Sean C. Morgan
The City of Sweet Home Budget Committee held off on final decisions Monday night, April 29, after hearing objections from three people regarding a plan to transfer funds from the police and library operating levies to a new Internal Services Fund to pay administration and finance costs.
Budget Committee Chairman Dave Holley suggested waiting until Tuesday evening to avoid rushing a decision.
Budget Committee members spent the evenings of Thursday and Monday reviewing the proposed 2019-20 budget, which takes effect at the beginning of the next fiscal year, July 1, if adopted.
Finance Director Brandon Neish outlined the reasoning behind the new fund, something that City Manager Ray Towry called a “best practice” that is used in many other cities.
Under the arrangement, city departments would transfer funds to the Internal Service Fund to pay for the city manager’s office, the Finance Department and non-departmental expenses, services that are used to support the operations of the library and Police Department, Neish said.
The city has already had a practice of transferring Public Works funds, which are primarily from the state gas tax and utility rates, to the General Fund to help pay for those services while neither the Police Department nor the Public Library have.
Neish and Towry proposed charging the Police Department approximately $191,000, approximately 6.5 percent of its operating expenses, and the Public Library $48,000, approximately 10 percent of its operating expenses.
The city has not charged those two departments administration or finance fees in the past, and at times, the city has transferred money from its General Fund to cover budget shortfalls in the levies.
“The General Fund in the next five-year picture was not looking so rosy,” Neish said.
He displayed a spreadsheet showing a negative balance of about $465,000 in the General Fund beginning in 2022, about $936,000 in 2023 and about $1.4 million in 2024.
“We asked the library and Police Department to contribute to those general operations,” Neish said, explaining that would help stabilize the General Fund. With the transfers, the General Fund would be in solid black over the next five years.
He said it also increases transparency in budgeting.
“I have a big problem with this $230,000,” said Councilor Diane Gerson of the transfers. “I don’t see where some of these expenses apply to the levy. Just because we can doesn’t mean we should.”
She pointed to items like advertising and the council’s community grants program, which were included in the list of charges. Each of those levy-funded services already has its own line item for advertising.
Gerson said she has discussed this with the Library Board, of which she is a member.
“The Library Board’s position is it would make more sense to take a certain percentage out,” she said.
The General Fund has had to help the levy-funded departments in the past, Gerson said. “We don’t want to be in the position to have to do that again.”
Towry told the committee that with this decision, down the road, the General Fund would be healthy enough to help the Police Department or the library.
Community members at the meeting raised concerns about the plan.
“I really think that because the police and library are levy-supported, you’re going to have an issue with the people at large that will not see this as transparency,” said Gary Jarvis, a Sweet Home resident.
With the General Fund projected to go into the red and the library and police levies being charged service fees, “people are going to feel like they’ve been robbed,” Jarvis said.
He asked whether it wouldn’t be better if the city proposed this the next time the levies go to the voters for approval.
Decisions like this affect the willingness of the people to vote for levies, Jarvis said.
The next levy vote would be prior to the 2021-22 fiscal year, which begins July 1, 2021.
Gerson said she was torn on the issue, but the Budget Committee reached a consensus to accept it Thursday night, April 25.
With the explanations, Holley said, he can agree with the proposal.
By Monday evening, the proposal had been altered, with the Police Department’s contribution to the Internal Services Fund reduced to $180,000 and the library’s to $47,000.
Towry said the city wants to make sure it gets it right. He and Neish met with Library Director Rose Peda and Police Chief Jeff Lynn to look at the numbers closer, to ensure that only expenses related to their departments were included.
“Municipal budgeting is not simple,” Towry said. “It’s complicated and not always straightforward. That being said, we want to do it right. We want to pass something that is defendable, open and fair.”
Neish said the transfers should be something “centered around what really does belong” in the administration services fund, and what is palatable to the community, to the public.
They removed some items, including street lights, lien search fees, labor relations, tourism, office supplies and a number of items.
