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FY09 and FY10 Proposed Budgets

Submitted to the Assembly on April 9, 2008

City Manager’s Budget Message

It is my pleasure to forward to the Assembly and community the balanced FY09 and FY10 biennial budget, as required by the Charter. In the first year of each two-year budget, the Assembly adopts the first year’s budget (FY09) and approves, in concept, the second year’s budget (FY10). The conceptually approved FY10 budget will be brought back before the Assembly next spring for review and consideration of any adjustments or changes that may be needed.

We have continued to hold the line on governmental growth and spending. It continues to be a challenge to maintain a sustained level of public service and still meet the needs of a growing community. This year’s budget reflects a ‘maintenance level’ for general government operations. In balancing the FY09 and FY10 biennial budget, we tried to be mindful of ensuring that we maintain core functions and services. In developing this year’s budget, each city department was instructed to:

Continue to operate as conservatively as possible and keep spending to an absolute minimum;
Revise the FY09 and FY10 biennial budget to reflect the minimum funding level necessary to maintain services;
Any incremental requests must be submitted separately and accompanied with adequate justification of need; and
Departments were instructed that any funding requests for new positions would minimal and receive close scrutiny.

Additional Revenues

Over the past few years, real property values across the continental United States have increased and decreased dramatically. In Juneau, we have been somewhat isolated from these extreme changes although we have experienced some significant real property value increases during the past five years. Our residential real property value growth has been relatively flat for the last two years. For calendar year 2008 (budget year FY09), we are projecting that property values will increase by 2.9% and for calendar year 2009 (FY10) there will be no overall change. We are continuing to experience reasonably strong growth in commercial property values. We are also experiencing some increases in new construction. Over this past year the Kensington Mine continued to move a head and we saw several new large retail commercial structures constructed or expanded (Home Depot, Wal-Mart and Fred Meyer). In addition, there are several housing developments and subdivisions planned or underway. For FY09, existing residential real property values are projected to decline by less than one percent and existing commercial real property values are projected to increase by approximately four percent. For FY10, we are expecting residential property value to continue to decline slightly and with this decline being offset with commercial property increases and new construction.

Our sales tax revenue growth trend has increased over the past two and one-half years. In the early 2000’s up through 2005 we were experiencing sales tax growth trends in the range of two to three percent. In the summer of 2006, we started to experience a growth rate of approximately five percent. This budget assumes that our sales tax growth rate will continue to grow at a rate of approximately five percent through FY10. This increased sales tax growth rate in FY07 and FY08 have resulted in a significant amount of additional sales tax funds being available (rolling over) for use in this biennial budget. Another significant source of funding for the biennial budget are fund balance carryovers from FY07 and FY08 (projected). These carryovers are due to a combination of actual or anticipated revenue increases and expenditure decreases during these budget years. The following table summarizes some of the revenue changes in our general governmental operating funds (General Fund and Roaded Service and Fire Service Areas) between the FY08 Amended Budget and the FY09 and FY10 proposed budgets.

Funding Sources	FY09 Change from FY08	FY10 Change from FY08
Revenues:
State Revenues Sharing (exc. debt reimb.)	$ 305,700	$ 305,700
Federal PILT	(57,700)	481,800
Property Tax (excluding debt)	965,700	942,500
Sales Tax Current Year	3,663,800	4,786,700
Interest Income	398,300	178,900
Miscellaneous *	147,300	168,400
Total Current Year Revenue Increases	5,423,100	6,864,000

Prior Year Rollovers:
Sales Tax Rollover (operational)	1,659,000	539,000
Fund Balance	(2,180,800)	(792,100)
Total	$4,901,300	$ 6,610,900

*The miscellaneous category includes income from various sources such as penalties and fines, user fees, grants, transfers from other funds and permit sales.

A revenue reduction not shown above, is the elimination of the National Forest Timber Receipts Program. The City and Borough had received funding for years under this federal program. The program was to terminate in FY02 and then was extended for several years. We are now anticipating that there will be no future support from this federal program. For a more complete explanation of this “National Timber Receipts” program, please refer to the “Major Revenues” section of this document.

