City council deadlocked over Kenai budget deficit

Posted: Sunday, May 12, 2002

The Kenai City Council has yet to make unavoidable decisions about the budget and the city's mill rate.

The council met in a policy work session Tuesday night to address the budgetary woes the city faces in the coming fiscal year. In the three-and-a-half-hour meeting, a wide variety of issues were discussed, voices rose and tempers got short, but in the end, very little was actually decided.

If adopted, the proposed city budget for fiscal year 2002-2003, which begins July 1, would run at an estimated $336,500 deficit. (See related story, this page.) The council faces the choice of either accepting the proposed budget as is and dipping into the general fund reserve (which is at an all-time low of around $4 million) to cover the shortfalls, accepting the budget as is and increasing the city's revenues -- by increasing the mill rate, for example -- to cover the deficit, or by cutting the proposed budget to make it balance.

After five budget work sessions, the council has yet to reach a consensus on which option to take.

"I've never seen a budget process that has gone like this," said Kenai Mayor John Williams. "... Five meetings and we haven't gone anywhere at all."

At Tuesday's meeting, the council split on, among other issues, whether to continue deficit spending in the next fiscal year.

"It's quite obvious that the council is at a stalemate," Williams said. "On one hand, there are council members who would like to just give the budget back and say 'let's go for it for another year and see where we come out at.' And on the other hand, council members are saying 'we've been deficit spending for several years now and we've depleted reserves down to a level less that 50 percent of our budget, and it's time to call a halt to that.'"

The meeting ended with the suggestion to approve the proposed budget as it is and direct the administration to attempt to reduce the deficit as much as it can. The council was split 3-to-3 on this option.

Council member Duane Bannock said he was happy with the outcome of the meeting, although he was a little disappointed the council didn't give the administration any clear policy directives, he said.

Bannock advocated that the council make some cuts to the budget, but he said was not opposed to turning it over to the administration with a deficit and dipping into the general fund reserve this year.

"For me the budget itself is more important than the revenue coming in," he said. "Deficit spending is all right in some situations."

Council member Jim Bookey agreed with Bannock's position on making some cuts, generating money by increasing fees and covering the budget deficit with money from the general fund reserve.

"There's a lot of opportunities we've failed to look at to generate revenue," he said. "... I think a lot of these things can be mitigated by thinking outside the box."

Council member Linda Swarner was the third member in favor of adopting the budget as is and leaving it up to the administration to reduce the deficit where it can, although she was frustrated that the council didn't come to a consensus on the issues, she said.

"I was happy with that outcome because (the administration) knows the areas best that can be cut or the amounts decreased in which department, rather than me, personally, as a council person," she said.

Swarner said she is concerned about deficit spending and further depletion of the general fund reserve, however, and wanted to set specific dates for the administration to report on the budget to the council throughout the year, she said.

Council member Pat Porter did not support this option and is not in favor of having a budget with a deficit next year.

"I think it's my job as a council person, once we receive the budget from the administration, if we have issues with income or outflow, then it's our call to find where we can either increase revenue or cut spending," she said. "I don't think it's fair to give it back to the administration and hope they come in under budget, or why do we even look at it?"

Council member Amy Jackman did not support the option, either, and cited similar reasons as Porter for her discontent.

"I did not feel comfortable with just saying to the city's administration 'go ahead and just cut wherever you want to cut' and not be able to hold them accountable, because then I'm accountable," she said. "It's my job above all to make sure it gets done, that we meet our budget or come as close as we can."

Williams said he is strongly opposed to deficit spending. He would rather make cuts to the budget and increase the mill rate by 0.5 mill or adopt the budget as is and increase the mill rate by 1 mill next year to avoid running in the red and raiding the general fund balance, he said.

Swarner and Porter would also support a mill rate increase in the next fiscal year, they said. Bannock, Bookey and Jackman said they would not.

The mill rate was another of several issues the council split 3-to-3 on in the meeting, including giving cost-of-living increases to city employees and the snow berm removal program.

The numerous deadlocks were due to the absence of council member Joe Moore, who said he had a prior commitment but hopes to be at future meetings.

"There you see the (value) of a seven-member council," Williams said. "You never want to wind up with an even number."

Moore said he would lean toward raising the mill rate and would, at this point, be in favor of giving the budget back to the administration for further cuts, he said.

Without reaching a consensus in Tuesday's meeting, the council put off making decisions on the budget and the mill rate, although the meeting was an informal work session, so even if an agreement had been reached, no official action could have been taken.

According to Kenai City Manager Linda Snow, the introduction of the budget ordinance is scheduled for May 15, and the public hearing on the budget is planned for June 5. The deadline to adopt a budget is June 30, Snow said, although Williams has asked the city attorney to research what will happen if the council does not adopt a budget by that time.

The deadline to set the mill rate is June 5, Snow said. According to Williams, if it is not set by then the borough can decide to freeze the rate at its current level of 3.5 mills.

The council may not have been able to reach an agreement in the budgetary process so far, but at least it is addressing the issues that need to be discussed, Snow said.

"I'd like for the public to have confidence that their council is addressing these important policy issues," she said.

"It is never easy to talk about cutting services and/or raising taxes, and I think it's courageous to address it and get those issues out there. That's a tough call to have to make (and) the council is doing that tough work. This should make the next budget process a lot smoother next year."

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