They moved some of the expenses, such as property and casualty insurance, directly into the department budgets, Neish said.
City officials did not say|Monday how much was moved into the department budgets as a result.
The changes reduced the total amount of administration costs for non-departmental expenses from $327,000 to $292,000, an amount split among all departments but offset by franchise fees. The move reduced the proposed transfer by about $7,000 for the Police Department but increased the Library’s transfer by about $500.
Also part of the calculation are $43,000 and $23,000 in finance fees based on the time and overhead required to process checks, a reduction from Thursday’s proposal of about $2,000 and $1,000 respectively to the proposed transfers from the Police Department and Library.
The transfer in both Thursday’s and Monday’s meetings included $325,000 for the city manager’s office and materials and services. The total is spread among the city’s departments, based on their number of employees, with the Police Department contributing $144,000 and the library contributing $24,000. Public Works will contribute $96,000, and the General Fund will contribute $60,000.
A second worksheet provided by Neish Monday night showed that without the transfers, the General Fund would have a negative balance of $207,000 in 2022-23 and a $519,000 shortfall in 2023-24, declining from a balance of $1.2 million in 2018-19.
If the city doesn’t make the transfer, it will need to find $167,000 to cover the reduction to meet requirements to maintain four months of operations, Neish said.
Retired Police Chief Bob Burford addressed the committee Monday night.
“Temporary levies are just that, temporary,” he said. “Sweet Home voters have been supportive of both the police and library levies, but I believe the past support for these levies is due to the city keeping its commitments and standing true to the old adage of, ‘Say what you mean and do what you say.’”
During his 19 years as police chief, he said, “I made sure every dime of voter funding went where I said it would at the time asked for vote support.”
“I believe Chief Lynn has continued this practice.”
Regarding this transfer, “even if the General Fund doesn’t ask for an even bigger transfer in 2020, that’s still $360,000 of redirected funds over the two years of the remaining levy,” Burford said. When the city passed the current levies, the ballot asked whether the levy should “maintain services for another five years.”
The ballot summary for the levy stated: “All revenues received will be used to provide continued funding for the City of Sweet Home Police Services operations through June 2021.”
Burford said: “Not once during the lead-up to this election did anyone with the city advise the voters that monies allocated by voters for police operations would instead be transferred into the (Internal Services Fund) for non-law enforcement purposes.”
If the City Council deems the transfers necessary, Burford suggested, the council and Budget Committee should hold off on the transfers until the levy is renewed. At that point, he said, the city should tell voters what it plans on doing and the rationale.
“If your reasoning is sound, I’m sure voters will agree,” Burford said. “But more importantly, you will be maintaining the integrity and trust that many of us have worked so hard to achieve.”
Neish responded: “It’s going to support the operations of the Police Department.”
Det. Cyndi Pichardo has been with the Police Department for 20 years, she said. She is president of the police union and owns property in the community as well.
“I seriously enjoy working in this community,” said Pichardo, who lived in the city when the current levy was on the ballot.
A $180,000 transfer from the dedicated police levy, she said, “is huge to me.”
“We have a department that needs a lot of things,” she said. She has seen equipment fail, and $180,000 per year would be useful for police services, but she was also concerned about the long-term picture.
“If we lose that public trust, we’re not laying people off,” Pichardo said. “Our department closes, period. You tell the public what you plan on doing and you get their opinion before you do it.”
Committee member Bob Briana said it’s clear to him that the transferred money is being used for the Police Department.
Towry said the services in question are actually functions of running the Police Department. “Historically, the city has chosen to support the Police Department functions that could not be supported through the levy.”
Because of financial improvement, the levy is able to support itself in its entirety now, he said.
Police property tax revenues have increased by more than 38 percent since 2016-17, from $2 million to a projected $2.8 million in 2019-20. Library property tax revenues also have increased by more than 38 percent over the same period, from $309,000 to a projected $422,000 in 2019-20.
