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HomeMy WebLinkAbout08 City Update From City Manager David Timmons The Administration has been briefing Council for some time on the status of the City’s finances. We have heard much discussion centered upon an examination of the drivers contributing to the City’s financial situation. As the Mayor aptly states in her column, the real issue facing the City is regaining local control over the long-term financial decisions facing the community. In 1999, an effort began to evaluate the City’s programs and finances. This effort helped us identify the critical issues that the community needed to address. We began this process by evaluating services on a program basis. You may have heard this referred to as “Programmatic Budgeting.” This financial tool helps to evaluate a city service by examining a pro- gram’s level of service, cost of the program and the revenue basis to support it. Very early on in this process it became clear what is happening. The Mayor has highlighted many of the challenges and issues which are slowly eroding the ability to adequately fund continued mainte- nance of City assets. What are the City’s assets? Build- ings, parks, streets, water and sewer systems, storm water system, and equipment are the City’s basic assets. During this lengthy evaluation process, the City struck a compromise by maintaining some services while deferring investment in maintenance and up- keep of City assets. This is not unique and many communities around the nation find themselves facing similar situations brought on by the deferral of maintenance. The communities that have suc- cessfully addressed these challenges are those that have made a local commitment to invest in their community’s future. City of Port Townsend (360) 379-5047 (email: citycouncil@ci.port-townsend.wa.us) www.ci.port-townsend.wa.us August 2004 Council News From Mayor Catharine Robinson This is the time when the City begins to plan the budget for next year. Each year brings new and old challenges to the forefront. We have heard much about the finances of local govern- ments and in particular about the issues and challenges we face locally. Also, we have been following closely the state-wide initiatives that affect us whether or not we, as a community, endorse them. I-695 repealed the Excise Tax on motor vehicles. It passed on a state-wide basis, but did not pass locally. I-747 restricted the Council’s ability to adjust local property tax burden from a maximum of 6% to a maximum of 1% annually. Again this initiative passed state-wide, but did not pass locally. This year we braced ourselves for yet another initiative, I-864, which would have reduced city-wide property taxes by 25%. It did not gain the necessary support to place it on the ballot; how- ever, the initiative author did say he would be back next year. Other challenges that we face are unfunded mandates handed down to us by federal and state legislation. Over time this has taken a toll on city services that once again has been directed by actions beyond our local control. A third issue has been referred to as the “trickle down” effect of these previous issues on our governmental and not-for-profit partners. As they face their own challenges, the City in turn is faced with the rising costs of these partnerships and a need for increased participation by the City. If we are to maintain the quality of life that is so special to Port Townsend, we are going to have to begin to address these issues locally. I have asked the City Administration to focus this entire newsletter on a discussion of the issues we face and the state of the City’s finances. We as a City must face these issues as a commu- nity in partnership with our friends and neighbors. Truly this ability to work together is the most spe- cial aspect of our community. Defining the City’s Financial Status: There have been any number of opinions expressed about the state of the City’s finances. Bottom line, the City has been evalu- ated by many outside agencies that have granted accolades for our efforts. The City is doing well, but cannot sustain the current level of services it offers. In fact, in streets alone, the City is losing ground. Municipal finance is a very complicated subject. It is governed by law and operates on a program basis referred to as “Fund” accounting. Fund accounting is similar to a household maintaining separate checking accounts. Funds are segre- gated according to their designated use and yet the combination of the segregated funds work together to support the household. An example would be the Water and Sewer Fund. It supports the operations and maintenance of this essential service. It also operates independent of the property taxes paid by residents. It is a user supported community service. Another example would be the EMS tax levy for emergency ambu- lance service. This is a restricted tax that can only be used for the EMS program. Twice in the past five years, the City has received a financial rating by a national rating service. This rating would compare to an individual’s credit score. Each time the City was granted an “A” rating which is an excellent score for a small community. The State Auditor’s Office has also recognized the City’s financial controls as an excellent example of fiscal responsibility. Basis of Comparison: When comparing the City’s finances, care must be used to find a true comparable. In many Washington communities, Library, Fire, and Parks are provided by separate taxing districts. In addition, lower property tax burdens may reflect the existence of special districts or a high retail sales tax. The same is true with utility rates. The level of capital investment can easily skew a comparison. In comparison to other cities, Port Townsend’s utility rates are average and property taxes which support City services are very low. Another point to be considered is that although the property tax paid to the City has remained relatively unchanged for the past five years ($1,500,000), the City has absorbed an increase in mandated services of $500,000 over the same period. Issues, Challenges and Solutions: The increasing challenges identified by the Mayor have taken a toll on the City and will compromise the City’s quality of life if they are not addressed. Over the past ten years the City has had to address a loss of revenue, in- creased demand for services, and unfunded mandates. The General Fund alone has needed to absorb over $1,000,000 in unfunded services in the last ten years. As a result the City has had to make many compromises and difficult choices. Through careful scrutiny of the City’s finances, the Council has been able to identify long term deferred maintenance of critical city assets as the key element the community must address. This problem exists despite many efforts that have been made to address this issue in the past several years. Some elements of the maintenance program are being successfully addressed through grants and program financing. Money from the Water and Sewer Fund has been actively in- vested in much needed improvements. “F” Street, City Hall and the Fire Station are all projects funded through grants and special financing. Grant monies received so far total more than $5,500,000 and further funding is anticipated. The City is currently planning to address the needs of Parks, Library and Police. The Street Fund has been consistently identi- fied as the program that lacks a dedicated source of revenue. This fund maintains the street network as well as sidewalks and trails that link our community . The City has had some success with special projects funded by one-time grants; however, the network is in need of serious maintenance. This mainte- nance will be essential over the long term. The challenge to adequately fund a street maintenance program cannot be met with current revenue without seriously compromising other services. Where will the funds come from if not from current revenue to the City? If current revenues are used, what services will be impacted by this reallocation? In the next few months, these questions will be addressed by the City Council and Administration. It is anticipated that a ballot measure may be presented to the community in November which will allow the City to fund our investment in vital infrastructure as well as continue the other services which are necessary to maintain the quality of life in Port Townsend.