City budget on track, but warning signs persist
The city of Ashland ended the first year of the current two-year cycle on a positive note, according to Director of Administrative Services Mark Welch at Monday’s City Council study session, but he also cautioned that the city’s structural deficit still exists and what money was saved from delayed hiring of positions won’t apply now as most vacant positions have been filled.
The review updated the council of the state of the budget at the halfway point of the 2017/19 cycle. The budget year runs from July 1 to June 30.
“We know ultimately we do have a structural budget deficit in the general fund,” Welch said, “and also in central services that needs to be addressed.”
The Central Services classification includes departments that provice services to almost every other city department but don’t in themselves generate much, if any revenue, including the city administrator’s office, administrative services, human resources, information technology, city recorder and engineering and graphical information systems (GIS).
Welch briefly highlighted some notable figures from the general fund. He said that property tax revenues came in above budget by $33,805, the transient occupancy tax increased by 6 percent, the food and beverage tax increased by 7 percent and that salary and benefits was $793,681 below budget.
While salary and benefit expenditures were less than projected, since some open positions weren’t immediately filled,
“The makeup of salary compared to benefits has increased pretty drastically in the last 10 years,” Welch said. “In terms of benefits, there’s been pretty big increases.”
Over the past 10 years, per employee, the city’s general public employee’s retirement system has increased 59 percent, the police and fire Public Employees Retirement System (PERS) costs have increased 96 percent, healthcare has increased by 76 percent and the overall cost-of-living allowance has increased from 16.5 to 20 percent.
Materials and services are down this year and because the Ashland Forest Resiliency grant hasn’t been received, that money hasn’t been spent yet. Welch also said the contingency funds weren’t spent this year either.
Welch said that the recent switch in the city’s healthcare will influence the budget in an unpredictable way for the next biennium, but the switch to BlueCross-BlueShield should help cut costs.
“With some of the changes in pharmaceuticals, we except some reductions in our total claim costs,” Welch said. “We expect to see some reductions in our current claims based on current benefit offerings.”
This past year, an estimated revenue amount of $28.4 million was projected, but only $26.6 million came in, $1.8 million under budget.
Expenses were estimated at $30.3 million, but the actual amount came to $26.6 million, a difference of $3.7 million. Actual revenues less expenses came in at a positive $33,923.
Welch also noted the central services expenses and said that a study is being conducted to revamp the way cost allocation is figured for the next biennium. Welch said the first draft should be ready in November.
According to a staff report, central services should be an internal zero cost operation where expenditures equals revenue every year.
“The Central Service Fund remains a major long-term financial sustainability concern,” the document read.
The cost allocation study will work to find a more accurate estimate of central services cost to help with that concern for the following biennium.