(SitNews) Ketchikan, Alaska - The proposed 2013 City of Ketchikan General Government Operating and Capital Budget has been submitted to the City Mayor and City Council Members and the budget meeting process began this evening. The Ketchikan City Council must adopt a final spending plan or budget no later than the third day before the beginning of the next fiscal year, which is December 29, 2012. At least one public hearing on the proposed budget is required prior to adoption of the final spending plan.

The programs and services contained within the proposed budget for 2013 were developed by various City of Ketchikan departments and were reviewed and modified as necessary by Ketchikan City Manager Karl Amylon and the Finance Director Robert Newell, Jr. According to the proposed budget's transmittal letter, direction from the City Council, the various City Advisory Boards and the general public were considered prior to finalization of the proposed spending plan.

In order to address an expected deficit, City of Ketchikan management made the following recommendations to the Ketchikan City Council and have incorporated these recommendations into the proposed 2013 Budget:

• Raise the mill levy from 6.2 to 7.2. This will increase property tax revenues by $816,600 and the payment in lieu of taxes from the City’s enterprise funds by $177,000.
• Transfer $486,947 from the Fire Station Bond Construction Fund to fund the debt service on the fire station bonds. The amount that can be transferred is limited under the bond covenants to the amount required for annual debt service. There is approximately $1,014,000 available in the bond construction for debt service.

The City of Ketchikan currently receives $6.20 per $1,000 of assessed valuation from property owners located within Ketchikan city limits. Management is recommending that the City raise the amount it collects to $7.20 per $1,000 of assessed valuation. The effect of this action would be a property tax increase of $200 on a home assessed at $200,000 and would raise approximately $817,000. This additional property tax revenue would be dedicated to provide for a portion of the $846,491 required for the annual debt service on the general obligation bonds issued to finance the construction of the Ketchikan’s new fire station and library facilities and replace the loss of raw fish tax revenue.

Certain assumptions were made in submitting a comprehensive and complete budget for 2013. The key assumptions used by staff in developing the City of Ketchikan's 2013 Budget are :

• No reductions to existing services or the current level of the work force have been proposed.
• No cost of living adjustments were programmed in 2013. All increases in personnel costs were due to step increases.
• A 10 percent increase in health insurance premiums has been programmed, effective July 1, 2013.
• Water and wastewater rates will be increased 5% and 10%, respectively, effective March 1, 2013. The rate increases are in line with the increases that will be recommended in the soon to be released cost of service study.
• An increase in the property tax mill rate from 6.2 to 7.2 has been programmed and is being driven by the need to fund an estimated $846,491 of annual debt service for the fire station and library general obligation bonds, replace the raw fish tax that has been designated for harbor improvements, and the rising cost of personnel. The increase will raise about $816,600 in additional property tax revenues and is necessary in order to maintain the reserves of the General Fund.
• Assessed property values were projected to increase 1 percent above the 2013 assessment roll.
• Funds in the amount of $486,947 will be transferred from the fire station bond construction account to the General Obligation Bond Debt Service Fund. This transfer will fund a portion of the annual debt service on the bonds issued to finance the construction of the City’s new fire station.
• Sales tax revenues have been projected to increase 2 percent above 2012’s estimated sales tax revenues. If this projection is realized, it will fall short by about $23,000 of the City’s best year on record for sales tax revenues.
• The Port Enterprise Fund will receive $2.1 million in CPV funds from the State of Alaska. This assumes an estimated 840,000 passengers at $2.50 per passenger.

In preparing the proposed 2013 Budget, city staff also identified issues for the City Council's consideration that may have the potential to impact the long-term finances of the City of Ketchikan, its operations and/or the proposed 2013 Budget. The issues are:

Harbor Rates.

On June 26, 2012, the voters of Ketchikan authorized the issuance of up to $5 million of general obligation bonds for the capital improvements planned for the City harbors. In addition, $1,250,000 will be loaned from the Economic Development and Parking Fund in 2013 to finance the proposed drive down float. Although many of these projects will be grant funded, the City will be required to put up matching funds. The sale of the bonds will provide the matching funds. A plan needs to be in place to provide for the debt service on these bonds and the loan from the Economic Development and Parking Fund. Current harbor rates are not sufficient to provide for the repayment of this debt. An earlier analysis prepared by staff suggested that harbor rates will need to be raised by 7 percent for every $1 million of debt. It has also been suggested that the raw fish tax be dedicated towards the repayment of the loan from the Economic Development and Parking Fund.

