September 17, 2009
Thursday

As you decide how you will vote on the proposed Pool bonds on October 6th, you may want to consider the following concerning the health of the City and Borough finances:

Most of the following is from the City's annual report and the FY 2010 Community Legislative funding request (FY2010 CLFR) prepared by the City and Borough.

• Borough budget up 1.3 million this year.
• City operating budget projected to increase by $2.9 million from 2008 to 2009.
• Borough plus City budget increases equal approximately $320.00 additional (on top of existing) tax burden per capita in Ketchikan (just one year).
• Per the FY2010 CLFR the Borough reports the following: "To meet the fiscal demands of local government, citizens of the KGB bear the following impacts$63,859,401.00 (fiscal year spending) which is equivalent to $11,826.00 per household".
• Charges for services, e.g. ambulance, parking solid waste fees, etc projected to increase by $482,100.00
• Harbor fees will continue to increase as a result of harbor rates increases that took effect in April. The rate of increases range from 7.5% for reserved moorage to 38% for transient moorage.
• Approximately 6.6% of the City's budget / spending now goes to service debt. This years cost projected at $3.7 million.
• City property tax revenue increased last year due to a 10.2 % average rise in property assessments. Property assessments expected to increase again in 2010, surpassing inflation.
• Borough property values have increased over 30% since 2003, far exceeding inflation resulting in significantly higher property taxes.
• Borough property taxes rates up over 600% since an all time low in the 80's (if inflation is considered the increase is even greater). This increase even factors in the recent (small) cut in the mill rate. The mill rate decrease averages less than the last assessment increase for most families. Sales tax rates during the same time frame have more than doubled.
• The estimated cost of the community capital improvement plan (CIP) for the five year period ending 12/31/2013 is $98.3 million.
• Library budget up $110,000.00 since 2006. The amount the City paid for a design of a new library $1.57 million- now obsolete due to building location change. To put this into comparison, the City could have bought the entire mall for about double what they paid for a set of BLUEPRINTS. Increased operating cost if the proposed library is built.additional $150,000.00 per year.
• The proposed CIP for the harbor department between 2009-13 includes $15.2 million in improvements and upgrades. Absent assistance from the State the City will be required to fund $13.9 million by issuing bonds. Per the finance department harbor rates would have to double over the next five years to provide the debt service on those bonds.
• In order to balance the 2009 proposed budget for the Gateway Center the City increased the contribution from the hospital sales tax fund from $768k to $1.45 million.
• Water rates increased by 11.4% in 2009. Due to the current City budget crisis an additional double digit increase is currently under consideration.

Is the City and Borough being fiscally responsible?...you decide

• City "gave-away" $802,802.00 to non-profits this year, Borough hundreds of thousands as well. Many communities do not fund non-profits.
• Subsidizing bus service (all) now over a million per year. Free shuttle service for tourists.
• Borough budgeted $501,000.00 for a shuttle service from the airport to land side parking lot.almost no one is riding it. Even after grants and fees, it will cost the taxpayers at least $200,000.00 per year.
• Borough now renting the Whitecliff building at an additional cost of $495,120.00 per year, with a $9.47 million purchase liability that they have no plan to pay for. If the Borough can not get the state to pay for the building, a tax increase will be needed. Could have rented downtown commercial property or mall space for a fraction of the cost. It certainly seems that this was more about saving a historical property and not about finding the most cost effective solution for borough offices.
• Borough spent $500,000.00 for bathrooms for tourists, they are calling it a performing arts center (no lie) Cruise ship tax monies (CST). If this is challenged by the industry the borough may be forced to pay back the funds. As I mentioned in a previous letter, I expect Mayor Kiffer to funnel local tax money each year to First City Players "to maintain" these bathrooms once they are built. Time will tell.
• City, $338,000.00 for the metal pole signs downtown. Interestingly enough, the borough recently transferred another $27k in CST funds to replace some of the signs on Creek St.
• City, $100k pedestrian way finding survey. Contract with an outside firm to tell the City the best way to herd the tourists.
• City spent $247,150.00 on two bronze statues and stain glass window art (it's in their report!)
• Borough spent between 100k-300,000 on a bronze statue of their own (I don't know the exact amount) CST funds. Glad we don't need that money for maintaining the docks.
• Borough spent $3,200.00 to $55,873.00 (depending on how you crunch the numbers) for a voter pamphlet regarding the pool -is it objective or propaganda?
• City budget proposal includes tens of thousands of dollars to renovate City break rooms.
• City $32 million Birth III, $100 million contract for Birth IV. City is currently unable to fund needed repairs to Birth I and II which is expected to cost $26-31 Million. As reported in the KDN on 9-17-09, corrosion was recently discovered on the 3 year old Birth III. Cost to repair is estimated at $45,068.00 for design and interim repairs, $184,316.00 for further design and inspection, and $615,000.00 for final repairs.
• City and Borough? spend tens of thousands of dollars yearly to "woo" Juneau legislators. Last year this included renting the entire restaurant in the Pioneer hotel (Juneau) providing free buffet and open no cost bar (free alcohol) to ANYONE in Juneau who walked through the door (hundreds attended). I attended some of these meetings and learned that the Pool was listed low on the community priority "wish-list". Why? Because your leaders want the State to fund projects the voters here are unlikely to support, and have you tax yourselves for more popular projects. For your information, they deemed a training center and a maintenance facility as more important than the pool. We might have been able to have the state fund the pool last legislative session had it been listed as the top community priority.
• And on and on, I'm sure there is more, but I am tired of looking and need to go to work to pay my taxes.

