The City of Tacoma faces a major general fund budget shortfall, a hole of at least $10 million, three city sources have separately told The News Tribune.
One source said the deficit projects to $20 million over the city’s two-year budget cycle. The city’s general fund budget runs through 2012.
The news comes just days before Interim City Manager Rey Arellano and Finance Director Bob Biles are set to present the first detailed budget update to the City Council since former City Manager Eric Anderson’s dismissal in July.
Arellano was in meetings and unavailable for comment Friday, city spokesman Rob McNair-Huff said. McNair-Huff also declined to provide budget details.
“I’m not going to pre-empt the budget update,” McNair-Huff said. “All I can say is that there will be a budget update on Tuesday.”
Reached earlier Friday, Councilman Jake Fey said he is bracing for bad budget news, based on poor sales tax revenue figures that Pierce Transit already has shared with the council.
“I have suspicions that we’re going to have a serious problem,” Fey said.
Councilman David Boe said Friday that he has seen a preview of Tuesday’s presentation, but declined to provide details.
“I think it would be premature,” Boe said. “There are still lots of numbers they’re chasing down.”
Asked if the $20 million figure was accurate, Boe responded:
“Well, yeah, if you have a projection for one quarter, it can look pretty scary if you project that out over two years. But that’s why we’re fortunate to have a biennium budget. We can make adjustments along the way.”
If layoffs are used to close all or part of the projected gap, the rule of thumb cited by city officials in the past was that each employee typically costs the city $100,000 per year.
In separate interviews with The News Tribune, three sources said this week that the budget shortfall is the result of problems on both the revenue and spending sides. Overall, revenues are projected to come in about $8 million less than projected, while spending calculates to about $12 million more, one source said.
“All revenues are down, across-the-board,” the source added. “Every single one of them.”
A key underpinning of the budget problem appears to be wildly off-base projections, all of the sources said.
Among the worst revenue projections to date, the sources said, are collections from city building and land-use permit fees. The approved budget had assumed overall collections for such fees would be about $6 million over the two-year budget – the same figure the city had adopted for its 2009-2010 budget. That projection is off significantly, they said.
“Just look around,” one source said. “Do you see many new developments in Tacoma?”
On the spending side, a key assumption that Anderson built into the budget plan – that all city workers would accept across-the-board pay freezes – simply didn’t materialize, one source said. While some union-represented employees agreed to certain wage freezes, regular step increases have continued for all employees, one source said. That puts city spending for employee pay about $1 million above projections, the source said.
Anderson did not immediately respond to a phone call and email seeking his comment Friday.
For much of his six-year tenure, Anderson had won praise for guiding the city’s budget through a deep recession while largely avoiding layoffs and service cuts. But by late last year, several city officials began publicly doubting his budgeting methods.
Before the council approved Anderson’s $399 million general fund spending plan for 2011-12, several members raised questions about whether his budget was based on overly favorable projections. Fey, the lone member to vote against the budget, specifically took issue with Anderson’s projections for building permit revenues and questioned whether the building and land-use staff, collectively paid about $11 million, was too large to sustain.
“This council member is concerned about whether we’re being real about our budget,” Fey said during one meeting.
Lewis Kamb: 253-597-8542
lewis.kamb@thenewstribune.com
Twitter: @lewiskamb
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