When the Kenai Peninsula Borough Assembly meets Tuesday evening, it will be charged with approving $55.8 million in expenditures for the borough's fiscal year 2004 budget, which will take effect July 1.
"For the most part, these are status quo," said Borough Mayor Dale Bagley of line items listed on the proposed 2004 balance sheet.
They include appropriations in general fund money to operate the borough, pay for schools, cover debt and handle other borough functions. But this year's operating budget exceeds the 2003 amount by more than $2 million.
While additional debt and a greater load on the borough to maintain borough-owned facilities account for some of the increase, the majority of the additional cost is due to a projected $1.5-million spike in borough insurance rates, said borough finance director Jeff Sinz.
"There is a substantial increase in risk management," he said. "Property insurance and workers compensation were the two main areas of increase."
Sinz said the borough share of the Public Employee Retirement System will go up by 22 percent, and the borough cost for providing health benefits to employees will increase by 17 percent.
"In terms of providing those programs, the costs went up dramatically," he said. "The costs affects virtually all of government. If you've got people or facilities, the cost of insuring (them) goes up more than we would expect."
Bagley said he anticipates decreases in the future.
"I think it's just going to be a one-time blip," he said. "I think the increase in PERS and insurance rates will come down. If some of these things will soften ... we can definitely look at a mill decrease next year."
When voters elected last October to expand the central peninsula landfill outside of Soldotna and to build a new Seward Middle School with funds generated through bonding, more than $2 million was added to the 2004 budget to accommodate the associated debt. Payment for the first year of debt service on Phase 1 of the 15-year landfill repayment plan is $855,385.
The Seward Middle School bond, which will reflect a debt service amount of $1.2 million in the budget, was passed under the condition that the borough be eligible for 60 percent debt reimbursement from the state. This expense will be added to the more than $2.5 million in debt services the borough still carries for Homer High School.
In anticipation of this repayment from the state school debt reimbursement program, the budget also includes $740,000 in additional state revenue. Although the borough received the nod from the state Department of Education and Early Development, Sinz hinted that payment for the school this year still could be dicey, and even more tenuous in the future.
"We just got formal notification that we are eligible," he said. "Our understanding is that the state budget provides 90 percent funding for that school debt reimbursement program. But that remains to be seen, because the governor hasn't approved the budget.
"If that remains, we will get 63 percent in fiscal '04 on those bonds. In the future, reimbursement will depend on whether or not the state fully or partially funds that program."
The bond for the landfill was sold last week, Sinz said. He anticipates sale of the Seward Middle School bond in two to three months. The funds for both projects will be appropriated apart from the budget, although a resolution to apply the $7,040,000 for the landfill is on Tuesday's assembly agenda.
The money the borough gives to the school district includes more than $24 million in sales tax dollars and $6.4 million in in-kind services that is mostly for maintenance.
This is in addition to $350,000 to provide for noneducational facility maintenance. In 2003, the district carried the total cost, to the tune of more than $5 million to maintain facilities, grounds and equipment.
"Historically, the school district operating budget has paid for 100 percent of operational maintenance of borough property," Sinz said.
Beginning in fiscal year 2004, the borough will take on some of this expense from the district, based on an analysis of the square footage of space being maintained and used by the borough. The modification is designed to cover the cost of facilities primarily used by the borough like the borough building and the Kenai River Center.
"This isn't an earth-shattering change," Sinz said. "From a policy standpoint, it's a change in the way we fund things."
The budget allocates $150,000 to begin a project to replace borough and school district business applications, Sinz said. This will be computer software through which much of the internal payroll, purchasing, accounting and possibly human resources functions will be handled for both entities.
"The budget reflects an increased effort to work jointly with the school district to address certain needs like facility maintenance and basic automated systems," he said.
Bagley has included in the assembly meeting agenda an ordinance that proposes funding for the Kenai Peninsula Arctic Winter Games Host Society, the organization responsible for putting together the 2006 Arctic Winter Games. The three-year, $500,000 proposal calls for $200,000 to be added to this year's budget.
"Then $200,000 in next year's budget and $100,000 in the final year's budget," he said. "But I'm hoping we may not need the last $100,000."
The budget only impacts the mill rate for one service area, however, and this increase was not a result of the risk management increases, Sinz said. The Central Peninsula General Hospital service area mill rate will jump one-tenth of a mill from 0.4 to 0.5, to generate roughly $280,000 to support the hospital's Serenity House and Sexual Assault Response Team/Sexual Assault Nurse Examiners programs. The basic mill rate of 6.5 will remain unchanged.
About $235,000 of that money will fund the Serenity House, a substance abuse program that "does not anywhere near pay for itself," Sinz said. The remaining money will fund the SART-SANE program, which provides trained and qualified staff to respond to rape cases.
Sinz said the money generated would provide a stream of nonoperational tax dollars to ensure that these program are maintained at a high level of service.
"The notion is that these are programs that are important to the community," he said, "not necessarily to provide operational revenue to the hospital."
Assembly budget work sessions will be held Monday from 10 a.m. to 5 p.m. and Tuesday from 8:30 a.m. to 11 a.m., at the borough building in Soldotna and are open to the public. The assembly meeting begins at 7 p.m. Tuesday in the borough building.
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