People like me have been testifying before the City and Borough assemblies for years now asking that they hold the line on spending and prepare for the effects of the economic downturn. Have they?....no, many are too influenced by the special interests they are involved in, or too close to the supporters of these projects. Here is what the latest data looks like:

Most of the following information is from a July 21st Ketchikan Daily News article, the rest is from other news articles and government reports.

• Sales tax revenue for the first quarter of the year down 8.4%
• $125,000.00 less sales tax revenue for the City so far, and if the trend continues $800,000.00 less sales tax revenue for the year.
• Gross sales down 5.84% (go to the realtor web sites on SitNews and see how many commercial properties are for sale; our local businesses are hurting)
• Cruise ship passengers down 3.26% and if the trend continues, 30k fewer passengers than 2008, resulting in $210,000.00 decline in passenger fees (this year).
• Five cruise lines have announced that they will cut the number of ships stopping in Ketchikan in 2010 which equals a loss of 113,000 passengers (still think it is a good idea to spend a lot of money?) That many passengers would cost the City $628,000.00 in lost sales tax revenue, $1.03 million in port fees, and $30,000.00 in water sales. Borough will lose millions as well. One bright note is that Disney Cruise lines may help stem the loss, however we will still be negative by at least 75k.
• School enrollment down 5% in one year, projected to continue to decline.
• Alaska Airlines announced (on 9/12/08) it is reducing capacity in Ketchikan 8% through 2009 and reducing its work force by 9-10%.
• Community population declining (fewer people left to pay the bills).
• Our young people unable to afford to live here and are leaving in record numbers due to the high cost of living.

What are your leaders doing to address these severe budget problems?

Several have suggested

• Another increase in water rates, on top of the 11.4% rate hike a few months ago (Williams / West).
• A new (additional) tax to fund detox services for inebriates.
• Consideration of a property tax increase recommended by City Manager Amylon, who wrote."With the City experiencing its first decline in sales tax revenues since 2002, this policy (of maintaining the property tax rate) may no longer be as effective. Amylon also recently suggested raising the sales tax rate by one half cent to fund bridge repair.
• City considering increasing the sales tax cap from 1k to 2k. Means if you buy a new car or another expensive item or service the sales tax goes from $60 to $120.
• Senior sales tax and property tax exemptions. The City and Borough constantly complain that the senior PROPERTY tax exemption is an unfunded mandate, and list the senior SALES TAX exemption on their books as a loss. Page 15, of FY2010 CLFR prepared by our governments says the following:

"The following additional duties and unfunded mandates imposed on the borough will add (several line-items) Mandatory property tax exemptions $635,000.00".

When times get tough the senior SALES TAX (not property tax exemption) exemption becomes a target for elimination or reduction. The City of Juneau brought this up a few years ago. So far our governments have not discussed this topic this year, but it is always in danger if /when spending becomes unsustainable.

Folks bad financial times are in our future. The City and Borough have mortgaged us to the hilt with projects such as the Whitecliff building and the 100 Million dollar contract for Birth IV. They enter into contracts for these projects, instead of bonding, because it is the ONLY WAY to avoid a public vote that they know would not go their way. We may need to consider a citizen initiative requiring voter approval for any government contract over a set amount. It would be nice if one of the more fiscally conservative leaders, (K.J. or Thompson?) would submit a proposal of this nature.

The City is currently burning through its reserves and finding it impossible to maintain what it has. The Borough increased its operating budget by $1.3 million in just one year and is still pushing through multi-million dollar projects such as the mega-pool.

The bond for the pool will be October 6th, but the full effects of the economic downturn will not be fully known until a few months later. For the pool to not increase taxes, or cause cuts to other areas of the budget really depends on several factors.

I strongly suspect that some of our leaders base the ability to fund this project on past sales tax projections. If tax revenue is down, and/or project costs increase then the additional funding needed has to come from somewhere and that usually means tax increases.

