Spokane on cusp of $14 million reserve goal

After years of struggle, the city of Spokane achieved a financial milestone Monday night.

The Spokane City Council voted unanimously to put $3.2 million in the city’s bank account, bringing the total reserves to almost $14 million – or 10 percent of its general fund budget. The city had promised bond-rating agencies it would reach that goal by the end of 2008.

Most of the City Council felt so good about the city’s financial standing, in fact, that minutes later they voted 5-2 to end consideration of extending the city’s two-year property tax increase.

City Council members Mary Verner and Al French, who are running for mayor, opposed ending discussion on the matter and questioned whether shifting money to reserves was prudent given Mayor Dennis Hession’s announcement last week that he wants to hire 24 police officers and 10 extra fire personnel. They noted that recent administration figures point to budget shortfalls in just a couple of years.

“I have not yet seen the mechanism to finance that approach,” Verner said.

French added: “The budget as we know it and the presentation made by the mayor doesn’t add up.”

The rest of council, however, said they’d heard enough.

“We need to give our voters a break,” City Councilwoman Nancy McLaughlin said. “I’m willing to put an end to it tonight.”

The decision means most city taxpayers will see their tax bills decline next year unless voters approve new taxes.

Monday’s vote ends a debate that started in March when Hession announced he would not support reauthorizing the two-year levy lid lift. Some council members argued that the decision was premature. Councilman Brad Stark proposed extending the tax, but in a surprise move, announced last week that he supported the mayor’s plan.

French and Verner said they didn’t necessarily support taking the measure to voters, but wanted to force the administration to provide specific budget numbers before making a decision.

Hession, who is running for re-election, says his plan will work without tax increases. He supported moving the extra money into the reserve fund.

Chief Financial Officer Gavin Cooley said the feat will help lower interest rates and the cost of bond insurance. Since 2004, the city’s bond rating has improved six steps, he said.

He said even if there were problems funding shortfalls in future budgets, it would be unwise to use surplus money to cover it.

“It’s very dangerous to fund any operations with one-time money,” Cooley said. “This is not ongoing revenue. This is one-time revenue.”

George McGrath, who is running for City Council against Stark on a campaign of fiscal conservatism, criticized the move, arguing that if the money is in a reserve fund, it will be another excuse to raise taxes when a need arises.

But City Councilman Bob Apple said the transfer is about saving taxpayer money.

“We’re just trying to get you the best rate we can,” Apple said.