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City faces $1.2 million shortfall in biennium

PERS hike hits school district with even higher expenses


In a new move to address a growing hole in the city budget, West Linn is asking for ideas and suggestions from its citizens to cut costs and generate revenue.

On Sept. 28, the state Public Employee Retirement System board announced the new PERS rates, which public employers, such as the city of West Linn, will need to pay for the next two years — these rate increases will cost the city an extra $430,000 per year.

PERS is the retirement system for public service workers in Oregon, including state, local government and school district employees.

The rate jump doesn’t come as a complete surprise, but the 4.5 percent increase did. The city was planning for an increase of at least 2 percent, but no more than 3 percent, according to Chief Financial Officer Richard Seals.

Out of West Linn’s 133 employees, roughly 132 employees qualify for PERS.

That is money the city does not have. Other cities with larger reserves, such as Lake Oswego, have planned for the increases and have set money aside. Lake Oswego has saved $562,000 for future PERS expenses.

The city operates with a narrow reserve of a little more than $1 million. And although the city recently increased these reserves by about $200,000, this additional PERS cost has created a sense of urgency in city hall. After six years of budget and staff cuts, the city is turning to the community for ideas.

Two years ago, the city slashed $1.2 million from its budget. The city is facing a similar challenge for the next biennium, with more than $800,000 of it resulting from this added PERS cost.

“It’s almost like a déjavu situation,” Assistant City Manger Kirsten Wyatt said.

“The cuts we made two years ago can’t be cut again,” Chris Jordan, city manager, said.

According to Seals, the city is updating its forecast over the next couple of months and estimates will be refined once auditors have completed their work finalizing the fiscal year 2012 financial results.

At this point in time, the city is going to have to start cutting programs to save money or raise rates to bring in money.

“We can and we will make whatever reductions that need to be made,” Jordan said.

However, city officials first want to hear from the public.

“We want to engage the community in discussions of alternative revenues,” Wyatt said.

The city is creating a community values forum by inviting prior citizens budget committee members from 2005 to present day. This group will brainstorm the best options for raising revenues.

Another group, the budget evaluation and efficiencies taskforce, will be made up of 14 city employees from different departments. This group will look at streamlining processes and saving money.

The two groups will first meet Nov. 6 to hear an overview of the city’s financial realities.

“The overall goal is to create buy-in,” Wyatt said.

In early November, the city will conduct an online community survey to gauge what city offerings citizens value most. This information will be presented to the two groups in December.

Then the city will use its new website to use crowd sourcing to share information and ideas and respond to the committees.

The committees will then brainstorm in January and the budgeting process will commence in February. It will be finalized in March and adopted by the city council in June.

Jordan said he thinks the community is not aware of how few choices the city has at this time.

“It’s sharing of the pain a little bit. The decisions are just getting harder and harder.”

In the last six years, the city has cut 10 percent of its staff while the city has continued to grow. This time, Jordan said, programs could be cut. Potential reduction areas include the library, the police department, parks and recreation and the planning department.

Wyatt said she hopes the community will learn how difficult it is to put together a balanced budget in this economic environment.

Jordan said the next round of cuts will not be Draconian, but decisions will need to be made.

“It’s really plotting your course,” Wyatt said. “It’s such an important process for our community.”

West Linn is not alone with its shrinking budget. School districts are also feeling the pinch.

Doug Middlestetter, business manager for the West Linn-Wilsonville School District, said the district anticipated an approximate 5 percent increase with PERS. The approved 6.1 percent rate increase will cost the school district an additional $2.2 million dollars from the general fund per year.

Middlestetter said the $2.2 million jump is a very significant increase. The school district’s general fund budget is approximately $68.63 million.

One reason the school district’s increase is higher than the city’s is that schools are in their own pool, which carries their own retirement funding needs, according to Seals. Oregon school districts pay 100 percent of teacher insurance through PERS when they retire until age 65. West Linn, like most cities in the state, offers the coverage option at retirement, but the retiree pays for the premium.

Other factors in the difference between the city and the school district include the selling of PERS bonds and re-investments. West Linn did not sell PERS bonds and therefore is not as heavily invested relative to the schools/state, according to Seals.

“It’s just another expenditure the school has to factor in,” Superintendent Bill Rhoades said. “There’s nothing anybody out there in the classroom can do.”

Middlestetter said the majority of West Linn-Wilsonville School District employees are covered by PERS. The school district did not set aside a reserve fund in anticipation of offsetting PERS costs, however both Middlestetter and Rhoades said it’s too soon to predict how the expenditure will affect the school district.

“Anything would be speculation until we know what kind of funding we will have in the next biennium,” Rhoades said. Gov. John Kitzhaber is anticipated to announce his budget recommendations in December.

“Only at that time do we get a first glimpse at what next year might look like,” Rhoades said. “There will be lots more information and light shed on this in the coming months.”



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