Politics from the Palouse to Puget Sound

Sunday, December 16, 2007

"City points to delicate balance as state, federal money dries up; Initiatives and mandates clash with increased costs and public demands"

Increased taxes or increased sales tax revenue? Which do you think the residents of this town prefer? I have never seen a better case laid out for a Pullman Wal-Mart Supercenter than in the article below. Do you think the PARDners will get it? No, I don't either.

Of course, I made this same case two-and-a-half years ago. Wal-Mart will generate somewhere around $1 million a year in sales and property tax revenue.

From yesterday's Moscow-Pullman Daily News:
Former Pullman Mayor Mitch Chandler remembers when his position as city leader was easy. The city was booming with projects and money was in place to fund them.

"In government, it's a lot more fun when there's money to spend," said Chandler.

Chandler and the City Council weren't aware that two controversial state initiatives loomed a few years down the line that would cause a near budgetary catastrophe for the city. Pullman has never quite regained its fiscal balance, and city officials are desperate to increase funding.

Finance Director Troy Woo said the problem is deeper than simply rearranging the budget.

"There isn't a lot of room to be creative," he said. "Each year we've gone through the same types of actions to control our expenditures."

Chandler was elected in 1996 at a time of relative fiscal certainty. The city was recovering well from the 1987 elimination of the General Revenue Sharing - a 14-year federal program that provided $4 billion in unrestricted money to municipalities across the country.

City Supervisor John Sherman points to former President Ronald Reagan's term as an era when states and local governments were expected to begin fending for themselves. In addition to the elimination of GRS, the role of the federal government as a mechanism for local projects was diminished.

As an example, Sherman said in the early '80s the federal Environmental Protection Agency and state Department of Ecology once provided funding for 90 percent of Pullman's wastewater treatment plant costs. The funding was later lowered to 75 percent. Now, it's zero.

"That was a change," Sherman said.

Intergovernmental contributions provided 32 percent of the city's $7.4 million general fund revenue budget in 1991. The $14.1 million 2008 budget was adopted by the City Council earlier this month and includes 9 percent revenue from intergovernmental sources.

The devolution of funds wasn't necessarily a bad thing, Sherman said. The city was able to repair blows to the budget relatively quickly, as the city looked have more local control and to initiate its own taxes to pay for future projects.

"The incentive is that you don't have the choice," Sherman said.

Washington cities were allowed to increase sales tax by one-half a percent to replace lost federal money, and Pullman voters agreed to increase the tax on gas, electricity and telephone bills by 2 percent.

Chandler said during the late 1990s, "the city was running sound. There were no problems."

Enter Initiative-695, which lowered vehicle taxes from 2.2 percent of a vehicle's value to a flat $30 fee. The initiative later was declared unconstitutional, but the Legislature enacted the $30 fee provision during its next session. Woo said Pullman lost approximately $1.3 million in revenue.

Following the passage of I-695, city hiring freeze was instituted and all expenditures had to be approved. The city's public services director, switchboard operator and public communication specialist positions were eliminated in 2002 and remain unfilled.

"That was very hard," Chandler said of the layoffs. "Those are people's livelihoods."

The city hasn't fully bounced back from I-695 and Pullman officials now must look to year-end savings to balance the budget. The creation of the Real Estate Excise Tax has helped fill some of the gaps left by I-695. Pullman, for instance, receives about $102,000 in backfill funding from the state, which is better than nothing but still a dramatic decrease.

"We'll always feel the effects of 695," said current Pullman Mayor Glenn Johnson.

Initiative 747, which limits local governments from increasing property taxes more than 1 percent a year, was another low blow to cities in 2001.

"It was limited to Washington state. It was one more example of funding sources drying up in the state of Washington," Woo said. "This has the potential to be a long-term problem. There's the potential that we're in a continual state of reduction."

Sherman said despite a 1982 comprehensive plan goal to increase Pullman's retail tax base rather than implement taxes, the city went to residents for help.

