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Mayor Sullivan to taxpayers: 'I hear you'

Mayor to city's unions: "Layoffs are up to you"

2011 Budget keeps property taxes essentially flat

Personnel reductions designed to maintain vital city services

ANCHORAGE- Mayor Dan Sullivan provided an overview of his proposed 2011 budget
to Assembly members today following months of preparation.

The budget reflects the reality that a combination of increased costs and modest
revenue growth prohibits a continuation budget that would total approximately $450
million. The budget proposed for next year comes in at $435 million, or $14.8 million less
than a continuation level; it also comes in almost $12 million under in the maximum
amount of property taxes allowed by the tax cap.

"We can't, and shouldn't, tax our way out of this problem," said Mayor Dan Sullivan.
(See attached spreadsheet for 2011 salary/benefit increases) .

The continued cost increases are due to generous labor contracts passed in late 2008
and the increased cost of municipal employee health insurance. In addition, the 2011
spending plan does not realize the same one-time savings in refunded debt as in 2010.
Even the most optimistic revenue projections fail to produce enough to cover these
increases.

The proposed budget requires a 1.6 percent increase in property taxes, or $36 more per
year to the average $300,000 home. All but 0.6 percent of the increase is voterapproved.
"I have heard from many citizens, including those who participated in the Community
Budget Dialogues, who said they prefer not to increase property taxes," said Sullivan. "I
agree that this is not the economic climate in which to raise citizens' taxes by eight or
nine percent, and this budget reflects that commitment."

Results from the budget dialogues also revealed the public's desire for local government
to become more efficient. If that effort were to be successful, the same citizens said they
would consider additional taxes (i.e. an alcohol excise tax, sales tax) to offset property
taxes. Most citizens also expressed their desire to maintain current city services, but not
at the expense of higher property taxes. In fact, more than 57 percent of respondents
said property taxes should not increase in spite of the city's budget woes.

The Anchorage Police Dept.'s (APD) budget will increase by $2.8 million in 2011, which
covers about half of the $5.3 million increase in salaries and benefits for the current
number of employees.

The Police Executive Research Forum (PERF) report that was recently conducted
recommended that the department better allocate current resources. The proposed
budget takes several of the report's recommendations, including returning a combination
of detectives and traffic officers to patrol, who take the place of junior officers that will be
laid off due to the union's seniority rules. This number includes $1.2 million in revenue
the APD just received from a federal grant that provides funding for four officers. In
general, however, the proposed budget provides funding for the same number of officers
as the department has now.

In spite of reductions to the police department, its total budget is up four percent, and
employee salary and benefits increase by nine percent in 2011.

The Anchorage Fire Dept. (AFD) also will experience reductions, though it is important to
note that fire department leadership has applied for a federal grant that could provide
$2.4 million in funding for 2011 and $2.7 million in 2012. If the grant is received, the
reductions outlined below could become entirely unnecessary.

In the fire department, emphasis was placed in maintaining the department's ability to
respond when needed and using personnel more efficiently. As such, the department
ranked potential reductions based on how often a particular piece of equipment was
called out in 2009. Station 11's (Eagle River) ladder truck will be taken out of service
because it is the least used: 4.6 percent of total calls for fire trucks. All other apparatus
at Station 11 will remain in service, and Truck 1 (Downtown) and Truck 3 (Airport
Heights) will provide coverage.

The other reduction affects Station 10 (Upper Hillside/Bear Valley). The budget proposes
to take Engine 10 out of service, again based on its utilization. In 2009, it responded to
1.2 percent of all calls. Current plans are for the station's other piece of equipment, a
tender that carries a large supply of water, to remain. Responses will continue to be
provided by Engine 9 (Huffman) and Engine 8 (O'Malley).

The total savings within AFD is $3.2 million, with the elimination of 24 positions, of which
16 currently are vacant. AFD's budget actually increases by one percent, and its
employees enjoy an increase in salary and benefits next year of seven percent.
"Unfortunately, when poorly conceived labor contracts increase the price of employees
to a point where even taxing to the cap won't cover the costs, you must then have fewer
employees," said Mayor Sullivan. "It's simple math, but it has real consequences."

In addition, the mayor is hopeful that the city's labor unions will offer potential solutions.

"When we have employees making seven, nine, and even 15 percent increases in salary
and benefits in just one year, we don't have a revenue problem, we have a spending
problem," said Sullivan. "It is my hope that our public servants will do what's right for the
long-term fiscal health of the city and offer permanent, sustainable savings, an ad
campaign won't fix this problem. Union members could eliminate the possibility of layoffs
by taking an across-the-board cut, which undoubtedly would save jobs. Bottom line, we
need their help."

Other notable items in the proposed budget include the permanent closure of the
Samson-Dimond Library, and changes to the frequency of some People Mover bus
routes.

Today's presentation to the Assembly is only the first stage in the budget process. It is
widely expected that Assembly members will offer budget amendments relating to
spending and revenue. As such, the mayor and Assembly members will work together to
find mutually acceptable changes.

"This is just the beginning of the budget process," said Sullivan. "We have a long way to
go, and I look forward to hearing from the public and working cooperatively with the
Assembly."

2011 Budget Overview (opens in a PDF)

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