City Fiscal Year 2010 Budget Process:
Last night the Sun Valley City Council, with the help of the Mayor, passed a $6.1 million budget for Fiscal Year 2010 (October 1, 2009 through September 30, 2010).
I feel very good that we passed a sound budget that focuses first on the health, safety and welfare of our citizens and then works to ensure that our local economic output and tax base is kept strong to the benefit of all Sun Valley citizens.
After listening to the public during the official Public Hearing, we adjusted the budget accordingly. Council Member Briscoe and I worked out a compromise to further reduce the total budget by lowering total staff salary increases, reduced the contract with Sustain Blaine, funded a stronger Fire Department and funded tourism marketing at last year’s level. Our amendment to the budget passed on a tie-breaking vote with Mayor Willich’s help. Following our amendment, the Mayor asked for further discussion on the budget, hearing none from the Council, he called for a vote and the overall budget passed 3-2 with Council Member Briscoe, me and Mayor Willich voting in favor.
During the lengthy Council discussion following the Public Hearing, I presented an updated Unreserved Fund Balance Analysis. Based on the FY10 Budget, my analysis showed the projected financial condition of the City at the END of the next Fiscal Year (September 30, 2010). As you can see from the analysis below, we should retain a strong fund balance to get us through another tough year or so, if the economy continues to stay in the dumps.
I pointed out during the Public Hearing that this has been the most transparent budget process I have seen or been involved with since I’ve been associated with the City. We began the FY10 budget process over 3 months ago and yesterday’s Hearing was the seventh budget meeting in that process. The actual detailed budget we considered last night had been before the public for 38 days. Every person who wished to have a say in the budget was given an opportunity to do so and they were heard. Thank you for your participation.
Nils Ribi
Response to Fiscal Year 2010 Budget Comments:
In my role as Council President, I have a responsibility to make sure accurate information is disseminated to our citizens.During the past year our City Council adopted a number of policies and procedures to guide the Council’s annual budget process. Council procedures include a Council Code of Ethics and an agreement on Council powers and authorities. Policies include Fund Balance, Debt Management, Revenue and Expenditure Management, and Property Tax Levy Policy. We also agreed to respect each others’ opinions and, after decisions have been made, accept them and move forward. Our Fiscal Year 2010 Budget process, which we concluded on July 30, 2009, produced good discussion with the public and the Council, where all received unlimited time to be heard.
In a Letter to the Editor in the August 12, 2009 issue of the Idaho Mountain Express [here], Councilmember Lamb presented inaccurate information about the City of Sun Valley’s Budget and its finances. Letters to the Editor with erroneous information do not help us move forward and are divisive. It is unfortunate that Councilmember Lamb has chosen not to follow the policies the Council has adopted.
While we can all appreciate any Council Member’s right to vote against the City’s FY10 Budget, I respectfully disagree that one should be able to publicly print inaccurate information about the subject and have that misinformation stand uncorrected. I have addressed each point from Councilmember Lamb’s Letter to the Editor regarding the FY10 Budget (her statements are italicized and in quotes) and the corrected information follows.
1. “It has a 20 percent (just under half-million-dollar) increase in personnel expense over 2009 and over three-quarters of a million dollars since 2008.”
Line items in the FY08 and FY09 City financial statements that Councilmember Lamb uses for comparison do not include the entire Street Department salaries and benefits or a portion of administrative salaries in FY08. Prior to FY10, Street Department expenditures were kept in a fund separate from the General Fund. By combining them in FY10 we will be able to do better cost tracking and financial planning over the years to come. Additionally, during the transition in City Administrators during FY08, the expense for the position was charged as an external contract, not as a personnel expense. Also, there were unusual vacancies in certain positions in FY08. The City is finally catching up with several understaffed and underpaid positions in the Fire Department in the FY09 and FY10 Budgets. The Fiscal Years of 2008 and 2009 to 2010 are not appropriate apples to apples comparisons the way Councilmember Lamb presents them. This incorrect basis is continued in statements about “increased costs“ below.
2. “It uses fund balance reserves (savings accumulated over many years) to pay for these increased costs.”
The fund balances Councilmember Lamb refers to were built primarily from bond proceeds and were used to pay for capital improvements and capital equipment, including a fire engine and major street renovations. What remains are savings built specifically for tough times like these so the City can continue to provide its citizens and visitors the services they expect.