We should vote "No" on the Pool bonds for the following reasons:

• We already have a pool and with proper maintenance it will last for years. Even if we vote yes a new pool will not be built for two years. Some are trying to "hype" you into believing that the situation is dire and we must do something now. In reality this is how voters are manipulated into building these mega projects.
• If we renovate our existing pool, vs. building a new one, we will save at least $11.5 million. Ask yourself why you are not being given that option on the ballot. Valley park pool can be re-opened while Mike Smithers Pool is being renovated, meaning that we will ALWAYS have an open pool.
• The proposed mega-pool is significantly larger than our current one. As a result, operating expenses will increase. The new pool will cost approximately $30,000.00 or more per month just to heat (does not include the diesel surcharge).
• The bonds are for 30 years. The projected life of the new pool is approximately 25 yrs meaning that before the bonds are paid off, the pool will likely need significant renovation (another bond). Our current pool can be renovated to last just as long, with bonds half the length and half the expense.
• According to the borough IF (note big IF) they are able to get funding for the pool at a interest rate of 5.2% (considered unrealistically low by some), annual principal and interest payments will be $1,563,737.00 for 30 years. $23.5 million in bonds equals approximately $50 million or more when interest is included (depends on interest rate).
• Currently the Borough has $24,965,000.00 in debt, and the City an additional $10,030,828.00 (both are general obligation debt, does not include other debt such as Births I-III, future liabilities, etc). Current general obligation debt is $3257.00 per person (City residents, less for those outside the City). If the pool bonds are passed per capita debt will INCREASE by $1809.00.
• Incurring this much additional debt will make future borrowing for the City and Borough more expensive. Debt markets / lenders typically increase interest rates for communities with high debt loads. This will make future bonds for critical infrastructure such as schools higher. Keep in mind that the pool bonds being proposed are for 30 YEARS.
• The following is a quote from the Borough regarding the proposed pool bonds. "A general obligation (G.O.) bond is backed by the full faith and credit of the borough. If circumstances change, the borough is still required to pay the bonds. If for example, sales tax revenue drops significantly, the borough may have to raise property taxes or cut services (expenses to make up the shortfall." Folks, sales tax revenue is already dropping!
• A "no" vote will hopefully convince the Borough to list the pool as community priority one, and seek funding from the State. This could cut the project cost in half.

If we approve these bonds, this will MAX-OUT the recreation sales tax account, and possibly put it in the negative if sales tax revenue drops off as expected (see above). This gives us no ability to maintain the recreational assets we already have without raising taxes, transfers from the General Fund, or cutting other programs. For example, the borough reports in the FY2010 CLFR the following regarding the Recreational Center BUILT IN 1997.

"The furnishings have exhausted their wear and tear; the roof has holes in the metal roof panels that need to be repaired. Heavy precipitation and snowfall/ice could cause further damage if not repaired immediately."

A recent article in the KDN reports that the Recreational Center Roof replacement is now estimated to cost close to a million dollars.

Where is the money coming from to fix this, our parks, sports fields, or maintain the newly acquired Coast Guard Beach? The answer is YOU. If you remember, you were originally told that to build a new pool would require a one-half cent sales tax increase for 10 yearsthen it changed to no tax increase. Why?

1. Because it was likely that the Chamber of Commerce would oppose a sales tax increase as they did when the City proposed one for bridge repair.

2. Because our leaders knew the voters were unlikely to pass a sales tax increase, and

3. To manipulate the voter into thinking that we have sufficient resources to fund this project without raising taxes or affecting the budget. Keep in mind that Mayor Kiffer was on the Pool Committee, and that you are not being given the option on the ballot to renovate our existing pool.

This is a shell game folks.you can get a new pool with no DIRECT tax increase (hopefully) and pay new and increased taxes to maintain and repair our other community assets, or the other way around. Either way THERE WILL BE NEW TAXES AS A RESULT OF THE MEGA-POOL PROJECT.

Not quite upset yet?... Did you know that the new pool is slated to be built where the skateboard park is now? Have no fear, the Borough is proposing to build a new and bigger skate park when the pool is built and has projected an ADDITIONAL expense of $125,000.00 to pay for it (see page 81, FY2010 CLFR). This is not an expense we would incur if we renovate the pool.

In another letter I will discuss the other $200 plus million dollars of proposed projects including such things as larger museum, parking garage, bus maintenance facility, etc.

I will close by saying this:

In 2005 pool supporters in Juneau tried the same doom and gloom tactics to get the voters there to build them a similar sized mega pool in Mendenhall Valley. The voters rejected the proposal, sending them back to the drawing board. In just over a year, Juneau government found a way to reduce the project cost by nearly ten million dollars and the project was approved by the voters in 2007.

We need to look for additional (outside) funding and savings, and wait to see what our community financial situation will be at the end of this year.

Just because you are told that you can get a mega-pool without a tax increase, does not mean the mega-pool will not cause a tax increase. The existing recreational sales tax fund can completely renovate our existing pool AND provide funding to operate and maintain what we have. This is a far better choice for our community.

Please make a sound fiscal decision for this community, not an emotional one as Mayor Kiffer would have you do. Please vote "no" on October 6th, and talk to your neighbors about this important issue.

Rodney Dial
Ketchikan, AK

Received September 17, 2009 - Published September 17, 2009

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