A very positive move in our revenue position starting in FY09 will be the decision by the State Legislature and the Governor to provide a permanent revenue sharing program. In the 2008 legislative session, a new program was approved, SB72, that will provide up to $60 million per year for a State Community Revenue Sharing Program. Under this program, the City and Borough of Juneau will receive approximately $2.05 million per year. While we have received State Revenue Sharing for the past few years, SB72 implements a permanent program that will allow us to anticipate and estimate future State revenue sharing support.

Additional Expenses

As can be expected, we are projecting additional costs for our FY09 and FY10 operations. These cost increases include wage rates (bargained increases), employee benefits (health care) and inflationary adjustments in commodities and services (includes vehicle fuels and heating oils). A very large positive budgetary impact for this year is the decision by the legislature to adopted SB125. SB125 will permanently set the employer retirement system contribution rates at a maximum of 22%. In for the past few years, the City and Borough of Juneau has, along with other Alaskan communities, been struggling with dramatic increases in our employer’s contribution rates. In the early 2000’s, our employer contribution rate was 6.22%, by the end of FY07 there were projections indicating the contribution rate might go as high as 50%. Adoption of SB125 means that our PERS employer contribution will not materially change for budget years FY09 and beyond. The table presented on the following page, summarizes some of the expenditure changes in our general governmental operating funds (General Fund and Roaded Service and Fire Service Areas) and support to other operations (School District, Transit, etc) between the FY08 Amended Budget and the FY09 and FY10 proposed budgets.

Expenditure Areas	FY09 Change from FY08	FY10 Change from FY08
Operating:
Wages and benefits	$ 2,572,300	$ 3,550,700
Commodities and Services	1,347,300	1,337,500
Support to Education	1,462,300	2,169,300
Support to Transit	456,000	456,000
Interdepartmental Charges	(531,900)	(524,400)
All Other Changes	(404,700)	(378,200)
Total Operating	$4,901,300	$6,610,900

Mill Levies and Debt service

The City and Borough of Juneau property tax mill levies consist of two parts; the general operating mill levy and the debt service mill levy. The debt service mill levy is used to pay for voter approved general obligation bond issues. The FY09 and FY10 biennial budget includes no proposed changes in the total operating mill levy; however, it does include increases in the debt service mill levies. In calendar year 2007, voters approved several general obligation bond authorizations. While we have scheduled the issuance of these bonds to minimize the impact on the mill levy, an increase will be required. The general obligation bond authorizations approved include –

$17.1 million for the new High School,
$22.4 million for Glacier Valley and Harborview Elementary Schools (funded with sales tax) and
$19.8 million for the Dimond Park Swimming Pool.

	FY08	FY09	FY10
Debt Service (dollars):
General Obligation Debt Service (Gen’l Gov)	$12,791,300	$16,619,700	$17,931,500
State School Construction Reimbursement	8,561,400	11,814,600	12,131,500
Tax Supported Debt Service	4,229,900	$ 4,805,100	$5,800,000
Debt Service (Mill Levy):
Total Mill Levy Required	1.11	1.22	1.48
Net Change In Debt Service Mill Levy		0.11	0.37

Summary

Financially, the City and Borough of Juneau is in very good shape. We have $10 million in our sales tax budget reserve which is the first time this has been achieved since being recommended by a Mayor’s Task Force in 1994. We have increased our Emergency Reserve account from $3 million to $4.3 million. Our PERS (employee retirement) liability to the state has been capped at an acceptable level for future years which provides predictability when preparing future budgets. We will have an additional source of funds through the Revenue Sharing Program established by the State to assist local municipalities for future years. Our tax base is growing, our population is remaining fairly constant, and we can look forward to a busy retail season this summer along with a healthy construction season for the next several years.

Juneau is a strong and diverse community where the citizens have come to expect responsive municipal services delivered in an efficient manner. As City Manager, I appreciate the community and Assembly’s support in providing the City with the necessary resources and funding to meet the various public needs and allow us all to live in a safe and progressive community that we can be proud of.

Respectfully submitted,

Rod Swope

City and Borough Manager

If you have questions regarding the budget, please contact Bonnie Chaney, Budget Analyst at 586-5215 or at Bonnie_Chaney@ci.juneau.ak.us.