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Mayor Sullivan: Preliminary 2011 Revenue Estimates Show Budget Gap

ANCHORAGE- Mayor Dan Sullivan today provided a report to the Assembly of 2011 revenue
estimates, as well as tax limit calculations.

The estimated cost to finance current services in 2011 is $448 million, which creates a gap between
estimated revenues of $18 million (if a 3 percent increase in property taxes) and $8.5 million (if an 8
percent increase in property taxes).

Preparation of the 2011 budget is underway, though no formal decisions have been reached. A
proposed budget is due to the Assembly on Oct. 1.

"I said last year that we would embark on a two-year plan to return us to fiscal stability," said Mayor
Sullivan. "This year's budget will again require difficult choices about what services to provide and at
what level. Unfortunately, revenues are unable to keep pace with the increased costs of running the
city."

A dedicated effort to find savings by identifying efficiencies is ongoing. It takes time to restructure
government and its processes; as a result, savings likely will not be realized until next year's budget.
Major factors complicating the 2011 budget are the pay raises mandated by the municipal labor
contracts, increases in the cost of employee health insurance and obligatory contributions to the
police and fire retirement fund.

Sullivan says he is keenly aware of the strain many Anchorage residents are under. "I hear from
citizens who have seen salary reductions of 10, 20 percent in the past year because of the economic
slowdown," he said. "It's clear to me that now is not a good time to raise taxes by double digits,
especially given the 36 percent increase in taxes already imposed on taxpayers earlier this decade."
"Our personnel costs also have increased 66 percent during the last ten years, which is a reality we
have to deal with given that our revenues have not managed to keep up," Sullivan said.

Community members recently were asked to weigh in on potential revenue shortfalls and tax
scenarios during the city's community budget dialogues. A final report detailing the results from all
four budget sessions is expected later this month.


___________________________________________________________
September 1, 2010
TO: Anchorage Assembly
FROM: Mayor Dan Sullivan
SUBJECT: Preliminary 2011 Budget Information

Anchorage Municipal Code 6.10.040 (A) requires the Administration to provide preliminary
information regarding the 2011 budgets for general government, the utilities and enterprises 120-
days prior to the end of the fiscal year. The required information included in this memo is:

· 2011 preliminary revenue estimates;

· Tax limit calculation;

· Major organizational changes;

· Preliminary general government capital budget and plan; and

· Administration's service priorities.

Also required, but submitted under separate cover, is:

· Business plan and updated strategic plan for each utility and enterprise; and

· 2011 capital budget and 2011-2016 capital plan.

Preliminary 2011 Revenue Estimates
Preliminary estimates show a $4.4 million increase in non-property tax revenue:

Preliminary Estimate 2011 Non-Property Tax Revenue
                            2010 Revised   2011 Proposed  Difference
Federal Revenues               $ 938,255     $ 938,255          -
State Revenues                16,797,079    16,587,130     (209,949)
Taxes, Interest,Other Revenue 36,860,579    36,925,981        65,402
MUESA/MESA                    17,067,411    18,363,000     1,295,589
Room Tax                      17,300,000    19,167,392     1,867,392
Motor Vehicle Rental Tax       4,271,327     4,666,128       394,801
Utility Revenue Distribution   6,524,243     6,864,000       339,757
MOA Trust Fund Contribution    5,100,000     4,900,000      (200,000)
Program Generated Revenue     50,798,283    51,627,236       828,953
Total                      $ 155,657,177 $ 160,039,122  $ 4,381,945

Preliminary 2011 Tax Limit Calculation
The total amount of all taxes allowed to be collected under the Tax Limit is estimated to be $8.2
million higher in 2011. Of note is implementation of phase two of 2009's Proposition 9, which
brought MUSA/MESA payments back under the Tax Limit. In 2011 a total of $13.5 million in
MUSA/MESA revenue will be subject to the Tax Limit, which will displace $13.5 million in
property taxes that otherwise could have been collected.
Attachment A is the preliminary Tax Limit calculation. The tax limit will be finalized next April
after first quarter amendments when 2011 property tax rates are set.
Major Organizational Changes
A major reorganization of the departments that report to the Department of Community Planning
and Development is being finalized. The current organizational structure of departments located
at the Tudor Campus is confusing to the public with different departments having jurisdiction
over a project or process at a given state of review. As part of the Administration's goal to
streamline operations to more efficiently deliver services, the new organization is as follows:

