City and Borough of Juneau
155 S. Seward Street
Juneau, Alaska 99801
tel. 907-586-5240
fax 907-586-5385
http://www.juneau.org

Finance Department

FY07 Adopted and FY08 Approved Budgets

CITY MANAGER'S BUDGET MESSAGE

It is my pleasure to forward to the Assembly and community the FY07 adopted and FY08 approved biennial budgets.  In the first year of each two-year budget, the Assembly adopts the first year’s (FY07) budget and conceptually approves the second year’s (FY08) budget.  The FY08 budget will be brought back before the Assembly next Spring for review and consideration of any adjustments or changes that may be needed.

The last biennial budget included nearly $1 million in reductions beyond what was necessary to balance the budget.  I recommended this approach in anticipation of additional cuts that might be necessary to balance the budget in future years and to bring some stability and predictability to the budget process.

For the past two years, we have continued to hold the line on governmental growth and spending in light of State funding reductions, unfunded mandates and normal operating cost increases.  It continues to be a challenge to maintain a sustained level of public service and still meet the needs of a growing community.  Each year we are left with fewer options to balance the budget and still not significantly impact services that the public expects us to provide.  In balancing the FY07 budget, we tried to be mindful of ensuring that we maintain core functions and services.  In making adjustments to this year’s budget, each city department was instructed to:

 

  • Continue to operate as conservatively as possible and keep spending to an absolute minimum;
  • Prepare their FY07 budget (and FY08) at 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 discouraged from requesting funding for new positions.

 Additional Revenues

This year, we will experience an average increase in property values (including new construction) of approximately 12.6% (note: the net property tax increase was 2.9% after taking into consideration the 1.0 mill rate reduction approved by the Assembly), a modest increase in sales tax revenues, a carry over in fund balance, a higher interest rate on our investments, and a small increase from various other miscellaneous sources as follows:

 

Category

FY06 to FY07 Projection

FY07 to FY08 Projection

State sources

         $   2,007,000

See next page

Property tax (excluding debt)

              1,272,000

            $3,972,000

Sales tax (operational)

              2,270,000

              1,015,000

Miscellaneous (operational)  

                 558,000

                   45,000

Investment income

                 437,000

                 204,000

Total

           $ 6,544,000

            $5,236,000

Over the past few years property values across the country have increased significantly.  The City and Borough of Juneau has experienced similar increases in values.  While I anticipate that interest rates will increase and property values will begin to level off, we should continue to see increases in property values and sales tax revenues in future years with the construction of the Kensington mine and Home Depot, the opening of WalMart, the expansion of Fred Meyer and Costco, and numerous housing developments and subdivisions that are currently under construction or planned.  The miscellaneous category includes income from various sources such as penalties and fines, user fees and permit sales.  In addition to the anticipated FY07 sales tax revenue increases, we also have unexpended revenue being carried forward from FY06.  Finally, this budget includes a 1.0 reduction in the mill levy for FY07.

Another significant change in the FY07 budget is the inclusion of State funding for general governmental operations.  The City had experienced a steady decline in State support, with that support becoming $0 in FY05.  While this had a major impact on Juneau, it was more significant on small Alaskan communities without a tax base.  Due to a major revenue surplus from increased oil prices, the State legislature decided to provide some funding assistance to Alaskan communities in FY07.  The additional funding allowed the Assembly to further reduce the mill levy from my recommendation in the proposed budget of 0.33 to 1.0 mill.  Although it is likely the State will continue to provide some support, currently there is no provision to continue this funding beyond FY07, and it is not included in the FY08 approved budget.

Additional Expenses

We anticipate additional costs and/or reductions in revenue as follows:

 

Category

FY06 to FY07 Projection

FY07 to FY08 Projection

Wages

            $      927,000

            $      998,000

Benefits (Health and PERS)

                 2,869,000

                 1,985,000

Workers Compensation

                    121,000

                      50,000

Heating Oil

                    191,000

                        3,000

Gas and Diesel Fuel

                    266,000

                               -

Support to Education

                 1,740,000

                    465,000

Reduction in State Support

                               -

                 2,231,000

Reduction in Federal Support

                      97,000

                 1,000,000

MPF General Support Decrease

                    350,000

                      22,000

Increments

                    160,000

                    238,000

Total

             $  6,721,000 

             $  6,992,000  

The reduction in Federal support in FY07 reflects a reduction in grant funds such as the Fire Inspection Program.  In FY08, we will no longer receive $1 million in National Forest Timber Receipt funds of which $800,000 was available to help fund general operations (the remainder was required to be spent on capital projects).  The National Forest Timber Receipts is a six-year program ending in FY07.  The FY08 reduction in State support is due to the uncertainty of continued State funding beyond FY07.

Increments

There were over $1 million in increment requests for FY07 submitted from the various departments.  I recommended and the Assembly approved three increments for the biennial budget.

The largest increment request is $185,000 in FY08 to fund two additional police officers.  This is an ongoing operating expense.  In 1986, the Juneau Police Department assumed borough-wide policing responsibility when the Alaska State Troopers were redeployed to other locations.  Since that time, our population has increased by nearly 10,000 people and the geographical area of coverage has also increased.  These additional officers will enable JPD to provide a more effective patrol development plan and help reduce the impacts and added costs associated with chronic understaffing.  It will also allow deployment of more officers during peak hours and allow for directed patrol efforts on selected community problems.

The second increment request is for $160,000 in FY07 and $53,200 in FY08 to accomplish an update of the Comprehensive Plan.  This is a one-time cost incurred over the period of two years.  This goal is a stated priority of the Assembly.  This funding will provide for a GIS technician to conduct fieldwork and upgrade the existing GIS database and maps, funding for a geotechnical firm to assess mass wasting and avalanche hazards of publicly-owned sites that can be developed, funding for a consultant to delineate wetlands and flood hazards and miscellaneous costs to support the above efforts as well as update/revise the narrative portions of the plan.

The third increment is to provide funding for a commercial appraiser position.  The number of residential and commercial parcels has increased significantly over the past few years, while the Assessor’s Office has had no increase in staff support.  This lack of adequate staffing has resulted in the Assessor’s Division failing to meet the Assembly’s approved 5-year property inspection cycle.  In particular, commercial appraisal updates have fallen well outside of the 5-year inspection cycle creating inequities for both commercial and residential.

Summary

The amount of increased revenues that we anticipate in FY07 will be consumed by a 34% increase in health insurance costs and mandatory contributions to PERS (combined), a 30% increase in workers compensation insurance, a 66% increase in heating oil, a 60% increase in gas and diesel fuel, a 3% negotiated wage increase and a 7% increase in support to education.

In FY08 we are anticipating a 17% increase in health insurance and mandatory contributions to PERS (combined), a 9% increase in workers compensation insurance, a 1% increase in heating fuel, no increase in gas or diesel fuel, a 2% negotiated wage increase and a 4% increase in support to education.

Based on the State’s existing school funding formula, the minimum funding contribution to education will increase by $845,000 in FY07 and an additional $564,000 in FY08.  This projection assumes no changes in the State’s educational funding formula for FY07 or FY08.

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 & 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.

 



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