Historical and future revenue and expenditure projections considered by the Council during the Budget deliberations demonstrate the City’s continued financial stability. Projected fund balances comply with Fund Balance Policy adopted by the Council.
3. “A quarter of a million dollars of city revenue currently being used for debt service on infrastructure bonds will also be used to pay for these increased costs, thereby requiring the payments on future bond debt to come from additional tax levies.”
This debt is actually a note, not a bond with a separate tax levy. It will be paid off in full at the end of this month. The Council actually budgeted $375,000 for infrastructure improvements next year that we are able to partially pay for with the money saved by not having to carrying this debt. Also see Item 5 below regarding future financing of infrastructure and where we are spending on infrastructure in the Budget. See the issues about “increased costs” discussed in Item 1 above.
4. “$1.5 million of fund reserves has been spent in the past two years, which together with the approved 2010 amounts will diminish the fund reserve balances to under a half million dollars, exclusive of the mandated 16-week operating reserve. If fund balances continue to be used to pay operating expenses and tax and fee revenue does not increase significantly, this surplus will be depleted in the next two years and cuts in services will have to be made.”
This point contradicts Councilmember Lamb’s argument in Item 2 above. The fund reserves were built to purchase a fire engine (done), and for specific major street renovations (done). My Fund Balance Analysis of last year’s budget [here] and this year’s budget [here] show that we are carefully bringing the fund balances down to an appropriate and sound level. Too large of a fund balance is not fair to current taxpayers. It is inappropriate for a government agency to tax current taxpayers in excess of current needs. Maintaining a fund balance in excess of policy or without a plan for use of the funds is also inappropriate. See my response in Item 5 below which explains why the City will not deplete the appropriate surplus.
5. “Repair of city roads and other infrastructure needs are not addressed in this budget, so while it may appear that the overall spending is declining, this budget has over $1 million less in infrastructure, related debt service and fixed asset purchases than each of the 2008 and 2007 budgets did.”
As the Council discussed on numerous occasions during the seven times the Sun Valley City Council met on the FY10 Budget, we are in the process of preparing a Capital Improvement Program (CIP) which takes a comprehensive look at long-term infrastructure and capital asset needs. Citizens will have an opportunity to review and provide input on the CIP. Once that program is complete, we, as a Council, will then address how to finance the CIP appropriately through long-term financing. Fortunately we have the final piece of City debt being paid off in 2010. That, combined with our solid financial position, will give us the opportunity to structure a well thought-out plan in an effort to minimize the impact on our tax rate. This is a very important piece of information that our citizens need to know in order to see the full picture.
It is also important to point out that the FY10 Budget does include over $375,000 for major road repairs and another $250,000 for normal road repairs and maintenance.
6. “This budget assumes a 3 percent property tax increase on top of a tax rate that is already considerably higher than neighboring jurisdictions, and is difficult to justify in an economic environment of declining labor and material costs.”
No Council Member offered an amendment to the budget to reduce the 3% property tax cap the State of Idaho imposes. Only Councilmember Briscoe and I offered an amendment to reduce the Budget. The claim made by Councilmember Lamb that Sun Valley’s tax rate is “considerably higher than neighboring jurisdictions” is not completely accurate. To give you an example of how Sun Valley compares with our neighboring jurisdictions, here are the latest core city tax levy rates per $100 in assessed value, as provided by the Associated Taxpayers of Idaho:
Jerome 0.8037354
Shoshone 0.6990200
Twin Falls 0.6592610
Fairfield 0.4118541
Bellevue 0.1506617
Hailey 0.1287042
Stanley 0.1222106
Sun Valley 0.1116119
Ketchum 0.0798708
The only jurisdiction we are higher than is Ketchum. Many who are knowledgeable in municipal finance will argue that Ketchum’s tax rate may actually be too low in comparison to their operational needs.
The City Council’s adopted Property Tax Levy Policy guides us in the analysis and adoption of the property tax levy. We applied and followed that policy when we adopted the FY10 Budget.
We will continue to add to our City Council Policy Manual in an effort to
make your government more responsive and accountable. Your City is financially
sound, and above all, we are working to make sure it is as transparent as
possible by providing you with factual information.
City of Sun Valley Fiscal Year 2010 Budget:
The official Public Hearing on the FY10 Budget will be held on July 30, 2009 at 4 pm in Sun Valley City Hall. I have prepared a Fund Balance Analysis of the Tentative FY10 Budget which the Council will consider. Click here for my blog about the Tentative Budget.