News from Patrick Flynn

Last week was a busy one on the budget front with a Budget & Finance committee meeting on Wednesday, an informal budget discussion Thursday and a work session on Friday.  We’ve now plowed through the entire operating budget and the administration only has utility and capital budgets left to present.  That doesn’t mean we’re settled on the operating side yet.

First off, as you may have read in this morning’s paper, the editorial suggests the mayor will seek $10 million in additional cuts if we don’t approve his plan to refinance (technically it’s called a “refunding”) a portion of the city’s 2010 debt service.  I’m not sure the editorial is correct; here’s why.  When the administration first presented its proposed budget many (including, I think, administration officials) felt the debt refunding would free up tax dollars to support the operating budget.  At the aforementioned Wednesday committee meeting we determined that was not the case.  Here’s how it would actually function:

• In 2010 the city is scheduled to pay about $49.1 million in debt service, roughly $28.4 million in principal and $20.7 million in interest.
• The administration’s initial proposal was to “refund” (refinance) $12.5 million of the 2010 principal payment and $10 million of the 2011 principal payment.  While we don’t know for sure, it is expected that the interest rates would not change significantly so don’t expect any savings on that front.
• If the Assembly approved this proposal the city would issue bonds raising the dollars to make the 2010 and 2011 principal payments with the new bonds having the same term as the existing bonds (to explain, if a bond for which we were “refunding” this year’s principal payment were slated to mature in 2018 then the new bond would also mature in 2018).
• In the years we performed this “refunding” the debt service portion of your property tax bill would go down but (there’s always a “but”) your property tax bill would rise in future years to pay off not only the principal but also additional interest.
• Not one penny of the money “saved” in the years we “refund” our debt could be used to support Anchorage’s operating budget – again, we’d see tax relief in those years but pay it all back, with interest, in future years.

To put this in simpler terms, the administration’s proposal is akin to using your Visa card to pay your American Express bill – you don’t have to spend your paycheck to cover your bills, but you still owe the money and will ultimately pay more interest.  That doesn’t necessarily make it a bad idea if you’re short of cash but as a “debtophobe” my skepticism is steadily growing.

In previous conversations I didn’t fully understand the mechanics of this transaction and thought the debt “refunding” was intended to provide support to the operating budget.  As I mentioned, I’m pretty sure administration officials thought the same thing so I suspect that was the mayor’s interpretation too.  The rub here is that you cannot take debt service revenue collected outside the tax cap and roll it under the cap – that would violate the city’s charter.  In other words, the only thing the “refunding” would accomplish is tax reductions in 2010 & 2011, followed by greater off-setting tax increases for the following 16 years.  Given that I’m wondering if, once this is more thoroughly explained, the mayor will stick to the position cited in today’s editorial?  We’ll see.

Many other concerns about the operating budget revolve around the near-elimination of grants to non-profits that provide community services.  Specific entities about which I’ve heard Assembly members express support include:

• Project Access – this relatively new entity combines donated medical care with some donated dollars to provide health care to low-income residents.
• Federation of Community Councils – while I continue to be frustrated by the FCC’s inability to send me e-mails about community councils I represent (their new system apparently doesn’t work), other Assembly members feel the support they lend is worthwhile.
• Neighborhood Watch – supported with $92k in the 2009 Police Department budget, this line item is zeroed out in the proposed 2010 budget.
• Arts grants – the administration recently updated its six-year fiscal plan to highlight its operating support of entities like the Performing Arts Center.  That’s a valid point but gently overlooks the near elimination of grants supporting organizations that actually produce many the performances in the PAC.  One of my Republican friends, Benjamin Brown, is the chair of the Alaska State Council on the Arts.  While Ben lives in Juneau these days, he grew up in Anchorage and called me Thursday to express his concern about the cut to grants and let me know he was meeting with the mayor later that day to discuss the matter.  I hope he made some progress.

Other than the occasional greeting it’s been several months since I heard from the mayor personally – the last time was when he called to tell me he didn’t need to be lobbied on the equal rights ordinance and therefore wouldn’t meet with me – but I’ve been told that he’ll only accept additions to the budget if they’re coupled with off-setting cuts.  I don’t know if my resolution limiting Anchorage School District use of property tax dollars (which Superintendent Comeau helped develop) counts but I expect it’ll save taxpayers about $10 million in 2010 so maybe that will create some flexibility.

Our first public hearing on the budget occurs this Tuesday, October 27, with the second slated for the following Tuesday, November 3.  That’s your chance to speak about any of the above or other topics you’ve addressed to me – libraries, domestic violence and sexual assault prevention, bus fares, bus routes and an Eagle River fire station, to name a few.  Those comments will help guide the discussion as we negotiate the final budget, due for a November 17 vote.  I look forward to hearing from and seeing you.

Regards,

Patrick

P.S. to Steven, the gentleman who slipped me a very nice note at Cafe del Mundo on Thursday, my thanks for your kind words.