FY08 Revised Budget

Presented to the Assembly Finance Committee on April 4, 2007

 

CITY MANAGER'S BUDGET MESSAGE

It is my pleasure to forward to the Assembly and community the FY08 revised budget. 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 has been revised to reflect various changes that are projected to occur in the coming year.  It is being brought back before the Assembly for review and consideration of various adjustments that have been made and proposed changes that are being recommended.

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. This year’s budget reflects a ‘maintenance level’ for general government operations.  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 FY08 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:

 

 

Additional Revenues

This year we will experience a slight average increase in property values (on average, residential property values have remained the same as last year and commercial property values have increased approximately 6%), an increase in sales tax revenues, a carryover in fund balance, and an increase from various other miscellaneous sources.  The following table summarizes the revenue differences between the FY08 conceptually approved budget that was presented to the Assembly last year and the revised budget that is being submitted now.

 

Category

FY08 Revenue Changes

State sources

$                0

Property tax (excluding debt)

  (796,000)

Sales tax (operational)

2,141,200

Interest Income

460,500

E911 Surcharge

564,600

Miscellaneous (operational)  

94,900

Fund balance carry over (see note below)

__2,022,300

Total

$4,487,500

 

Over the past few years property values across the country have increased significantly.  This year interest rates are increasing and residential property values have begun to level off.  Commercial property values are continuing to increase.  We should see increases in property and sales tax revenues this summer with the construction of the Kensington Mine and Home Depot, the opening of Wal-Mart, 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, grants and permit sales.  In addition to the anticipated FY08 sales and property tax revenue increases, we also have unexpended budget being carried forward from FY06 and FY07 due primarily to a large number of unfilled positions that remained vacant.

The City has 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 State funding included in the FY08 amended budget.

 

Additional Expenses

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

 

Category

FY08 Proposed

Budget Changes

Wages

            $                 0

PERS Benefits (directly supported funds only)

                 2,422,400

Support to Education

                    1,692,700

Support to Transit

                  (351,500)

Other Operating Expenditures (includes E911)

                 723,900

Total

              $ 4,487,500 

In FY08, we will no longer receive $1 million in National Forest Timber Receipt funds of which $850,000 was available to help fund general operations (the remainder was required to be spent on projects specifically benefiting federal lands).  The National Forest Timber Receipts was a six-year program ending in FY07.  This program may be reauthorized by Congress; however it faces an uncertain fate because it is attached to an emergency spending bill for the wars in Iraq and Afghanistan which the President has said that he will veto.

 

Increments

There were no increment requests submitted by the departments that were approved.  Transit did request the use of grant funds to upgrade and increase a half time position to full time.  The position cleans and maintains all of the transit bus shelters throughout the Borough.  The position will continue to be funded with grant funds.

 

Summary

Last fall, as a result of an unanticipated increase in our employer’s FY08 PERS contribution rate (a jump from 21% to 42%), we estimated that we could be facing a general operating funding shortfall of nearly $3.4 million.  In response, I requested that the Assembly agree to temporarily commit the balance of the budget reserve and a portion of the general CIP sales tax to address this projected shortfall until it was determined whether or not the legislature would take action to provide relief to local communities regarding their required PERS contribution.  The amount we will need to withdraw from the sale tax budget reserve has been reduced substantially.  This reduction is primarily due to a greater than projected increase in sales tax revenues, and the carryover of unanticipated one-time fund balances from FY06 and FY07.  It appears that we now only have to withdraw from the sales tax budget reserve an additional $640,000 in order to meet the requirement of submitting a balanced budget.  As promised, I remain committed to making the necessary cuts to general government operations and programs if the legislature does not address the PERS liability problem.  If we receive any additional revenue beyond what is required to balance the budget, I will be recommending that we set it aside in the sales tax budget reserve or emergency budget reserve ‘savings accounts’ for the future.

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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