Plan to transfer funds from cops, library OK’d by city budget panel

Sean C. Morgan

The City of Sweet Home Budget Committee approved the city’s proposed budget 10-0 on April 30, accepting the creation of a proposed Internal Services Fund that will draw money from the city’s various departments, including nearly a quarter of a million dollars in police and library levy funds to pay for administrative and financial services provided by other city departments.

City officials argued that the proposal was necessary to keep the city’s General Fund in the black. It also would mean that the police and library departments would begin paying for administration and finance services, $180,000 and $47,000 respectively, part of the cost of operating and something Public Works had already been doing.

Under the proposal, the city’s executive and finance departments move to the Internal Services Fund, and the General Fund itself would transfer money as well to pay for their services.

City Manager Ray Towry said that internal service funds and charges are a “best practice,” according to the Government Finance Officers Association and many other cities use it.

During a meeting on April 29, a police detective, a retired police chief and a member of the public criticized the proposal, urging the committee and City Council to hold off until the next police and library levy elections.

They explained that when voters approved this levy, the city was asking for funds to pay for library and police services – not transfers to administration, finance and General Fund services – “for non-law enforcement purposes,” as retired Police Chief Bob Burford explained.

“Those of us who opposed the use of levy funds to be back-doored for service costs brought copies of the levy language and the Q&A, and read them aloud at the meeting,” city resident Gary Jarvis told The New Era. “That Q&A posed the question: ‘What happens to money from the levies?’ The answer was ‘The tax revenue can be used only to help fund Sweet Home Police Operations.”

Jarvis emphasized the word “help.”

“The answer does not say that the fund is the only source of police or library funding,” Jarvis said. “It says that it is exclusively for use in helping fund the police and library. Accordingly, the levy measures expected monies other than the levy funds to support the police and library.

“What this language says to me is that there is a one-way transfer mechanism for funding of police and the library: money to the police and library from the city and money from the levies to help to fund those entities. It implies it is a one way street, not a two-way street.”

Jarvis sent a letter to the members of the City Council, whose members serve on the Budget Committee, prior to the April 30 meeting explaining his objection to the proposal.

Councilor Dave Trask responded to the letter April 30, noting his agreement with Councilor Diane Gerson’s earlier comment, mentioned in the letter, that “just because you can do does not mean that you should.”

Trask said that despite the letter’s claim that Jarvis did not wish to demean the Budget Committee, that was exactly what happened.

Trask objected to Jarvis calling the transfer a “money transfer scheme.” Trask said he looked up the word “scheme,” which is defined as to “make plans, especially in a devious way with an interest to do something illegal or wrong.”

At the end of the letter, Jarvis said “I believe this appropriation of dedicated funding to be immoral.”

“In the conversation, I also hear that what was proposed is unethical and immoral,” Trask said. “I have been called a lot of things. But I have never been accused of being unethical or immoral. I am offended by those statements, and it is outrageous.”

The Budget Committee accepted no further response or public comment during the April 30 meeting.

“I certainly did not say it about him,” Jarvis told The New Era, noting he never used the word “unethical” at all.

“My letter never challenged Mr. Trask’s integrity, character or ethics. I didn’t call anybody immoral. I never called Trask immoral.”

Specifically, Jarvis said, he called the proposed new practice an “immoral” act, noting that the letter and Trask’s response preceded the vote on the budget.

“There’s a huge difference between what I said and what Dave is couching it to be,” Jarvis said.

Without making the transfers, said Finance Director Brandon Neish, the General Fund will have a negative balance beginning, a $207,000 shortfall, in fiscal 2022-23. The shortfall would grow to $519,000 the following year.

It would take cuts elsewhere, in parks, for instance, if the transfers were not approved, Neish said.

“What I’m hearing is we don’t have a choice,” said Garrett Schaffer, committee member.

“We always have a choice,” said Chairman Dave Holley. “(Removing the transfer) is not the best option in my view. There is nothing taken out of the Police Department budget or the library budget to accommodate this. Everything is still there.”

Trask said that administration and finance services are, in fact, part of the cost to operate the library and Police Department.

“This is a business,” he said. “It should be run like a business. Lastly, we have been blessed with an economy to let us give all the wants and needs to all of the departments.”

The library and Police Department have received funding for all of their requests in this budget, Trask said.

“The reason it is in that budget is because we have worked to save that money,” said Library Director Rose Peda. The police and library departments have been thrifty in their spending. “This isn’t right.”

She said the committee should at least look at $300,000 of a fund of approximately $500,000 set aside for economic development to solve the problem in the General Fund rather than transferring money from the police and library levies.

“I’m really trying to hold it together,” Peda told the committee. “I just can’t. If you want to censure me, fine; you’ll have my resignation tomorrow.”

Holley told her that would not happen as a result of her comments at the Budget Committee meeting.

That money has been there for the past three years, said Bob Briana, committee member, and she has a point.

The committee voted 10-0 to approve the budget, including the transfers, along with adjustments and a $50,000 increase in payments to pay off an $800,000 loan from the Water Depreciation Fund that is being used to pay for the remodel of the new City Hall.

The committee approved tax rates at $1.4157 per $1,000 of property valuation for the city’s permanent rate, which serves as revenue for the General Fund; and $7.85 cents per $1,000 for the police levy; $1.17 per $1,000 for the library levy.

To explain what would happen if the committee did not approve the proposed transfers and Internal Services, Fund, Neish presented a handout to the Budget Committ.

According to the handout, the General Fund had total expenditures of $2.33 million in 2014-15. It reached $2.44 million in 2015-16. It fell to $1.96 million in 2016-17 before increasing in 2017-18, last fiscal year, to $2.56 million. The average General Fund expenditure has been $2.32 million per year over the past four years.

The current fiscal year, 2018-19, which ends on June 30, has projected total General Fund expenditures at $3.03 million. Without the transfer, Neish projected that the city would spend $3.29 million in the General Fund in 2019-20, the fiscal year beginning July 1.

That is a 41.5-percent increase over the four-year average of actual expenditures from 2014-18 and a 28-percent increase over actual expenditures last fiscal year, 2017-18.

Projected General Fund spending for the current year, 2018-19 is an increase of 18.3 percent increase from last fiscal year, 2017-18.

Without the transfer, the increase in General Fund spending from this year, 2018-19, to next 2019-20, would be another 8.3 percent.

Going forward, expenditures in the projections continue at more than $3.1 million annually in the General Fund, reaching $3.46 million in 2023-24, resulting in negative fund balances in the General Fund as cash carryover, beginning fund balances, are spent down, from $1.64 million in 2018-19 to $-207,000 in 2023-24.

In the projections total General Fund revenues, including beginning fund balances, increase from $2.64 million in 2018-19 to $3.15 million in 2023-24. Actual General Fund revenues, including beginning fund balances, increased from $2.19 million in 2014-15 to $2.64 million in projections for this year, 2018-19, an total increase of 20.7 percent.

From 2014-15 to next fiscal year, 2019-20, revenue increases a total of 22.9 percent – from $2.19 million to $2.69 million – while expenditures increased by 41.8 percent over the same time period – from $2.33 million to $3.29 million.

Currently, General Fund revenues include primarily the city’s permanent tax rate of $1.41 per $1,000 of property valuation, building fees, court fees, liquor taxes and franchise fees, which it collects from Sweet Home Sanitation, Pacific Power, Northwest Natural, Comcast and CenturyLink.