Woo said since 1999, voters agreed to increase the property tax levy to $3.60 per $1,000 in order to hire three fire and three police employees. Property owners also approved a 50 cent property tax levy to help fund Emergency Medical Services and a 50 cent per $1,000 levy to create the Metropolitan Park District. City fees have increased and a gambling tax was passed. Washington State University students voted to increase fees by $15 to keep Pullman Transit operating, and residents approved a $2 million bond in 2006 to improve city parks and paths.

Sherman said the city is now at its maximum taxing ability without having to go for voter approval.

I-747 is an example of an unfair mandate, he said.

"It would be preferable to not have restriction. Those are the types of strings that really kill us. It's burdensome," he said. "We need additional funding to sustain current operations. Let our City Council as decision makers for our voters determine what is best for the city of Pullman."

Former Mayor Karen Kiessling agreed. She said during her 1976-1980 term, brainstorming sessions and public meetings paved the way for a mix of grants and taxes to pay for needed city projects.

"Pullman is at its best when we can solve our own problems," she said.

Johnson said in the last several years, the city has not increased the burden on Pullman residents beyond the allowable 1 percent yearly property tax increase.

"I understand they don't want to raise taxes, but then in the same breath, they say 'we want these services,' " he said. "We're a council that is trying to keep everything intact and we don't have any another way."

Woo said Pullman provides services for a population of approximately 27,000, though revenue reflects that of a much smaller city. The property tax exempt status of the university and small retail base in Pullman decrease the city's per capita property assessed value at 30 percent of the state average, while sales tax generation is 47 percent of the state average per capita.
Woo said an increased assessed value of more than $50 million to the city due to new construction has helped postpone further financial woes.

Much of the construction has taken place on the WSU campus and includes renovations to Martin Stadium and the Compton Union Building. Many of the projects will be wrapped up by 2008, and Woo has warned the council that when construction projects are complete, the funding stream will be, too.

Until the budget is better under control, the city will still have cutbucks. Spending requests for 2008 that included a handful of new police staff and a parks maintenance worker were denied, and the city pulled more than $800,000 out of reserves to balance the $14.1 million budget.

"We haven't been able to address some very justifiable needs for service," Woo said, adding that increasing cost of living, medical premiums and benefits are inflating the city's expenditures.

Kiessling said the city needs to be more assertive by letting legislators know not enough funding could be disastrous to cities and counties.

"We just don't let the disaster happen. We promise it ... then the climate of the whole governmental function will have to improve. Those who speak louder will get most," she said.

Johnson said federal and state money is available, but mostly through competitive grant programs or low-interest state loans.

"It's not the case that they give you money and say 'this is for the benefit of the public,' " he said.

When grants do come in, Woo tries to keep the money in capital projects, such as the grant used to expand the Pullman Transit maintenance facility.

"That way, if the funding's gone the next year, we don't have to cut operations," Woo said. "The keyword there is 'competitive.' The grants are very limited."

Unfunded mandates also don't help.

Sherman pointed to the stormwater management permits issued by the Washington State Department of Ecology to manage the quality and quantity of runoff from development and to control stormwater discharges into sewer systems statewide. The DOE has provided $75,000 so the city can begin to institute the estimated $4 million, 5-year program.

"If you're going to give us the money, you can put some restrictions on it. But if you aren't giving the money, who are you to tell us what to do?" he said.

Sherman said the city is still driven to achieve the comprehensive plan goal to increase the retail sales tax base. In the 1980s, the Pullman Industrial Park was developed with the Port of Whitman County and Bishop Boulevard was created as an attractant to new commercial businesses. Recently, the city helped the port expand the industrial park, and city officials have hopes that a super Wal-Mart will soon locate on Bishop Boulevard. New retail spaces also have been constructed and await tenants.

"That's the most attractive way of doing it. If you increase taxes, you risk driving away all your residents and businesses. It's a delicate balance," Sherman said.

Woo said he doesn't see the city's financial woes lifting anytime soon without increased taxes or increased sales tax revenue.

"Every year the departments present budgets to the mayor that include various issues that we simply aren't able to fund," he said. "Right now, with revenue and expenditures going in opposite directions, it's kind of a recipe for disaster."
Technorati Tags:

No comments: