The Coeur d'Alene City Council's budget workshop on Monday afternoon revealed a grim picture in the foreseeable future with the FY24 city budget. Not only are two of the major capital projects over budget by millions of dollars, the city was hit with the realization that they will have a cash flow problem, potentially making it difficult to pay staff if a large, unexpected expense is brought to the council over the next few years. The somber mood of the meeting intensified as participants heard the news that the city would have to take a 3% tax levy against property values, AND dip into savings, just to pay the bills.
Problem 1: CDA Police Building Expansion
One of the big ticket items that was to be financed by American Rescue Plan Act (ARPA) funds was the expansion of the CDA Police building. Police Chief Lee White asked, and received, $4.5 million in ARPA funds to purchase the land and build the expansion. In Monday's budget workshop he presented the design of the expansion, and then let the council know that this project is going to be $1.2 million over budget...which they will have to find the funds to complete.
The city council is at a crossroad with this project; if they continue forward and find money where they can (impact fees and the like), it's going to make the next few years REALLY tight until they are able to go out for a general obligation bond in 2025. If the council decides to hold off on this project for a couple years until they are able to get more revenue, then the price tag for construction materials could potentially skyrocket from it's current value.
Problem 2: Streets and Engineering Building Remodel
The Streets and Engineering teams have been bursting at the seams inside one building that was never meant to hold more than one team. They are working through a remodel that had a $1 million price tag but NEW estimates have put the cost of the job closer to $1.8 million. The Engineering team is looking to do a lot of the work themselves and may squeeze the price down to $1.4 million but are currently unsure if that's feasible.
This project has the same issues as the police expansion: if the project moves ahead now they will have to find the capital to make up the price difference, if they wait there could be a jump in construction costs. Not to mention, if the Streets and Engineering teams do a lot of the work themselves, they won't be able to start those projects until Spring - Fall and Winter are their busiest seasons with plowing - which could also potentially jack up the cost if contractors had to wait until spring to do their parts.
Problem 3: CDA is Spending More Money Than They Can Find Revenue Streams, Have to Dip Into Savings
There is a lot to unpack with the overall FY23/24 CDA budget but the original discussion was during the budget presentation at the August 1st city council meeting. The workshop was a follow up discussion to that August 1st meeting.
Full budget presentation at August 1, 2023 city council meeting.
Highlights (lowlights?) from the proposed FY24 budget:
Salaries/benefits are $2.7 million HIGHER than they were last year (thanks unions)
New growth can typically cover staff cost-of-living adjustments (COLAs) but now it only covers about half.
The City Administrator is patting the council on their back for the "great job the council has done at growing the city's valuation over the past few years." Doesn't mention that the city council had nothing to do with it, there was just a mass exodus from other states into Coeur d'Alene. He does mention that because the property values are so high it has made the levy rate so low and now the city is not getting as much money from property owners as they did before...
...even though the total tax revenue is almost $10 million HIGHER than it was a few years ago (if they take the full 3% from taxes).
The state legislature puts a cap on amount of taxes to 3% as well as caps on other one-time revenue funds, for example like how much money the city can take after closing urban renewal districts.
There are always open positions within the city, including open police and fire positions. Every year the city puts money aside just in case those positions are filled, and at the end of the fiscal year if there's still money that was set aside, the city uses it to cover the rest of their budget instead of dipping into savings.
FY24 is the first time in recent history that the CDA Police Department is pretty much fully staffed. They are also some of the highest-paid city employees. Because the city has employees to actually pay this year, there is none of that open position money that will be able to cover the rest of their budget, meaning that the city WILL have to dip into their savings (aka unassigned fund balance) to pay all the bills in FY24.
The problem the city is facing is that they have no new ongoing revenue streams to balance out the money taken from savings. Looking ahead FY25 the city is in the same boat, further depleting their savings if they cannot find another ongoing revenue source.
This problem of depleting the savings account is on top of taking the full 3% from property taxpayers. Even after taking as many taxes as possible, the city is still draining savings.
At the June 6 CDA City Council meeting, we learn that the Government Finance Officers Association (GFOA) suggests that each municipality keep at least 60 days’ worth of unassigned funds to cover regular operating expenditures in case of a rainy day. In the case of Coeur d'Alene, that's about 16% of the overall expenses. As one can see from the graphic above, the city will barely meet that threshold at the end of FY24. Looking ahead in FY25 one can see the city will fall below the 60-day suggested minimum if they cannot find a new ongoing revenue stream.
After hearing the grim details in yesterday's workshop, the city council ended the meeting without solutions to this budgeting problem except for proposing a hiring freeze and directing finance staff to put together a final proposed FY24 budget that includes taking the full 3% from property taxpayers. The short-term outlook for the FY25 AND FY25 budgets are so bleak without some major cutbacks and/or new revenue that one can only pray that there are no large, unexpected expenses over the next few years.
The staff is putting together the final proposed FY24 budget and the public hearing will be held on September 5, 2023 at 6:00pm. This will be the public's chance to give their opinion on the proposed budget and pray for the council to make thoughtful decisions about the future of this city.
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