An outside review of Tacoma’s finances supports city budget officials’ grim forecasts for a $31 million general fund shortfall through 2012 – and it concludes the city’s budget problem is even slightly worse.
Analysts for Hebert Research, Inc., found Tacoma faces a roughly $32 million shortfall in the current two-year budget – a projected gap about 2.7 percent higher than the city’s forecasts.
The projections are likely even closer than that, analysts for the Bellevue-based research firm said. Their review didn’t include new revenue-generating strategies, employee layoffs and other steps recently taken by the city to deal with the current budget crisis.
“You have taken some actions that we did not include in our analysis,” Cynthia Sullivan Hebert told the council. “The gap (between projections) is probably not as big as you’re seeing.”
The council last month called for the outside review of city revenue and expenditure forecasts through 2014, after public employee unions and others questioned the city’s budget projections. Interim City Manager Rey Arellano and his staff have used the projections to justify making deep budget cuts, including controversial proposals to lay off more than 100 city police and fire employees.
All public safety layoffs have since been put on hold, while the city negotiates potential concessions with the city’s police and fire unions. Meantime, more than 60 proposed general government layoffs moved forward.
On Friday, the city officials announced 14 employees targeted for layoff had lost their jobs. Thirty-six others on the layoff list were demoted, transferred into nongeneral fund positions or voluntarily retired, Human Resources Director Joy St. Germain said Tuesday.
Police and fire union representatives declined comment Tuesday about the city’s outside review, saying they need to review the work more closely.
Tacoma’s police union recently hired its own accountant to review city finances. That review didn’t attempt to verify the city’s budget projections. Rather, it concluded surpluses in alternate city funds may exist to help reduce the budget problem. The review also took issue with some accounting methods and said the city tends to overstate deficits.
City budget officials largely disputed the findings. Hebert analysts said they didn’t critique the police union’s review.
In conducting its analysis, Hebert used detailed city budget figures and other data updated through December. For the 2011-12 general fund, the analysts forecast a $7.98 million deficit in 2011 and a $24.1 million deficit for 2012. For those years, city budget officials had predicted shortfalls of $7.76 million and $23.4 million, respectively.
Along with the review of the current budget, Hebert analysts also forecast projections for the 2013-14 budget and calculated a $83 million shortfall. That’s about 9.2 percent higher than the $75 million shortfall the city projects for the next two-year budget.
“It’s a huge number, but it’s manageable,” Sullivan Hebert said.
The difference in 2013-14 projections largely falls on the revenue side. Hebert’s analysts predict the city will bring in about $8 million less for 2013-14 than what city budget officials project.
“We’re a little bit lower (in revenues) because we took a more conservative approach,” Sullivan Hebert said.
The city’s budget deficit is expected to grow because its revenue collections aren’t keeping pace with expenses, Hebert analyst Jason Millet said. Revenues are on pace to grow about $3 million per year, Millet noted, while expenditures are projected to increase $50 million per year, with labor by far the largest city expense.
While the outside team’s overall projections were similar to numbers from the city’s budget team, forecasts for some individual city revenue sources varied significantly.
For instance, Hebert’s analysts project the city’s manufacturing business tax revenues will decline, from about $2.3 million this year to about $1.9 million in 2014. By contrast, the city predicts manufacturing taxes to increase from $2.7 million to $2.8 million during the same years.
City Finance Director Bob Biles said Tuesday that the Hebert review included three more months of data and didn’t include revenue changes caused by changes in the city’s business and occupation tax.
“I’m not discounting their work at all,” Biles added. “But that’s something we’ll want to take a closer look at.”
Lewis Kamb: 253-597-8542
lewis.kamb@thenewstribune.com
blog.thenewstribune.com/politics
Twitter: @lewiskamb
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