Daily Sitka Sentinel

City Reviews Budget Funds for Assembly

By SHANNON HAUGLAND
Sentinel Staff Writer

Some 19 funds in the City and Borough of Sitka cover city expenses large and small – from school bond debt and visitor marketing, to library books and cemetery maintenance.

“We have a lot of funds - we’re rather complex,” Finance Director Melissa Haley said Monday.

At the Assembly’s last special meeting on the fiscal year 2022 budget Thursday, Haley reviewed the status of “other governmental funds (trust, agency, special revenue).”

The Assembly weighed in on a few key decision points related to funding schools and Visit Sitka, as reported in Friday’s Sentinel, and reviewed the status of other funds.

City staff is preparing its draft budget for first reading at the May 11 Assembly meeting, with final reading set for May 25. Fiscal year 2022 starts July 1. If the Assembly takes no action, the budget stands as proposed by City Administrator John Leach.

Haley is expecting the general fund will finish the current fiscal year with a surplus of $1.5 million, much of which has been realized through cutting about $2 million in capital projects and other “belt-tightening” measures. 

City staff is proposing rolling over the $1.5 million in savings into fiscal year 2022 to make up for some of the shortfall in revenue from the loss of two cruise ship seasons.

In the enterprise funds, rate increases are scheduled for fiscal year 2022, for electric (2.5 percent), water fund (2 percent), wastewater (2 percent), solid waste (4.5 percent) and moorage (5 percent). The moorage increase would be presented as a resolution.

In other budget wrap-up comments from city staff, Sitka is expecting to receive an estimated $3 million in federal funding through the American Rescue Plan, for pandemic relief. Some of the money is expected to arrive in the current fiscal year with the rest arriving in fiscal year 2023, so it doesn’t affect the FY22 budget.

The rules on these funds are not yet known, and city staff members are receiving regular updates from the Alaska Municipal League, the Assembly was told.

Governmental Funds

Haley’s slides for most of the remaining funds covered a number of areas the city is responsible for. Haley estimated funds in the value of $30 million, including $23 million in the Sitka Permanent Fund.

Although Haley reviewed a large number of funds at Thursday’s meeting, a few additional smaller funds weren’t covered.

In discussing the fund balances, city finance staff used the figure from fiscal year 2020, the last full fiscal year for which information was available. The current fiscal year, 2021, ends June 30 of this year.

Various Funds

The city holds on to the money in the Cemetery Agency Fund for the nonprofit Sitka Cemetery Association. The city tracks interest earned, and disburses it to the association to maintain Sitka Memorial Park (located next to Sitka National Cemetery). The fund balance was at  $105,070, and is expected to generate $2,000 in fiscal year 2022 for the association.

The Rowe Trust Fund had about $227,720 at the end of the last fiscal year, and expected to generate about $4,500 in interest to be used to purchase children’s books and computer equipment to facilitate children’s enjoyment of reading. It was created from a bequest by former Sitka schoolteacher Eleanor Rowe.

“We have not actually been expending some of these appropriations,” Haley said. She noted the high turnover of library directors in recent years, and said plans are in the works to expend some of the funds next year.

The city Permanent Fund is used to provide an “ever-increasing income stream to the general fund in perpetuity to reduce the tax burden on the citizens of Sitka.” The fund had $22.9 million at the end of the last fiscal year.

“We have to appropriate 6 percent that gets transferred out of the Permanent Fund into the general fund,” Haley said. She noted that the revenue generated by the Permanent Fund is equivalent to about one mill of property tax. 

The net transfer to the general fund is $1.2 million, after some funds go back to the Permanent Fund for inflation-proofing.

The debt service fund for school bonds tracks debt service for general obligation bonds for school projects, state reimbursement of debt service, and revenue generated by the seasonal 1 percent sales tax.

The fund balance was at $1,876,192 at the end of FY20. The city has an estimated debt on the bonds of $11.1 million at the end of FY21 and $8.7 million at the end of FY22.

The state had committed, when the bonds were issued, to cover 70 percent of the bond payments. The rest is covered by the 1 percent seasonal sales tax.

“Unfortunately this fiscal year there was no school bond debt service reimbursement whatsoever,” Haley said. “It was completely eliminated from the state budget for the entire state. That should be about $1.6 million this year (and going down in future years).”

The city budget for FY22 calls for using the $1.25 million collected from the seasonal sales tax, and state reimbursement at $816,719 - about half of what the state committed to. 

