Budget Work Faces Funding Unknowns

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Category: News

Created on Friday, 10 January 2025 15:37

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By SHANNON HAUGLAND
Sentinel Staff Writer
    The Assembly at a special meeting Thursday gave city staff initial direction toward creating the general fund budget for fiscal year 2026, which begins July 1.
    The meeting consisted mainly of the Assembly’s reviewing and asking questions about the list of “resource proposals” submitted by city staff and reviewed by the city administrator and finance staff to be included in the budget. Some proposals also came from nonprofit organizations.

A load of rock is dumped as workers on a barge connect pilings at the site of the boat haulout in the Gary Paxton Industrial Park today. The $9.2 million haulout is one of several multi-million dollar projects scheduled for completion in 2025; the $45 million airport expansion and the $300 million SEARHC Hospital are also scheduled to open this year. (Sentinel Photo by James Poulson)

    It was the first in several special meetings leading up to approval of the budgets for FY2026 by the June 20 deadline.
    The next meeting is 6 p.m. Jan. 16 to review the local funding level for the Sitka School District, which is the largest single outlay in the general fund. Other special meetings are January 30 for enterprise funds (water, harbors, wastewater and garbage, etc.); internal services; and special revenue funds.
   “This is kind of the first meeting where we seek Assembly guidance,” City Administrator John Leach said. “The hope for tonight is to have a healthy discussion on, if we need to change any direction, or if there’s specific projects you’d like us to focus on.”
    Information packets available at the meeting included an outlook for the year, but most of the time was spent reviewing the list of projects or fund increases that were given a “high,” “medium,” and “low” priority by city staff. They will be included in the draft budget presented for Assembly consideration at a later time.
    Some items were marked “not recommended” by staff, and will not be included in the draft budget. Items were kept in the general fund budget unless the Assembly objected.
    The Assembly made no decisions to remove or add items, saying they needed time to consider the information presented. A few Assembly members wondered why they were being asked to consider some of the dozens of projects and purchases, which were essentially items needed to run city services.
    At the outset of the meeting, Finance Director Melissa Haley said the Resource Proposals were generally new items and new programs, not replacement items.
    One of the main points of discussion came at the end of the meeting, when Assembly members expressed concern about going forward with a budget while facing the possibility of losses in sales tax income if voters approve the cruise ship limits proposed in an initiative petition that’s being circulated in town.
    “I’ve just been wondering and pondering how we’re going to plan a budget when a decision made by the people of Sitka could have adverse effects on our budget,” Kevin Mosher said. “Are we going to plan for it if it passes, or plan for it to fail, or have the ability to do it both ways.”
    Haley said she prefers taking a conservative approach to the budget and will have a better idea of revenue once she has the October-December 2024 sales tax figures sometime in February.
    “We have reserves, we’ve been careful with reserves, but it’s not going to be the end of the world, short-term, if we end up with a budget that is essentially a deficit budget, but we can’t continue that,” she said. “It would be at some level irresponsible to be making decisions today for expenses that might continue or have future impacts.”
    The majority of Assembly members preferred to stay the course with an approach that didn’t add employees or take on major long-term commitments, and if needed revisit the budget if the cruise ship initiative passes, since it is assumed to have at least some impact on sales tax revenues at the end of FY26.
    She said today her direction going forward, from Assembly comments Thursday, is to present a conservative budget assuming the ballot initiative doesn’t pass, but also draft various scenarios showing the impact on the bottom line under each scenario.
    Mayor Steven Eisenbeisz said Thursday that in his review of the budget, he didn’t see items that marked a continued long-term obligation.
    Last year, when the city saw larger increases in sales tax revenue, the city took on some major additional obligations and expenses in the general fund, including funding school maintenance and taking over pool operations, in addition to funding schools at the maximum allowed by the state.
    Eisenbeisz said he shares the concern about revenue uncertainty.
    “At this point I think we need to continue forward with some reasonable expectations of what revenue would be and look at it that way, knowing if we do go forward and we have to make some changes rapidly, we can do that later down the road.” he said.
    The Assembly agreed that they could make needed changes to the budget at a later time. Leach said during COVID, the city and Assembly assumed revenues were going to decrease, and canceled all general fund projects for the year to maintain the level of basic services.
    “There will be some options but the best answer is, we’ll have to watch and see and adjust accordingly,” the administrator said.
    The Assembly was generally in agreement to stay the course at this time on the budget process.
    “Nothing has happened yet, so build your budget as if we are where we are today, and we will cross those bridges if and when we ever even get to them,” Assembly member Tim Pike said to city staff. “Who knows what the impacts of (the ballot measure) is going to be regardless? We don’t know what the revenue is going to be. So let’s just plan it as we usually do. We have good reserves and we can weather a brief period, we can make adjustments as we go. So I would encourage us to not plan for something that may or may not happen.”
    Most of the meeting was a review and explanation of a number of proposed public works projects, including deferred projects at the Blatchley pool, improving drainage on the Cross Trail, and fixing the HVAC system at the city state building, which requires a two-thirds contribution from the state.
    Some of the items called for adding funds into a project that’s a few years out, such as the Wachusetts Street storm drains, and paving of Katlian Street. City staff members were available to answer questions about the projects.
    The draft budget includes funding for adding money equal to two-tenths of the cost of one full time employee (FTE) to the library payroll for a library assistant, and increases in funding to two city-supported nonprofits, the SAFV Shelter, and Sitka Economic Development Association. Both were ranked “medium” priority by the administrator.
    There were no objections to keeping the increase to the SAFV Shelter in the budget at this time, with annual support going from $50,000 to $100,000. Leach proposed the increase. Nor were there objections to keeping the increase to SEDA, from $70,000 to $120,000, to make up for the loss from inflation over the years since the last increase.
    Assembly member Thor Christianson spoke in favor of the support increase for SAFV. “They make life easier in a lot of ways for the police department because if they have a domestic violence incident there’s some safe place for the family to go,” he said. “I think the argument can be made they save us a huge amount of money because there’s a lot of arrests that don’t happen because of them.”
    There was some discussion on a resource proposal to continue working on the commercial recreational land use plan, but Assembly members felt more resources were not necessarily needed since the plan was nearly complete.
    The meeting lasted more than two hours and included testimony from the public requesting new pavement on Price Street; using cruise ship head tax funds for pedestrian safety improvements in front of Centennial Hall; making city electric power available to ships docked at the cruise terminal; and a program to maintain roads heavily used by the cruise industry.
    Other resource proposals, with costs, goals and justifications for each of the proposals, is available under the “Assembly meetings” link for the January 9 meeting, at cityofsitka.com.