Storm Water Management.

In 2010, a consultant was hired to inventory and assess the condition of the City storm water collection system and to review the various methods for managing and funding storm drainage systems. In 2011, another consultant was hired to prepare a revenue requirement and cost of service study in the event the City decides moves forward with a comprehensive storm water management program. The purpose of the study was to develop a revenue stream to pay for the program and recommended an initial startup fee of $10 per month per parcel increasing to $20.11 at the end of the six-year study period. Included in the Street Division’s 2013 – 2017 Capital Improvement Program is $7.17 million of improvements planned to address significant deficiencies in the City storm water collection system. The amount programmed for 2013 is $198,000 with funding to come from the Public Works Sales Tax Fund. Although it was possible to fund the first year of the proposed five year program from the Public Works Sales Tax Fund, the fund cannot absorb the entire program without compromising other critical maintenance projects such as asphalt overlays that have been traditionally funded by the Public Works Sales Tax Fund. Whether the City decides to establish a formal storm water utility or develop a new funding mechanism to address the immediate issues, it is essential that some action be taken before the City is forced to address catastrophic failures in the system that could result in significant property damage in the neighborhoods located in the high risk areas identified by the City’s consultant.

Wastewater Rates.

In 2010, the City began a program to gradually increase wastewater rates in order to finance capital improvements for the City’s wastewater utility. In 2010 and 2011, rates were increased by five percent. In 2011, a consultant was hired to prepare a revenue requirement and cost of service study for the wastewater utility and reaffirmed the City’s earlier decision to begin increasing its rates. The consultant’s study covered a 6-year period and was based on a capital improvement program prepared by staff and reviewed by the Council. The study recommended rate increases ranging from 6.5 percent to 12 percent beginning with a 12 percent increase in 2013. Staff is recommending a 10 percent increase.

Financial Impact of the Proposed City of Ketchikan 2013 Budget

Compared to what is occurring in municipalities across the nation, the City of Ketchikan's finances continue to weather the economic storm that is impacting the country. Property values remain stable and sales tax collections are near record levels. The community managed to avoid the sub-prime mortgages that wreaked havoc on property values. Sales tax collections have been boosted by high fuel prices and an improving tourism industry. The proposed 2013 Budget was developed with the goal of continuing to keep the City financially solvent in a prudent manner without compromising the level of services it provides to its citizens and without passing on to its citizens “unnecessary” increases in taxes or fees for services.

The General Fund is the City’s most important fund. Nearly 70 percent of the City’s general government labor force is funded by the General Fund. Many of the City’s critical services such as public safety and public works are accounted for in the General Fund. Most financial analysts and bond rating agencies look to the financial health of the General Fund as the prime indicator of the overall financial health of a municipality. For these reasons, it is important that the General Fund remain in a strong financial position.

In last year’s budget transmittal letter ,it was stated the City’s General Fund was heading in a direction that would soon require some important decisions about the City’s future revenue and spending policies. The second draft of the proposed 2013 Budget had the reserves of General Fund down to approximately $1.5 million, which was below the minimum required balance of $3 million. Reasons provided for this decline can be attributed to the issuance of general obligation bonds for the library and the fire station; changes in revenue policies regarding the raw fish tax, borough library services, business personal property taxes, boat taxes; and cost of living adjustments.

Following tonight's meeting, budget meetings are scheduled for November 28th, December 3rd, December 10th and December 12th. All budget meetings start at 6:50 pm. in the City Council chambers. Time is allowed for public comment at the start of each budget meeting.

If you missed this evening's meeting, you can view it online.

Edited by Mary Kauffman, SitNews

On the Web:

Proposed 2013 Budget Documents

Proposed 2013 GG Budget & CIP(pdf)

Proposed 2013 KPU Bdgt & CIP (pdf)

KVB 2013 Funding Request (pdf)

 

Source of News: 

City of Ketchikan
www.city.ketchikan.ak.us

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