About 2,600 ballots were cast in 2016 municipal election, approximately 900 more than last year’s election, but 700 fewer than in 2005, when voters decided a total of 10 ballot questions. Voters rejected a Proposition to raise the cap on the mill rate to 8 mills. (Emily Kwong/KCAW photo)

While some of Sitka’s municipal races were fairly close, the question on the ballot was not. Proposition 1 proposed raising the cap on the mill rate from 6 to 8 mills in order to balance the city’s budget. The measure failed by a margin of 67 to 33 on election night (10-04-16), with 1353 Sitkans voting “No” and 677 Sitkans voting “Yes.”

With the failure of Proposition 1, the City of Sitka will have to find other ways to make ends meet. KCAW spoke with parties both inside and outside city hall for ideas about what the Assembly should do next.

Downloadable audio.

You don’t have to go far to meet Sitkans who voted “No” on Proposition 1. I took a walk out the radio station down Lincoln Street and soon bumped into postman John Wiley, leaning out of his mail truck. “I don’t think it’s fair. A more fair tax would be a sales tax that’s going to hit everybody,” Wiley said.

Further down the block was Alene Henning. She served on the Citizens’ Task Force that unanimously recommended lifting the cap. Henning voted yes then, but no at the polls. The reason? “They need to look inside the city hall and see what they need to cut out,” Hening said. “Starting at the top.”

Megan Pasternak, who was walking to her car, considered a two mill increase in one year too extreme. She wasn’t confident the city would dedicate the money to the right areas. Instead, she’d prefer government look for ways to reduce spending. “Personally, when I’ve got money problems, I buckle down and cut something,” Pasternak said.

City Hall has already been thinking of ways to do that. The FY18 budget process will begin early this year, in November. They’re starting with a budget deficit of $3.5 million dollars, represented as $1 million in the Electric Fund and $2.5 million in the General Fund.

Those numbers could worsen funding through state and federal programs falls through. “Where we are at risk from the state is in revenue sharing (officially, the Community Revenue Sharing Program). We had over $600,000 this year, but I think that’s going to be at high risk next year. And [from the federal government], for Payment in Lieu of Taxes (PILT) and Secure Rural Schools.

Should those revenue sources disappear, Gorman said, Sitka’s deficit could balloon to $5 million. “The situation I believe is really quite critical. I’m optimistic we can get through it, but it’s going to require work on the part of the Assembly and the public,” he said.

Gorman also wonders how the city can better convey the depth of Sitka’s municipal budget crisis to the public.

In light of the property tax question failing, City Administrator Gorman plans to focus on what he calls the three R’s: Revenue, Reserves, and Reductions.

For revenue, he wants to the Assembly to find a revenue source that generates $1 million. For reductions, he’ll suggest downsizing local government by the same amount – $1 million. “The lion’s share of it will have to come out of the city, but I believe the school district and the hospital will have to share in those reductions to a certain degree.”

Gorman also foresees a reduction in the workforce by as many as six to seven positions, preferably through attrition rather than layoffs. “We did one lay off last year and it was painful. I’d like to avoid doing that,” Gorman said.

Next year’s budget already commits $900,000 for the Sitka School District and $1.5 million for the Public Works Department to maintain infrastructure.

When it comes to revenue, Sitka has money in a variety of funds. Some of those funds are protected, while others are not. Gorman will describe the parameters of tapping those funds at the next Assembly meeting on October 11th.

One idea of his is to make use of the Permanent Fund, which is protected by Sitka’s charter and currently holds $32 million dollars. Every year, the fund generates interest, which flows into the General Fund. But through a special election, Sitka could re-direct it towards the Electric Fund until it is self-sustaining.

“That would give the Electric Fund a steady subsidy into the future. We could wean off as consumption grown,” Gorman said. “This of course, deprives the general fund of that money. It’s a tough balance, these three R’s.

Key to Gorman is that the city properly convey the depth of its budget crisis. He doesn’t feel the city has always done a good job of doing that, which brought to mind a line from the movie Cool Hand Luke. The prison warden is mad at Paul Newman’s for saying something kind of flippant. He says, ‘What we have here is a failure to communicate.'”

“And he says it in a nice Southern drawl – ‘What we have here is a failure to communicate.’ We have a great struggle in terms of communicating our needs and our fiscal situation,”

That disconnect between what the city thinks it needs and what citizens think they needs is something all parties must to bridge to avoid the biggest R of all. That being a recession.

Marty McGee, the State Assessor, said that municipalities must be cautious to not cut city services, like schools or infrastructure, too deeply. Otherwise, Sitka could struggle to attract industry. I asked him for an example of this.

“Places like Detroit, Michigan or in Wisconsin…you look at what happened communities where they cut all the services. They realized, ‘There is no way we can attract jobs or industry to our community unless we provide services. So now we’re going to decide to fund it.” McGee considers property taxes the fairest source of revenue, especially when the rate is driven by the budget and not capped.