“Somebody’s got to pay their bills,” Towry said. If those departments didn’t have their own finance and executive departments, they would still have legal fees and requirements it needs to pay. If they had to hire someone to do it, those are the costs the transfer covers.
These are Police Department expenses, said Dave Jurney, a committee member. “We’re not taking a nickel from the Police Department.”
“One hundred eighty thousand is still a pretty good hunk of money,” Burford responded. “That pays for two finance directors completely.”
He argued the same in the past when this kind of proposal came up, he said, telling the committede that the city needs to say so when it goes out for the next levy.
“You make a good point,” Holley said. “It should be brought up ahead of time.”
If the city doesn’t change the way it’s handling internal services, then the state gas tax-funded streets and the other departments must cover all of the costs of administration, he said, and some 24 to 26 of the city’s employees would not be bearing any of the cost.
Burford said: “I went out in 2015 and publicly spoke in support of this levy. I don’t know that I would do that again.”
Pichardo said she advocated for it in 2015 too.
“I can’t sell what is being proposed right now,” she said. “I can’t support that, and I can’t get behind it.”
Jarvis called the proposal “immoral.”
“I believe it’s a misappropriation of funds,” he said Monday, noting that the explanation on the ballot said the funds were to be used to fund police and library services.
City staff are obviously interpreting that to mean administrative and financial costs, he said. “But they are interpreting it very permissively.”
He asked whether, the next time city officials find a gap in funding, would the city would start charging its own departments rent for the buildings. He wondered aloud whether the city would find a connection between stop signs, traffic lights, street lights or dangerous trees to public safety and charge the Police Department.
The transfers would eradicate the willingness of voters to pass levies, he warned. It’s hard to win trust, and once lost, it will take years to recover.
“The amount that is being offered is way too much for the actual services being provided by the city,” Jarvis said.
“I believe it goes away from previous commitments. It is incumbent on you to wait till the next levy.”
Gerson responded: “I’ve made no bones about the fact I’m not happy about this either.”
Councilor Dave Trask acknowledged that “we asked, in my opinion, for a lot of money” in the levy. “I was shocked that it passed. I was grateful it passed.”
As a devil’s advocate, he pointed out that when “you turn on your lights, you pay a bill,” and the same goes for water.
“I’m not happy with this, either,” Trask said. “This council may say, ‘No, we’re not doing this.’”
It also might not, he said, but “we have tried our darnedest to protect you guys,” noting the addition of two new sergeant positions last year.
Burford said he also thought the increase in the tax rate, $1.45 per $1,000 of valuation for police and 35 cents for the library, was risky. He also agreed that the council and Budget Committee have been supportive, but he wondered what has changed over the years to create a situation in which the city finds the need to transfer funds to pay finance and administration costs.
He thinks funding is in a growth spurt, like in the mid-2000s, but that’s going to ebb and flow.
Holley said that the fact that the levy is rate-based is “the biggest reason this has become an issue this year.
“There’s a lot more money there than we thought.”
Present at the Budget Committee meeting Monday evening were Greg Mahler, Gerson, James Goble, Lisa Gourley, Trask, Derek Dix, Holley, Jurney, Gerritt Schaffer and Briana. Absent were Susan Coleman, Cortney Nash and Kenneth Hamlin. Nash and Coleman also attended on Thursday.
The Budget Committee reviews the city’s proposed budget. It includes all seven city councilors and up to seven members of the public. The committee decides whether to approve the proposed budget and recommend adoption of the budget to the City Council.
The City Council must hold a public hearing and adopt a budget prior to July 1, the beginning of the next fiscal year.
The committee did not approve the budget by press time. It planned to meet again Tuesday night, April 30, to consider approval.
Details about the budget will appear next week. The proposed budget is available for public review at the city’s website, sweethomeor.gov under the link “finance” under “department.” Click on “city budget” to find a PDF of the proposed budget.