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Budget is passed, but plenty of work and debate will continue, city manager tells business leaders
- Mark Sabbatini
- 9 hours ago
- 5 min read
Katie Koester says spending plan is a two-year process, plenty of unknowns about impacts of voter-approved tax cuts and decisions OK’d by Assembly remain to be resolved
By Mark Sabbatini
Juneau Independent
The Juneau Assembly might have passed a budget for next year on Monday after six months of effort, but the work on that spending plan and its outcomes is far from over, City Manager Katie Koester told business leaders Thursday.
"I want to let you know that the outreach isn't over because this is a multiple-year process and there's so much information that we still need to gather, whether it's the actual returns on sales tax data (or) the implications of some of the revenue measures that the Assembly passed," she said during a midday presentation at a Greater Juneau Chamber of Commerce luncheon.
She said there will be more opportunity for public participation as the process continues, since some aspects of implementing the budget are ongoing and adjustments may occur.
Among the reasons for what she called a two-year cycle is the impacts of two tax cut measures passed by voters last fall aren’t fully known yet, Koester said. Those measures resulted in a more contentious series of cuts and debates than usual, although the budget passed Monday also relies heavily on reserve funds to cover much of the projected deficit rather than making some of the most drastic proposed reductions.
Still to be resolved are tax-related proposals that could generate additional revenue for the city during the coming year, such as repealing the sales tax exemption for items and services sold by nonprofit organizations (they could still buy items tax-free), which Koester said could bring in $2.4 million during the coming year. The Assembly is scheduled to consider that and four proposals making various property tax adjustments at its July 27 meeting.
"I think one kind of silver lining of this exercise has been an opportunity to look at why we do things — what we do and why we do them," Koester said, noting that’s how city leaders came up with the list of potential tax adjustments, some of which have gone unchanged for many years.
Such adjustments could effectively offset the loss of revenue from the voter-approved reduction of the mill rate cap to nine instead of 12 — which Koester said apparently will have a relatively minimal impact during the year — and exempting food and utilities from sales tax. She said the city lost $2.4 million in revenue during the first three months of the sales tax exemption, a bit lower than the $2.7 milllion loss that was projected.
Assembly members have already passed one significant tax change that could bring in a substantial — but unknown as of now — amount of revenue by applying sales tax to the first $50,000 of a single-item purchase rather than the first $15,000 starting on Oct. 1. The new policy exempts vehicles that cost $50,000 or less.
"We don't know what that impact will have because we don't have that data, we don't track those sales," Koester said. "Again, another reason why this one is like ‘Let's take two years, let's figure out what our actual revenue will be.’"
At the end of the next fiscal year, which begins July 1, the city is now expected to have about $3.3 million in its restricted fund balance — far below the estimated $20.7 million in the account this spring — and face a deficit for the following year of $7.6 million, according to Koester.
But in the meantime, in addition to the tax changes she discussed, there are also unknowns such as whether Juneau voters in this fall’s election will renew a 3% temporary sales tax, approve a 1% seasonal sales tax that may be on the ballot, and if bond measures providing up to $16 million for school projects and $9.4 million for utility improvements will be considered.
Koester spent much of her presentation on objections and concerns people have raised about the city’s spending and budgeting.
The total general fund budget approved by the Assembly is about $545 million, for instance, which might make the projected deficit of $16 million that leaders sought to patch seem small. But she said most of that funding went to separate city entities such as Bartlett Regional Hospital and Juneau International Airport rather than municipal government programs and services.
She also reiterated reasons for big-ticket decisions that have been heavily criticized by some residents recently, including plans to relocate City Hall to two floors of the Michael J. Burns Building at a projected cost of more than $20 million.
Koester noted the move will cut by half the $1.2 million in annual City Hall operating expenses, helping the investment to pay off in the long term, and the city has to move some employees regardless because some leased spaces downtown are no longer an option.
"The Assembly has chosen to do that project not so that we can have a flashy new building because, guess what, we only get two floors of a new building, but because it's going to create more operational efficiency for city employees to be in one building," Koester said.
"It's going to be better for the public to have one stop. We're going to have a nice public counter where you can come in and you can do cash office, permit center, manager's office, you can ask all those questions. Oh, by the way, parking will be better and it'll also be easier to access off the road system when you're coming in versus having to come all the way downtown."
Koester also noted glacial flood mitigation measures are now the issue taking up most of her time, due to the immense complications and implications of needing to develop short-, medium and long-term solutions. The next major flood may be less than two months away, with an extensive expansion of HESCO barrier protection walls scheduled for completion by July 15. In the meantime Koester plans to return to Washington, D.C. this month to advocate for long-term solutions with federal officials.
She said she is still in support of a "lake tap" solution that would involve drilling a drainage tunnel under Suicide Basin, and is hoping a public-private effort involving local mining companies can convince policymakers the lake tap is possible for less than its early estimates of up to $1 billion.
"I think my job is to convince the Army Corps of Engineers that it can be done more affordably, and I'm going to D.C. the week after next to work on that, and then it's our job as a community to get the (congressional) delegation to get us funding for that," Koester said.
• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.
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