Ultimately, it is up to each community ut ultimately, he said, it’s up to each community to decide which tax policy is best for itself and given that this is the third time property taxes have been voted down in three years, Sitka will need to look elsewhere for solutions.

My name is Rob Allen. Sitka is a great place to live, and we need to keep it that way. That’s why I’m voting yes on Proposition 1.

Downloadable audio.

I grew up here, got a good education in our local schools, and ran a successful business in town. I’ve been involved in many of our local agencies, institutions, and organizations in one way or another for nearly 30 years. I came back to town in 2015 to help the community hospital get back on its feet, and I was the chair of the Citizen’s Task Force that studied our financial issues and tried to develop solutions eartlier this year. All of us on the Task Force agreed: The city needs to cut expenses, but it can’t cut enough to balance the budget without doing real damage to the things we all love about living here — schools, libraries, parks, trails, infrastructure, and public safety.

We need new revenue. We all know it’s expensive to live here. The thing is, it’s already unaffordable for some of us. That’s why those of us who are doing well need to pay our fair share. There’s no perfect way to do that, but the property tax is the best option we have, because the people with more expensive properties will pay more. If Proposition 1 passes, my family will be paying more to live here. But we’ve always believed the community is worth it. I hope you’ll join me in voting yes on Proposition 1.

Rob Allen is the CEO of Sitka Community Hospital.

In exchange for a 2 mill increase to property taxes, the Assembly is offering to dedicate one mill of revenue to the electric fund to stabilize rates. But will voters approve? (Emily Kwong/KCAW photo)

During their meeting last night (09-13-16), the Sitka Assembly approved a key element of their plan to raise property taxes while making Sitka more affordable.

The ordinance says that if voters approve raising property taxes next month, from 6 mills to 8 mils, the revenue generated by one of those mills will go towards Sitka’s electric fund. The goal is to prevent electric rates from dramatically increasing, as the city strives to keep up with bond payments on the Blue Lake dam.

Downloadable audio.

Before we get into the Assembly’s conversation, I want to back up a bit to the Citizens’ Task Force. Seven Sitkans were appointed by the Assembly last year to study the budget gap – it’s projected to be $2.5 million next year – and propose solutions for closing it. See their meeting minutes and reference materials here.

The Task Force recommendation was to raise the mill rate, but offer a tax break in return, something that would make Sitka more affordable. They called it the Grand Bargain. And the Assembly embraced that idea.

Mayor Mim McConnell: There’s so many people that are struggling with the high cost of groceries here.

Assemblyman Tristan Guevin: I’ve talked to a grandparent who sits in the dark because she’s worried about her electric bill.

In the spirit of the Grand Bargain, the Assembly considered two ordinances that would to return property tax revenue to citizens. One proposed removing the sales tax on groceries (Ord 2016-30). The other suggested subsidizing the electric fund, to keep rate increases low (Ord 2016-31). The Assembly has been getting a lot of emails on the merits of both.

McConnell said,  “I keep going back and forth, it’s like everytime someone says something, ‘Oh yeah, good point.’ I feel like I’m on a ping pong table.”

Let’s take this ping pong metaphor a bit further. The biggest lob on team grocery is the immediate cost savings. At their last meeting, the Assembly determined that – on paper – removing the grocery sales tax would save households more money, a little over $100/month for a four-person household.

But Assemblyman Steven Eisenbeisz countered that if electric rates increase next year, that cost savings may be moot. “I don’t believe any of our local grocery stores would absorb a 20% increase in their utility bill – in their power bill specifically – and not in some form pass that on to consumers. So while I would agree with your facts initially, I would think over the long term the electrical subsidization would save more money,” he said.

The Assembly has subsidized the electric fund before: by $1.5 million last year  and $1.6 million the year prior.

Guevin recognized this boost may need to continue to keep rates manageable. “The usage continues to decline so it’s kind of that spiral we could go down into you, if rates continue to go up and up and usage continues to go down and down,” he said.

Declining usage is the current trend in Sitka. Earlier in the meeting, Utility Director Bryan Bertacchi gave a presentation on future rate increases. Given the current budget, if electric usage in Sitka remains the same, rates would have to increase by 18%. He added that if usage declines by 1%, “we’re looking at a 20% increase in FY18 with no subsidization for the electric fund.” For many on the Assembly, the prospect of a 20% increase was to be avoided at all costs.

Deputy Mayor Matt Hunter argued that stripping away the grocery sales tax could even hurt the city. Quoting e-mails he received from the public, Hunter said, “So many people buy groceries for their boats or tour businesses and other such entities during the summer months. We’re going to lose out on revenue from visitors.”

