The Sitka Assembly is already starting the budget process for next year. And while where the budget will end up is always pretty hazy this early in the budgeting cycle, the full impacts of the coronavirus and a timeline for Sitka’s economic recovery are still mostly unknown.
There’s always a bit of uncertainty when it comes to city budgeting, especially in December. It’s very early in the process– it’s really a time for city staff to get guidance from the assembly about the ‘big picture.’ The ins-and-outs of next year’s budget will usually be hammered down and finalized in the late spring.
But when the Sitka assembly met on Thursday (12-17-20) to hear a presentation on the FY22 budget, which begins on July 1, there were more unknowns than usual.
City Finance Director Melissa Haley had some concrete data to share in her presentation. Sales tax revenue this calendar year, the city’s biggest source of income, was down just by under $3 million dollars compared to 2019.
But other important data for this year remained a mystery: How much holiday sales would boost the city’s tax revenue this winter? What will the city collect in online, out-of-state sales tax revenue? And of course, Haley asked the big question on many Sitkans’ minds…
“Do we get cruise ships back at the beginning of next year? You know, that’s a hard one,” she said. “If the vaccine rollouts go well, and things kind of start getting back to normal, we might be looking pretty good by the end of 2021, but we can’t count on that at this point.”
The loss of sales taxes was offset somewhat by a reduction in spending — just under a million dollars in the general fund. Haley attributed this mostly to vacant staff positions. Most of those positions are now filled, with a staffed Sitka Police Department and many department head positions hired this summer and fall. As a result, Haley anticipated a corresponding increase in staffing costs for FY22.
Read Haley’s full presentation here
Haley said she would likely put together a conservative budget, but if they kept things “status quo” that budget would be in the red.
“It can be balanced, which by the charter we are required to pass a balanced budget, but that means that we might dip into our reserves to some extent,” she said. “We, historically have been reluctant to present deficit budgets to the assembly. This is a year that if our guidance is that you don’t want to see a deficit budget, that means there’s going to be pretty significant cuts to services.”
Haley and city administrator John Leach sought direction from the assembly on what level of service they wanted to see in the budget, and how they wanted city staff to proceed with capital projects.
Mayor Steven Eisenbeisz said he wanted city staff to present a balanced budget without a deficit, and was wary of dipping into reserves without more information.
“I realize that this year some service areas are going to suffer. I believe that to be unfortunate, but I think perhaps some lawns won’t get mowed quite as regularly as they had before,” he said. “I believe that also to be a short-term, holdover situation. I don’t believe that to be long term. I do think things are going to get better, but for this year I really think we need to buckle down and potentially spend money later if money does come in.”
And, if they asked city staff to present a no-deficit budget, assembly member Kevin Knox said he’d like to see the assembly bring forward suggestions for cuts.
“It’s a tough position to be putting staff in if we’re looking for a no-deficit balance budget. There are a ton of questions that need to be answered, and none of us have that crystal ball to really know exactly how down we’re going to be,” he said. “If we’re asking them to make the call on what kind of services would have to be cut, it would be more fair of us to come forward with some of those suggestions.”
When it came to the enterprise funds budgets– like electric, water, wastewater and solid waste–there were mixed feelings at the assembly table about what, if any, rate increases would be appropriate. The city has an established model for incremental rate increases each year. Some are steeper, to fund big future projects like an anticipated overhaul of Sitka’s aging harbors, and others are stair-stepped with inflation.
Member Valorie Nelson said she would not vote for any rate increases this year, should the assembly consider them. Member Rebecca Himschoot asked for a history of rates for each of the funds, and more context on how the city’s rates are calculated. Member Kevin Mosher said he could support rate increases at the level of inflation.
And Mayor Eisenbeisz said while he’s supported rate increases in the past, he thought this would be a good year for a break from most of them, with the exception of the solid waste fund, as Alaska Marine Lines has already announced an increase in shipping costs next year along with more restrictions for shipping solid waste. But for the other rate increases, he said staff would need to make a convincing argument.
“Sell me on all of the rate increases that you’re going to put forward. Make a strong case for them, so that not only I fully understand, but when I get questioned by members of the public asking why rates are going up, that I have something I can tell them too that holds face,” he said. “It’s going to be very difficult for members of the public to accept rate increases this year.”
The meeting was merely the first in a series of meetings mapping out the FY22 budget, and no concrete decisions were made. The assembly will revisit the budget in the new year and members and staff may make suggestions on what cuts to consider. But while things are hazy for now, one thing is clear: The Sitka budget pie will be sliced a bit thinner come July 1.