But there are still several details that need to be ironed out, and much of the information needed to make final decisions is incomplete.
Like in most years, Homer’s 2007 budget has become a complex equation filled with unknown variables. The solution to that equation may come Dec. 11 when the council votes on proposed changes and could vote on the entire budget at its regularly scheduled meeting.
Until then, Homer citizens can give their feedback or ask questions at a public open house on Friday at city hall from 6-7:30 p.m.
In the early rounds of debate Monday, the city’s sales tax projections took the biggest hit.
Council member Mike Heimbuch called into question the method used to determine the growth rate of 9 percent for sales tax revenues.
The method looked at revenue generated from the sales tax and did not take into account last year’s 1 percent tax increase, therefore skewing the projection upward, he said.
If you look at growth in taxable sales instead, you get a different picture, Heimbuch said. “The growth in taxable sales was different than the growth in tax revenue,” he said. “It paints a different picture.”
Even if the growth in taxable sales is used to determine the projected growth rate for 2007, that number would change depending on how many years of data is used to determine the rate, he said.
Go back three years, the growth rate would be around 5 percent. Go back four and it would be closer to 8 percent, he said.
While all this might sound like merely an accounting issue, the real-world strains a lower growth rate would have on the budget would be felt in nearly every city department. As it stands, there is less than a $150,000 surplus projected in the city’s entire $21.2 million budget.
That surplus would evaporate or become a deficit with a lower projection.
Since the budget must be balanced, a projected deficit could force the council to put a stop to any new city hires, including a widely supported new position at the Homer Public Library. It also could halt a proposed increase in city employees’ cost of living increase — something many council members and city department heads view as essential to keep the growing city working efficiently.
The proposal would increase city employees’ bi-annual cost of living adjustment from 2 percent to 3 percent. The total cost of this proposal is $74,388, and finding the money in the budget could be tricky.
There was some reason for optimism at Monday’s work session that a solution could be reached, however. And it, too, came from accounting.
According to City Manager Walt Wrede, the city could make up the difference from lower than projected sales tax revenues with higher than projected property tax revenues. Property tax revenue projections in the budget were calculated at a conservative 2 percent growth as the city waited for more up-to-date information from the Kenai Peninsula Borough. When the new assessments came in last week, the city found that the growth was closer to 7.5 percent. Therefore the city could, once again, afford new city hires and a COLA increase.
Increases to revenue also could come from Homer Electric Association’s rate increase, which would give the city more sales tax revenue, and a proposed per-person tax on charter clients making its way through the Kenai Peninsula Borough Assembly, said Regina Harville, the city finance director.
There was no data as to how much the HEA rate increase could mean for the city at Monday’s meeting.
The assembly will hold a public hearing Jan. 2. on Ordinance 2006-41, which, if approved, would delay implementation of the new per-person, per-day sales tax provision applying to certain recreational package sales.
That provision was set to go into effect on Jan. 1, 2007. However, the administration said there were several issues that had to be ironed out before the tax could be collected.
One proposed change to Homer’s budget looks to have gained some support in the council and will pay for itself.
If approved, the city would increase water and sewer rates slightly in order to pay for new employees needed to maintain an ever-growing system. The plan would cost the average city resident $3.23 per month for water and sewer, said Harville.
Another part of this proposal aimed at spreading maintenance costs over more customers would raise the turn on/turn off fee $45, add a dwelling unit charge for multi-family customers (like hotels and apartment complexes) and continue billing service charges when service is turned off by seasonal residents.
The proposal would raise more than $112,000 and allow the public works department to hire two new employees without digging into the general fund.
All of this wrangling and number crunching could become a moot point, however, if the Alaska Legislature decides to reinstitute some form of revenue sharing for 2007, or help by taking on more of the Public Employee Retirement System/Teachers Retirement System (PERS/TRS) debt funding.
District 35 Rep. Paul Seaton R-Homer, testified at Monday night’s special meeting that the Legislature is looking at a $50-million revenue sharing package that would help the state’s municipalities.
The Legislature also is looking at ways to pay the PERS/TRS debt, but Seaton warned that it is currently looking at only a partial payment, not taking over the debt entirely at this point.
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