The Haines Borough Assembly set its 2020 operating budget on Tuesday, adopting a significantly lower property tax mill rate than the manager’s proposed budget based on a gamble the state will fully fund debt services owed to the borough.
The school debt reimbursement program that provides the borough about $1 million a year to pay back school construction costs is the largest threat to the borough in Gov. Mike Dunleavy’s proposed budget cuts.
In his initial budget, Dunleavy proposed zeroing the fund. On Monday, the Alaska Legislature adopted an operating budget fully funding bond reimbursement funds, though Dunleavy can still strike it with line-item veto power.
The state budget has to be signed by the governor by June 27 or the government will shut down.
Up against an earlier deadline to pass its own budget, the Haines Borough Assembly adopted new property tax rates Tuesday.
Small Increase to Mill Rate
The 2019 mill rate for the townsite will be 9.69 with an additional 1.22 mills in debt service, a .17 overall mill increase from last year. The townsite levies the highest property taxes in the borough because of services including police, public works and animal control.
In 2020, a homeowner with a house valued at $100,000 will pay $122 towards construction bonds.
Borough manager Debra Schnabel’s proposed budget in April set the townsite mill rate at 13.68, anticipating debt reimbursement from the state.
In a committee of the whole meeting on June 4, the assembly agreed it would be prudent to anticipate a 50 percent cut to the school debt program, but reversed course on Tuesday after the Legislature passed its operating budget with full funding.
“We can only act based on the information we have available,” assembly member Brenda Josephson said. “The best information we have available is that its been funded at this time.”
Finance officer Jila Stuart said if Dunleavy vetoes the debt payment, the Haines Borough will rely on its areawide general funds reserves to cover the $900,000 shortfall. The projected fund reserve for the end of June is about $3 million.
Assembly members Tom Morphet, Sean Maidy Stephanie Scott and Will Prisciandaro agreed that before the borough starts raising taxes, it should spend savings.
Assembly member Heather Lende opposed adopting a lower mill rate over doubt that Dunleavy would fully fund the debt program and concern the state budget will slash other funds requiring reserve money.
Property tax revenue will generate an increased $207,000 from last year, at an estimated $3.2 million total.
Juneau is building their budget expecting full funding, while the Mat-Su Borough is anticipating zero funding, Stuart said.
Increased Pay for Union Workers
The collective bargaining agreement increased union pay and health benefits for borough employees for the first time since 2016, a $149,814 addition to the budget. The contract includes a trigger formula where the union will accept lesser pay contingent on state funding.
If the school bond debt reimbursement is funded 95 percent or more, union employee wages will increase by 4.5 percent over three years at an estimated cost of $110,000 to the borough. If the program is funded between 50 and 94 percent, wages will increase by 3.5 percent; less than 50 percent of state funding will mean a 2.5 percent increase in wages.
Major changes to the collective bargaining agreement include changes to required leave, an additional $80 a month in health benefits for each employee, a wage schedule dependent on state funding, and a reduction in police standby pay of almost $2 an hour.
Morphet proposed approving the benefit package and delaying salary increase discussion for one year until state funding is settled. He opposed what he called “between a $514,000 and $748,000 cost to taxpayers” over the three-year union contract without knowing the status of funding. His motion failed, and the assembly adopted the collective bargaining agreement 4-1 with Morphet opposed and Maidy recused due to his wife’s job at the borough.
Budget Amendments
On Tuesday, the assembly made few amendments to borough manager Debra Schnabel’s draft budget, allocating $20,000 to trails and revoking free swims for children.
Lende moved to transfer $20,000 from the fund balance to capital improvement project fund for trail inventory assessment or development in the borough, which passed unanimously.
Josephson proposed increasing user fees to the swimming pool by reversing the 2018 decision to allow children under 18 to swim for free.
“Last year, we cut $17,000 out of the budget so that 18 and under would swim free. The theory at the time was that it would increase usership. Usership has not increased because of it,” she said.
Morphet and Lende opposed the amendment.
“When we forgave user fees for children, we did not make an effort to notify the public,” Morphet said. “I might be okay with this a year from now but I would hope we could find some money in our budget this year to let all the kids know the pool is free.”
User fees for swimmers will be reinstated September 1.
Morphet proposed two budget amendments that failed, to fund the community chest to the full amount as last year, and to allocate $20,000 to accommodate visitors’ trash.
Schnabel’s budget included $20,000 for non-profits, plus $20,000 for the state fair, and $15,000 for the tourism department to support non-profits who need help paying for advertisements and other requests. Last year, the community chest non-profit fund included $37,000 plus the same fair allocation.
Morphet said he doesn’t believe the tourism money will be spend on non-profits.
Assembly members said they agreed with Morphet’s intent to mitigate illegal dumping by paying for more dumpsters, but the motion failed without a plan.
“If we had a plan already, I’d be more willing to go with it but I can’t put my support behind just $20,000,” Maidy said.
Morphet and Josephson criticized Schnabel’s budget for its lack of cuts.
“I’m disappointed in this budget. The cost of our expenditures have gone up and I’m certainly looking forward to next year where we can address the costs.”
Morphet said the budget proved “I was largely a failure on this assembly. I have not been able to curb the voracious appetite of government.”
Budget Synopsis
The manager’s budget otherwise remains the same.
It reflects an anticipated 7 percent growth in sales tax revenue, up from an expected $3.3 million in 2019 to $3.6 million in 2020.
The Haines Borough School District will be flat funded at $1,817,000 in the proposed budget.
Despite Josephson’s efforts to cut library and museum funding, department budgets for police, dispatch, public works, museum, library, information technology, land assessment and planning, finance and tourism all increased in this year’s budget.
Police standby time has increased by $16,000 to reflect the Nov. 16 directive by the borough assembly for townsite police to respond to urgent calls outside the service area. The police have exceeded budgeted standby hours for the past two years. An increase in insurance costs also contributes to an overall budget increase of $32,253.
Public facilities, administration, the Haines Borough Assembly and the Haines Economic Development Corporation will see a decrease in borough funding under the proposed budget.
Last fiscal year, the borough spent about $13.4 million. This year’s budget would be similar if not for a spending increase that reflects $6.1 million worth of Alaska Department of Fish and Game and other outside revenues that will pay for the construction of a sport boat launch ramp.