Ketchikan officials say the city’s spending plan for 2023 is a move towards normalcy after years complicated by the COVID-19 pandemic. The City Council approved next year’s budget on Thursday.
Council members sought to trim the budget in a series of detailed meetings but ultimately didn’t agree on any substantial cuts to day-to-day spending.
At the start of the budget review process last month, City Manager Delilah Walsh cast the city’s 2023 budget as continuing the city’s recovery from the COVID-19 pandemic.
“Really, the budget theme this year is, we’re trying to dig out of the hole. We’re trying to get back to normal. We’re not even close to where we were in pre-COVID levels,” Walsh told the council in November.
The city projects about $75 million in revenue for the next year and expenses of more than $84 million across a variety of funds, excluding Ketchikan Public Utilities. Those figures are all-time highs, driven by inflation in labor and material costs. Finance officials project a record-breaking cruise season, with some 1.5 million passengers visiting Ketchikan.
The spending plan would leave the city just $5.2 million in the all-purpose general fund, which pays for first responders, street maintenance, the library, and much more. That’s about $1.6 million less than the minimum balance set out in city code.
That led to sometimes acrimonious discussions as a group of three City Council members — Riley Gass, Abby Bradberry and Jai Mahtani — sought to trim the budget to make up for the shortfall. Most attempts at significant operating budget cuts failed by a 4-3 margin, though the council did vote to scale back or delay a variety of capital projects.
Gass voiced his frustration in advance of the budget vote.
“We’ve gone through this entire budget process and tried to make minor reductions to growth in each department meeting by meeting, department by department, line item by line item,” Gass said. “And quite frankly, we’ve gotten nowhere.”
The council, in a 4-3 vote with Mayor Dave Kiffer breaking a tie, settled on one substantial cut — a $100,000 reduction to the Ketchikan Police Department’s budget that would delay the hiring of two new officers. But in the leadup to the final budget vote, the council undid the cut.
As a last-ditch effort, Bradberry proposed an across-the-board reduction.
“I would like to make a motion that we cut two and a half percent from every operating budget for all departments,” Bradberry said.
Mahtani and Gass offered their support for the move. But Walsh, the city manager, said the cuts would require significant reductions in services, given that more than half of the city budget is tied up in labor costs.
“I don’t know if I’m doing my math incorrectly, but that’s between $1.7 and $2.5 million. It’s not $100,000 or $200,000,” she said. “Which is great — it would bring us to our reserve levels and well beyond — but we will have to cut operations, because I can’t cut personnel.”
The city’s finance director said the eleventh-hour cut would require each of the city’s departments to come up with substantial savings on short notice. But Mahtani said the reduction was necessary to ensure taxpayer money would be spent responsibly.
“I can understand the fact that it is a mammoth task, but we have to achieve fiduciary responsibility,” Mahtani said.
But a majority of the council opposed the cut. Council member Lallette Kistler said the group had tried and failed to find consensus on ways to reduce spending.
“We picked apart the budget, and really couldn’t agree on anything much that could be dropped. The reason we couldn’t find much is because there’s not much there. We all saw it,” she said.
Council member Janalee Gage said that she hadn’t heard from residents calling for reductions in city spending or services.
“I haven’t seen anyone come to the dais but I can tell you right now, if they don’t have good running water, and their sewer isn’t working, and we get a good amount of snow this year — which is looking pretty good — and we can’t clear our streets like they couldn’t do in Anchorage, we’re going to hear about it,” she said.
Council member Mark Flora said the across-the-board cut was “overly simplistic and untenable.” He drew a connection between the city’s budget woes and the council’s 2020 decision to forgo a contract private port operator to run the city’s cruise ship docks.
“This community got what it asked for,” he said. “It asked for no new and unique and hopefully a profitable, profitable relationship with how we manage that asset. And if we had had that in place for two years, and if it hadn’t failed to a referendum, and all the what ifs, the general fund balance would look remarkably different today.”
Responding to concerns over the city’s dwindling fund balance, Walsh said the budget was built on conservative assumptions for spending and revenue.
“We know there’s equipment that won’t be coming in, we know that there’s going to be salary savings, and we really, really conservatively budgeted revenues,” she said. “We did not go to what we really think the market is going to deliver.”
She said she was confident the city would be on solid financial footing heading into 2024.
The council rejected the 2.5% across-the-board reduction in a 4-3 vote with Gass, Bradberry and Mahtani in favor.
The council approved the overall city and utility budgets 6-1 with Bradberry opposed.
Next year’s budget negotiations could look very different. Walsh, who took over as city manager this year, says she’d like to move from line-item budgets built on historical spending to performance-based budgets, which focus on the value that taxpayer money provides.
But first, they’ll need a long-term plan. Walsh is calling on the council to develop a strategic plan in the new year to guide future spending — and council members said they hoped better planning would help avoid last-minute haggling over the budget.
Disclosure: Jai Mahtani is a member of KRBD’s nonprofit board of directors. The board does not direct news coverage.