Spokane Valley Council likely to tap reserves to balance budget

Spokane Valley likely will dip into its reserves next year rather than increase taxes to cover anticipated spending.

Financial projections show that the estimated $64.5 million in 2015 tax revenue would fall about $395,000 short of planned spending, largely because of about a half million in one-time expenditures that the council decided in June to undertake next year. Most city leaders have pledged to avoid the state-authorized 1 percent annual property tax increase, which would generate about $110,000 in extra revenue and would be the sixth year in a row that the Valley hasn’t raised taxes.

But while council members appear generally united in their desire to avoid tax increases, clear points of division are emerging over the prospect of tax cuts any time soon.

Councilman Chuck Hafner this week said he would oppose efforts to cut the city’s existing property tax rate, following Councilman Ed Pace’s suggestion to scour the budget for ways to cover a decrease in the city’s levy in the next year or two.

Hafner noted that the council has repeatedly cut spending in recent years and promoted economic development while avoiding tax increases, unlike many other cities across Washington.

“We’ve cut and cut and cut,” he said. “I think as long as this council is going and moving forward in a very positive manner, and looking at economic development and what we’re doing … why would we want at this time to ruin many of the things we strategized to do in the past simply because we may have someone ultra conservative that wishes to cut?”

Pace, who took office in January, had questioned whether the city needs to continue paying dues and other fees to national organizations, whether it could trim travel expenditures and streamline its economic development efforts to eventually be able to cover a tax cut.

Although a proposed budget for next year is still being crafted, the council was briefed earlier this week on revenue and expenditure projections and a public hearing on the estimates is scheduled Tuesday. City Manager Mike Jackson is expected to roll out the proposed 2015 spending plan in October, which can be adjusted by the council following public hearings before its final adoption later this year.

Revenue from the city’s local-option sales tax continues to be a bright spot for the budget. Total collections for next year are expected to climb 7.5 percent to about $17.6 million.

Meanwhile, the city’s reserve fund is at nearly $20 million and even if tapped to cover the projected 2015 shortfall would remain at a healthy 51 percent of the city’s annual operating costs, said Finance Director Mark Calhoun.

He and others downplayed the potential 2015 shortfall, saying that ongoing costs such as payroll and other recurring operating expenditures would remain about $100,000 below recurring annual tax collections. “Recurring costs is the key measure and the one we watch closely,” Calhoun said.

Creating the potential 2015 shortfall is a series of planned one-time costs, including renovations at the Valley’s police precinct and funding to help cover updating of the city’s comprehensive land use plan.