Mayor changes mind on tax hike

Posted: Wednesday, June 05, 2002

After months of railing for a mill rate increase in the 2002-03 fiscal year budget to balance the estimated $335,000 budget deficit, Kenai Mayor John Williams is now toning back his rally cry in the interest of reaching an agreement with the council.

"The problem we face is there's three plans out there and nobody can really seem to get their act together," Williams said. "(I want to) bring it to a conclusion, which is absolutely necessary. I'm trying to get everybody off the dime."

The council has been debating whether to pass a budget with a deficit and cover it with money from the general fund balance, raise the mill rate to cover the deficit, cut the budget and limit spending to reduce the deficit, or some combination of those options. The council meeting at 7 p.m. today is the council's deadline to set a mill rate and pass a budget.

In past meetings, Williams has been adamant about avoiding deficit spending. Raising the mill rate has been his preferred solution.

"I'm no longer willing to start a budget season out in the red," he said in the May 15 council meeting. Williams went on to say he would not accept a budget that was not totally balanced, and that it would take a mill rate increase to make a balanced budget.

In a letter Williams sent to council members, the city clerk and the city administration May 28, Williams reversed those sentiments. The council originally cut about $6,000 from the budget the administration prepared in its budget work sessions. In his letter, Williams stated he would accept an amendment to the budget that would undo those cuts and would be willing to operate for another year at a deficit without a mill rate increase.

"The amendment would say we return to square one, start exactly where we were at and go with the original budget the administration proposed and float for one more year," he said.

"I think the $6,000 in cuts is nothing more than show. A couple hundred here and there doesn't mean anything in an $8 million budget."

Williams said his change of heart was not due to comments he's received from people against raising taxes. The residents he's spoken to have not been against the option, he said. Instead, he's proposing this amendment in the interest of getting a budget passed.

Williams stressed his ideal plan would still be to raise the mill rate and have a balanced budget. He pointed out that Kenai will receive an estimated $300,000 in municipal revenue sharing from the state this year, compared to the $800,000 it received when it set the current mill rate of 3.5 mills in 1993. The city also is running about $500,000 less in earnings from savings than last year, he said.

Running a deficit budget again next fiscal year would further deplete the general fund balance, which is at an all-time low of just over $4 million. In his letter, Williams stated the city would be able to do this without seriously jeopardizing the city's finances, but it would mean the council may have to miss out on some projects.

The Kenai Visitors and Cultural Center, the Kenai Health Center and the juvenile detention facility are all examples of projects the council received matching funds for, Williams said. If a similar opportunity arises in the coming fiscal year, the city may have to pass on it due to constrained finances.

"If you're willing and able to take advantage when an opportunity presents itself, you can do very well," he said. "If an opportunity came along again, we'd have to think long and hard about it."

So even though running a budget with a deficit for another year is not his first choice, Williams is no longer adamantly opposed to it.

"It rubs me the wrong way to continue the deficit spending, (but) the city isn't broke, we can go for another year. It's pretty much the easiest way to do it."

If the council does pass the deficit budget, Williams said he hopes it is with the full realization that it will only be delaying the inevitable. Issues like the mill rate and the salary and benefits of city employees will have to be addressed again next year, he said. Williams also said he may yet decide not to vote for a deficit budget.

"Come and find out what the conclusion to this mystery will be," he said.

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