Williams’ dilemma: Filling revenue cup

Posted: Friday, November 25, 2005


  Kenai Peninsula Borough Mayor John Williams Photo by M. Scott Moon

Kenai Peninsula Borough Mayor John Williams

Photo by M. Scott Moon

Editor’s note: This is the last of a three-part series in which the Clarion will present Kenai Peninsula Borough Mayor John Williams’ initial assessment of the state of the borough as he begins to put his administration together.

Measuring and then mastering the approaching fiscal crunch is going to involve some pain — perhaps a lot, says the new mayor of the Kenai Peninsula Borough.

As reported Thursday in the Clarion, the cutting of personnel and other expenses already has begun. In an interview last week, John Williams was straightforward. Spending cuts alone won’t be enough to avoid a future of red ink in the ledger.

The borough is going to have to raise revenues, too, and that could include new fees and taxes, Williams said.

The borough, however, faces a real dilemma regarding how it raises revenues. Borough voters recently passed Proposition 5, which capped the borough sales tax at 2 percent and required that any increase be approved by 60 percent of voters. The same group that led that charge, the Alliance of Concerned Taxpayers, is now pushing another initiative to cap borough property taxes.

That fact has the mayor scanning other horizons.

“We are looking for a variety of other revenue enhancement and spending cut ideas, all of which we are trying to package as one report that will come out in the final transition report due in 30 to 45 days,” he said. “Those will range over everything — equipment, services, leases, new fees, new methods of doing business.”

An example of a fee the administration is considering involves requiring service areas to start paying the borough for administering grants. The borough currently handles some $30 million worth of such grants, but does not charge the service areas.

“It is my intention to institute a service fee,” he said. “The common reason is this: The residents of Homer, say, are all taxpayers to the borough. The city could care less what the North Peninsula Fire Service Area grants are. So why should they be asked to bear some of the administrative costs? We feel there is a large issue here.”

Williams has asked the Finance Department to prepare a schedule of possible fees that might be applied to various grants. Some, he noted, include restrictions against such fees — as in the cases where administrative services are part of the local in-kind match. But other grants are eligible, and they soon might be tapped for service fees.

“It’s an absolute that those who receive the service should be paying for it,” Williams said. “Those that don’t should not be asked to pay.”

Williams was somewhat less ready to discuss the details of possible revenue enhancements than he was regarding personnel cuts and other spending reductions. But, he said, there is a good reason.

Rather than talk about revenue ideas piecemeal, something he fears might engender suspicion by one group or another that they are being uniquely or unfairly “targeted,” Williams said he would rather wait and present the assembly and the general public with a complete package of possible cuts and revenue sources that could turn borough finances around, probably sometime in early January.

“A lot of things will be unpopular,” he warned.

Williams did say the administration is investigating five separate revenue enhancement ideas, all of which he said are outside the boundaries of Proposition 5 and present constraints of the budget.

He explained the budget dilemma this way.

“The problem we face is how to maintain a credible fund balance,” he said, referring to funds available for day-to-day expenses and to meet emergencies. “Now, that’s about $12 million. Three years out, I would want to have no less than $12 million. The problem is there will be a curve to get there. I don’t want (the curve) to fall below the zero line. If it does, we have real problems.”

At the Nov. 15 assembly meeting — his first as mayor — Williams told members that unless something is done, the fund balance could be as low as $5 million below the zero line — that is, in the red — in three years.

“The whole trick is going to be how to address that budget to where I can come as close to the zero line as possible and get back up here (at $12 million) as quickly as possible without damaging myself. The closer you get to the zero line, the more you flirt with danger. Any little thing goes wrong, and it pushes you below and you’re in trouble.”

Williams said he has asked the Finance Department to manage the borough’s course along that curve using cuts and revenue enhancements, while causing as little pain as possible to taxpayers.

“Maybe somewhere in the middle a certain amount of tax will be required,” he said. “I can probably say this very truthfully, it is not a maybe, it is a fact. But we don’t know what the number will be yet.

“We have some parameters for it. It is a very basic principal to bring us back without a lot of trickery.”

Williams said his reluctance to discuss revenue enhancement in more detail is a temporary measure only. He has promised his administration will be “transparent.”

“That means the guy out in the street who wants to know what we are doing has the absolute right to know, and we’ll furnish the information,” he said. “As long as the statement itself is not going to damage the borough financially or in a court of law.”

The revenue picture is not entirely bleak. In recent days, Gov. Frank Murkowski has proposed the state pay the municipal premiums on employee retirement programs for another year. He’s also suggested setting up a community dividend program to share some of the new oil wealth.

None of those figures will be calculated into the next borough budget, however, because for now they are only words. Williams credited the “tremendous pressure” from municipal governments around the state with bringing the governor around.

“Every city, every village, every borough is in a world of hurt,” he said, adding that much of that was the result of cuts made by state lawmakers and the governor.

“It was the Legislature that said (to municipal governments in the late 1990s), ‘Don’t pay your PERS/TERS (Public Employee Retirement System/Teachers Retirement System) premiums. It was the governor who canceled the last remaining vestiges of the Municipal Assistance and Revenue Sharing programs. It was the Legislature that laid down the unfunded mandate of the $150,00 senior property tax exemption.”

Williams said he thinks the Legislature may be ready for a swing from the far right to the moderate middle.

“I can see it coming,” he said, “but it may be two or three years before we notice the effects.”

Another positive is that borough sales tax revenues have been higher than expected. And two years from now, we could be feeling the impact of a Wal-Mart store in Kenai, whose sales could enhance borough sales tax income by $400,000 a year.

Boosting the number of visitors to the borough will help, too. They leave their sales tax money behind. Many will spend cash at Wal-Mart, Will-iams said.

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