Carey cuts deep — Borough mayor seeks to absorb $12 million in next budget

By Jenny Neyman

Redoubt Reporter

There is one thing Kenai Peninsula Borough Mayor Dave Carey and those most directly affected by his proposed budget cuts agree on — the public needs to speak up.

Beyond that, though, there hasn’t been much common ground as Carey shares the direction he plans to go for the borough budget this year. That lack of common ground includes agreement on who the public should speak up to.

Constituent groups supporting property tax exemptions, a seasonal break on sales taxes as well as Kenai Peninsula College, Central Area Rural Transit System and other “nondepartmental” agencies the borough funds, are encouraging outcries to the mayor and Kenai Peninsula Borough Assembly members.

The mayor, however, while saying he’d listen to public input and pass on any written comments he receives to assembly members, suggested that anyone at odds with his suggestions for balancing the budget direct their vehemence where it has more potential to garner results —legislators in Juneau.

“I need all these groups that are concerned about funding to be communicating with Juneau and say, ‘Please help us.’ I believe it greatly that it helps when you have a community, and we’re 60,000 people, if you have people from all different parts of the borough as well as all different user groups saying, ‘This is a one-time need we have,’” Carey said.

Carey is looking to cut about $12 million out of the borough budget as a worst-case scenario to absorb the estimated cost of developing a new Homer Transfer Site to transfer waste and recycling to the Central Peninsula Landfill in Soldotna.

Comprehensive plans going back to 1989 started forecasting federal regulations on the horizon that would necessitate closing smaller, regional solid waste disposal sites, in favor of transferring trash to one large site. Sites in Seward and Kenai were closed over the intervening years, and solid waste transfer sites were developed. Now it’s Homer’s turn.

Carey said that the permit for operating Homer’s current solid waste site is set to expire in August 2013, and that the facility will be full by then, so money must be secured now so that construction of the transfer facility can begin in 2012. The borough has been setting tax dollars aside — about $5 million, Carey said — to cover the estimated $3.8 million cost of closing out the current Homer Solid Waste Site, and to conduct required ongoing monitoring.

But money was not previously dedicated to paying the estimated $9 million to $12 million it will cost to develop a new transfer facility. Carey said it’s one thing to use tax dollars to save up for closing out a currently utilized facility, but it would have been inappropriate to use tax dollars from current residents to pay for a facility to be used by future, possibly different, residents.

“From my way of thinking, if we would have asked previous-years taxpayers to pay for the conversion of the transfer facility for future solid waste, you normally do the cost causers are the cost payers. So the people who have received the service, they have set aside, through (the borough), the money through borough taxes, to close it,” Carey said.

Large capital projects such as this are often funded through bond measures, as were the transfer facilities in Seward and Kenai. But Carey said he’s not asking for a bond measure because he doesn’t think it will pass, especially not on the heels of a $16.8 million bond for school roof repairs that went before voters in 2010. That measure passed in part because of favorable financing terms with the state, which reimburses the borough for the majority of the cost of the project.

“That was not a tough sell as I went all over the borough, as well as the school district and others, because people, one, understand roofs, and they understand 70 percent reimbursement,” Carey said. “To go out this year and ask for $8 or $9 million and we pay all of it I think, economically, it would be very difficult to pass. So that is a decision that I’ve made. But the assembly certainly still has that option before them.”

Carey said the borough could pursue grants to help with the cost, but that doesn’t appear to be an immediate option. The state has a ranking system for projects, and the Homer transfer facility does not rate high in line for funding, Carey said. Though it is an emergent need, from a scheduling standpoint with the permit for the old solid waste site expiring, the project poses no emergency in the sense that nothing is leaking, threatening drinking water supplies or posing any other immediate risk or damage.

“Our permit is valid. We have no regulations that we’ve violated, so we have no grievances. We have no reports of fluids coming off of it that are above levels of how the different things should be, so we are totally in compliance. And as a result of that we don’t get all the extra emergency points, and so we’re just not going to qualify,” Carey said.

That leaves paying for the project out of the borough budget, and/or requesting funding through the Legislature. Carey, the borough clerk and most of the assembly were in Juneau last week to meet with legislators and request assistance for the project.

Carey said he met with Gov. Sean Parnell, who seemed to understand the borough’s predicament but wouldn’t commit to anything regarding it, and the peninsula’s legislative contingent, which seemed sympathetic but couldn’t promise anything.

“We had very favorable conversations about our need. The legislators said, ‘We don’t think we can fund all of it,’” Carey said.

He took that as positive, since they could have said there wasn’t a chance of funding any of it.

Still, with budgetary timing being what it is, Carey will be working on a budget to present to the assembly without knowing for sure how things will shake out in the Legislature, much less what projects the governor may or may not veto. Because of that, he said he’s planning a budget that covers the cost of the new transfer facility, as well as absorbs costs from a new negotiated agreement with borough employees, strictly out of borough coffers.

“I am required by law to submit a balanced budget. I cannot put in the budget ‘X million dollars from the state — hopeful,’” Carey said. “I very much understand people’s angst at hearing that their particular part of our budget may not be funded, but I have $12.5 million dollars to fund. I have to do a balanced budget.”

