Sean C. Morgan
City Manager Ray Towry outlined a relatively optimistic city budget proposal for 2020-21, but that optimism is tempered by uncertainty caused by the COVID-19 pandemic.
Towry delivered his annual budget message to the city’s Budget Committee on April 29. Members of the committee received copies of the proposed budget and were scheduled to begin deliberations about the proposal this week, with possible approval next week.
The proposed budget is $34.7 million, up from $23.9 million in 2019-20. Towry said the additional $10.8 million primarily includes grants allowing the continuation of the Wastewater Treatment Plant and Sankey Park improvement projects.
“This budget makes relatively positive assumptions and is opportunistic for the next year with the clear understanding of the need to be responsive to changes in revenue going forward,” Towry said. While the last three years, the city has successfully forecast General Fund revenues within 1 percent, the tools the city uses to project budget forecasts “went out the window with the onset of the COVID-19 pandemic. There is no trend to apply in this situation; and while there are ever-changing state projections we refer to, a crystal ball may prove to be the best tool we have for this budget. There is no blueprint or template to follow for our current situation.”
Changes in property taxes are delayed by at least a year as valuations change in the real estate market, Towry said, so city staff are cautiously optimistic about the 2020-21 fiscal year.
The budget does anticipate falling revenue in some areas, like state pass-through taxes, the gas tax and the transportation payroll tax, Towry said. Both are used in the street division. The city also anticipates decreases in revenue from the transient occupancy tax, an increase in uncollected property taxes and no change in compression, which is the effect of statewide property tax limitations.
Compression was at 19 percent last fall, which means 19 percent of property taxes levied on property was not imposed. That figure is down from 38 percent in fall 2014.
Towry said city staff anticipates that compression will increase by the 2021-22 fiscal year based on decreases in property values as a result of a COVID-19-related recession.
For 2020-21, the budget preserves many capital projects, Towry said. “However, we are aware of the looming uncertainty and have forecast for it. We present this budget knowing full well some of it may not come to fruition as a result of the COVID-19 pandemic’s effect on the economy.”
If the city should have the funding in the budget, decreased costs for materials may present an opportunity to realize savings in projects and help stimulate the local economy at the same time, Towry said. In order to take advantage of lower market prices, the projects must be in the budget.
Going forward, Oregon law requires the council to accept bids and approve contracts, he said.
Based on projects, the budget preserves at least five to six months of operating expenses in all funds through 2024 except for the water and wastewater funds, which remain at two months, Towry said
The city enacted a spending freeze in March with the onset of the pandemic, Towry said. That will bolster a large cash carryover into the next fiscal year, which begins July 1.
Towry said that if the economy does not rebound, he fully expects that the council may cut back on an approved increase in water rates that remains lower than they were for most customers two years ago. If that happens, the city will need to cut back on three planned water projeccts.
In the police levy, the budget proposes reducing the tax rate by 30 cents, from $7.85 per $1,000 of assessed value to $7.55, a reduction in revenue and savings to property taxpayers of $230,000.
“City Council stated they would not collect the entire Public Safety Levy if was not needed,” he said. “This budget follows through on that council promise.”
The expected increase in unpaid property taxes and estimated loss of revenue equates to about $400,000 less in revenue to the Police Department than last year.
As a result, Towry said, the department is not filling two full-time equivalent police officer positions. Those positions are vacant through attrition. One remains in the budget, and with council approval may be approved later in the budget year, returning the department to 2020 staffing levels.
Towry told The New Era the city cannot fully afford to reduce the tax rate to the 2015 level, an additional $1.15 per $1,000.
“We’re doing the best we can with what we’ve got,” Towry said. The department has had a number of expenses in recent years, including a fleet of replacement patrol vehicles that aged together after a 2012 pursuit ended with multiple damaged patrol vehicles. Insurance replaced them simultaneously.
The department was reorganized, with two new sergeant positions; and a citizen member of the Budget Committee successfully sought the addition of a second detective two years ago, Towry said. “I think you can look at the department and see the benefits already. Crime rates are down.”
“We’re trying to provide the best service we can to the community in the most efficient way possible,” Towry said, and since 2015, the city has had a lot of feedback that police services are important. “What we’re doing is in response to requests from the community. We’re trying to do that the best we can to provide the level of service the public is asking for and still following through on the promises.”
Finance Director Brandon Neish noted that every year, the public has an opportunity to comment on the budget during the budgeting process, which includes the tax rate.
Library funding, also provided by a property tax levy, is projected to remain relatively flat, Towry said in his budget message. Any decrease in property values won’t be reflected until the following budget year.
Voters approved a 35-cent increase in 2015. That rate remains unchanged in the proposed budget.
“There are plans and support for a new library building,” Towry told The New Era. “We’re trying to be prudent with our operational spending,” and what it can, the city is saving for a potential new building.
“This budget is designed to allow the community to continue moving forward and take advantage of falling market prices for goods and services, while allowing the City Council to maintain control over expenditures and adjust as needed,” Towry concluded in his budget message.
The Budget Committee elected Kenneth Hamlin to serve as chairman and David Lowman to serve as vice chairman.
Committee members present at the meeting were councilors Cortney Nash, Susan Coleman, Lisa Gourley, Diane Gerson, James Goble and Dave Trask; Mayor Greg Mahler; and citizen members Robert Briana, Derek Dix, Hamlin, Dave Jurney, Lowman, Gerritt Schaffer and Lisa Willson.
The committee met in-person with some members meeting through videoconferencing software.
The next Budget Committee meeting was scheduled for May 5. Additional meetings are scheduled for May 14 and May 19. All meeting times are at 6 p.m. The public may attend by calling City Hall at (541) 367-5128 or by using Microsoft Teams with a link available at http://live.sweethomeor.gov, which is also listed as a link in the agenda PDF for each meeting, available through the city’s calendar at sweethomeor.gov.