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Viewpoints: Letters / Opinions

Taxing Citizens Out of Ketchikan

By Rodney Dial


August 09, 2016
Tuesday AM

If you have been reading my SitNews letters over the years, you can remember how I correctly reported:

  1. That if borough and city governments consolidated it would cost us millions. Proven true less than two weeks after voters defeated the last consolidation attempt (2006). Consolidation would have cost us over 2.2 Million dollars every year since (now over 20 million saved because we did not consolidate).
  2. That approval of the library and fire station bonds would result in tax hikes. Proven true when the City manager used them as justification for three tax increases (two property, and one sales tax increase).
  3. That the last tax increase (2014) was, in part, to provide for the continued expansion of local government; that would allow the City to renovate the towns 2nd Museum (we have two), without a vote of the people.

If you have been watching what is going on lately in City Government, #3 is taking place now. The City Council has been siphoning money from various accounts to renovate the museum without your approval. They could have asked voters for an advisory vote, or to approve bonds. However, because they know you would never vote to approve it; they won’t ask and will simply deplete reserves and then claim a tax increase is necessary.

I have testified before the city council in the past regarding this topic and have suggested that the museum be moved to the old fire station and operated seasonally. The Centennial building (current location of the museum) could be sold, generating the cash to renovate the old station into a museum and easily save hundreds of thousands per year. Considering that virtually no one visits the museum in the winter, this seems like a common sense idea.

Anyway, at the City Council meeting on 8/4 the council voted to spend nearly two million on the current phase of the museum renovation project. What I found ironic was that renovation of the museum bathrooms, budgeted at nearly ½ million (yes that’s a lot) will be paid, in part, by Cruise Ship Taxes from the borough, that would not have been available if we voted to consolidate.

To avoid a public vote the Council is pulling the remaining funds for this project from the public works sales tax fund. This is the fund that we desperately need and rely on to repair critical infrastructure, such as bridges, roads, etc. The City’s own analysis of this fund is that it will be depleted by 2019. This analysis was done BEFORE they decided to raid it for the museum, so it will likely have no reserves far earlier.

Just as I have been correct on consolidation and the past tax increases, I can assure you the following will happen in the coming years.

  1. Renovation of the museum WILL cost more than the two million they just budgeted. This is an old building, with many problems. Watch and count all the cost overruns.
  2. They will deplete the public works sales tax fund and something major will break or need emergency repairs, happens almost every year (read below to see why). When this happens they will tell you another tax increase is necessary. However, they will shuffle the funds around enough to make it appear that something other than the millions they are spending on the museum is to blame. My guess is they will blame it on reduced state spending or a state recession… all things they are uniquely aware are potential dangers NOW.

The following is my testimony to the City Council on 8/4, asking them to reconsider this project in light of our current economic condition. You can make up your own mind as to if this community should be spending millions on this project, weeks before the largest tax increase in Alaska History (PFD reductions). Quite simply, I believe we are taxing our citizens out of this town and possibly setting up our community for major problems. Eventually this out of control spending with threaten the senior citizen sales tax exemption that so many rely on (already occurring in Juneau).

All the information below was pulled from City documents available on line.

_____________ Testimony

I am here to speak against the Councils attempt to spend millions on renovation of the museum.

I would like to read a few comments from the City’s 2016 general government budget narrative.
About a year ago, the City council held a budget work session and emphasized that the local economy is still recovering and remains fragile. The council stated that it desired to maintain the current level of services and limit reductions in the city’s workforce.

Most of the Council indicated that replacing aging infrastructure is a high priority but recognized that the city may need to scale back plans for future projects. The expectation is that the funds for capital grants will continue to decline as both the federal and state governments deal with budgetary constraints.

Council members acknowledged that the cost of providing municipal services is rising and that the city needs to begin addressing a plan to increase rates in order to remain solvent.

Finally, that the city should recognize that the dramatic drop in oil prices will directly affect the finances of the city in the form of reduced funds and a reduction in the states work force in Ketchikan and that the budget should take into account the expected fallout from the state’s current fiscal crisis.

Those are your (official City documents) words…

So what has happened since that City Council work session.

City Manager Amylon has increased hours and expenses at the library and hired additional employees at the museum. As was reported in the Ketchikan Daily News, sales tax revenue is down, several local businesses have closed and Loss of at least $1000 of each citizens PFD will pull millions more from our local economy.

We also have Wastewater rates that have increased 35% since 2012, with planned 7% increases annually for the next five years.