Carving $12-plus million from the borough budget requires some drastic measures. As a starting point, Carey is proposing a status-quo budget at no more than the current year level of funding. He said that actually represents a 7 to 12 percent cut for most departments, once inflation and an increase in personnel costs from the recent negotiated contract are factored in.

The recent announcement that the ConocoPhillips Liquefied Natural Gas plant would be closing further complicates matters.

“We absolutely are going to take a hit,” Carey said. “For the borough, our estimate is $255,150 down in property taxes.”

That number is not firm, since ConocoPhillips hasn’t yet announced its long-term plan for the LNG plant, nor the level of activity it expects to maintain with all its facilities and infrastructure in the borough. Production is figured into property valuations set by the state.

“We can’t know because ConocoPhillips hasn’t said exactly what they’re going to do. There’s been some discussion that they would leave it at a very low burn so that if they started importing liquefied natural gas they would process it,” Carey said.

From the outset in this budget, there are some options Carey does not wish to entertain. Proposing that the assembly raise the property tax mill rate is a last resort, Carey said. Draining the borough’s fund balance — the in-case-of-emergency reserve account — is also something Carey is loathe to propose. The borough is required to maintain $12 million to $20 million in fund balance and currently has about $19 million, Carey said.

“We never know what expenses will be. In order to survive emergencies you have to have a set amount. I believe $14 million is the lowest we should even come close to, because sometimes problems come in groups, rather than just by themselves,” he said.

Last year’s budget dipped into the fund balance for about $3.5 million to supplement local funding to the Kenai Peninsula Borough School District, Carey said. That was in addition to all borough sales tax revenue going to fund education, as is required.

Carey said he doesn’t want to decrease funding to the school district in next year’s budget, so even funding at last year’s level means another $3.5 million coming out of the fund balance, assuming sales tax revenue remains consistent. If the borough were to pay for the Homer transfer facility out of its fund balance, as well, even if it gets away with the low-ball $9 million estimated cost, that would be $12.5 million to come out of the fund balance, leaving only about $6.5 to $7 million in the reserve.

Carey prefers to dip into the fund balance no more next year than the $3.5 million that came out for education this year, so he’s considering a slew of other measures to make up that $9 million to $12 million elsewhere in the budget.

He proposes reducing hours at several borough-operated facilities — the Gilman River Center, the George Navarre Borough Building and annexes and the Central Peninsula Solid Waste Site — setting fees for solid waste disposal, reducing borough participation in 911 Dispatch and increasing the 911 surcharge to cover all 911 Dispatch services.

Carey said he initially was considering removing property tax exemptions, such as those for firefighter and emergency service volunteers, senior citizens, homeowners, disabled residents and disabled veterans, but has decided against it. He said it would not only pose a hardship to those on fixed incomes, such as retirees, but would likely cost the borough a considerable amount to administer, and could run afoul of state-mandated exemptions. All that to save, at best, a little over $2 million, Carey said.

“I am not looking at exemptions anymore. Those are off the table,” Carey said. “We would have to inspect every single house and every single business to know everything we have. That’s absurd.”

He does intend to introduce an ordinance at the assembly’s March 1 meeting to rescind the nine-month holiday on sales taxes on nonprepared food items. He estimates that could generate an additional $2.8 to $3 million in sales tax revenue for the school district, which would free up most of the $3.5 million the borough would otherwise be taking from property taxes or the general fund to fund schools.

“The nonprepared food exemption is critical, as I see it, to get past this issue. The Legislature very often says, ‘You want money from us, you need to show us you’re putting money into it, as well,’” Carey said.

The sales tax holiday came about through an initiative petition that was passed by voters in 2008. The assembly can rescind a voter initiative 24 months after it goes into effect. If it chooses to do so, Carey said he expects the people who got it on the ballot in the first place — the Alliance of Concerned Taxpayers — to launch another initiative to get the tax suspension reinstated. Carey said he doesn’t think it will pass this time.

“What I’ve heard is that people have said .‘We did not realize that the sales tax holiday on nonprepared food would impact education.’ They did not seem to realize that all sales tax goes to education,” he said.

Another hotly decried area of budget cuts Carey is proposing is the “nondepartmentals” the borough funds — Kenai Peninsula College, Central Area Rural Transit System, the Small Business Development Center, Economic Development District and Kenai Peninsula Tourism Marketing Council.

This is Carey’s third attempt at cutting funding for these groups. His first year as mayor he proposed cutting their funding, and last year he proposed reducing it by half, with the assembly deciding to reinstate the funding.

“I am not comfortable with us funding things we are not required to by statute,” Carey said. “I believe those things are unmandated funding. I believe that if taxpayers want to be funding those things they can certainly choose to do so on their own. But it is not, I think, a proper decision for us to take out of everyone’s taxes. However, the assembly has disagreed with me on that in the past.”

Cutting out nondepartmental funding would save just about $2 million, Carey said.

