Budget battle at City Hall

by Pia K. Hansen


There's a simple sign taped to the wall outside of City Administrator Jack Lynch's office. It reads: "Did we inform the council?" Depending on who you ask at city hall, you're likely to get a wide variety of answers to that question.


The city's $397 million budget is supposed to be approved by the end of this month -- with the final battle likely to take place at the city council meeting on Monday night.


Since Mayor John Powers presented his budget about a month ago, the city council and the mayor's office have gone back and forth, not only on budget items, but also on the political process leading up to the presentation of the budget.


"I think it's all a learning experience," says City Council President Rob Higgins. "Perhaps we could do a better job, by our asking questions of the mayor and the mayor asking questions and providing information to us. I think, as he develops the budget, the mayor could keep the council more informed, but now, once the budget has actually been presented, I think we are doing a lot better at communicating."


What makes this year's budget approval such a nail-biter is not only the budget itself, but adjusting to the new form of government Spokane has adopted. Under the past city manager/council government, the council participated much more actively and in greater detail in the development of the budget. But with the strong mayor system now in place, that has all changed.


"Today there is much more responsibility vested in the mayor in preparing the budget and submitting it to the council," says Lynch. "But we have worked hard to engage the council [in the process]. We have had many study sessions where we have gone department by department through the seven major budget areas."


Still, the city council has to adapt to a new role in government, a role that is more like the role the legislature plays when the governor proposes his budget.


"The council used to be much more intimately informed about the budget by the city manager because the manager worked for the council," says Higgins. "Now the mayor works for the people and he has his agenda as to where he wants to go. Overall, I think there has been a good give and take, but maybe next year we should start a little earlier with the process."


The council still has to give the budget its stamp of approval.


"We need to have it finalized by December 3," says Lynch.


The city council has already accepted the revenue side of the budget, he adds, and the council also approved a one percent property tax increase, which, Lynch points out, was not part of the mayor's agenda.


In case the city council and the mayor fail to agree on certain parts of the budget, could the debate between the mayor's office and the council continue indefinitely?


"Could we hit January and have the budget not be approved? I hope not, but yes, it's possible," says Lynch.





When Mayor Powers introduced his budget, he had three main goals: no tax increases, no wage increases at city hall and the creation of a reserve fund.


Since the idea of no new taxes has been discarded already, the debate now focuses on the creation of a reserve fund and keeping spending in check at city hall.


"The mayor's budget is much more austere than the last budget we had," says Lynch.


That may be, but critics of Power's budget say that he's hired more people and paid some of them higher salaries than the previous administration ever did.


Lynch disagrees with that criticism: "There is no increase in staffing in the mayor's office. The other thing that I think is very inaccurate is the perception that employees here were given raises. They weren't."


The three new positions in Powers' office (Randy Whitrow, chief of staff; Greg Sweney, director of public and legislative affairs; and the mayor's secretary, Martina Simms) have been criticized loudly as excessive and expensive. Some council members have said they received last-minute raises before the mayor imposed hiring and spending restrictions in July.


"That was a step increase that was afforded to 365 city employees," says Lynch. "But it's only the three who work here [in the mayor's office] who have been hit with that. That is really unfair."


He maintains that staffing levels are virtually unchanged. "Overall the mayor's budget is $10,000 less than last year's budget," says Lynch.


And it doesn't include any provisions for staff pay raises next year? "I can't say that. I can say that there is no money in the budget for cost of living increases," says Lynch.


Higgins says he doesn't have a problem with the size of the mayor's office.


"I've always said that this form of government is going to be much more expensive than the city manager form," he says. Higgins adds that he expects the money the mayor plans to spend on lobbying -- not only in Olympia but also in Washington, D.C. -- to pay off. Funds for lobbying is not a new item, but it's now being moved into the budget for the mayor's office.


"We need a lobbyist in Washington, D.C.," says Higgins. "The money for that is being brought into the mayor's budget, and that is the biggest increase right there. I'm sure we are going to see positive results from that, when it comes to gaining access to grant funds. I'll monitor the process closely, but I'm willing to let the mayor go for it."





The biggest disagreement between some city council members and Mayor Powers is over the $3.5 million restricted reserve fund Powers has proposed.


"The city was really dependent on cash carry-over at the end of the year, in order to balance the subsequent year's budget," says Lynch. "We have for the last several years had about a $6 million spread between revenues and expenses. We have balanced that in the subsequent year by curbing spending in the current year." He says the recommended way to do business is to have a 30-day operating reserve in place at all times.


"It's also something we have to do to satisfy the bond people in San Francisco," Lynch adds.


Yet critics say the mayor should focus on building up Spokane's dwindling tax base instead, and that the city simply can't afford to set aside $3.5 million -- or 3 percent of the general fund -- as a reserve.


The way Higgins looks at it, the city so far has been fine with the cash carry-over from last year's budget. That amount has been somewhere between $2 million to $4 million, but if the mayor's budget is approved with a $3.5 million reserve, this year's carry over will be just above $140,000.


"That's almost like zero. And then you have to ask yourself: if that is all we are carrying forward, how you are going to deal with that?" says Higgins. "To set aside a reserve is a very good idea, but the issue is how aggressive you are going to be on it right off the bat?"


"If the reserve comes in around 2 percent [of the general fund], it would be acceptable," says Lynch. "But we need to practice financial restraint. We know that in 2002 we can struggle through, but 2003 is going to be more difficult."


Currently Lynch says all city division administrators are going through an exercise trying to reduce their budgets by 5-10 percent and submit detailed plans as to how they would do so.


The city is also faced with some rapidly decreasing sources of revenue, and in order to avoid significantly cutting services, the belt-tightening is likely to continue.


"A couple of things have affected us: loss of revenue and increase in gas and power prices. And medical and dental policies for employees have gotten more expensive," says Lynch.


What about the cost of dealing with the River Park Square parking garage?


"From my perspective, the money we spend on lawyers could be spent a lot better in operations," says Lynch. " We need to get that issue resolved. It has affected our bond rating, our operations and everything we do. It's like the smell of Limburger cheese: it's everywhere we go, and we can't get rid of it."


The biggest revenue hit, however, comes from slacking sales taxes.


"We have been down in sales tax for seven consecutive months," says Lynch. "We anticipated a 4 percent a month increase in this year's budget, but by now we are at 0.35 percent increase. We are down $2.5 million dollars. And we've lost $1 million in interest earnings since September 11."


The passing of Initiative 695 last year is also really beginning to hurt.


"People keep saying we won't be affected, but that is not correct. We have absorbed about $4 million in losses from that initiative alone," says Lynch. "Some of that was to be backfilled by the state for a period of years, but backfill was only $1.5 million, and now we anticipate we are going to lose the $1.5 million because of the state's budget shortfall."





Higgins says he's surprised by the lack of public participation, which he says may be because the budget is such an intimidating document.


"Maybe we could do better at presenting it, so people would feel more comfortable commenting on it," he says. "We've had hearing time set aside at each council meeting, but we've only heard from a handful of people." Among them are supporters of the one percent allocation to the human services, which is now part of the city's budget.


"I expected more comments from groups like the neighborhood councils or other groups like that, but there really hasn't been a whole lot of that," Higgins adds.


Unless critics have decided to wait until the last minute before piling into city council chambers, Higgins is optimistic that the budget will be passed soon.


"Do I expect the budget to pass on Monday? Yes, I think we can pass it on Monday -- or at the latest on December 10."