by Caitlin Fowlkes Ashland TidingsSunday, March 24th 2019
Ashland City Hall
The city of Ashland faces a $2 million deficit in its general fund for the next biennium.
Financial Director Mark Welch said at the City Council’s budget meeting Wednesday he hoped to release a plan to eliminate the deficit on April 17.
In an interview Friday, he said the key is analyzing every department and finding ways to reduce or outsource expenditures without impacting the community’s quality of life.
Welch said employee salaries and Public Employees Retirement System costs make up about 70 percent of the city’s expenditures for the general fund.
Salaries and wages are estimated to increase by about 2.5 percent, equaling a little less than $9.1 million in fiscal year 2019-20, and increase about 2 percent more in 2020-21, Welch said.
The PERS rates are estimated to increase 25 percent, or $450,000, in the next biennium, Welch said.
“We pay the rates they tell us to pay,” Welch said.
To help reduce the next biennium’s deficit, Welch said during Tuesday’s City Council meeting that revenue from the transient occupancy tax will be distributed differently this year.
TOT revenue is used each biennium to meet state requirements to support tourism and infrastructure and to implement City Council goals. A resolution that was passed Tuesday leaves a restricted component, which funds tourism and makes up about 70 percent of the total, alone, while holding the rest for possible deficit reduction. That money in the past has gone toward the city’s economic development program and small grants for other organizations. Last year the TOT rate was increased from 9 to 10 percent, said Adam Hanks, assistant to the city administrator.
Citizen Budget Committee member Shaun Moran said the city’s budget is not sustainable and that there is a structural deficit issue.
“Money doesn’t grow on madrone trees,” Moran said. “Councilor Slattery said it, we need to take a deep breath in and realize that we have to live within our means. We have to prioritize.”
Welch said the city has seen an ongoing deficit for the last three to four years of about $1.8 million.
In addition to dealing with a deficit, the City Council faces decisions on large capital improvement projects, including a City Hall remodel at an estimated $12 million to $19 million and a proposed project to pipe part of the Talent Irrigation District canal in Ashland a cost of between $2.4 million and $4 million.
“It’s going to be a tight budget process,” Welch said at the Wednesday meeting. “There’s going to be a lot of tough decisions.”
When asked if the city should hold off on some of these projects until the budget is more stabilized, Welch said that delaying projects makes them more expensive in the long run and that would be a disservice to citizens. It takes continuous improvements and maintenance to keep the systems in place, he said.
Some citizens have expressed concerns that the city is sitting atop a cash pile of approximately $49 million. Welch also addressed this at the budget meeting.
He said because the city operates many services, including city-owned utilities, about $30 million is restricted in enterprise funds to maintain those systems and to build a reserve for large capital improvement projects. That money is not able to be moved into different operations.
He said the remainder is allocated to different “special reserves,” such as the street fund and insurance services. Information on what money goes to what reserve can be found at https://bit.ly/2HApceF.
He said the city tries to keep a 60- to 90-day cash reserve for some funds necessary for daily life such as the water fund. The water fund has been accumulating savings from increased utility bills to pay for a new water treatment plant to be constructed at the end of the year, or early next year.
“Because they’re so critical to life, they can’t run out of money,” Welch said.
“We want this budget to set the city up for success,” he said.
Mayor John Stromberg said he couldn’t comment for this story until staff has presented more information.