“We’re in the process of re-funding (some of the bonds) ... and that could save us up to $500,000 over the next 10 years,” Haley added. Once the bonds are paid off, the seasonal sales tax sunsets.

Some of the special revenue funds are smaller. The Pet Adoption Fund (balance $75,000) uses interest to provide donations for pet adoption services, such as spaying and neutering; the Sitka asset forfeiture fund tracks funds when the city police department seizes and disposes of assets. 

A small balance is left in the Sitka library building fund, used to manage donations for the renovation project. Some $530,000 went to the project, and about $18,516 was left at the end of FY20.

The fund balance of the Southeast Alaska Economic Development Fund is $3.6 million, which has been used for loans and grants for economic development projects. The fund balance includes $2.6 million in cash, and $988,000 in loans outstanding. Interest earned ($50,000 in FY22) goes into the building maintenance fund.

The funds can be used for “internal loans” to the city aimed at increased efficiency, or “participation loans” to private entities, going through financial institutions. The original source of the funds was federal relief (“Stevens money”) after the closure of the pulp mill.

The contingency fund for what’s now the Gary Paxton Industrial Park was established after the closure of the pulp mill for environmental assessments and cleanup of the property for future uses. It was at $640,311 at the end of FY20, and some $270,000 will be spent in FY22 to assess two old APC landfills.

The Sitka Community Hospital dedicated fund was originally used to track the tax on tobacco products which subsidized hospital operations. Now it’s used to track revenue and expenditures related to the former hospital, including the Public Employees Retirement System expenses. 

“By the end of this year there should be very few receivables still coming in and a few pending liabilities beyond PERS,” Haley said, in reference to the Public Employees Retirement System. “We know PERS is going to be a very significant liability going into the future. It’s well over $1 million a year ($110,000 a month).” 

The PERS liability is related to retirement expenses for former SCH employees after SEARHC purchased the hospital business in fiscal year 2020. SEARHC pays over $700,000 a year under the purchase agreement, and the city continues to collect tobacco taxes to help cover the liabilities. The fund balance was $1 million in the red at the end of FY20 but was “going in the right direction,” Haley said.

Sitka Mayor Steven Eisenbeisz said he would like to be updated if the fund doesn’t recover, although Haley said today she believes the deficit will shrink and go into the black within the next five or six years. Tobacco tax brings in over $800,000 a year.

The Student Activities Travel Fund is from $10,700 in revenue collected from state marijuana licenses and permits. It is intended to go toward student travel.

The Fisheries Enhancement Fund consists of the “fish box tax” paid on boxes of fish caught by the charter industry. Some 30 percent goes to the city to administer the tax. The rest goes to harbors and fisheries enhancement programs.

The Utility Subsidization Fund tracks funds appropriated by the Assembly to help rate payers. The balance at the end of FY20 was $105,125, and some $72,000 will be appropriated in FY22.

The Commercial Passenger Vessel Excise tax fund tracks a portion of the per-passenger fees paid by cruise visitors. The city is restricted on the uses of the funds. Past uses include transportation of cruise ship passengers from the dock into town and dock security. Some $140,000 from the fund will be spent in FY22.

The Visitor Enhancement Fund manages the revenue collected from the city 6 percent bed tax. The pandemic resulted in a drop in visitors and bed tax revenues in 2020. Most of the funds collected goes to Visit Sitka to market Sitka, under a three-year contract. (The Assembly at the meeting approved the requested $158,600 for Visit Sitka, on top of the $300,000 under the contract.)

The Revolving Fund for LIDs had $1.2 million at the end of FY20, with some $18,300 transferred to the general fund for fiscal year ‘22.

The Guaranty Fund had $285,383 at the end of fiscal year ‘20, and is used to provide guarantee for debt service for bond issuances. Some $6,000 is expected to be transferred to the general fund in FY22.

The Sitka Public Library Fund is used to track donations for the library. It had $267,795 at the end of FY20, and $35,000 is expected to be transferred for a library shelving project in FY22.

“What we’re working on is being able to expand our collection,” library director Jessica Ieremia said today. She said the library is adding shelves, and has created a new “tween” section, for third through fifth grades, with games, seating and shelves near the circulation desk.

The Bulk Water fund is used to track revenue and expenses related to the sale of bulk water. The $856,483 in the account as of June 30, 2020, was collected under water sales agreements from private ventures, although only a nominal amount of bulk water exports have taken place. The FY22 budget includes a $30,000 appropriation for the GPIP enterprise fund.