Assembly rethinking past decisions

Posted: Tuesday, February 08, 2005

Several years ago, the Kenai Peninsula Borough Assembly passed and the borough adopted a policy to cut its sizable fund balance, the day-to-day operating fund cache it had in the bank.

At the time, the account hovered around $25 million. Based on then-current economic conditions, auditors recommended the borough reduce the fund balance to somewhere between $12 million and $22 million. Such a move was considered safe and prudent.

Among the steps taken to achieve that goal was to cut the property tax rate.

Subsequent events, however, have changed the equation. Today the fund balance, projected to be at about $14.7 million come the end of the fiscal year in June, is not large enough to provide the kind of flexibility the borough would prefer to have during the current economic unease, said Finance Director Scott Holt.

While he said he wouldn't criticize the assembly for past policy decisions made with the best available information at the time, he did note that the administration had made an effort last year to address the apparent coming revenue shortfall.

"We did propose raising the sales tax cap rate (from the first $500 to the first $1,000 of purchase value)," he said. "The assembly chose not to do that."

The administration also discussed the potential of raising property taxes.

"You can defer those things for only so long," he said. "At some point, you have to start paying the piper."

Holt said he would have preferred a slower approach to lowering the fund balance.

Whatever the effects of past decisions, the assembly and the administration appear now to be heading in the same direction, examining all aspects of cost cutting and revenue building.

"They are making concerted efforts to arrive at some solution," Holt said.

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