In the face of a city budget deficit of $1.2 million, Mayor Clay Koplin has two words of advice: shop local.
There are two simple things every Cordovan can do to assure a financially, socially and culturally successful future in our town, Koplin said. They are to use local health services at the Ilanka Clinic and Cordova Community Medical Center, and to shop locally for many other items.
Koplin’s advice came on the heels of a Cordova City Council budget workshop with city department heads and City Manager Alan Lanning on Nov. 29. That was the latest in a series of budget workshops designed to deal with revenue shortfalls and state of Alaska budgetary restrictions.
The FY2017 budget worksheet shows a proposed general fund revenue total of $9,731,166.64, with a proposed general fund expenditure total of $10,974,033, a deficit of 1,242,866.36.
The city’s current FY16 operating budget shows general fund revenue of $11,065,434.75, with an expenditure total which equals the same amount, leaving a zero balance in the general fund at the end of this year.
The 2017 budget cycle will be one of the most difficult that Cordova has faced in years, perhaps decades, said Koplin.
“While there are reasonable operating reserves and a permanent fund reserve, income is down sharply,” he said.
“There are four major sources of income to Cordova; raw fish tax revenues, property tax revenues, sales tax revenues, and U.S. Forest Service timber receipts. The raw fish tax revenues were down sharply this year, sales taxes are holding steady, as are property taxes. Timber receipts are expected to happen, but there are no guarantees,” Koplin said. “The only steady and reliable income stream is taxes on Cordova’s land owners – those who have invested most in Cordova, and businesses – who are struggling against stiff competition from Anchorage, Seattle and the Internet.”
Creating a sin tax on alcohol and tobacco sales is one option being looked at, along with a seasonal or a year-round sales tax increase, and a small increase in property taxes.
City Finance Director Jon Stavig estimates taxes on alcohol and tobacco would bring in about $250,000 in new revenue, while an increase in local sales taxes from six percent to seven percent would generate about $500,000.
According to Lanning, said there is historical sales tax data to support the idea of increasing city sales tax by one percent.
City department heads were tasked a month ago to trim their proposed budgets prior to submitting them for inclusion in the proposed FY17 operating budget worksheet.
“There have been no cuts as of yet,” Lanning said. “We’ve started this cycle with a $1.9 million deficit and I’ve asked all departments to reduce their requirements as much as possible, to reduce wherever they’re able to,” Lanning said. “We have to figure out how to make everything work within the city on a very limited basis.”
Still, the upcoming operating budget deficit isn’t going to be fixed in a single year, he said.
“We’re going to have to grind hard for two to three years and undergo proactive strategic planning for our future to fix this and establish other revenue sources, so that we don’t have to face this type of deficit again,” Lanning said. “Right now, the biggest question is, how do we get through this year?
That’s the $1.2 million question.
“The council has a very difficult job of deciding where the operating costs will be cut; the schools, the hospital, city of Cordova services, or, most likely, all of them,” Koplin said.
“I do not want to saddle property owners with that entire amount,” said Councilman Tim Joyce.
The schools and city are going to have to pare back, and we need to generate revenue, he said.
It’s going to be tough – I realize that. It’s time to tighten the belt,” Joyce said.
Councilman David Allison echoed Joyce’s sentiments.
“Budgets are tight for property owners, too. I’m not in favor of raising property taxes, although they may have to go up a little. Sin taxes, I could go for. People are going to sin, no matter how much it costs,” Allison said. “I do think that before we try for additional taxes, we need to look at where we should cut.”
Koplin declined to share his thoughts on what the budget should look like, saying that Lanning
and the council have a hard-enough job balancing community needs and solving short-term problems, while charting a path to the future.
“The challenges offer opportunities,” he said. “We’re collaborating on a strategic plan for Cordova that will help mitigate these revenue swings and chart a more sustainable future for the community.”
Meanwhile, Koplin said, residents can help by utilizing local health services and shopping locally for everything else.
“We now have two doctors at CCMC, one male and one female,” he said. “I’ve had the opportunity to see them both for medical reasons. I’ve observed them in life-threatening, emergency situations. I have also used the Ilanka clinic. I’ve been impressed with the suite of medical services provided in Cordova and the fact that doctors, nurses and hospital administrator have all purchased homes in Cordova,” Koplin said. “This has given me the confidence to move all of my medical records back to Cordova and to schedule my annual physicals and medical check-ups here. I encourage every resident to do the same. The hospital administrator has indicated that CCMC can serve two-to-three times the patient load without adding staff and I would wager that Ilanka clinic also has a measure of capacity.”
Koplin said that two additional visits per day to CCMC would eliminate the $900,000 budget request the hospital has made to the city, which is almost exactly the annual maximum funding to Cordova schools.
In the proposed FY17 city operating budget worksheet, the city contribution to Cordova’s public schools is shown incrementally with the first transfer indicated January-June of $861,000 and a second transfer indicated July-December of $407,500.
During the workshop, the city council directed city officials to increase the school’s contribution by $100,000, for an overall contribution of $1,368,500 for FY17.
The proposed FY17 city contribution to the Cordova Community Medical Center is listed in the budget worksheet at $650,000.
Koplin said supporting local merchants helps the local economy and while shopping only in Cordova can be trickier, due to price differences and the demand for high quality perishables, there are numerous advantages.
“I have experienced better Cordova pricing than I could find online or in Anchorage from North Star Lumber, Cordova Outboard, Plumbline, Cordova Gear, Radio Shack and many other businesses,” Koplin said. “I changed my shopping habits back to a stronger, local commitment a couple of years ago, after doing the ferry-to-Anchorage-run game. What I learned is, that when I buy what I need, when I need it, in Cordova, two or three times a week and use everything in my refrigerator and pantry, I avoid over-shopping and waste, and have actually reduced my grocery costs.
“If we can find ways to provide first-rate quality and convenience for reasonably higher costs, the entire community will benefit and our friends and neighbors at these community organizations and businesses will retain their jobs. I challenge and encourage every Cordova citizen to help reduce the money we export from Cordova and work hard to generate new sources of revenue to bring money into Cordova,” Koplin said.
“We were given direction by council to find additional cuts from the city, add $100,000 back into the school district’s request (for funding) and to provide options to council with respect to potential taxes,” Lanning said.
“No specific decisions were made regarding any taxes at this point,” he said. “There was also direction to explore the money in the city permanent fund, mainly to understand the balance, how we got to the balance – primarily the initial investment and the earnings in the fund to date. The next budget meeting was to be held on Dec. 7.
Lanning is optimistic that a solution will be found and agreed upon by the Dec. 21 budget deadline.
The 2017 City Budget Worksheet is available at City Hall. The proposed FY17 City Operating Budget was to be addressed further at the regular city council meeting on Dec. 7.