Some e-mails took that logic even further and asked the Assembly: Why not put all the money towards budget gap? At the outset of the meeting, Eisenbeisz spoke to that option. He asked, “What are we really trying to do here? Are we trying to close a budget gap, which we see on another spreadsheet is once again at $2.5 million, or are we trying to shift around the burden? I believe there’s merits in both, but we’re trying to close a budget gap here.”

This third option – of letting the property tax stand on its own – hung in the air throughout the whole conversation. But ultimately, Assembly returned to that foundational idea of the Citizens’ Task Force that in order to get something, you have to give a little back.

Calling into the meeting by phone, Assemblyman Bob Potrzuski said, “There’s so many competitors for every single city dollar out there that I think we’re doing the best thing to the people of Sitka by saying, ‘We are going to pay our debts first. We’re going to take care of that first. That debit is not going to overwhelm us. It’s not going to drive businesses out of town, it’s not going to drive people out of town. We’re going to take care of the debt.”

And that clinched it. Speaking to KCAW today, city administrator Mark Gorman said he was enthused to see a policy idea generated by the Citizens’ Task Force go all the way to the Assembly – and pass. “I literally had goosebumps and wanted to punch the air and say, ‘Yay!’ Whether the ballot initiative passes or not, to me it’s a reflection of actualized civic engagement. The Assembly asked citizens to step up and get involved and give advice. They did that. The Assembly took that advice and acted on it. Now, it’s before the citizens.”

The Assembly unanimously approved the electric fund ordinance. It would go into effect on July 1st, 2017 should citizens approve increasing property taxes. And that’s a question that will only be answered at the polls next month.

The Assembly wants to pose a ballot question to voters in October that would raise the millage rate to 8 mills. For twenty years, the mill rate has been capped at six.

The Sitka Assembly is making a bid to increase property taxes in by two mills, raising the cap from six mills to eight. At their regular meeting last night (07-26-16), the group settled on that figure in response to $2.5 million budget gap for the next fiscal year.

Downloadable audio.

You know how they say a spoonful of sugar makes the medicine go down?

(Music from Mary Poppins musical)

Well, at their last meeting (07-12-16), the Assembly took that approach to raising property taxes. They directed the city to draft a package deal. The medicine? A budget-driven mill rate, which raised the cap from 6 mills to 12 mills, with rates not to increase by more than two mills on a given year. And the sugar? Eliminating the sales tax on groceries, funding the school district to 95% of the cap within four years, and offering a property tax exemption for residential homeowners of up to $50,000.

So, did it work? I’ll let Bob Potrzuski, quoting one of many e-mails he received, tell you.

Potrzuski: You know, one of them started, ‘Thank you very much for all the work you do on the Assembly.’ And the next line was all caps, multiple exclamation points, ‘Are you insane?’

Other Assembly members and city staff got e-mails more strongly worded than that. Citizen feedback was a blend of criticism and concern. On Tuesday night (07-26-16), five Sitkans offered their comments. Alene Henning told the Assembly, “Whether you cook a frog slowly or drop it in boiling water, it will still be cooked at the end. If our taxes must go up, I would suggest doing it in a way that doesn’t cost property owners to have to sell.”

Henning served on the Citizens’ Task Force, whose “Grand Bargain” proposal directly inspired the Assembly’s proposal. But Henning’s suggestion on Tuesday was to keep the mill rate fixed, not implement a budget-driven mill rate that changed every year to balance the budget (as recommended by Assessor Wendy Lawrence).

“If the ballot measure were to read simply and without confusion, ‘Raise the millage rate by one mil and the people would retain the power of a vote for any additional chances,’ that would be much more acceptable to the public and helpful to the city,” Henning said.

Joe Meador, who was a tax auditor for ten years in Florida, said that property taxes should increase in Sitka, but the mill bump has to be small in order to pass. “If you’re going to get the citizens to bite this and have me vote on it, it’s going to have to be written properly. No strings. It’s going to benefit the city and the citizens because citizens make the city,” Meador said.

So, the Assembly went back to the drawing board. Assemblymen Steven Eisenbeisz, Bob Potrzuski, and Tristan Guevin met with city staff last week to talk about reframing the property tax question for voters in a way that gets everyone on the same page.

Guevin has been asking himself three questions: What is needed? What would I personally vote for? And what do I think has a chance of passing?  “Those three factors kind of run through my head,” Guevin said. He said he wants to the community to work together in ensuring that, “in 20, 30, 40 years, our children are going to have the same Sitka that we get to experience. That we get to have.”

And for that, Sitka needs money, badly. A whole $2.5 million to close the budget for next year. To make ends meet this year, the city slashed $1 million from the operating budget and cut six positions. The library is closed on Sundays. The fire department is smaller.

