FIFTH OPENING – The Sitka seine boats Hukilau and Rose Lee pump herring aboard this afternoon at the end of Deep Inlet during the fifth opening in the Sitka Sound sac roe herring fishery. The opening was being held in two locations beginning at 11 a.m. (Sentinel Photo by James Poulson) 

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Daily Sitka Sentinel

Optimism is Keyword in City Budget Draft

By SHANNON HAUGLAND

Sentinel Staff Writer

City staff at a Tuesday work session proposed creating an “optimistic” yet “conservative” city budget for the fiscal year that starts July 1.

“It’s optimistic – as in, we think the recovery is going to continue – but it’s conservative at the same time,” said finance director Melissa Haley, who presented a summary at the budget work session.

Tuesday’s one-hour session was an overview of the upcoming process for building 2022-23 budgets for the general fund, enterprise funds (harbors, electric, water, etc.) and internal service funds (garage, IT, building maintenance).
City staff is assuming a “middle of the road inflationary increase,” Haley said. But she also suggested remaining flexible for the number of “uncertainties” on the horizon.

Major factors in planning next year’s general fund and enterprise funds budget were the possibility of as many as 478,000 cruise visitors this summer, increased sales tax revenues from remote sales tax collections (online sales) and summer visitors, inflation continuing upward then leveling off, and continued economic recovery from the pandemic.

Assembly members had a few questions but generally were supportive of the direction city staff is taking in developing the draft budget.

“In general, based on the questions you’re getting tonight and maybe the lack of questions too, I think we’re headed in the right direction,” Kevin Knox said.

More decision points are expected on projects and services at the next work session January 27, said City Administrator John Leach.

One of the Powerpoint slides showed the estimated sales tax revenue for FY22-23 as “optimistic yet cautious.” The administrator’s budget estimates $15.4 million from that source, up from $12.8 million in 2020-21, the last full year of receipts.

While the outlook for the  2022-23 budget year was generally positive, challenges are on the horizon.

“There’s the impact of inflation,” Haley said. “Just doing what we’re doing now without a doubt is going to cost more - it’s already costing us more. We’re also seeing related supply chain issues. That means we  might not be able to get what we need to get to keep doing what we do.”

Inflation will undoubtedly affect the cost of projects the city has planned, as well as the upcoming contract negotiations with the city’s unions.

“We’ve seen as the rest of the nation has – challenges with staff retention and staff turnover,” she added.

A summary slide on sales tax revenue showed expected increases, after a dip in fiscal year 2020-21. The main increase in sales tax revenue has been from remote sellers, particularly in the winter season quarters (Christmas sales). One quarter showed a 33 percent gain over four years.

“It’s not a huge increase and a big portion of that is going to be coming from the remote sellers commission,” Haley said. In the last year and a half Sitka and many other Alaskan communities have been receiving sales tax revenue from increasing numbers of remote sellers.

 

Core Services

One slide in the presentation clarified that core services as defined by code and city charter are public safety, public works, education, city services, and infrastructure.

“We’ve been funding above what is technically the maximum allowable (for schools) but the schools are faced with flat-base student allocation (from the state),” Haley said. “So every year they’re relying more heavily on the funding that comes from the city.”

Haley also noted the upcoming public discussions about revitalizing a Community Schools program, as the Community Recreation Initiative.

The core services slide also noted that tourism needs to come into the discussion since the large number of visitors expected will have an impact on such services as internet availability, garbage, sewer, traffic, emergency services, and water.

“We need to really put effort to making sure that visitors and locals are still having a good experience,” Haley said. “And that’s going to tie to our sales tax revenue. If cruise passengers aren’t having a good experience and can’t get in to shop they’re not going to be spending any money and we’re not going to be collecting any sales tax from them.”

On the same slide, Haley called attention to infrastructure, including projects deferred for the past two years. She said the city is working to determine which projects are most urgent to address.

Federal funding is available potentially for various projects through the Infrastructure Investment and Jobs Act and other programs. But city staff has made it clear that the funds aren’t going to come to the city without any effort on the city’s part.

“In order to maximize potential for federal infrastructure funding we need to make investments to (make) projects shovel ready,” one slide says. That means allocating resources, prioritizing projects and “balance needs with fit for federal funding.”

The city also is expecting growth outside city government, such as the expansion of SEARHC healthcare facilities and the Coast Guard’s plan to station another large vessel in Sitka, which will impact the city at various levels

“We need to be ready to address that,” Haley said.

 

Enterprise Funds

Enterprise funds, which have budgets based on fees for service, have some of the same challenges as the general fund, including inflation, labor shortages, the need to prioritize projects and the impact of cruise passengers, the finance official said.

Haley said most of the funds are healthy but uncertainties remain.

She said that while the city would like to use CPET funds to cover passenger impacts on the community, it is “challenging to justify CPET use to cover costs for wear and tear on infrastructure, security, etc.” 

The general plan for enterprise funds is to look at various rate increase scenarios, budget for service at present level, and at the next meeting talk about improvements.

City Administrator John Leach also talked about the kickoff of the strategic planning process this week, which will help tie the city’s budget to strategic goals.

The next budget meeting is 6 p.m. Jan. 27, followed by a joint meeting with the School Board on Feb. 3.

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20 YEARS AGO

March 2004

Matthew C. Hunter of Sitka recently returned from Cuba as part of a St. Olaf College International and Off-Campus Studies program. Hunter, a junior physics major at St. Olaf College, is the son of Robert and Kim Hunter of Sitka.


50 YEARS AGO

March 1974

Eighth graders have returned from a visit to Juneau to see the Legislature. They had worked for it since Christmas vacation ... Clarice Johnson’s idea of a “White Elephant” sales was chosen as the best money-maker; Joe Roth won the political cartoon assignment; highest government test scorers were Ken Armstrong, Joanna Hearn, Linda Montgomery, Lisa Henry, Calvin Taylor and David Licari .....

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