Budget focus of council retreat

The conversation at Tuesday’s Spokane Valley City Council retreat was again dominated by the need to pay for street preservation projects, but no conclusions were reached on how to fund the projected shortfall of about $10 million a year.

The council met at CenterPlace for eight hours to go over the city’s proposed 2013 budget. The projected general fund budget of $34.8 million is only half of a percent higher than the 2012 budget, an increase that is much less than inflation. In order to meet that mark most city departments will have to cut costs in a variety of areas, including reducing full-time positions to part time, cutting seasonal staff, eliminating a citizen survey and delaying a planned skate park master plan.

“We have to make reductions,” said City Manager Mike Jackson. “We would have to budget $1 million to maintain current services.”

Councilman Dean Grafos suggested freezing employee wages and benefits at 2012 levels in order to free up $400,000 for street preservation.

Any changes in wages or benefits would have to be negotiated with the employee union and Jackson said the city can’t control some costs like health insurance, which may go up 10 percent next year.

“You have to subtract the mandatory increases,” said Mayor Tom Towey. “We don’t have any control over that.”

Jackson said he does not believe city wages are too high – the city has lost people to higher-paying jobs recently.

“I’m not saying anyone is going to take a pay cut,” Grafos said. “Just don’t increase it.”

Parks and Recreation Director Mike Stone said freezing wages wouldn’t make a big impact on the city’s needs. “The problem is quite a bit more than $400,000,” he said.

Councilman Arne Woodard said city pay has continued to go up in recent years while the median income in the area has dropped. “The private sector has taken a tremendous hit,” he said. “I do believe we have to freeze the wages.”

Councilman Chuck Hafner questioned whether freezing the pay would really do any good. “When we hit 2014, what do we do?” he said. “Well, I’m talking about 2013,” Grafos said. “But what have we really done?” Hafner said.

“It doesn’t go very far in solving this problem,” Jackson said.

Woodard said the city should look into breaking away from the current countywide solid waste management system and going its own way. Such a move could save the city $4 million to $7 million a year, he said, which could be put toward street preservation. “This is not in-the-box thinking,” he said. “I don’t have all the answers. I’m just putting it out there.”

Grafos suggested taking 6 percent out of the general fund every year to pay for street preservation. Six percent of $34.8 million is just over $2 million. Cutting that much from the budget would force the city to close swimming pools and significantly increase the amount of time to get building permits, Jackson said.

The city’s draft 2013 business plan already lists the consequences of a 6 percent general fund budget cut. It calls for the elimination of some current staff as well as the two free summer movies in the park and the Haunted Pool event. The biggest impact would likely be a significant cut in the number of police officers on the street, which would eliminate entire units, including the school resource officers.

Grafos said he thinks the city’s revenues will increase enough to cover the 6 percent without budget cuts, but if it doesn’t the city can always use part of its ending fund balance, which is projected to be about $26 million at the end of 2012.

The current ending fund balance is about 75 percent of the annual budget while the city’s policy calls for a minimum of 15 percent, said Finance Director Mark Calhoun. “In a sense, it’s a savings account,” he said.

Some of that is needed to pay the bills while the city waits for its twice a year property tax income and sales tax from the state. Calhoun said he believes the city needs to have a minimum of $12.7 million or about 36 percent in the ending fund balance. “That’s not me sitting here saying go ahead and spend the balance,” he said.

The city still has to consider large projects coming up like the replacement of the Sullivan Bridge and a possible new city hall, he said.

Councilman Ben Wick said he isn’t in favor of spending any of the ending fund balance on recurring costs. “It took a long time to build that up,” he said.

Hafner said the city should keep half the money where it is, set aside $4 million for the Sullivan Bridge and use the rest. Otherwise it’s like saying “Honey, we’ve got a good savings account, but the roof is leaking,” he said.

“We need to look at the bigger picture,” said Councilman Gary Schimmels. “Our ending fund balance is down, our expenditures are up, our revenues are still down. We didn’t get here by playing with our ending fund balance.”

Towey pointed out that for the first time in the city’s history the city will spend more in 2012 than it will receive in revenue. “That’s definitely a red flag for us,” he said.

“What did we spend it on?” Hafner said. “Street preservation, predominately,” Jackson said.

The city can’t just “sit on a pile of cash” while the roads deteriorate, said Councilwoman Brenda Grassel. “It wasn’t as if we borrowed that money,” she said.