City Administrator Mark Gorman could reduce spending further, but the question is whether Sitkans could live with those changes. “The e-mails haven’t stopped flying in terms of dissatisfaction in our citizens and in terms of reductions that they’ve seen and felt. I was accused just the other day that my legacy at city hall would be reducing the quality of life for Sitkans. And I know the Assembly members have received e-mails like that too,” Gorman said. Just this week, his staff talked about whether Jeff Davis Street should be turned to gravel.

With more cuts to come, Gorman likened the situation to keeping the wheels on the bus partially inflated. And the Assembly is putting their faith in property tax increases as the main source of air.

After some discussion, they settled on a rate increase of 2 mills.  For Assemblyman Matthew Hunter, the ballot language stating that needs to be as clear as possible. Hunter said, “Raise the cap to eight mills. It’s a two mill raise. That’s the ballot question. Any ordinances, or any other stuff we want to pass contingent on that ballot measure, could happen any time,” Hunter said.

“Contingent ordinances” includes removing the sales tax exemption on groceries. The Assembly also discarded the homestead exemption idea in favor of subsidizing the electric fund. Otherwise, unless there’s a brutally cold winter, rates could increase by up to 19% next year. Assemblymen Steven Eisenbeisz said, “I believe that a 15 – 19% increase in our electrical rates is going to be a lot more damaging to lower income families than a 6% sales tax on groceries.”

Now, the Assembly didn’t decide which tax break was better – groceries or electric rates – so directed the city to draft an ordinance of both. Keep in mind, either of these would be contingent on voters successfully passing the property tax increase.

The Assembly will review these documents and take comment during a special meeting next Tuesday, August 2nd at 6 p.m. The location has yet to be determined.

The Assembly has balanced the FY17 budget by drawing from savings, increasing rates, and making cuts. But the solutions for closing the deficit may not be possible next year. (Flickr Creative Commons)

Times are tight in Sitka, but the Assembly has managed to balance the budget. The deficit was as high as $700,000 in March, but shrunk like a candle over the subsequent months to zero. How? Through combination of cuts, rate hikes, and money in reserve that may not be around next year. KCAW’s Emily Kwong has more on this year’s budget balancing act and why next year will be even trickier.

Downloadable audio.

(Sound of cash drawer being opened)

You are now inside the cash register of the City of Sitka and I’m going to take you on a little tour.

(Sound of change being counted)

The Assembly has been noodling around in here for nearly two months, holding four special meetings and building off six months of work by the Citizens’ Task Force to close the FY17 budget gap. The good news? They’ve done it!

But, as Assemblyman Matthew Hunter said at their May 3rd meeting, it’s not without some casualties. “We’ve cut 3 positions this year. We’ve cut some services. And it’s been emotionally hard for me, which kind of surprised me. I like to think I’m logical, but it hurts to make those cuts and see jobs disappear. Even if they’re vacant, those are jobs in Sitka. Those are futures, people living here, making money and raising families,” Hunter said.

Now by cut, what the city really did was consolidate. The positions of Parks and Recreation Manager and Buildings and Facilities Manager, previously held by Lynne Brandon and Chris Wilbur, were merged. Sitkan Michael Colliver is the new hire. The Assembly won’t hire a new Assistant Fire Chief in Al Stevens stead. And one police officer is being reassigned as a detective, going down to half time.

The draft budget also reduces non-profit support by $89,000, snow removal, janitorial, and other public works operations by $250,000, and zeroes out funding for the Ride (which faced a major shortfall last year).

Connie Sipe is with the Center for Community, which oversees the largely grant-funded public transit system. Right now, the Ride runs buses from 6:30 in the morning until 7:30 at night, but those hours may be cut down. “We may have to half hour in the morning or a half hour at night. That’s the first thing we’ll do, is not eliminate the service, but figure out how we can shave a little bit,” she said.

A few special requests did make it on to the till, however. That includes $65,000 for the assessing department to hire a temporary employee. Assessor Wendy Lawrence estimates that Sitka is missing out $1 million a year from undervalued property. Until the city can afford new software, she needs another set of hands to help bring taxes in line with market value.

Speaking the backlog of undervalued properties, Lawrence told the Assembly, “What we have now is a car without an engine. I have a system where I can put things into, but it’s all done manually and I’m the engine.”

The Assembly also voted “yes” on $40,000 to rebuild the community playground in Crescent Harbor, reasoning it was a deferred maintenance issue, and $40,000 for rewriting Sitka’s comprehensive plan.

The Assembly voted “no” on a new phone system. Assemblyman Steven Eisenbeisz, who runs the outfitting store Russell’s, said, “At my business, I wish I had phones that were 13 years old. Mine were made in 1992.”

Electric rates will increase by 5% and both water and wastewater fees by 1%. But it was a citizen, Matt Donohoe, who waited over two and a half hours for persons to be heard, who turned the tide on a proposed 6.2% increase in harbor rates.

