a specific appropriation,” he said.
There is also no five year budget forecast in the budget, though it does remain in the city’s business plan. The forecast changes often depending on what numbers are plugged in for expected growth in annual revenue or expenses, Jackson said.
“I really believe that projection should be in there,” Grafos said. “I understand it’s a projection and you can plug numbers in and make it say whatever you want. It kind of gives you an overview of where we’re headed.”
Gothmann said he was fine with removing the forecast, which is really just a guess. “I’ve seen it used more as a political tool,” he said.
Grafos asked Gothmann to give an example of when it was used as a political tool. “I’ll give a direct quote from Mr. Grafos: ‘We’re going broke.’ ” Gothmann said.
The city’s general fund was growing between 7 and 9 percent a year previously, Grafos said. “At the rate we were heading, we probably would have gone broke,” he said.