The city had $10 million more in the bank than expected at the end of the past fiscal year, but could be facing requests to spend an extra $30 million for various emergency, maintenance and other costs during the coming year, according to an analysis presented to Juneau Assembly members Monday.
City leaders will also have to cope with an ongoing series of uncertainties ranging from the local flood-risk situation to post-election political changes in Washington, D.C., Angie Flick, finance director for the City and Borough of Juneau, said during a meeting of the Assembly’s Committee of the Whole at City Hall.
The city is currently in decent shape with its roughly $200 million annual budget due to pluses such as much higher interest earnings than expected during the past year, Flick said. That boosted the city’s overall fund balance to $10 million more than expected — with an unrestricted balance of about $32.4 million and restricted reserve of about $19 million as of June 30 — even though there were minuses such as less sales and property tax revenue during the same period.
But Flick said the budget for the current fiscal year that started July 1, and the outlook for future years, is a concern due to accumulating requests for extra funds — notable among them paying for costs related to glacial outburst flooding that has occurred at record levels during the past two years and damaged hundreds of homes.
“It is amazing that since the budget was approved in June there’s been approval for $6.5 million of different fund balance uses,” she said. Furthermore, “there’s well over probably $30 million worth of requests that are headed your direction in various forms.”
As for paying for the extra CBJ costs, Flick reminded Assembly members every $1 million in spending equates to roughly a 0.1% increase in the mill rate, which is currently 10.04%. Alternatively, she said, increasing the sales tax rate by 0.5% during the six months cruise ships are in town would generate about $4 million in tax revenue.
Of the $6.5 million extra approved so far this year, about $5.75 million was for flood-related costs (mostly future protection measures and studies), and another $700,000 to support health care programs such as substance abuse treatment and hospice that are part of a budget-crunch situation at Bartlett Regional Hospital, according to Flick.
Additional expenditures that could come up during this fiscal year and next include $6 million to install flood barriers, up to $11 million in building improvements for the Floyd Dryden and Marie Drake buildings that CBJ has taken over from the Juneau School District, and $4 million for “Cubicles and Floorplan Reversal,” as an office shuffle continues for city employees working in downtown buildings, according to a report presented by Flick.
Numerous other city projects, facilities and operations are seeking extra funds as well, despite some getting warnings from Assembly members that such requests have a high likelihood of being denied.
Eaglecrest Ski Area, for instance, may need up to $1.75 million in extra operations and capital funding this fiscal year, plus another $2 million next year, according to Flick’s report. The city-owned ski area is facing a backlog of maintenance issues while at the same time trying to implement a major expansion into year-round operations including the installation of a gondola.
Eaglecrest officials discussing the situation at a meeting of the board’s Finance Committee on Tuesday acknowledged that while they might need, say, $1 million to balance its books during the current fiscal year, in reality the ski area might need an approach such as trying to generate half that amount from sales and other revenues while asking the Assembly for the other half.
“From a PR standpoint Eaglecrest needs to dig itself out of this hole at the same time the Assembly helps them to do it,” said Kirk Duncan, a former Eaglecrest general manager hired as a consultant earlier this year to help during a leadership transition.
Similar discussions have occurred during the past year among leaders at the Juneau School District and Bartlett Regional Hospital — both CBJ entities that have their own operating budgets separate than that of the municipal government — due to major budget shortfalls at each. In both situations the Assembly has offered help, such as spending about $4 million last year to take over maintenance of buildings used by both the school district and CBJ, but both entities have also made major spending and operational adjustments.
Assembly members, top administrative managers and other officials involved in citywide operations are scheduled to discuss budget goals, plus a wide range of other issues and objectives, during the Assembly’s annual retreat in the Juneau International Airport conference room from 8:30 a.m. to 4:30 p.m. Saturday. The meeting is in-person only — meaning no online viewing or participation — and public testimony will not be allowed.
Flick emphasized the figures in her presentation Monday are preliminary, and numerous factors may unexpectedly affect income and spending during the coming year. During the past fiscal year, she noted, the city earned $9.5 million in interest income — when only $2 million was forecast — because federal decisions about interest rates were different than predicted.
“We entered (the year) with this expectation that the Fed was going to cut rates early and often, that we’re coming out of inflation, and they were going to start cutting rates and work towards a soft landing,” she said. “The first rate cut didn’t happen until the fall and so the market was much stronger than we anticipated.”
On the downside, local property valuation was unexpectedly nearly flat last year, with a 0.6% increase, Flick said.
“It just seems like the market is slowing,” she said. “We’re not seeing those skyrocketing sales which is escalating prices…which is good in a lot of ways, but it does mean that it’s not an area of natural growth from a revenue perspective.”
Flick noted there could also be a decline in some property value assessments, including for some flood-affected properties.
Looking ahead, she stated national happenings are again likely to play a significant role in the city’s fortunes, as will upcoming contract negotiations with CBJ employees.
“The biggest unknown economically is the transition of power and policies in Washington D.C. and impacts to the market, state and local governments,” she wrote in her report. “Internally, the labor negotiations that will commence shortly will have an impact on the budget, although the extent of that impact is unknown at this time.”
• Contact Mark Sabbatini at mark.sabbatini@juneauempire.com or (907) 957-2306.