Mayor Mim McConnell: Any public comment? Thanks for waiting Matt.

Donohoe: Thank you guys for your service. This is excruciating. I think that in the next five years you’re going to see a very different fishing fleet here in Sitka. It’s going to be vastly changed. It’s going to be because of the actions like this, the 6.2% increase.

It will take an ordinance, but the Assembly voted to curtail the rate increase to 5%. They also approved a recommendation by the Citizens’ Task Force to transfer $100,000 from the city’s share of the raw fish tax to the harbor fund.

The city won’t be imposing any furloughs. That proposal didn’t gain traction in union negotiations.

Over the phone with KCAW, City Administrator Mark Gorman said that local government will definitely have a smaller footprint on July 1st. “I hope when individuals encounter those diminished services they will have an understanding of why they’re no longer there,” he said. The biggest reason for this, of course, it’s the state’s fiscal crisis. Sitka will receive 35% less state funding than last year.

But the second reason is simple math: Sitka cannot afford the cost of its infrastructure. To close the FY17 budget gap this year, some significant transfers took place: $1.6 million from the general fund to the electric fund to stabilize rates, $1.3 million from previous years appropriations for capital projects, and $1.1 million from the public infrastructure sinking fund for public works. That’s a lot of money for patching holes — money that won’t be there next year.

Due to this, Gorman said FY18 deficit will be even more difficult to overcome.  “If the tealeaves are correct as we read them in City Hall, next year is going to be twice as tough. So, we can’t really stop right now and take a deep breath and say, ‘We’re done.’ The heavy lifting is about to begin.

But, Gorman added, while walking down the street last week (the sun was out after all) he was pleased to see Lincoln Street bustling and stores open. “We’ve got a great community. We’ve got tremendous assets here and we’ve got a can-do attitude. So, we’ll get through this. But there’s going to be a couple rough years,” he said.

Mayor Mim McConnell said that, although the Assembly has made several budget decisions already through these special meetings – in years past, all this discussion happened during the regular meetings – the public is still welcome to weigh in. She said, “Just because we’ve made these decisions, doesn’t mean we can’t change our minds.”

She added, “I definitely expect people to speak up because, after all, it’s their city.”

The Assembly will have their first reading of the FY17 budget tonight at 6 p.m. at the Sealing Cove Business Center. Assemblymen Matthew Hunter and Bob Potrzuski will be absent.

The Sitka Assembly meets tonight (4-1-16) at 6 p.m. in room 229 at the University of Alaska.

A lot. After a three week hiatus, the Sitka Assembly has a hefty agenda that touches upon everything from marijuana business and distracted driving, to landslide risk and budgeting.

Assembly Agenda for 4/12/16

During a work session at 5 p.m., the Citizens’ Task Force will present their final report. See the full CTF report here. 

The Assembly appointed the seven-member group to craft a recommendation for closing Sitka’s budget gap. And after 40 hours of meeting, they developed the Grand Bargain.

The bargain proposal, which would take three years to implement, is largely identical with the one presented at a public town hall last month. Major features include a vehicle registration tax and asking voters to approve a 2 mill increase in property taxes, in exchange for eliminating the sales tax on groceries.

Assembly member Tristan Guevin has been the liaison to the Task Force since the beginning. He appreciated their efforts to educate the public, in advance of municipal budget talks this spring. “For example, we discussed a millage increase to support the schools last year, but I think what was missing was that public process and just having that opportunity for a robust discussion,” Guevin said at their last meeting (4-4-16).

The Bargain maintains a $1.7 million cut to the City’s General Fund and a $600,000 cut to the School District over the next three years, but recommends the Assembly never cut funding below 92-percent of the cap on any given year.

Task Force Chair Rob Allen said that change came directly from public input during last month’s town hall (3-21-16). “So it went from a straight $200,000 cut for three years, so a total of $600,000 over that three years, to that same recommendation but with a threshold,” Allen said.

On second and final reading, the Assembly will vote on a local ordinance to ban the use of handheld devices while driving. Drafted by the Health and Human Services Commission, the proposal is meant to reduce distracted driving by fining drivers with a phone in their hands.

The Assembly will also hear a report from the Sitka GeoTask Force, a multi-agency group formed after the August 18th landslides. The report pools existing information about the slide area and next steps for geophysical research, as summarized by NASA, the US Forest Service, NOAA/National Weather Service, and others. Full GeoTask Force Summaries Report is here.

In new business, the Assembly will submit a multi-parcel state land acquisition request to the state of Alaska. The four parcels – now vacant – would be used for future community development and include Indian River Valley, Starrigavan/Katlian Bay, a Department of Education parcel known as Millersville, and another DOE parcel at the end of Seward Street.

