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Ashland revised budget forecast looks less severe

According to a revised budget forecast, the city of Ashland still faces fiscal trouble, though not as severe as councilors thought entering the year. Still, the question of how to adequately fund the Parks and Recreation Department will take focus in upcoming budget discussions.

Total expenditures from the general fund for the first quarter came in at 21.5%, reported interim Finance Director Alison Chan at the Tuesday City Council meeting — satisfactorily below the one-quarter benchmark.

“I’m very comfortable with that number,” Chan said. “We’re sticking in line with budget.”

Chan presented a revised general fund budget forecast indicating the city’s financial woes appear less dire when contingency dollars are not assumed as entirely spent in the budget.

She laid responsibility at the feet of the former finance director, whom Chan said made a critical “error” by assuming in the forecast that all contingencies would be spent, and/or failing to adjust ending fund balances minus contingency.

“I think this, unfortunately, is a perfect example of what happens when you don’t have those layers of review,” Chan said. “The sky is falling and then a couple months later I come in and go, ‘It’s not falling, but it’s raining pretty darn hard.’”

“I am totally in favor of a contingency; I’m not saying don’t have one,” she said. “I’m saying for forecast purposes, I’m not willing to say we’re going to spend 100% of our contingency.”

The original forecast, accompanying the adopted biennial budget, showed an ending fund balance of just under $6 million at the end of fiscal year 2023, and $5.8 million in the negative by the end of the forecast period fiscal year 2026, prompting the council to begin prioritizing essential, mandated and nonessential services and attempt to resolve the significant projected shortfall.

In Chan’s revised forecast, contingency funds were removed from expenditures, a $500,000 expenditure from the ending fund balance was added to 2024 to account for a dip in Parks and Recreation Department revenue from the food and beverage tax reallocation, and $1 million of expenditures were removed associated with a not-yet-secured grant to the fire department.

“In the second year of this biennium, the way they moved the food and beverage tax around, it actually reduced the allocation to parks by half a million dollars,” Chan said. “So I put it back in the FY 24 forecast and then it gets inflated in the next two years as all the numbers are inflated by a set amount.”

Councilor Tonya Graham expressed concern about the difference in recalculated revenues and expenditures from the fire department in the new forecast related to removal of the grant amount — hesitant to relax into an improved ending fund balance forecast if the fire department needed to incur the associated expenses after all.

The new forecast shows the ending fund balance in FY 26 to be just over $6 million. While no longer in the negative, the forecast still shows the ending fund balance being spent down in an unsustainable way, Chan said.

“In the fiscal year 2026, we’re spending $2.5 million more than we’re taking in, and we would have an ending fund balance of $6 million,” she said.

Her recommendation echoed early guidance given to the council regarding budget turmoil: increase revenues, decrease expenditures, or both, before compiling the next biennial budget.

If left over, contingency dollars fall back into ending fund balances for allocation the next year — a “spendable reserve” that requires council approval, Chan said.

With the half-million-dollar fund recovery in the revised forecast, the city’s contribution to parks and recreation increases during fiscal years 2024-2026 to nearly $4.6 million by the end of the forecast period — still far from what parks requires to operate, said Councilor Stephen Jensen.

“The big challenge that needs to be solved is how do we fund parks going forward,” Chan said. “I could boost parks up and we still wouldn’t be in a negative overall fund balance, but we’d be spending the fund balance down even more.”

Continuing the City Council’s scheduled series of financial review meetings, Milliman presented examples of revenue enhancement options that other municipalities with which he worked have employed.

“In Oregon, revenue options are very limited under state law,” Milliman said. “You have already enacted some of those revenue measures, such as the food and beverage tax.”

The Sustainable Services Revenue Task Force for the city of Salem recommended their city enact a city operations fee of $6.40 per month collected through the monthly utility bill, he said.

“Cities have increasingly used a fee that’s attached to utility service as a mechanism to either pay for specific services, general operations or capital improvement,” Milliman said. “My former city of Brookings has a long-standing system replacement fee for capital improvements; it’s attached to the water and sewer utility bill.”

Brookings dropped its street system replacement fee when the voters approved a fuel tax, he said. Voter-approved tax levies have also been used to fund operating costs, typically for a five-year period, he said, citing an example from Port Orford in which voters approved two successive five-year levies to sustain their police department.

However, in Curry County, repeated attempts to fund law enforcement services with levies have consistently failed, he said.

Councilor Shaun Moran said instead of asking members of the public to pay more, the city should look internally at departments and cut costs that can be made without affecting services, as a “first step” to resolve any shortfall or decline.

“When we look at revenue, I’m hoping we can look at ways to decrease the expenditures and be able to not burden the residents of Ashland anymore with additional taxes,” said Councilor Gina DuQuenne.

“Recognizing that voters are experiencing tax and fee fatigue, cities have increasingly focused on developing public-private partnerships to not only undertake capital projects, but to generate revenue for projects in which the city is a partner,” Milliman said.

In 2005, the city of South Gate, California, used the value of its infrastructure to support and help assemble a site for a new shopping center, to secure an equity share in the project and generate about $5 million in equity partner revenues for the city’s general fund, he said.

Graham made a motion directing staff to analyze revenue enhancement options, prioritize what is feasible for Ashland, and define what each revenue option brings to the community as part of the larger general fund vulnerability conversation.

“I think it is clearly important that we’re looking at where we can trim expenses, but the full breadth of the conversation in front of us also includes this revenue enhancement potential,” Graham said. “It’s important that we lift both of these conversations at the same time, so that when we come back in front of the community, we can ask … which ways they want us to go to solve this general fund issue.”

Councilor Stefani Seffinger, who seconded the motion, said the City Council should not lose sight of factors such as climate change, and cautioned against cutting ways of dealing with associated threats to the community, including city commissions that focus on climate change-related issues.

“I want to be sure that we really know what all of the options are and what the public really is invested in,” Seffinger said.

The motion directing staff to compile further information about revenue enhancement options feasible for the city passed 4-2, with Moran and DuQuenne casting nay votes.