Committee begins reviewing proposed spending plan tonight
Lake Oswego City Manager David Donaldson has released a 2012-13 proposed budget that avoids slashing services and programs but could pose long-term consequences for the city government's finances.
Members of the Lake Oswego Budget Committee will begin fine-tuning the budget today.
Donaldson called the 2012-13 spending plan a 'maintenance budget,' keeping the 'status quo' by holding the line on most materials and services spending.
'I'm pleased we were able to achieve this goal despite rising fuel costs and increases in many of the goods and products we purchase, and charges by vendors,' he wrote in his official budget message.
The giant spending jump from $188.3 million in 2011-12 to $242.5 million in 2012-13 reflects some major projects funded by public utilities, he said. The city plans to spend slightly more on employees in 2012-13 but will spend less on materials and services, according to the proposed budget.
In addition, Donaldson said, officials will continue working on some big projects but don't anticipate any major new initiatives in the next fiscal year, which begins in July.
Ongoing efforts include implementing a redevelopment plan and possible urban renewal area in Lake Grove with $15,000 budgeted to carry over that work. Donaldson noted additional funding may be needed later to pay for rebuilding Boones Ferry Road, a major element of plans for Lake Grove.
Also staying on the table is redevelopment in Foothills, where $50,000 is budgeted to continue developing a vision for the area.
Other initiatives include continuing efforts to overhaul the community development code, budgeted for $100,000; completing the updated comprehensive plan for $50,000; completing the Luscher Farm area master plan for $25,000; and moving ahead with the Lake Oswego-Tigard Water Partnership, which will eventually overtake the recent interceptor sewer project as the biggest public works effort in Lake Oswego history. The city will issue $65.5 million in bonds in 2012-13 and plans to spend $29.6 million on water infrastructure projects.
Some other planned expenses include:
• $1.55 million in West End Building expenses and to continue making loan and interest payments on the WEB;
• $1.36 million from the street fund to rebuild the 10-block stretch of A Street downtown and $290,000 for regular pavement preservation work;
• $475,000 from system development charges to extend a trail from Lake Oswego to West Linn;
• $58,000 for an electronic ticketing system and $216,000 for vehicle replacement in the police department; and
• $25,000 from the tennis facility's fund for design of a new replacement tennis center.
The estimated $30,000 cost to recruit a new city manager will be covered by savings realized by moving Donaldson, previously assistant city manager, into that position on a short-term basis.
But Donaldson's proposed spending plan wasn't all good news.
Temporary franchise fee hikes aiming to help funnel $2 million to public schools will expire, and it's unclear whether the school district will receive $500,000 it has requested to pay for new turf on one of its sports fields.
Expenses, including employee health insurance costs and public employee retirement obligations, continue to outpace revenue growth.
And Donaldson said the city council's direction to build the budget with a property tax rate reduction could maroon future capital projects, typically those involving major purchases or renovations of buildings, infrastructure and expensive equipment.
The tax cut idea, proposed by Councilor Jeff Gudman in January, aims to relieve some of the burden on residents from recent sewer and water rate hikes, which help pay for major infrastructure upgrades. The 3 percent cut would offset an automatic 3 percent annual increase in assessed property values. It would save the average homeowner about $50 in the next year, while shaving $750,000 from what the city would otherwise get from increases in property tax revenues.
Because the impact of a tax rate cut would be cumulative, over time, the city will forgo nearly $10 million in general fund money, Donaldson said.
As a result, the city won't be able to use any unreserved fund balance for capital projects, won't be able to launch an equipment replacement fund to save for future expenditures and will reduce ongoing revenue for other services, Donaldson said, noting the budget committee could decide not to reduce the property tax rate.
At the same time, he said, while the city may seem to be on stable ground financially, it has so far narrowly avoided money problems seen elsewhere.
In many areas, the economic recession has driven down properties' real market values, pushing them closer to their assessed values, the factor on which taxes are based. When that happens, agencies collect less than the usual 3 percent increase in tax money.
'My message is to be cautious in terms of looking at future years, to be cautious about revenue growth in general,' Donaldson said during an interview this week.
'We have a five-year financial plan, and we need to be cautious and to understand our capital needs as we move forward. … We don't have a lot of room now to add services or make changes,' Donaldson said. 'If you're planning ahead you can recognize you need those monies and you should be putting those monies aside.'
After all, he added, capital needs are often the first to take a hit when budgets are reduced, because community services take priority over one-time projects. But without investment, broken-down equipment and faulty infrastructure will eventually take a toll on public services as well.
The proposed budget will now be reviewed and tweaked by the budget committee, which includes the mayor and six city councilors along with seven citizen volunteers. The budget committee will then forward its recommendation to the city council for adoption.