Maegan Bosak, Planning and Community Development Director, said that Governor Walker’s administration has been inviting communities to request land. “We all know the state is having some fiscal troubles and not able to provide a lot of financial support to communities. So what does the state have? They have land. And that may be a way they can support future community development and economic growth. It’s not a for sure, but at this point, we feel like there’s no harm in asking.”

The Assembly will also discuss community-wide landslide hazard mapping and consider awarding a contract for debris flow and risk analysis in the Gary Paxton Industrial Park to Shannon & Wilson. The same firm performed a geotechnical analysis on Harbor Mountain, following the Kramer Avenue landslide on August 18th. That same day, a slide damaged the administrative building at GPIP.

In ceremonial matters, the Assembly plans to commend the Sitka High School boys basketball team for rescuing Anchorage residents from a fire during the state tournament. They will also recognize three student wrestlers for their achievements in the Arctic Winter Games in Greenland.

And finally, the Assembly will take its first steps towards establishing marijuana businesses in Sitka. The ordinance, drafted by the Planning Commission, would allow marijuana businesses to set up shop downtown, at the Gary Paxton Industrial Park, and in several other commercial zones, but only if they obtain a conditional use permit.

By awarding those permits per request, Bosak says the city will have a level of control over where the marijuana industry is located in Sitka. “You’re weighing the potential harm to the surrounding area, the surrounding neighborhoods. So that’s what that conditional use permit process is for. And that’s why the Marijuana Advisory Committee (see their final report here) and Planning Commission both felt that there was a need, as this new industry comes into Sitka, to have the conditional use process,” Bosak said.

The Sitka Assembly meets in regular session at 6 p.m. in Room 229 at UAS. A work session will precede the meeting at 5 p.m. Raven Radio will join the meeting live in progress at 6 p.m. after Alaska News Nightly.

“The Grand Bargain” is a multi-tier proposal by the Task Force. Among their suggestions is a plan to raise property taxes, reduce grocery bills, and soften electricity rate hikes for the next three years. (Emily Kwong/KCAW)

After six months of scrutinizing Sitka’s budget, the Citizens’ Task Force is ready to reveal their plan. They call it “The Grand Bargain.” Here’s a glimpse of the bargain’s major line items, some of which are still a source of disagreement among the task force.

Downloadable audio.

With a budget gap to close and state funding growing ever more unlikely, how will Sitka make due? The Task Force says, ‘By striking a deal with its citizens.’

This is their idea: If citizens approve a ballot initiative to raise cap on property taxes by two mills, the city will eliminate the sales tax on groceries.

At their March 7 meeting, Cyndi Gibson crunched the numbers and lit by the glow of a projector, presented her findings. “The idea is that people that have homes that are more valuable can have the resources to absorb those expenses a little bit easier,” Gibson said,  “than people who maybe have fixed income or maybe have bigger families and these other expenses.”

Cyndi Gibson explains that under the grand bargain, the tax burden would be shifted to Sitkans with properties that are of higher market value. (Emily Kwong/KCAW photo)

Her example compares two families. Let’s call them Family A and Family B. Each one has a mom, dad, and two kids and spends the same amount on groceries. Repealing the sales tax on groceries (which would apply only to food, not toiletries) would save each family $825 a year.

Now, if family A’s home is valued at $350,000, then the Grand Bargain would save them a bit of money. But what about family B? If the have a second home, Gibson said they would pay more. “Maybe you own a second house that you rent. I own a house that’s $350,000 and I live in a house that’s $400,000. So you will pay $675 more per year.

By Gibson’s calculations, this pattern also holds true for senior citizens and renters. Those who have more properties (or more highly valued properties) will pay more under this new paradigm. Task Force member Dyan Bessette worried that the burden shift would negatively impact seniors, who may have second properties but are on fixed income.

Bessette: You’re assuming seniors are a lot better off financially than other people.

Gibson: No, I never meant to imply that.

Bevan: There’s two groups of seniors.

Task force members have also been divided on whether to assign these mill rates to a specific purpose. Hugh Bevan suggested dedicating the revenue from one of the mill rates towards bond payments on the expansion of the Blue Lake hydro dam. “I’m in favor of splitting it in half and dedicating one (mill) to debt reduction in the electric fund. The other I’m ambivalent about,” Bevan told the Task Force.

Vice Chair Max Rule worried that would put Sitka in a bind. He said, “If we get in to dedicating 1 mill of property tax for debt reduction of the utility, then we’re committed out there for 35 years.”

Other task force members wondered whether dedicating the mill rate to road maintenance would be a better sell to the public. But in the end, the Task Force decided to get more public input and leave the 2 mill bump undesignated for any one fund.

