Business, City of Seward, Economics, Opinion

It's Time to Re-invest Back In Our Own Community

Overall and looking at the bigger picture, the City of Seward is in excellent financial shape, but the city’s population is in decline and the cost of doing business in Seward has dramatically gone up in the last two years.

In the 2004-2005 Seward Annual Financial Report, the following information was reported:

Revenues over Budget Expenses Under Budget Unbudgeted Surplus

2004 $274,746             $432,937             $707,683

2005 $576,138             $478,750             $1,762,571 (Incl 2004)

In the 2006 I am sure the numbers will bear out our grossly under budgeted income (with the increases-doubling in fact- in gasoline and diesel fuel prices) the corresponding increases in sales tax, bed tax with the increase of hotel rooms and occupancy in Seward, and interest income with the higher interest rates.

We have a huge surplus of capital for reinvestment within our own city– not New York! The need for that re-investment, just looking at the numbers alone, bears this out.

Our real depreciation in 2005 was $2,817,860 and the capital outlay was only $1,683,258 with a shortfall of $1,134,602– which translates into much needed repairs such as repaving for 4th Avenue and other city streets. If we do not take advantage of the paving machines while they are here in Seward next spring, we lose a huge opportunity and cost savings to get the much needed repairs completed in a timely and costly manner.

Let’s next consider the City Cash and Investment Accounts:

2003 $16,392,129

2004 $18,177,188

2005 $19,461,429

We have strong reserves and I believe the prudent action would be to start reinvesting some of those funds back into the community and not Wall Street.

At the last city council meeting I attended, the city manager was quoted saying that there was no increase personal which is very misleading when salaries (page 22) are going from $2,724,994 to $3,383,582 for a 24% or $658,638 increase above the 2005 actual numbers.

The budget is a re-run of the same thing I have been seeing ever since I moved to Seward. The grossly understated income and the overstated expenses are all hiding under the mantel of “well we have to be conservative”. What the council should have and expect is an accurate budget truly reflecting what the numbers are going to be and based on the past history of city’s financial department under reporting the city’s cash flow- we are not in any kind of financial crisis and never have been!

The interest income is consistently under estimated just to name one income item. Another is (pg 25) sales tax which states in the report that “On average, taxable sales revenue has increased 9.48% per year over the last 5 years.” Yet the budget sales tax increase is only 2.6% over the 2005 actual.

I did not see in any where in the budget or notes of the past PERS reimbursement from the state or the reasonable assumption that the majority of the PERS payment will be reimbursed by the state. I respectively disagree with some comments and direction from the administration in pervious work sessions in that I believe we can count on the State of Alaska for assist with the PERS problem up to 75% this year and certainly along the same lines for 2008.

The State of Alaska created this problem and we should continue to do everything in our power to make sure they take care of this problem of us.

There is too much “crisis management attitude” in the budget process and if the city manager and finance director would address some of these issues before the budget comes out, we could focus on what is really important like the issue of Seward’s reinvesting policy back into itself- such as street improvements and real economic development. The direction to take I believe is reverse the current trend, leave taxes alone (the last sales tax increase only passed by one vote), and reinvest a portion of the surplus back into the City of Seward.

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3 Comments

  1. Paul,

    Your thoughts about re-investing in Seward are worth considering, but you have tasked the wrong people.

    These are policy decisions. The City’s policy is set by the City Council, not by the finance director or the city manager. This policy is discussed/set, or at least should be, during the week of budget work sessions that occur before the budget comes out.

    The City Council sets the policies that guide the financial director/city manager’s handling of the budget. If they change the critera, the staff will change the budget structure accordingly.

    I truly hope that the new administration in Juneau takes care of the responsibility of PERS/TERS. I think everyone agrees this is a problem that the State has made, and they should be the ones fixing it.

    “Should,” however, is defined by Black’s Law Dictionary as “ought to, but not necessary will.”

    If Palin lives up to her campaign promises, and relieves cities of the PERS nightmare, Seward should be in good financial shape and the City Council should be looking at strategic planning for real economic development and infrastructure maintenance.

    How they go about that remains to be seen. There has been a call for a professional economic development plan for the last three years and I have yet to see one.

  2. Besides repaving Fourth Avenue, what are some other re-investment ideas? Repaving Fourth is a necessity – though the tax that was designed to fund new pavement on Fourth and many other city streets at ten-year intervals was voted down last October. Life goes on. But what other projects would help Seward’s economic development? Would be good to give Council some input.
    On another note. Public funds invested in economic development – business development – would be covering externalized costs for Seward’s businesses. Fine, but there are other projects in which Seward could invest its surpluses and those are human-based, community based projects; green spaces, trails, community centers, new libraries and such. Improvements for the soul, riches for the mind. et cetera.

  3. Paraplegic Racehorse

    How about a short-term (say, five years?) tax incentive for small business start-ups who operate year round, rather than just during the summer tourist season? Whether that be sales tax or property tax relief is irrelevant, though sales tax has the advantage of applying to new companies who lease or rent their land/building.

    New businesses mean new jobs and the economic cascade that stems from them, etc, etc. There is a rising number of young people who initially come to work the summer season and decide to stay for winter. Those people need jobs at a survivable wage and affordable housing. Many of those young people who experimented with staying for winter two or three (or more) years ago have fled to warmer climes because one or both of those two things were lacking. When I spoke to them as they were leaving, they almost universally said they would love to stay if the situation were different.