The Petersburg borough is proposing a small increase in general fund spending for the upcoming year and would use surplus money to balance spending with revenues. Petersburg’s borough assembly got their first look at the proposed budget last week and will start its formal review in May.
Finance director Jody Tow outlined budget details expected for the fiscal year that starts in July. She explained to the assembly about the impact of federal emergency aid, especially 3.9 million dollars from the Coronavirus Aid Relief and Economic Security Act of 2020.
“The borough has used a total of $1.37 million in CARES funds to cover the payroll costs of first responders and EOC staff time,” Tow said. “This has occurred over the course of two fiscal years and has created a budget surplus at fiscal year end of 2020 and we’ll see another surplus at the end of fiscal year 2021. The borough is proposing to use 231,000 ($231,805) of the general fund reserves to balance next year’s budget.”
That amount is 50 percent of a state reimbursement for bond debt on school and other projects, which until recent years the borough has counted on for repaying that debt. Governor Dunleavy vetoed half that payment two years ago and the full amount last year with the expectation it could be made up with federal aid. The municipality doesn’t expect the reimbursement again this year. So in Petersburg’s case the federal aid is helping to offset cuts to state payments.
The budget proposes 9.7 million dollars of spending in the general fund, which are basic services supported mostly by local taxes. Tow pointed out that’s an increase less than half of a percent.
“This is equivalent to about $40,000, which I think is pretty impressive given that we also have in there a two percent payroll increase and increases to health insurance,” she said.
The budget assumes two percent salary increases for employees and supervisors, although the borough and its workers are still negotiating new contracts this spring. It would flat fund the local school district, with no reduction to the 1.8 million dollar allocation to local schools. And it would increase community service grants to KFSK, Mountain View Food Services and the Chamber of Commerce.
It could also mean an increase in the property tax rate, to offset a loss in the overall value of property in the borough. Property values decreased by one percent ($1,721,800) because of a jump in land owners claiming the senior tax exemption. There were an additional 16 properties claiming that this year.
In response, the proposed budget assumes an increased property tax rate in service area one by .42 mills. That’s a 42 dollar increase for every 100,000 dollars of value. The assembly normally sets the tax rate by resolution in June. But the assembly could choose other ways to address this decrease, like cutting costs, or using additional surplus money, around 117,000 dollars.
Sales tax revenue for the upcoming year is projected to be around 3.2 million dollars, similar to two years ago and recovering from a pandemic year loss expected to be around 125,000 dollars.
Capital projects that could start in the upcoming fiscal year include repairs and upgrades to the hydroelectric plant at Blind Slough and repairs for the aquatic center. The borough may spend $450,000 on pool repairs needed after a 2020 electrical fire. However manager Steve Giesbrecht called that just a placeholder.
“We should have a much better idea what that number is by end of May first part of June,” Giesbrecht said. “Some of the problem they’re running into is material costs are at their highest level ever. And so we’ve actually delayed the project a little bit hoping that once the COVID crisis kind of gets over that manufacturing will get back on board and we’ll see a decrease in some of those costs.”
A permanent fix for the pool, which could total over a million dollars, could be partly covered by insurance with the rest made up out of the borough’s property development fund.
Utility director Karl Hagerman talked about projects planned for the electrical department. One is a new backup diesel generator budgeted at 1.4 million dollars.
“Over the last couple winters we’ve seen a winter peak of right around 13 megawatts and basically don’t have enough generation locally if Tyee (Lake hydro) we’re to go down or SEAPA (the Southeast Alaska Power Agency system) were to go down we just can’t restore 13 megawatts so we need to add some standby generation to our system in order to handle all of our loads right now,” Hagerman said.
SEAPA may look at raising the wholesale rate for its hydroelectric power to cover the cost of replacing a submarine cable south of Petersburg. That may factor into an ongoing study of local electrical rates, which is also looking into covering the cost of major upgrades and repairs at the borough’s Blind Slough hydro plant. That bonding will require voter approval. Hagerman is not sure if the study will be done in time to get on this year’s ballot.
There are also projects planned for the water and sewer system. There could be some rate increases in local utilities, which would take approval of ordinances in three readings by the assembly, outside of the budget process.
The spending plan also includes some vehicle replacements including a new fire engine budgeted at 650-thousand dollars. Mayor Mark Jensen questioned staff on the need for that. Manager Giesbrecht responded that the 30-year-old engine has low miles and does not have maintenance problems.
“The problem is we’ve got a couple of other units that are coming up in age as well, a ’94 and and early 2000 and it comes into the question of when do you pull the trigger?” he said. “What we don’t want to do is have to replace two of these in a very short time frame because as you can see they’re incredibly expensive.”
Staff also said it’s likely a year or two process to replace that engine, including design and bidding. Borough departments make regular payments into a motor pool fund to cover the cost of anticipated repairs and replacement for vehicles and equipment.
Another unknown about this budget, is additional federal funding. The borough is expecting to receive another 633,420 from the latest federal aid bill, the American Rescue Plan, but doesn’t yet know how that will be spent. There are broad categories for how the municipality can use that aid with a deadline at the end of 2024.
The assembly plans to vote on the proposed budget and any desired changes in three readings of an ordinance starting in May and finishing in early June.