Shoemaker urges council to ‘preserve the reserve’
Tuesday, June 28, 2011
The City of Washougal has had a structural budget deficit off and on since 2006. That means that we committed to spending more than we earn. The deficit is projected to worsen each year until the economy improves.
Mayor Jeff Guard recognized in 2001 that the $50,000 city reserve was inadequate. He began strengthening the reserve. Mayor Sellars, benefitting from a growing economy, added to the reserve in 2007 and 2008. In 2009 the current economic downturn intensified, initiating the current string of annual deficits that pose a continually increasing challenge.
This is the situation that current mayor Sean Guard inherited. It was aggravated by employee contracts negotiated by the Sellars Administration that escalated salaries and benefits substantially in future years based on tax and fee revenues that were not guaranteed to continue, and didn’t.
For three of the past five years, the city has balanced its budget by drawing down the reserve built up during good economic years. Last year, the mayor, through good management and a million dollars in transfers from reserves to set up needed new accounts, managed to end the year with a surplus in excess of $350, 000. This surplus, and a couple of hundred thousand dollars more, evaporated in new spending under a budget amendment the city council passed in March 2011. Few of the projects approved in that amendment are essential.
About 45 percent of the current city reserve of $3.9 million is maintained to comply with best financial practice guidelines. This practice allows the city to manage the ebb and flow of expenses and tax income, which often do not match up. Bills come due monthly, while tax income arrives at varying times throughout the year. Without this part of the reserve, bills might have to wait for the next increment of tax revenue to arrive. That would not be a good way to do business.
The remaining 2.2 million dollars, is available to be spent as needed. The problem, as a recent speaker during the public comment period put it, is determining “want versus need” when considering proposed spending.
The definition of “want versus need” has set the stage for the conflict of visions that now engages Washougal City Council members. Free spending holdovers from the Sellers Administration era see the reserve as a way to maintain, and even boost, spending on a variety of existing or new programs. As Councilman Greenlee put it recently, the reserve was created during good years to be spent during lean years.
More fiscally-conservative council members see a need to match a decline in tax revenues with a decrease in spending in order to preserve the reserve. They view the reserve more as a contingency fund for emergencies.
Emergencies are unpredictable events entailing unusually high costs. Most of the emergencies that Washougal might experience are events that could significantly damage infrastructure or compromise public safety, such as severe floods, earthquakes, storms, and wildfires. Any one of these events could trigger spending that would substantially deplete our reserve. Barring such emergencies, the city should manage its budget to keep expenses within current income.
The key budget questions are (1) for what purposes the reserve should be spent, and (2) when the city should begin to curb spending to preserve the reserve. Answering these key questions requires something we currently don’t have but badly need, a concise mission statement listing essential services the city must provide. A crystal ball might also help.
The mission statement should list services required by law and desired by the taxpayers. Tax revenues permitting, it may also include services city government considers important. The city council must prioritize this list to enable the city administration and council to make good financial decisions.
Prudence suggests that the reserve should be devoted only to emergencies as we go through the lean years while the economy recovers sufficiently to restore our tax revenues. No one can be certain how long this economic recovery will take.
The consequences from depleting the reserve could be disastrous for both city employees and residents. If ever there was a time to be prudent, this is it! But you can choose your future.
For the first time in several years, every Washougal City Council member running for reelection is being opposed, most by multiple candidates. This election is your opportunity to reset your city government’s direction. The choice is between those who would prudently spend your hard-earned taxes, and those who would not.
Dave Shoemaker is a member of the Washougal City Council. He can be reached at firstname.lastname@example.org or 210-4654.