And speaking of the Blue Lake dam, the Task Force is also recommending a $1.9 million subsidy from the general fund to the electric fund. This is important because mild winters and low oil prices have put Sitka out of pace with bond payments for the dam. Rates will likely increase again this year and the subsidy is meant to keep that rate hike below 5%. Last year, rates increased by 6%. 

On the cuts side, the Task Force is proposing a $1.7 million cut to the General Fund and $600,000 to the school district over the course of three years. They did not propose a cut to Sitka Community Hospital, which concerned Gibson at last Monday’s (03-14-16) meeting. “I kind of feel like if we’re expecting our school to cut back and our city to cut back, then the hospital is pretty big,” she said.

Hospital CEO Rob Allen is Chair of the Task Force, though he was not present at the March 14 meeting. Right now, the city has budgeted $157,000 for the Hospital, which goes towards capital projects and equipment. Rule felt this cost was too small to cut into.

Rule: That was my reason for leaving it as zero.

Gibson: That’s fine, but we need to be able to tell that to people.

Just that – “being able to tell that to people” – kind of captures the challenge before the Task Force now. They need to figure out how to tell the story of the decisions they’ve made and why they made them, seeking public input while also defending their choices. Speaking to her fellow Task Force members, Gibson said, “If we think this is the solution, it’s our job to communicate effectively enough that everybody else can understand what it’s important and why they would want to do it.”

And citizen’s aren’t their only critics. The Task Force will present their recommendations to the Assembly at a work session on Tuesday, April 12 at 5 p.m. 

Listen to a half-hour “Grand Bargain” special with Task Force members Rob Allen, Hugh Bevan, and Cindy Gibson to hear about their plan in further detail.

The Task Force will gather public input on the Grand Bargain at a town hall meeting at 6 p.m. tonight (03-21-16) in room 229 at the University of Alaska Southeast.

The budget deficit for the City and Borough of Sitka is estimated to be $900,000 this year. And as oil prices drop, Sitka is unlikely to receive much state funding. How will Sitka make due? The Assembly appointed a Citizens’ Task Force to tackle the problem and the group is ready to unveil their solution: “The Grand Bargain”

Tune in Monday (03-21-16) at 10 a.m. for a half-hour special with Rob Allen, Cindy Gibson, and Hugh Bevan, three members of the Task Force to talk about the “Grand Bargain.” Full audio here. 

Downloadable audio.

This multi-tier proposal recommends raising the cap on property taxes by two mils. In exchange, the Task Force proposes eliminating the sales tax on groceries and subsidizing the electric fund, to keep rates from increasing beyond 5% this year.

Draft of the Grand Bargain spreadsheet

Core Services Worksheet

Website for the Citizens’ Task Force

The Citizens’ Task Force will host a town hall meeting on Monday (03-21-16) at 6 p.m. in room 229 of the University of Alaska to present the Grand Bargain to the public. Raven Radio will not be broadcasting the meeting live, but will provide full coverage in local news.

On Monday (02-29-16), members of the Citizens’ Task Force and city staff talked cuts and how to balance the deficit. (Photo from successionmedia.com)

Throughout the tenure of the Citizens’ Task Force, city staff have sat in the audience to answer questions and even offer solutions. The relationship has always been a collaborative one.

But at their meeting on Monday (02-29-16), the sobering uncertainties of the FY17 budget dominated the conversation. And it was there that the task force began to push back against city staff on what Sitka’s financial strategy should be.

Downloadable audio.

The size of Sitka’s budget deficit is completely unknown. Chief Administrative Officer Jay Sweeney’s preliminary estimate is $700,000, but the number changes based on variables beyond Sitka’s control, like state and federal funding.

At Monday’s meeting (02-29-16), Sweeney laid these unknowns before the feet of the Task Force. “What are we going to do about health insurance [coverage for city employees]? We’re faced with a 20 percent premium increase. Are we going to switch carriers? Are we going to go with self-funding? That decision hasn’t been made yet. We have union negotiations with all three collective bargaining unions. We may have a 0% increase or a 3% increase. We don’t know how that is going to play out” he said.

Funding that Sitka used to count on may not be in play next year. A proposal to change the shared fisheries tax puts $2 million on the line. Then there’s a possible $300,000 cut for community jails, and $760,000 if federal funding for Secure Rural Schools is not secured.

With all these moving targets, Sweeney said he’s in the dark. He said, “I’ve told our staff internally,  ‘I don’t know if I’m even going to have solid numbers by June or July.’ We may be in a position where we’re passing a budget based on best we know.”

A pause fell over the Citizens’ Task Force. Member Hugh Bevan joked, “I feel like I’m wasting my time.” Rob Allen responded in saying, “We’re just going to do the best we can with our estimates, knowing things could change.”

