Fiscal woes nothing new

Posted: Sunday, May 12, 2002

Running a budget in the red is nothing new for the city of Kenai.

The city operated with budget deficits in six of the last seven years. Some of those deficits exceeded $1 million, largely due to money spent on significant capital projects, said Larry Semmens, finance director for the city of Kenai.

The proposed 2002-2003 budget facing the Kenai City Council has an estimated $336,500 deficit, which seems relatively innocuous compared to past deficit amounts -- but there is a difference.

In the past, incoming revenues have helped offset those deficits. This year, a drop in interest rates means the city won't be getting as much money in interest revenues as it has in the past. Interest revenues are down $500,000 this year.

According to Semmens, the city has also been spending some of that revenue, on projects like putting ice in the multipurpose facility, so it is left with less money to invest, which results in less money in returns. So even without the drop in rates, interest revenues would still be down, Semmens said.

When talking about the budget, it is important to keep in mind that the budget and deficit numbers are just estimates, not set-in-stone facts, Semmens said.

"I don't know the accuracy of even one number (in the proposed budget)," Semmens said. "They're all estimates. I hope they're really close, but they are estimates, and all budgets are."

The administration has no way of knowing exactly how the budget is going to come out at the end of the year. Unexpected costs arise, revenues may not match expectations, and other factors can skew even the best estimates.

Last year, for instance, the Kenai council authorized spending $1 million more than the year's budget called for on unexpected purchases, projects and other expenditures, said Linda Snow, Kenai's city manager.

One of the options facing the council at the moment is to adopt the proposed budget and give the administration the directive to reduce the deficit as much as it can by tracking revenues, monitoring spending and possibly increasing user fees on city services throughout the year.

Snow said the administration would be comfortable with that task, although it would not be comfortable with the council expecting the administration to cut the deficit by a specific dollar amount by the end of the year because there are too many unknown factors in the budget.

"When you say 'we want the budget to be half of $330,000, there's more than one component of that," Semmens said. "Expenditures is only one side of the equation, revenue is the other, (and) we can't control revenue. If there's going to be a control put on the budget, it's typically done with expenditures. So to say you have to come in with a deficit of no more than $175,000, well, that's a lot harder because you don't know some of the revenue numbers until after the year ends."

Another difficulty in reducing the estimated deficit is that the proposed budget has already been reduced. The administration prepared a budget that was seriously cut to begin with, Snow said. And in the last four budget work sessions, the council decided on an additional $6,000 in cuts.

According to Semmens, the proposed 2002-2003 budget was expected to increase by 3 percent over last year's budget, but actually only increased one-tenth of a percent.

"Inflation alone would tell you you need a couple percent increase anyway," Semmens said. "So the budget is very tight. Everybody's absolutely convinced that there's something in the budget that can be cut. But the fact is that if you want to cut the budget, you're going to have to change the way you do business, which means you will impact services."

Subscribe to Peninsula Clarion

Trending this week:


© 2018. All Rights Reserved. | Contact Us