City Seeks Ways To Tighten Purse Strings With Revenues Melting Away, Reserve Fund May Be In Jeopardy

With revenues dropping dramatically and a serious problem with tax assessments, Spokane city officials are looking to cut way back on spending.

If they don’t, the city’s financial pillow - its $5.3 million rainy day fund - could drop to less than $1 million.

It’s a fairly simple situation, something like a family budget. The money coming in doesn’t cover all the planned spending.

While a family might stop going to the mall, the city has stopped hiring and promises to start streamlining.

It’s put in place a citizen committee with an aim to prioritize services - what do residents want, what could they care less about.

The city’s budget problems stem from several areas.

Sales tax revenues are down. Construction is flat. Real estate sales are slacking.

Couple that with higher jail bills - more crime and more arrests which have prisoners spending more time behind bars.

Pile on top problems with property tax assessments and costly state and federal clean air mandates.

Add it all up, and the city’s financial health looks as though it’s got a touch of the flu.

“We have a feel for where our revenues are going, and it isn’t exactly wonderful,” said Budget Director Ken Stone. “If we were to do nothing, things could get ugly.”

It isn’t as if the city is going into debt.

In fact, state law mandates that Washington cities balance their budgets every year. It’s just that slower economic times mean the city must dip deeper into reserves, something Stone and other city money people don’t want to do.

By law, the city must keep a 2 percent reserve for next year. For 1995’s $99 million budget, that means at least $2 million must be set aside for 1996.

If spending went ahead as planned while revenues took a bath, the city would have ended 1995 with less than $1 million in the bank, Stone said. But when sliding sales tax and other revenues became noticeable, the city began “tightening the rope,” he said.

Back in February, department heads were told not to fill vacant jobs - except for police and fire - without approval from the city manager’s office.

The rope pulled tighter a couple months later when no department could hire temporary-seasonal employees without the city manager’s OK.

Now, every vacancy - including police and fire - can’t be filled without City Manager Roger Crum’s say-so.

The city is doing away with positions left open by attrition. It also is offering a voluntary severance plan that lets employees get vacation pay for quitting, as long as that employee can prove the job could be eliminated or split among other workers.

“There’s been a progressive series of actions to reduce our expenditures,” Stone said. “You tighten as long as you need to continue tightening.”

The city began 1995 with a $5.4 million reserve - more than 5 percent of its $99 million general fund budget.

Keeping a healthy reserve is essential to keeping a high bond rating, Stone said. A slip in reserves could mean a slip in bond rating - signaling a hike in interest rates that could prove costly to taxpayers.

The county is facing just such a crisis, with less than $517,000 in reserves this year.

“We won’t let that happen,” Stone said. “We don’t want to take a chance it would effect our bond rating.”

Most of Spokane’s financial problems rest in the general fund, which pays for such things as police, fire and public works.

Sales tax is one of that budget’s biggest supporters - and those revenues are down more than 3 percent, gobbling at least $350,000 from the spending plan.

Mistakes in property tax assessments gouged another $350,000. Building permits are nibbling about $150,000. Taxes on real-estate sales are down about $300,000.

A hike in business license fees was included in the budget but later derailed by the council, another $200,000 lost.

Even with the hiring freeze and other changes, those dollar hits compounded by smaller ones will leave the city with about $2 million less at year’s end than expected.

Next year, things can’t help but worsen without a serious look at spending, Stone said.

The council recently selected a group of residents to draw up a service plan. The group is charged with finding out what services residents want and those they don’t. That way, council members say, they can focus on delivering only priorities.

Already, this year’s cutbacks haven’t been pain-free.

North Spokane resident Sandy Smith desperately wants safety stripes painted on the street near her home. She and nearly 80 of her neighbors signed a petition earlier this year asking that the improvements to Cozza Drive be done as soon as possible.

The city agreed to do the work, and Transportation Director Bruce Steele sent along a letter saying the striping should be done by this fall.

“Then, the budget cuts came,” Steele said, and plans to get the work done looked good on paper but dismal in reality. Steele had to cut seven temporary seasonal employees from his budget this year - and those employees do a majority of the summer street work.

“It’s a real tough situation,” Steele said, adding that the temporary seasonal workers he does have are painting school zones.

Smith, a frequent critic of the way the city spends, pleaded with the council last week to find the money for the road work.

“It’s too urgent to wait until next year,” she said. “We need your help to do this.”

, DataTimes