Daily Sitka Sentinel

Assembly Works On Schedule for Budget

By TOM HESSE

Sentinel Staff Writer

Sitka Assembly members have indicated that they may introduce an ordinance for a budget that is not fully funded, in expectation of settling on one or more new revenue measures some time in June.

Under consideration are measures to double the tobacco tax, raise the summer sales tax to 7 percent, and change the senior sales tax exemption to a rebate system.

During a work session Thursday night, city staff members briefed the Assembly on a handful of budget issues largely related to the time frame in which they must be addressed. The budget ordinance will come up for first reading next week, and must receive final approval before June 20. Any substantial change made after it is first introduced would require a special meeting to be called in order to meet the deadline, so staff members were looking for as much clarity as possible before bringing the first budget forward. 

Most of the questions at the work session had to do with the revenue stream. The draft budget was about $400,000 short of its target coming into the meeting and that didn’t account for an increase in funding for the hospital. The hospital had budgeted for the extra money, based on the doubling of the tobacco tax. Because that ordinance has not passed and may not by the time the budget is due, city staff pulled that money from the budget but offered to keep it in with the expectation that the money would be found elsewhere. 

“Certainly staff recommends that the hospital’s budget be funded to the level they’re asking for,” City Administrator Mark Gorman said, explaining that the extra money provided necessary cash flow for the hospital in the next year. 

Not including the revenue would cut the hospital’s projected cash flow in half. 

“I think that borders on irresponsible,” Gorman said. 

All of the Assembly members present encouraged staff to keep the money budgeted for the hospital, which creates a deficit of around $700,000 for the next fiscal year. Some of that gap may be closed with late-arriving funds from Secure Rural Schools, which sends around $300,000 to city coffers. 

City Finance Director Jay Sweeney said the Assembly had to decide if it wanted to address the shortfalls in the budget ordinance or leave them in while the tax conversations take place. 

“Would the Assembly be more comfortable letting the discussion play out?” he asked.

Mayor Mim McConnell said she traditionally opposes passing an unbalanced budget but because of the conversations already happening around revenue options, she could make an exception. 

“We have so many things that we’re looking at that I feel a little more comfortable with doing that,” she said. 

Assembly member Matthew Hunter agreed, saying he thought separating the tax issues into their own discussion might help the process. 

“My preference would be to leave it as is with the deficit and let the ordinances and discussions play out,” he said, adding later: “If we do have a deficit it won’t be long in lasting, I don’t think.” 

Gorman told the Assembly that city staff strongly encourages a balanced budget but that the numbers can be ironed out after the deadline required by city law. If the budget moves forward with a deficit and some tax increases aren’t approved, then he said the Assembly would have to look again at cuts.  

“I don’t feel like we have to do that by July 1, but we do need to come forward and look at some of those program reductions if some of these ordinances do not pass,” Gorman said. 

The first budget reading will be Wednesday, May 27. The tax increases have been postponed till the June 9 Assembly agenda, and a final budget needs to be approved by June 20.

Gorman said he plans on making a staff recommendation next week that the Assembly form a revenue task force to look at the various ordinances being considered. He said the task force would be comprised of citizens, including Hames Corp. Chief Financial Officer Max Rule, who contacted Gorman with concerns over the various tax proposals. 

Assembly members Michelle Putz, Aaron Swanson, Steven Eisenbiesz, Tristan Guevin, Hunter and McConnell were in attendance. Ben Miyasato was absent.