Politics from the Palouse to Puget Sound

Wednesday, July 26, 2006

Pullman Grows, Budget Shrinks, PARD To Blame

There was a story in today's Moscow-Pullman Daily News about Pullman's growing budget crisis:

Skyrocketing employee costs will leave the city of Pullman feeling the squeeze of budget cuts in 2007, despite some unexpected gains in property and utility taxes.

Pullman Finance Director Troy Woo wore a dour expression as he gave his mid-year financial report and year-end projections to the City Council Tuesday night, including an estimate the city will end 2006 with about a $500,000 deficit that will have to be covered by cash reserves.

That’s about half the deficit Woo had expected when the budget was adopted in December, meaning the city will end the year with about $2.6 million in its coffers.

That number most likely will drop by about $1 million by the end of 2007, Woo said. He estimated the city’s cash reserves will be depleted by 2009.

Woo’s estimates have historically been slightly more conservative than reality. Expenditures for the first half of the year were about 49 percent of the projections in the 2006 budget. Current estimates put total expenditures for the year at about $12.9 million, or about 96 percent of the $13.4 million budgeted for the year.

Revenues are up slightly because of unexpected bumps in property and utility taxes, largely because of the boom of new construction the city has seen over the last couple of years, Woo said.

Total general fund revenues through June 30 were slightly ahead of projections, coming in at about $6.3 million, or 51.8 percent of budget projections for the year. Woo expects to end 2006 with a total of about $12.5 million, or nearly $300,000 higher than the $12.2 million anticipated when the budget was adopted in December.

Another positive sign comes from a comparison between 2006 and 2005. By June 30, 2005, revenues were at about 49 percent of projections.

There is little cause for celebration despite some positive gains, Woo said.

“At mid-year, it’s looking like a tough budget year for 2007,” he said.

New construction appears to be slowing, although Woo is hopeful the city will see a bump in sales tax from projects at Washington State University and the Pullman-Moscow Highway expansion. Any construction done within city limits is taxable to the state, and Pullman gets a piece of the pie, he said. The biggest cause for alarm in 2007 is a projected $292,803 increase in employee salaries for cost-of-living raises. Raises are tied to the consumer price index for Seattle-Tacoma-Bremerton, which jumped to 4.6 on July 1, Woo said.

The national consumer price index is 4.2 percent, City Supervisor John Sherman said.

Another $116,397 will pay for 9 percent increases in employee health insurance premiums, and $101,836 will fund state-mandated increases to employee pension schemes.

Woo calculated the city will need to somehow bring in an extra 4.2 percent in income in 2007 to meet its rising employee costs.

“I think it’s more likely (2007) will be a budget that is reduced and not one of expansion,” Woo said.
Let's recap shall we? Another $500,000 will have to come out of the city's cash reserves, which will be depleted by 2009 and budget cuts forecast for 2007. This at a time when Pullman is experiencing record growth and construction. The city council last night approved FOUR new subdivisions. And as I reported recently, Pullman will be adding 500 new jobs over the next few years.

What's wrong? Simple. Washington has no state income tax, relying instead on property and sales taxes. Property taxes can only go so far, as Pullman is already maxed out on the rates. Sales tax from new construction, as pointed out in the article above, comes and goes in spurts. No, the problem is that Pullman continues to suffer from retail sales tax leakage, which affects the general fund.

Infrastructure demands (streets, sewer, fire, police, etc.) will continue to grow with the increased population and increased work force, but Pullman will continue to fall behind more and more in its budget needs as those residents and workers take their retail sales tax dollars elsewhere.

Simple economics. A Pullman Wal-Mart Supercenter, based on an anti-Wal-Mart group's own numbers, would generate annual sales tax revenue of $552,500. Combine that with annual property tax revenue estimated by the Whitman County Assessor’s Office at $229,000, that's $781,500. Throw in utility, B&O and other taxes, and we're talking about close to a million extra dollars a year for the general fund. Problem solved.

But, not so simple to PARD. They are putting their own left-wing, elitist ideology and intellectual vanity above the city's best interests. If PARD had not appealed the city's decision to approve Wal-Mart, we wouldn't be facing this problem. As it is, the city has already spent $20,000 badly needed tax dollars to fight thie frivilous appeal, with tens of thousands more yet to come.

Be sure to thank a PARDner when the budget gets cut next year.

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Scotty said...

We are very lucky there are very smart people at the university who are looking out for our best needs, and those of those poor deer who will not be able to reproduce offspring...

Scotty said...
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