Of that funding, Carey said post-secondary education funding would be his priority to retain. KPC last year got $637,570 from the borough, about 5 percent of its budget. That goes to fund myriad programs and services, including some that serve as a bridge between high school and college, such as Jump Start and GED programs.

KPC administration and students have been outspoken in their response to Carey’s proposed funding cut.

“My first thought was shock. My second thought was, ‘What about the Jump Start students?’ Then it went to the tuition waiver, to tutors, and it just kind of went down the list. The more I read it was like, ‘Oh my goodness,’” said Shauna Thornton, KPC Student Union president.

She said students were planning a demonstration at the Borough Building at 4:30 p.m. Tuesday, with students in the frog suits they used to gain attention for a bond vote to pay for on-campus housing in the 2010 election.

“I think if they see we’re all very supportive and this is what the public wants they’ll make the right choices. But this is when the public needs to get involved,” Thornton said. “These proposed budget cuts are going to affect more than just college students. They’re going to affect the community as a whole. How are we going to attract businesses to the community and create more jobs if there’s not an educated population base? It’s not going to be a very attractive place to be.”

Carey said that he’d like to retain funding for KPC, but in aiming to make up $12 million or so, he felt he needed to cut everything he could that wasn’t a service the borough is required to provide.

“I believe I am the trustee for every tax penny that comes in and I have to spend things as I would myself, and that means being sure we’re spending every penny as carefully and efficiently as possible,” Carey said. “This year my top priority is the solid waste project. I am going to reduce — relatively speaking, prudently — anywhere I can because I’ve got to find $12 million for this project.”

If the Legislature does come through with funding assistance, the budget can be reworked and possibly some of these areas of cuts reinstated, he said.

“If, indeed, Juneau would help to the extent that our fund balance would stay strong, that we fund schools at least at the status quo, then these other things, I think it’s much more likely there would be funding for them,” he said.

If that is to happen, Carey recommends people speak up to more than just him.

“I only propose a budget. The assembly passes the budget. The assembly decides the mill rate. Certainly what I send to them is a significant starting point, no question about it. But when there are statements made that I determine it, that’s not accurate. It is incomplete for the process,” he said.

Even more than just talking to the assembly, Carey encourages constituents to lobby legislators for funding help with the Homer transfer site, as that would free up borough money for other areas. Rather than fighting for one particular aspect of the budget, he said he’d like to see residents fight for the entire budget.

“I like to think that we’re really good and decent people here, that when there’s a problem we all rally together to help. It has been disappointing — however, it has only been two weeks — that different groups have thought only about themselves and why they absolutely deserve to be funded. ‘Even if you can’t fund schools, fund us.’ ‘Even if you can’t fund the college, fund the tourism and marketing,’” he said. “All those people who are discussing whether or not we can fund them? Help us. If we can move off of the selfish, ‘We need to have our money, we don’t care about anything else.’ We should move to, ‘We’ve got a problem, there is a significant solution.’ It may not be a solution to all of it, but funding from the state would be a significant solution.”

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5 Comments

Filed under budget, Kenai Peninsula Borough

5 responses to “Carey cuts deep — Borough mayor seeks to absorb $12 million in next budget

  1. sheila fenn

    I have been sitting here reading this article with interest. I know the value of education and think that the mayor is using the students to further his cause . He is doing this by vailed threats of removing funding. Is he smart or just a user of people?

  2. I am always impressed by Mayor Carey’s low opinion of the intelligence and good judgment of the voters of this Borough. Even though bonding for the new waste transfer facility makes the most sense, he doesn’t want to try. “Carey said he’s not asking for a bond measure because he doesn’t think it will pass.” Why don’t you trust the people of this Borough, Mr. Mayor? Granted, a majority of them were foolish enough to vote for you, but with an effort you could probably get the votes you needed to support such a bond. And if you did not, you would certainly be on firmer ground making such draconian proposals or even proposing to increase the mill rate.

    Imagine if you had shown some leadership on this issue. Then the forces marshaling against your draconian cuts might be working to support such a bond measure. Instead, we get more of the “shoot from the lip” that has characterized your administration.

    Speaking of shooting from the lip, I also found it interesting that it’s taken you less than a week to do an about face on eliminating all property tax exemptions. Did someone point out to you what a ridiculous proposal that was? Imagine if you had bothered to think it through BEFORE you said it in the newspaper…

    I hope frogs are to your taste, Mr. Mayor. I suspect you’ll be seeing a lot more of them over the coming weeks…

  3. oldboar

    These aren’t easy choices folks. A bond proposal is all well and good- but it seems to me the odds of passage *are* slim to none. Increasing mil rate is always politically untenable (systemic failure). In this comparably rich state- more funding for these community needs should come from the state coffers.

    • Bill Howell

      The odds of a bond passing are ZERO if the Mayor and the Assembly refuse to even put it to the voters. Kind of a self-fulfilling prophecy, isn’t it?

      • oldboar

        You are right of course. But I think it would be more expeditious and forthright to lobby the mayor/assembly to increase property taxes. The idiom: “if it quacks like a duck, then it’s a duck” comes to mind…

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