The City of Tacoma will seek to close a lingering $12 million budget gap this year mostly by tapping reserves set aside for liability claims and internal technology services, city officials said Tuesday.
City Manager T.C. Broadnax formally recommended to the City Council on Tuesday that the city spend nearly $5 million of reserves from the special internal services fund to help patch the budget hole – a move that will help balance the city’s 2011-12 general fund by year’s end.
“We do have available reserves in some of our internal support funds … to help close the remaining $11.8 million gap,” Broadnax said.
A combination of federal grants, tax increases already passed by the council, unanticipated revenues and the elimination of five vacant positions will help make up the shortfall’s remaining $7 million, he added.
Several council members seemed supportive of the plan.
“We really took a balanced approach,” Councilman Marty Campbell said.
A resolution that would allow the special fund transfer is expected to go before the full council next week.
Broadnax’s budget proposal Tuesday deals only with the current year’s budget gap. City officials are separately working on a 2013-14 budget plan, which is expected to be unveiled in October.
The plan presented Tuesday represents a second round of adjustments to the current general fund – a $399 million budget when adopted in 2010 that later faced a roughly $32 million shortfall amid stagnant revenues and higher-than-anticipated costs.
A first round of spending cuts, layoffs, public safety union concessions and other adjustments made earlier this year before Broadnax took over as city manager dealt with more than $20 million of the gap.
That left the roughly $12 million shortfall, but city officials waited for months to deal with it. Broadnax said he held off on addressing the gap partly to find out if the city would win two federal grants being sought to help Tacoma save about 55 police and fire jobs.
Earlier this summer, Tacoma won both grants, which total about $13.5 million over three years. But only about $2.5 million of the grant money can be applied toward the current budget gap.
Broadnax now recommends the bulk of the remaining shortfall be covered by tapping the special internal reserve fund – a shared account into which the city, Tacoma Public Utilities and general government utilities contribute payments for overhead and administrative costs.
A recent analysis found that reserves meant for technology, health care, life insurance and liability claims total more than $30 million – about $12 million in excess of recommended levels, Broadnax said.
Broadnax wants to tap about $5 million of the reserves for liability claims and radio costs to patch the budget hole. City budget officials “feel comfortable” with the amount recommended to be left in reserve “based on our typical expenditures from those funds,” he said.
To make the fund transfers, the council first must approve a resolution that sets ground rules for utilizing such reserve funds, city officials said.
“There aren’t currently any established policies for these reserve funds,” said Assistant City Manager Tansy Hayward.
Broadnax noted any reserves to be used to help balance the budget would come from general government contributions – not from public utilities contributions, which must be spent only for utility purposes.
Earlier this year, after TPU officials discovered the city had swept excess funds – including utility contributions – from the shared account to help balance the 2009 general fund, the city reimbursed TPU about $2.4 million.
TPU spokeswoman Chris Gleason said in an email Tuesday, “if the funds come from general government contributions, there should be no impact to TPU. We would not need to be included in or even informed of the decision.”
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