We had three consecutive harbor rate increases of 7% approved, and according to city documents two more are required. The city’s Solid waste disposal rates are programmed to increase by 20-25% and collection rates are projected to increase by 10%.

We also have new expenditures in 2016. Now the general fund will be solely responsible for paying the annual debt service on the 2010 Fire Station bonds that adds about another $300k to the cities yearly budget. Debt service is up, salary and wages up nearly $200 thousand, Operating costs up over $671 thousand and the hospital sales tax fund for 2016 has a deficit of $195,300.

Other funds have deficits as well… the small boat harbor fund has a deficit of $468,760, the solid waste services fund has a deficit of $261,292 and the wastewater fund has a deficit of $682,333.

With Amylon’s recent expansion of library hours and new hires for the Museum, nearly 12% of all City employees now work at just these two facilities. Debt service for the hospital bonds consumes 88% of the hospital sales tax receipts leaving little room to address any potential shortfalls, and that additional funds may be required to fund future maintenance costs. (That warning is from city documents).

And At the same time the State revenue sharing program to the city has been reduced by 13%

So now you want to use the public works sales tax funds to renovate the museum, however your own documents show that the city has numerous public work concerns, including storm water management issues.

In 2010, the City Council hired a consultant to address… and this is verbatim from city documents…. “Significant deficiencies noted by the city’s consultant during its assessment of the city’s storm water collection system… Including many components that are on the verge of a catastrophic failure”.

And here is what I consider the smoking gun regarding this…. from City budget reports…. Over the next five years the public works sales tax fund is projected to receive $21.5 million, but over the same period the city will require $22 million from this fund just to maintain the street department and other city departments.

But it gets worse… because in addition, the public works sales tax fund will be required to contribute $10 million to the general fund to pay for operating costs of other divisions in government. According to city documents this results in a potential commitment of $32 million from the public works sales tax fund that will totally deplete the reserves by the end of 2019.

But this is the same fund you want to pull two million from to renovate the museum. The numbers don’t add up, and you don’t have the money to do this without raising taxes at some point in the future… you know it.

You know the public would never approve this project and that is why you won’t seek a public vote to issue bonds. Instead, you will totally disenfranchise the citizens of this community… do the project anyway… and then down the road when we need the public works funds to repair critical infrastructure, you will demand a tax increase.

Here is what I want to know…. Have you solved the water issues that by some estimates could cost the community tens of millions….how about our bridges, roads and other public work projects? There all completely fine to the point that you can spend millions renovating a museum?

So you do this and we have your promise that when a bridge, road or some other public project needs replacing we won’t hear Karl (City Manager) tell us we need to raise taxes again, like he did when the Water Street bridges needed to be replaced.
The city is over $91 million in debt (does not include Borough debt), at an annual cost of $6.5 million and rising, almost $13 thousand per citizen and with interest included the debt per citizen rises to over $20,000 dollars….this is without the museum renovation.

In January of 2013, I wrote an article informing the citizens that this is exactly what you would do… renovate the museum without voter approval. And how just four days after the last tax increase, that we were told was necessary to prevent drastic cuts to city services, Amylon (City Manager) wrote a memo to the City Council providing input as to how the council could renovate the Museum at Centennial Building WITHOUT going through a voter approved bond.

In his memo he said that although reconstruction or renovation would require a significant expenditure of funds, renovation could be phased in over the next five to seven years and be paid through the city’s annual operating budget. Amylon advised that the cost estimates ranged from $6.8 to $9.5 Million (source March 6th Ketchikan Daily News' article).

According to the newspaper today your plan is to spend about two million on this phase, however we all know the contractor will likely find many things wrong with this old building…dramatically increasing the price.

A responsible city government would maintain one, seasonal museum that the citizens could afford. If you vote to do this, fully aware of all the economic issues that could easily push this community into recession, you are negligent, and are directly going against public will. the public would not push our community further in debt for this project at this time. You need to learn how to say no to special interests and yes to the will of the people you serve.

Please do what is right for the citizens… we cannot afford this project at this time.

Thank you

That was my testimony to the Council. Because I live on the North End, all I can do is show up and make my voice heard; I am unable to run for City Council. I am running for Borough Assembly and would appreciate your vote this October. If elected I assure you I will do my best to represent you, not special interests.

Rodney Dial
Ketchikan, Alaska

Received August 04, 2016 - Published August 09, 2016


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