Lawrence SpottedBird commented, that, with so many balls up in the air, it may be even more imperative to consider these choices. “Are we still going to operate a $26 million budget, in spite of what the external factors call for, or are we going to rely on the citizens to foot that bill? To me, that’s even more of a reason to be conservative. To tighten our belt and hope for the best, but be ready for the worst.”

If Citizens’ Task Force proposes cutting the city’s budget, which they have not done so far, it would impact either city staffing or operations.

Sweeney asked the task force to consider what a reduction of 20% to city operations (roughly $1 million) would do to Sitka. “Examples: Would you want to go to an all-volunteer fire department? Have one policeman on the road at any one point in time? Library open three days a week? Those are types of decisions you move to when you have that level of cut and that’s what a smaller cut would look like,” he said.

SpottedBird responded that he felt the task force was getting push back from city staff whenever the conversation turned to cuts. Public Works Director Michael Harmon, sitting in as acting Administrator for Mark Gorman, said that wasn’t so and that he was meeting with Gorman next week to discuss the possibility of cuts.

“Don’t take when we’re trying to explain – so we’re educated in what the cuts mean and what the impacts are, I think that’s important – please don’t take that as resistance. We know that needs to be a piece of this recipe,” Harmon said.

Another sobering conclusion: Sitka’s budget deficit will likely not be closed this year. By the Task Force’s estimate, it will take three years to balance revenue against spending and for many of their policy ideas to take effect.

Take, for example, raising property taxes. Rates are capped at six mils. Each additional mil would raise $1 million. But as Assessor Wendy Lawrence pointed out, time is running out to make that kind of change. “Mil rates are typically set by July 1st. We have time to change the mil rate if we chose but it’s a problematic situation because we haven’t had public input,” she said.

To help the Task Force project into the future, Gorman drafted a 3-year “Grand Bargain” budget, with columns for 2017, 2018 and 2019. But one line item (B13) raised eyebrows. In his budget, Gorman proposed subsidizing the electric fund to keep electric rates from rising. He does so by pulling $1 million from General Fund reserves.That’s because there’s just not enough money in the General Fund to make this kind of change.

A handful of Task Force members took issue with tapping Sitka’s reserves in any way to close deficits. Vice-Chair Max Rule said it countered the narrative of the group. He said, “I’m in favor of coming up with recommendations that don’t have any regard to any subsidy out of reserves and leave that discretion up to the Assembly to decide.”

Tristan Guevin, who sits on the Assembly and serves as a liaison to the Task Force, agreed. He said, “At some point, it’s our time to pick that up and make some hard decisions.” The Task Force is expected to deliver its report to the Assembly in mid-April.

Task Force members got a glimpse into the complex budget process of the Sitka School District on Monday (02-01-16). (Emily Kwong/KCAW photo)

On Monday night (02-01-16), the Citizens’ Task Force heard from the Sitka School District, which is beginning their budget process this month.

At the top of the presentation, each of the task force members received a shiny red apple. Superintendent Mary Wegner said that the apple represented a “whole education.” She added that if cuts represent bites, the dip in state funding has already affected Sitka students

“We cannot offer enough social studies classes for students to qualify for the Alaska Performance Scholarship, because we don’t have enough teachers in social studies. Students are required to graduate with a third year of math, but we don’t have enough math teachers at the high school to do that,” Wegner said. “So we don’t have any more fluff.”

The city gave the School District $1 million last year, which Wegner said preserved the jobs of ten teachers in art, career and technical education, music, reading intervention, libraries, and elementary education. The district wants that money to be maintained for the FY16 budget.

Pacific High School is Sitka’s alternative high school, serving 40 students (KCAW photo/Robert Woolsey)

Task Force Members Lawrence SpottedBird and Dyan Bessette asked if restructuring Pacific High School could save the district money. Bessette said, “If you’re in a really big financial crunch, it might be something to look at as part of your correspondence program rather than providing a physical location.

Wegner responded that some students do make up credits through REACH, the district’s homeschool program. But she defended keeping the school as is, arguing that it serves students at risk of dropping out at Sitka High. “If we didn’t have Pacific High School, we would have 40 students without career goals, without potential college goals, and without a high school diploma in our community.

Local funding is $700,000 short of the cap. Staff outlined what full funding would possibly enable at Sitka schools. (Courtesy of Sitka School District)

In the end, Wegner requested the Task Force recommend funding to the cap, which is maximum local contribution allowed by the state. Right now, the city funds 90% of the cap, about $6.4 million. The Citizens’ Task Force responded that it would need more time to look over the budget before making any final recommendations to the Assembly.

The Citizens’ Task Force also voted to move from bi-weekly meetings to weekly meetings. The group meets next on Monday, February 8th at 6 p.m. in the Sealing Cove Business Center. 

Presenting this chart to the Task Force, Wegner said the reductions to local funding by previous assemblies, between 2010 – 2014, cut programs the school district wants to bring back. (From Sitka School District)