Camas leaders received some unwelcome news late last month when they were informed by the Clark County Assessor’s Office that the city’s assessed value would very likely take a steep dive in 2011.
This translates into a severe decline in property tax income, which means the city is looking at a $1.6 million shortfall in the 2011 budget. Although early predictions pointed toward a decrease in assessed value, officials said the severity of the situation was unexpected.
The assessed value decline will have acute impacts on Camas finances, said City Administrator Lloyd Halverson, explaining that the municipality relies heavily on this funding source for its general fund and emergency medical services budgets.
Council gave authorization Monday during its workshop for city staff to appropriate a percentage of reserve funds to help balance the 2011 budget. That percentage is likely to be equal to approximately $800,000, which leaves an additional $800,000 in cuts that must be made. It would be the first time in two years that the city’s “rainy day fund” would need to be significantly tapped.
“We face a very serious situation that doesn’t lend itself to little nicks, and then another year of little nicks and cuts, and then expect that it will all turn out in the end,” Halverson said. “This is a larger magnitude than the stuff we’ve dealt with before.”
According to the city’s financial policies, the goal is to sustain a reserve fund that is at least 17 percent of the general fund budget. Dennis said the city’s reserve fund balance should be approximately $3.4 million at the end of 2010, meaning to meet policy $2.6 million would need to be left at the end of 2011. Reserves are typically used as a cash-flow buffer, and to have funding available for unexpected expenses.
Although specific line items that will be part of those $800,000 in cuts have not been officially determined, Mayor Paul Dennis said layoffs are a possibility.
“I think that it’s a high probability,” he said.
Council agreed that it would be better to make decisions regarding the 2011 budget immediately, rather than wait until January during the city’s annual planning conference — as initially proposed Monday by Dennis.
“I think we need to dig in and see what we can do,” said Councilwoman Melissa Smith. “I think it might cause some discomfort for folks about what is going to happen, but we have to be realistic.”
A hiring freeze is already in place, and significant restrictions are being placed on travel and discretionary training expenses. The preliminary budget for 2011 assumes a zero percent increase in wages, but also reflects a 14 percent — $300,000 — increase in the costs of personnel medical benefits.
Current contracts with all five of the city’s labor groups are up at the end of the year. Negotiations with fire, police, administrative, library and public works unions are expected to begin in the coming days. Dennis has scheduled a meeting with all department heads and union leaders for Wednesday, when he said he plans to re-iterate the seriousness of the city’s financial situation and express a determination to solve the budget “riddle.”
“One way or another we have to cut $800,000, and it’s not going to be easy,” Dennis said. “It’s a sign of the times we’re in.”
Officials said the city’s financial outlook isn’t expected to improve a great deal in 2012 either.
“This is likely, in the best of worlds, a two-year problem, not a one-year problem,” said Councilman Scott Higgins. “We should not forget this at any level of discussions.”
Dennis said he expects another version of the preliminary budget will be brought back to council for review and deliberation by Dec. 6, if not earlier. The final assessed value numbers will be provided to the city by the county in late December.
“I can’t say I’m looking forward to it,” the mayor said of tackling the city’s budget crisis. “It’s going to be hard work, but it’s something we’re going to have to take real serious.”