May 31 2011

Municipal Tax Review Committee News – May 25

A Report from the Chair of the 2011 Municipal Tax Review Committee,  Michael Rancer

At its May 25 meeting, the Municipal Tax Review Committee began examining possible revenue and expenditure growth trends for the next 5 to 7 years.  The committee has determined, based on data from the past 30 years, that revenue changes from year to year can be very volatile and therefore unpredictable, though longer term trends tend to even out the year to year fluctuation somewhat.  Still, it is not possible to precisely predict most of the city’s revenues sources from one year to the next.

Expenditure trends are much more predictable, and also more under city control.  Though they have grown over the years, and there are unfunded programs, mandates and liabilities awaiting us in the future, the city has more ability to match expenditures to revenues, than the other way around.

The committee has adopted a tool for modeling possible alternative scenarios for both revenue and expenditures.  Prior to the next meeting (June 8), a small working group will consult with city finance director Mark Bichsel to develop several variations, based on differing assumptions about revenues and expenditures.  The working group will bring those alternatives to the full committee for review and discussion at its next meeting.  This will help the committee to set boundaries for possible tax and spending recommendations to the city council.

Among the factors the committee will review are different growth rates for property taxes and real estate transfer taxes, which are the two largest city revenues, accounting for almost 60% of the resources.  These taxes do well in good times, but slump when the economy weakens, as it has in the last three years.

The committee will also review expenditure commitments and possible changes to growth rates, including assumptions about employee benefits, staffing, salaries, and commitments to new programs such as the swimming pool.

From these analyses the committee will recommend both revenue and spending policies to keep both under control and the budget in balance.  The committee has made no decisions yet about any such policies, pending review of the data.  However, as a working group (rather than deliberative body such as a permanent city commission), informal discussion around the numbers we have seen suggests that many members of the committee have concerns about long-term spending trends.  At the same time, there has been no expressed enthusiasm for significant tax increases.

The committee’s work plan for the remainder of its term is as follows:

  • May 25   Subcommittees report preliminary revenue, expenditure projections (COMPLETED)
  • June 8    Committee reviews consolidated projection, preliminary funding gaps
  • June 22  Committee reviews varying scenarios and assumptions for defining proposed parcel, sewer taxes
  • July 6     Committee finalizes recommendation for proposed taxes, including proposed expenditure policies
  • July 20   Subcommittees complete draft report sections on revenues, operating, capital & sewer expenditures
  • Aug 3     Committee reviews first draft consolidated report
  • Aug 17   Committee reviews second draft consolidated report
  • Aug 31   Committee adopts final report for recommendation to Council

As always the committee invites interested citizens to sit in on our meetings.

Michael Rancer

Chair, Municipal Tax Review Committee

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