The Bellingham Business Journal
As budget development season begins for the city of Bellingham, administrators have little good financial news. While headlines show glimpses of hope for economic recovery, city revenues are below expectations, construction activity remains slow, and the city’s general fund is looking at a third year of deficit.
“Despite our citywide cost-cutting and our hopes for an improved financial picture, as we approach mid-year our financial challenges continue,” Mayor Dan Pike said. “We have been watching carefully, so this grim news is no surprise but certainly not the turnaround we needed.”
The general fund revenue collected by the city is now back to 2006 levels, according to information prepared by Bellingham Finance Director John Carter. The Bellingham City Council approved balancing the 2010 budget with the use of $1.8 million from general fund reserves. Based on the projected revenue shortfall, without corrective action, another $1.5 million would need to be pulled out of the shrinking reserves this year.
On top of the revenue shortfalls the city already faces, employee medical benefits alone are estimated to increase in 2011 by as much as 17 percent, and recent news about some transactions by Canadian shoppers being exempt from state sales tax may further erode city revenue.
Chief Administrative Officer David Webster said city departments have started the process for developing the 2011 preliminary budget, including a budget planning exercise now underway. Each department has been asked to outline 2011 departmental budget options that are 5 percent less than 2010 and also absorb all wage and benefits cost increases.
“While we do not expect to recommend to City Council a 2011 budget that reflects cuts of 5 percent or more across all departments, this exercise will give Pike and the city council information needed to make any further reductions necessary for 2010 and help balance the 2011 budget,” Webster said.
While the budgeting exercise is helpful, it’s also causing difficult conversations throughout city government. For example, Bellingham Public Library officials are faced with identifying approximately $372,000 worth of potential budget cuts to meet the administration’s budget exercise target.
The library’s board of trustees met June 8 in special session to discuss a list of options to present to city administration in response to the budget planning exercise. The list included closing the Fairhaven library, permanent removal of one or more positions already vacant, further reduction in budgets for materials and further reduction or complete closure of the outreach program. No decisions were reached, and the board will continue the discussion at a meeting scheduled for June 15.
Webster said the information submitted in this budget exercise will be used to identify possible reductions that could be made in the middle of this year to compensate for lower-than-expected 2010 revenues, and potential reductions that will be incorporated into the 2011 preliminary budget, which will be completed in September and considered by city council beginning in October.