Change focuses on proposed tax rate cut
The Lake Oswego City Council Tuesday overturned the budget committee's recommended 2012-13 spending plan, with the mayor and three city councilors citing problems with a proposed decrease of the usual tax rate hike.
Mayor Jack Hoffman and Councilors Donna Jordan, Sally Moncrieff and Bill Tierney voted to restore the tax rate, which will require republishing the budget document and holding anther public hearing. Councilors Jeff Gudman, Mike Kehoe and Mary Olson were opposed.
When City Manager David Donaldson released the proposed spending plan earlier this year, he called it a 'maintenance budget,' a document that kept the 'status quo' by holding the line on most materials and services spending. The $242.5 million budget included some major projects funded by public utilities as well as a slight increase in spending on employees.
The budget approval process begins with the city manager releasing a proposed spending plan. The budget committee, made up of the mayor and city councilors and seven citizen members, then adjusts the document and sends a recommendation to the city council. The council then must adopt the plan by June 30, before the next fiscal year begins.
However, Donaldson warned that building the budget with a property tax reduction could maroon future capital projects, which typically involve major purchases of equipment, building renovations and infrastructure upgrades.
Gudman initially proposed the cut to offset the automatic 3 percent annual increase imposed on assessed property values. It would save the average homeowner about $50 in the next year while shaving as much as $750,000 from revenue the city might otherwise receive. He said he wanted to relieve some of the burden residents have faced from higher sewer and water rates.
Budget Committee Chairman Kent Studebaker and Vice Chairman David Berg told the council the recommended plan resulted from many hours spent analyzing city finances.
'We do not think this is an austere budget,' Studebaker said. 'There were no program cuts. We did try to rein in costs in the personnel area by getting an agreement from the city manager to cut personnel costs by $350,000.'
'We believe overall this is a very balanced budget,' Berg said. 'It not only provides our residents with relief on taxes, but it also begins to address some of the long-term issues facing the city.'
Berg added that he felt citizens bringing funding requests to the committee generally understood there were limited resources to pay for extra projects like new artificial turf on one of the school district's sports fields.
Former committee member Dan Williams also spoke in favor of the recommended budget, including the property tax reduction.
'The dollar amount might not be large, but the message is,' he said.
Several others testifying Tuesday opposed the tax cut.
Business owner Mike Buck said when it comes to city projects and services, he's not in favor of 'extravagance,' but he doesn't want to be 'negligent' either. Broken down to the individual property level, the average savings from a tax cut isn't much, yet it could pose major implications for the city in the future, he said.
Dan Vizzini, who filled a vacant council seat in recent years and has a long history of analyzing budgeting systems, suggested an alternative method of easing the burden from higher utility rates. He proposed the city boost its 'affordable safety net program,' providing more relief to residents struggling to pay their utility bills.
Craig Prosser, a budget committee member testifying as an individual, agreed. 'The proposal misses utility rate relief,' he said.
Councilor Jordan supported that sentiment, calling for the city to look at its safety net program and 'make sure it's wide enough and deep enough for today's aging seniors.'
She said reducing property tax rates doesn't address concerns about bigger utility bills.
'I'd rather see that those folks who are actually facing hardship … are getting the break,' she said. Otherwise, 'I think a lot of people out there will get the bigger tax break, because their property value is higher,' or some in the community might benefit despite not having to pay more to water their lawns each summer 'because they get to use other sources of water to irrigate.'
But Gudman said to suggest that reducing the tax rate is 'a gimmick' is 'patently false.'
'It is a serious effort to address the budget of this city,' he said.
Though some of the remaining fund balance is restricted from spending, Gudman said the city always has a surplus at the end of the fiscal year. And Donaldson confirmed that no service cuts were proposed as part of the 2012-13 spending plan.
Also, the budget committee had approved the recommended budget 11-3, with only councilors Jordan, Moncrieff and Tierney opposed. Gudman asked the mayor what had changed, as Hoffman voted to advance the plan to the council.
'Further reflection,' Hoffman said.
Kehoe said he hears a lot of talk about 'crisis' and the need for more money.
'I find it appalling,' Kehoe said, noting the city should work to reduce spending rather than relying on citizens. 'If you don't know somebody who has lost their job or has lost their house, you're not talking to your neighbors. … People in this community are hurting.'
He said a break of any size 'is really something that makes sense in this recession.'
But Moncrieff voiced concern that lowering the tax rate now could cause problems in future years.
'Although we may not see service cuts immediately, we do see our expenses outpacing our revenues in 2014,' she said. 'I think it's important to look to the future and make sure we aren't creating a revenue crisis.'
Olson said budget forecasts always show a projected deficit.
'There is no imminent crisis looming in our city,' she said, calling the use of the term crisis 'ridiculous.'
She added that the city is 'extremely conservative' with how much it sets aside as contingency money. 'I don't see that amount evaporating,' Olson said.
Although he supported Gudman's proposal to build a tax-cut into the budget, on Tuesday Tierney said he couldn't support the recommended budget because it wasn't balanced.
He said the council should ensure current revenues are greater than current expenses: 'In the absence of it, one is borrowing,' he said, pointing to the federal government as an example, 'or dipping into savings' like the local school district and the state government.
Any money left at the end of the year should go toward investments in equipment rather than being tapped for ongoing operational expenses, such as obligations for public employee retirement benefits, he added.
'I think all of us want to live in a city that is financially healthy and financially responsible,' Tierney said.
A new hearing on the 2012-13 budget is tentatively set for June 19 at city hall, 380 A Ave. The council will then also hold another hearing on the city's five-year capital improvement plan, as council members also adjusted the CIP to funnel money toward replacement of a street sweeper and a truck needed to clean manholes and catch basins.