City considers early retirements to balance budget

Discussion about strategies for cutting costs and balancing the city’s budget continued this week as City Manager Eric Anderson proposed...

Discussion about strategies for cutting costs and balancing the city’s budget continued this week as City Manager Eric Anderson proposed a plan that would offer incentives to approximately 125 city employees who elected to retire early, according to developments at the Tacoma City Council study session on Aug. 16.

According to Anderson, approximately 75 employees are eligible for retirement, and another 50 employees are near eligibility. Though Anderson did not elaborate on the specifics of the incentives, he did say that such a move would cut the city’s payroll and save money in the long-term. The early retirement plan would only apply to general government employees; police and fire employees have their own retirement fund, and Tacoma Public Utilities employees are paid out of utility fees instead of the general fund.

Wages and benefits account for approximately 65 percent of the $356 million 2005-2006 general fund budget Early retirement incentives, said Anderson, would be paid for by eliminating positions and cutting costs in the long-term.

Indeed, the idea of downsizing operations at City hall is an important part of Anderson’s plan to balance the budget. He told the council and Mayor Bill Baarsma that he is looking at areas where there are duplications of jobs and tasks — potentially eliminating or combining them. He is also looking at ways to reduce the city’s job classifications from 750 to 500. And he would like to reduce 318 city funds to 40, which would dramatically reduce workloads.

“Redesigning how the city is structured is going to have to happen as we go through and make things simpler,” said Anderson.

The discussion Tuesday occurred one week after Anderson unveiled a larger, long-term vision to balance the city’s budget through 2008 by eliminating property and business and occupation (B&O) taxes, reducing the utility tax, introducing user fees for emergency and library services, and avoiding a cumulative deficit forecasted to reach $40 million by 2016.

During the Aug. 9 meeting, Anderson told the mayor and city council that the city could reach bankruptcy as early as 2010, when the deficit grows to $24 million.

Still, comments from some councilmembers Tuesday revealed concern toward Anderson’s plan for eliminating property and B&O taxes, and introducing fees for emergency and library services.

“I believe it’s an idea who’s time has not come,” said Councilmember Mike Lonergan. He added that the term “bankruptcy” was “used and abused” recently by a candidate running for a position on the city council. “It’s causing consternation and misunderstandings,” he added. “We have general fund issues that many cities are experiencing right now. I’m not sure if the situation calls for the reinvention of tax structures.”

Lonergan added that the city has billions of dollars in assets.
“The term ‘bankruptcy’ was unfortunate,” said Councilmember Tom Stenger. “We’re one of the wealthiest cities in the state.”

Stenger recommended that the city enlist help from legislators in Olympia, as well as the Association of Washington Cities — particularly because a number of cities across the state face the same budget problems. “This is clearly something we can’t do on our own,” said Stenger.

Still, several councilmembers supported the idea of exploring Anderson’s plan further.

“We have to look at the budget with open eyes,” said Councilmember Bill Evans. “Whatever you do, it’s going to be controversial. But revenues aren’t growing fast enough, and our expenditures are out of wack.”

Councilmember Julie Anderson, who also supported further examination of the budget concept, said, “I’m confident we’re in a world of hurt. We’re going to keep having budget balancing problems in the long-term.”

Still, city manager Anderson was confident in his bankruptcy assessment if the city failed to take action. “We have the time and should take the action to avoid bankruptcy,” he said. “It’s something that could happen if no changes are made. Bankruptcy happens to anybody who’s liabilities exceed assets. We have to control expenditures and live within our means.”

Anderson’s plan is twofold.

In the short-term, he recommends permanent adjustments of $10 million to balance the budget through 2006, and the elimination of a $14.5 million projected deficit for the 2007/2008 biennium. Those adjustments would be made through the Breakthrough Change Initiative introduced by former city manager Jim Walton, who retired June 30. That plan is designed to reduce expenses by making structural changes in the way the city is organized and operated, in areas that include employee compensation and benefits, organizational restructuring, risk management, and vehicles and equipment.

The long-term plan, however, has received the most attention — largely because it calls for elimination of property and B&O taxes, reduction of the utility tax, and introduction of monthly user fees for police, fire, and library services. It’s a plan that would also require state legislative approval and public support.

Fees would be based upon either building occupancy or property value, applicable to all property owners — including hospitals, non-profit organizations, schools, ports, and governments (but not houses of worship), and charged monthly in an itemized invoice.

Eliminating B&O taxes would give Tacoma a competitive advantage in luring news businesses, and help grow start-up and neighborhood businesses.

Still, user fees for police, fire, and library services would have to meet or exceed $150 million — the revenue currently generated from the city’s B&O and property taxes — to pencil out, and exceed that amount in order to gain ground on the projected deficit.

For a copy of City Manager Eric Anderson’s “State of the Budget” presentation, visit http://www.ci.tacoma.wa.us/cronews/BudgetPresentation_Aug92005.pdf.

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