Avoiding a $26 million budget shortfall in the city of Tacoma’s next budget “will be very difficult,” said members of a committee convened to study how to reduce the city’s budget deficit.
Mayor Marilyn Strickland and a subcommittee of the City Council launched the Fiscal Sustainability Task Force in June. The group of business leaders, city union representatives, nonprofit officials and other Tacoma residents finished its review of city finances last month by presenting a report to the council with its recommendations.
The main message?
“There is an immediate and long-term problem in sustainability in the city’s finances,” Tacoma attorney Tyler Shillito, the task force co-chairman, recently told the Government Performance and Finance Committee.
Meeting twice a month, the group studied city finances, state law and city code to come up with ways Tacoma can trim a $26 million budget deficit for the 2015-16 budget year. If the city does not defer maintenance, the deficit balloons to $45.2 million in the 2015-16 budget season and $72.8 million in the following biennium.
City revenues, such as permit fees and tax money, are projected to grow at 2.3 percent per year. Expenses, which include salaries and benefits, are projected to increase at 6.3 percent per year.
Other cities around the country also face budget deficits, the report says, “but the city cannot sustain its level of services, the quality of life for its residents, or an ability to retain existing and attract new businesses to the city, unless this challenge is resolved.”
The task force is the group that opponents of Tacoma Proposition 1 pointed to as a possible alternative to the city’s street repair funding problems. The proposition would have increased the tax utility companies pay on their earnings to pay for road repairs.
Of the task force’s recommendations, none addresses street funding. The report does say the city has been deferring maintenance on roads and facilities, and not replacing police cars and computers in a timely manner, as a way to reduce costs.
“This group was never tasked to finding a solution to fix Tacoma streets,” Strickland said last month.
Instead, the group offered recommendations on budget philosophies, possible cuts and suggested revenues — some of which theoretically could help free up money the city could rededicate to another use such as streets.
Among the 63 recommendations the group made to help the city regain its financial footing are cutting city labor costs, selling unused assets and eliminating tax exemptions. The highest-rated recommendations ask the City Council to consider cutting city employee benefits, wages and pensions.
“The historical growth rate of salaries, health care benefits and pensions each far outstrip the rate of growth in city revenues or inflation,” according to the report.
Of the group’s 63 recommendations, 16 were approved by 80 percent or more of the task force members. The report cautions the city to close its deficit in a way that does not harm business and will attract more people to live here, but it does not offer a specific path to accomplish this goal.
“Nothing is going to be easy,” task force member Jenny Harris said. “I don’t think anything we provided was extraordinarily revolutionary. I don’t think it was so far out of the box that the city never considered it.”
Already the city is making some progress on the group’s No. 1 recommendation: lowering health care costs so the city won’t have to pay a $12 million federal penalty in five years.
Union officials and the city have reached a tentative deal to change the current city health plan. Human Resources Director Joy St. Germain said more changes are needed if the city is to avoid the penalty.
The task force also said the city should set a “target level” for benefits reductions, make cuts in the fire department that do not affect public safety and review union contracts for opportunities to reduce salaries and benefits during upcoming contract negotiations.
Potential revenues include selling any unused assets, selling naming rights to city-owned property, such as the Tacoma Dome and the convention center, and seeking changes in state law that would allow the city to keep tax money from the sale of alcohol and marijuana.
Many of the recommendations are not specific and are closer to concepts such as “competitively bid service provider contracts,” said Tadd Wille, Tacoma budget officer. The task force did not assign dollar figures to its suggested cuts or additional revenues, for example.
Lyle Quasim, co-chairman of the task force, said he initially thought the task force would have “significant opportunity” to find ways to cut the city budget that had been previously considered.
But the former secretary of the state Department of Social and Health Services said he found that the city’s budget actually has less fat to trim than federal and state budgets with which he’s worked.
“There was no silver bullet that I was able to find,” he said.
City Council members on the Government Performance and Finance committee said that the task force’s suggestions would be taken seriously.
Task force members have asked the City Council to consult with them at least twice in 2014 to see what progress, if any, the city is making on their recommendations. Councilman Robert Thoms said the council is interested in following up.
“I would just as soon say this committee should be in perpetuity,” Thoms said.
PURSUING FISCAL SUSTAINABILITY
Of the 63 recommendations issued by Tacoma’s Fiscal Sustainability Task Force, 16 were approved by 80 percent or more of task force members. They are:
• Address the budget in a way that attracts business and residents to the city.
• Address employee salaries and benefits in closing the deficit.
• Take steps now to avoid a $12 million penalty the Affordable Care Act will levy on generous health plans in 2018.
• Compare Tacoma’s health care plan with the market (including the private sector), and offer similar plans.
• Reduce the cost of providing employee health care benefits.
• Examine Tacoma Fire Department operations, reduce costs without significantly affecting public safety.
• Set a goal for benefits reduction.
• Review all union contracts for potential salary and benefits reductions.
• Re-evaluate revenue targets for city-owned properties, such as the Tacoma Dome. Minimize the general fund subsidy.
• Set a long-term vision.
• Track savings, and do not let departments spend the savings.
• Examine what service level the city can truly afford. Current service levels might be too expensive.