Eliminate:
Department of Community Planning and Development

New: Department of Public Works
Incorporates current departments:
Maintenance and Operations
Project Management and Engineering (PM&E)
Traffic

New: Community Development Department
Incorporates current departments:
Development Services
Planning
Neighborhoods

Name Change: Department of Real Estate
Incorporates current departments:
Heritage Land Bank
Real Estate Services

With the reorganizations, the Community Development Department will house all of the
planning, permitting, and inspection functions. This will consolidate all functions relating to
administration, interpretation, and enforcement of the land use code under one department that
will help ensure consistency on land use matters.
Traffic, PM&E, and Maintenance and Operations will be consolidated into one Public Works
Department. This will result in one department responsible for managing the planning, design,
construction, operation, and maintenance of all municipally-owned public infrastructure,
equipment, and buildings.
Preliminary 2011 Capital Improvement Budget and 2011 - 2016 Capital Improvement Plan
A major goal for this Administration is to take care of what the Municipality has-from roads to
parks to specialized equipment. To that end, the preliminary 2011 Capital Improvement Budget
(CIB) (Attachment B) proposes a $34.7 million general obligation bond package that includes
$31 million for roads and infrastructure and $2.7 million for parks, trails, and recreational
facilities. Preliminary funding levels for the 2011 - 2016 Capital Improvement Program (CIP)
are included in Attachment C.
In addition the Municipality also will continue its work with the Alaska Legislature and Federal
delegation on grants and other funding that can help meet Anchorage's infrastructure needs.
CIB and CIP project details will be provided in the submittals to the Assembly on October 1st.
Administration's Service Priorities
As in 2010, the challenge continues to bring spending to a level the Municipality-and
taxpayers-can afford over the long-term. The first step toward fiscal stability was taken in the
2010 budget when spending was reduced by $20 million. As was reflected in the Six-Year Plan
submitted last fall, expenditures in 2011 will be substantially higher than what can be supported
by projected revenue-even if the Municipality were to "tax to the cap".
While the Administration has a number of initiatives underway that will improve the efficiency
by which services are delivered, we are not yet to the point where financial savings can be
realized.
As a result there will be further spending reductions proposed in the 2011 operating budget. In
making these decisions, the priority will be to ensure that Anchorage continues to have an
unsurpassed quality of life that is enhanced by access to quality education, good employment
opportunities, and a low per capita tax structure.  


2011 TAX SCENARIOS

If 3% Increase in Property Taxes

If Tax to Cap Line       FY 10 FY 11 Difference   Line       FY 10 FY 11 Difference 1 Esimated Revenue




  21 Estimated Revenue




2

Property Taxes 221,394,860 228,036,706 6,641,846   22
Property Taxes per Tax Cap 221,394,860 238,143,887 16,749,027 3

Property taxes - service areas 15,900,271 15,983,923 83,652   23
Property taxes - service areas 15,900,271 15,983,923 83,652 4

Other Taxes 33,013,241 40,717,128 7,703,887   24
Other Taxes 33,013,241 40,717,128 7,703,887 5

Non-property taxes 122,643,936 119,350,994 -3,292,942   25
Non-property taxes 122,643,936 119,350,994 -3,292,942 6

IGCs Outside GG 25,911,733 25,099,878 -811,855   26
IGCs Outside GG 25,911,733 25,099,878 -811,855 7

Fund balance 2,561,206 255,801 -2,305,405   27
Fund balance 2,561,206 255,801 -2,305,405 8

2011 non-Continuation Adj
955,894 955,894   28
2011 non-Continuation Adj
955,894 955,894 9

Total 421,425,247 430,400,324 8,975,077   29

Total 421,425,247 440,507,505 19,082,258 10





  30





11





  31





12 Estimated Expenditures




  32 Estimated Expenditures




13
FY 2010 Base
420,540,903
  33
FY 2010 Base
420,540,903
14
Continuation Adj
26,815,678
  34
Continuation Adj
26,815,678
15
2011 non-continuation adjustments

  35
2011 non-continuation adjustments

16

Tax Cap - settlements, O&M 1,442,635
  36

Tax Cap - settlements, O&M
1,442,635
17

Other
164,800
  37

Other
164,800
18

Total   448,964,016
  38


Total 448,964,016
19





  39





20

Difference Between Estimated Revenue & Continuation Expenditures -18,563,692
  40

Difference Between Estimated Revenue & Continuation Expenditures   -8,456,511



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