Bracing for the storm to come


Posted: Friday, January 06, 2006

It’s time to break out the umbrellas in the Kenai Peninsula Borough, because we’re in for a rainy day.

Or a monsoon, more like it.

Judging from a report on the borough’s finances given by Mayor John Williams at Tuesday’s assembly meeting, the forecast for the next three years is looking quite damp, indeed.

Shortly after being elected, Williams put together a transition team to comb over borough government, checking its financial health and seeing what could be done to improve it. Their findings were not optimistic — or sugar-coated.

“The Kenai Peninsula Borough now finds itself on the brink of financial collapse,” is how Williams put it.

The findings also are not a complete surprise. Borough assembly members have warned for years that the borough was sliding onto a precarious footing. Williams’ report simply confirms the unpleasant scenario, and adds a note of urgency by predicting when the borough’s financial state will go from crunch to crash: 2009.

The downward spiral started four years ago. The borough was sitting pretty with a $28.4 million fund balance — the amount of money left over at the end of a fiscal year. Financial advisors at the time recommended maintaining a fund balance of $12 million to $22 million. That presented the assembly with the rare situation all politicians dream of — being able to lower taxes.

The property tax was whittled down from 8 mills to 6.5 mills. The lack of that revenue was covered by draining money from the general fund, which many at the time considered to be unnecessarily bloated.

According to Williams, borough property owners cumulatively saved $40 million because of the cut —which is great for residents. Who doesn’t like to save money?

The problem is the property tax cut hasn’t been the only siphon on the borough’s bank account. The last four years have seen the effects of elements that have become the bane of governments across the state: the end of the state’s revenue sharing program, drastically increased costs to fund insurance and the Public Employee’s Retirement System, and higher heating costs.

Add to that a borough-specific financial blow — a proposition that passed in October that nixed a 1 percent sales tax increase. Williams said the loss of revenue from not having that sales tax increase could total $26 million by 2009.

By then, all those factors will contribute to putting the borough an estimated $9 million in the hole.

Obviously, something needs to be done. The question is, what?

Those who favor smaller government and lower taxes will surely raise their rally cry of “cut government.” “Streamline,” they’ll say; “be more efficient.”

That’s easier said then done. Yes, governments as large as the Kenai Peninsula Borough inherently tend toward some unnecessary spending and inefficiencies. The borough is essentially a $500 million corporation. Of course some budget-tightening can be done.

And it has been done. Since taking office Williams’ administration already has cut more than $910,000 from the current budget, in areas like staff levels, car allowances and landscaping.

The problem with these types of cuts is they don’t amount to much — a few thousand here, a hundred thousand there. Any more than that and you significantly impact borough services, like road maintenance and school funding.

The borough’s financial problems are beyond the point where efficiency cuts will make much difference. There’s only two shovels that have the heft required to dig the borough out of this hole — cutting services or raising revenues.

So let’s hear it peninsula: Which umbrella would you rather use?

Is there a borough-provided service you can do without? And entire department you don’t think needs to exist?

Or would you rather pay more to support the services you currently enjoy? If so, then pick your poison — an increased sales tax or property tax, or perhaps something a little more creative — like a bed tax or doing away with current tax exemptions.

Now’s the time to speak up and get involved. For the good of the borough the assembly needs to get its finances in order soon, so there’s no time for denial or reminiscing about sunny days.

A storm is on the horizon. Let’s not be caught unprepared.

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