The City of Hood River is bracing for major operational changes to overcome a $1.13 million budget deficit.
City Manager Bob Francis said although the current budget is balanced, the city has not been able to overcome past problems. Instead of a cost reduction plan shrinking the deficit, it has grown by almost $800,000 in the last three years.
Francis, who inherited the deficit when he came on board in 2004, is hoping to avoid cuts in personnel or essential services. However, he said that may not be possible since the Oregon Constitution requires public agencies to maintain a balanced budget. And the city has been out of compliance since 1998, when the first deficit of $80,992 was recorded.
“In the current budget year we’re doing well. But if we spend what we bring in we’ll never see the deficit go away,” said Francis.
He said the state auditor already granted the city leniency to create a deficit-reduction plan in 2002. But that plan failed, said Francis, when several expected revenue sources from grants failed to come through.
In addition, he said both health care and retirement costs for public agencies have spiked significantly in recent years.
For example, the Public Employee Retirement System payment for 2005-06 fiscal year was more than $500,000, with a another $140,000 increase expected next year.
In addition, Francis said health care costs rose 18 percent this year, and have increased by 15-16 percent for each of the past five years. A health care committee is now looking at options to shave 15-20 percent off the cost of benefits in the 2006-07 budget.
Although the city has added five new employees in the last three years, Francis said that has not contributed significantly to the deficit. He said cost overruns by both the police and fire departments of about $250,000 each have been a major contributor to the financial morass.
“We’ve probably relied too much on outside sources of funding and we’re not going to do that anymore,” said Francis.
This week he issued a directive that building, police, fire and public works departments cut their overhead by 10 percent. He also plans to increase fees in the planning department to cover the actual cost of development reviews. Francis said Hood River is charging as low as $55 for services that cost $500-$1,500 in other Oregon cities.
“It’s time to start charging what’s fair,” he said.
Francis said the deficit lies in the general fund that covers the majority of city costs. He said money is available to fill that gap in other accounts but those funds are dedicated to one specific purpose.
For example, Francis said gasoline tax dollars are to be used only for road projects. However, he said it is allowable for administrators to bill a dedicated fund for the time they spend dealing with those issues.
Francis said parking problems in downtown Hood River have recently occupied a large share of his time. So, he can charge the parking fund for that percentage of his attention and add that money into the general fund. The city has also begun charging a franchise fee of $300,000 against water and sewer services as legally allowed for the sole provider.
Francis plans to start charging the building department rent for the space that it occupies, as well as utility costs. He said that could bring an increase in “user fees” to cover the added expense of operation. But, he contends that it is also fair for people accessing the service to pay for the staff time they utilize.
“What we’re attempting to do is get funds from the places that generate revenue,” said Steve Everroad, city finance director.
He said, contrary to popular opinion, property tax receipts do not pay most of the city’s bills. Everroad said about 30 percent of the $22.6 million budget for fiscal year 2005-06 is derived from these taxes. The remaining funds come from grants, fees for local services, and both state and federal dollars.
Before any new taxes or fees are levied, the city council wants to see how much revenue can be gleaned from the existing budget toward a deficit payoff.
Francis said the city auditor, Arens and Associates, will deliver a final report on the 2004-05 budget to the council by December. That summary of revenue and expenditures will be tied to recommendations for reducing costs.
Once city officials have all of the facts in hand, Francis said firm decisions about the future can then be made. He said several user fees that were considered last spring could be back on the table by next year.
These include a street maintenance fee of about $1 each month per household, a business tax of about $100 annually, and an unspecified charge for stormwater maintenance in front of each residence.
Earlier this year, the city was also looking into a local gasoline state to fund emergency services, and a tax on food and other tourist-related attractions that would exempt local residents.
“The two ways to approach it are to get more revenue in and make sure less money goes out,” said Everroad. “If you can do that successfully for three to four years you have no deficit.”