With Jackson’s general fund on solid financial footing in the current fiscal year, the Town Council and staff are looking long-range to ensure town reserves remain healthy while important services continue to be provided.
At a special workshop Monday morning, Town Manager Larry Pardee and the council continued their ongoing discussion of “Future Funding of Local Government.” Pardee and councilors examined spreadsheets showing where the town currently stands in Fiscal Year 2022 and five-year projections incorporating both estimated inflation and increased sales tax revenues.
In addition to the FY22 update, Pardee presented staff with three general five-year scenarios: One that estimated 7% annual inflation along with 5% growth in revenue, primarily from increased sales tax collections; a second which accounted for both of those projections along with department requests; and a third accounting for those factors plus council priorities.
The discussion, which began on a broad scale months ago, is incrementally getting more focused over a six-phase series of meetings — Monday’s finished the fourth phase before addressing the fifth — with the council and staff getting a big-picture view of possible revenues and expenditures over the next five years. The goal of the discussions, as articulated by the council at its Oct. 11 meeting is “to diversify and develop sustainable funding to meet the needs and desires of the community.”
“Sustainable” is the key word there.
Pardee noted in a Tuesday interview that the current fiscal year’s budget includes an approximately $3.6 million drawdown from the general fund, which is not sustainable over the coming years, requiring the council to identify either new revenue sources, examine areas to cut expenditures, or a combination of both.
“Revenues/expenditures clearly shows over the five-year period going forward we have a major deficit problem,” Pardee said. “We had with the approval of FY22. Again, if you just take FY22 scenario one and play it forward, we have a huge challenge. If you add staff’s requests or needs and councilors’ desires, you also realize increases the gut challenge that we face in the way of looking at it.”
Pardee’s five-year outlook scenarios painted that picture. Without new revenues or significant cuts to expenditures — essentially keeping the status quo — the general fund balance in five years would be at 12% of expenditures under scenario one, which only accounts for the 7% rate of inflation and 5% revenue growth. Under scenarios two (which adds staff requests) and three (which also adds council priorities), the ending fund balance would be in the red versus expenditures, at -7% and -27%, respectively.
By contrast, the current FY22 budget projects the ending fund balance at 49% of expenditures. The state recommends municipalities carry at least 15% to 20% of their expenditures in their general fund balances. A large part of the reason the general fund balance is currently so healthy is owed to better-than-expected revenues during the COVID-19 pandemic, coupled with massive town department budget cuts in anticipation of a worst-case scenario, and a number of one-time government payouts that are not recurring, explained Vice Mayor Arne Jorgensen.
But Jorgensen added that when passing a budget that dipped into the general fund to the tune of just over $3.5 million, it was done with the knowledge that the practice is not “sustainable.”
“I think the real benefit of that discussion yesterday was, it was adding clarity to the comments we were making when we approved this budget, that we knew we were approving a budget where we were spending more than we were bringing in, and that’s just not sustainable,” he said. “So, we approved a budget knowing that, and what we have in front of us now is a clarity around: What does that mean? Can we keep doing the things, the additional investments that we’re doing? And what do we need to do to put in place the revenue structures to allow us to do the work that the community is looking for from us?”
Addressing the last question was part of Monday’s discussion, in which a number of potential new revenue streams were discussed. Some within the town’s control, others requiring the approval of voters or the Legislature. For example, the town could levy the remaining available 7.5 mills of property tax after introducing a 1/2-mill levy earlier this year, or institute paid parking, which would not see revenues in the black for a few years until initial start-up costs were covered. The town — in conjunction with the county or on its own, thanks to legislation passed last year — could also seek voter approval of a “seventh penny” of sales tax, which was voted down county-wide last year, but would have passed if left to town voters, who favored the measure. There is also a 2% lodging tax at play, which would require voter approval.
One thing is clear to the vice mayor, though: One or more of those new revenue streams will need to be tapped in order to continue providing services residents demand.
“We have no choice,” Jorgensen said in a Tuesday interview. “We literally have no choice. We cannot cut the core services enough to continue to do what we’re doing. I’ve not heard anybody give me a rational discussion about what we would cut from our current core services that would provide us the resources to close the gaps that we currently have. So, we have no choice.”
Also mentioned at Monday’s meeting and in interviews with Pardee and Jorgensen is the possibility of sitting down with county commissioners and discussing the possible revision of funding of joint departments, which are currently funded 45% by the town and 55% by the county. Fire/EMS, housing, START Bus and Parks and Rec are the biggest of those joint departments.
If those discussions take place, Jorgensen acknowledged that “nobody, as an elected official, is going to raise up their hand and say, ‘Oh, I’ll take on more of that. You know, I will know I’ll be the one that votes for property taxes so you don’t have to.’ ”
The vice mayor added, though, that “there’s a more foundational question about what’s fair, how should we be funding local government? We’re all one community.”
“ ... There’s a more foundational question about what’s fair, how should we be funding local government? We’re all one community.” — Arne Jorgensen Vice Mayor