John Kerst, president and chief executive of Yampa Valley Bank, speaks Tuesday during the public comment portion of City Council's daylong budget discussions.

Photo by Matt Stensland

John Kerst, president and chief executive of Yampa Valley Bank, speaks Tuesday during the public comment portion of City Council's daylong budget discussions.

Painful cuts could accompany City Council's call to budget

Balancing on the edge

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Community members attend Tuesday's public comment portion of City Council's daylong budget meeting.

The Steamboat Springs City Council directed its staff Tuesday to balance the city's 2009 operating budget without using any of its reserves.

The $1.9 million decision could mean a hiring freeze, no pay increases for existing city personnel, the elimination of benefits for seasonal employees and layoffs. It could also mean reductions in community support spending in excess of the 40 percent cut recommended in a proposed 2009 budget presented to council members during an all-day hearing Tuesday.

The 2009 budget as proposed by interim City Manager Wendy DuBord and Finance Director Lisa Rolan showed general fund expenditures besting revenues, $27.7 million to $25.8 million, reducing the operating fund's balance by more than 15 percent. Council members unanimously directed staff to come back with a plan to close the gap. While she said the current economic downturn might warrant dipping into reserves, Councilwoman Cari Hermacinski noted city expenditures have increased 49 percent since 2004.

"I think what we have here is a trend of letting our spending exceed what we collect, and we've got to reverse that," she said.

Doing so won't be easy, said DuBord, who said it wouldn't be possible without layoffs and painful cuts in city services.

"There's not a service we provide that some special interest or some group of citizens values more than anything else we do," she said. "It's going to be very difficult."

Fearing she was "going out on a limb," Rolan said she would come back with a proposal to recommend $0 in community support spending.

"You're going to ask me and the management team to cut core services and personnel, yet you're keeping $1 million in community support," Rolan said.

The Centennial Hall crowd - scarce for most of the day as council members discussed their budgets for their operations, enterprise funds, internal services and capital projects - grew exponentially and filled the room as the scheduled time arrived to discuss community support spending, a relatively small but emotional portion of the city budget that goes toward organizations dedicated to areas such as the arts, human services and the environment.

While the spending has been described by some as "nonessential," several proponents said the organizations are integral to Steamboat's character.

"Something's happening here, and I am astounded at what art has come out of here," said John Sant'Ambrogio, founder of the Strings Music Festival. "Please don't let what's happened to Steamboat change. : To me, this is essential."

And, with the city so heavily reliant on sales tax, others said it would be foolish to cut spending to organizations that they say attract visitors.

"The city has a vested interest in marketing the hell out of itself," said Towny Anderson, president of Mainstreet Steamboat Springs and a former councilman.

In the end, council members agreed to leave community support at the heavily reduced level proposed by city staff.

"I'm confident that all these community organizations are stronger than this budget," Councilman Jon Quinn said. "So hang in there."

No spending - with the possible exception of snowplowing - was considered sacred during Tuesday's hearing, as council members took aim at a number of areas to possibly reduce costs. Councilman Steve Ivancie criticized the city's contribution to the Steamboat Springs Chamber Resort Association to perform summer marketing, believing there is not an adequate return on the investment.

Councilwoman Meg Bentley, noting her love for the arts organizations whose contributions are being cut, said the city's spending on the Parks, Open Space and Recreational Services Department also is nonessential and should receive a hard look. Hermacinski pointed to a historic preservation budget with a proposed increase of 62 percent.

No official action was taken at Tuesday's meeting. The 2009 budget is scheduled for adoption in late November or early December.

- To reach Brandon Gee, call 871-4210

or e-mail bgee@steamboatpilot.com

Comments

JLM 6 years, 2 months ago

The direction provided by the City Council is a damn good start and they are to be applauded for being pragmatic and practical. Good job, City Council!

No reasonable observer of the current economic climate could conclude anything other than revenues will be depressed and therefore spending will be under pressure. This is not the time to raid the cookie jar.

Zero based budgeting --- building the budget from the ground up and not just taking last year's budget and budgeting on the margin --- is what is called for here. Every program has to compete for money and justify its existence in competition with every other program. Programs have to be prioritized and funded in accordance with that priority (e.g. police, fire, EMS before arts).

Every department manager simply has to be told --- prepare three budget scenarios: 5% decrease v last year, 10% decrease v last year and 20% decrease v last year. This is simply considering the obvious. Some departments will have to be funded at different levels. If a department manager cannot get the budget job done, then consider getting rid of him/her.

Basic financial analytics must be employed to drive decisions.

In evaluating the current costs, it is important to establish analytical baselines. For an example --- if staffing costs have increased over the last 4-5 years, what has been the historic trend line of "staffing expense as a percentage of revenue or alternatively total expenses"? This will undoubtedly smoke out those areas which have grown at a rate faster than revenues or related expenses. These are the first areas to be evaluated for cuts.

If the percentage has been growing and the growth is analyzed, then this is a fertile area for consideration of "right sizing". This is the kind of thing that CFOs of real companies do on a quarterly basis.

This is not really a "cut" but rather a disciplined approach to balancing the budget. It is "right sizing" and CFOs do this kind of thing in good times.

The City has to decide what programs (particularly capital and planning programs) can be "delayed" for 24 months. This does not mean abandoning a commitment to that program but simply saying --- "kids, we cannot take two vacations this year but in a couple of years maybe we can".

The last thing is to engage in a philosophical "life boat" exercise. If all these programs were in a lifeboat taking on water (a pretty damn apt description of the economic outlook just now, eh?), which one gets tossed overboard first? And next?

What departments can be consolidated to achieve merger efficiencies?

Eliminate, consolidate, reduce, delay --- those are the verbs which must be employed.

Nobody should engage in qualitative debate until the numbers are all sliced and diced otherwise real opportunities will be missed. The CFO has to be shielded from the qualitative debate and just become a practitioner of the black art of financial management.

Good start, City Council!

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