Municipality of Skagway seal. (Greta Mart)
The Skagway Assembly has started its review of the fiscal year 2018 borough budget. Borough Manager Scott Hahn says he doesn’t think the municipality can keep up its current pace of spending without making cuts or raising new revenue.
Skagway accumulates millions of dollars in sales tax and cruise passenger tax revenue each year. That money is then transferred to the general fund, capital project fund, and more to cover large deficits.
“Well the city’s financially stable, we have quite a bit of reserves,” Hahn said. “However, there’s a concern that the operational side of the budget, that we’re taking in less money that we’re spending out.”
In the upcoming fiscal year, there is a projected $4 million deficit in the general fund. That’s where borough administration, the police and fire department, library, and more are located. The deficit will likely be covered by a mix of sales tax and cruise passenger vessel, or CPV, taxes.
There are also deficits in almost every other fund, from tourism to solid waste to water/sewer. The small boat harbor is the only fund that actually makes more money than it spends.
Those deficits don’t look so bad when you compare them to Skagway’s predicted $7.2 million in sales tax revenue and $4.2 million in CPV income.
But Hahn says that money might not be enough to cover expenses in FY 18. He thinks the borough may need to dip into its savings for about a million dollars.
That’s why he thinks it’s time to try to bring income more in balance with expenses.
“We did a utility rate study here this last year and we’ve got some utility funds that are underfunded by rates by maybe 300 percent,’ Hahn said. “You’d have to raise rates hundreds of percent to get them to pay for fund through users.”
Hahn said he is trying to stay ‘politically neutral’ and not throw his support behind specific revenue-generating or cost-cutting approaches. He says that’s up to the assembly.
“They have to prioritize what they want to do,” Hahn said. “The trouble here is we’ve been able to, anybody comes up with an idea, and we add it to this list of projects. So without having any cap or limitation on what you get involved with, I can’t do anything more. I can only take what policy and what direction they want to go and tell them how that affects their finances.”
Hahn has warned the assembly before about the growing list of major projects that might raise the borough’s debt.
Skagway is expected to have about $1.7 million in bond debt to repay during FY 18. Hahn points out that the public safety facility bond has added an annual burden of about $700,000, and taxes have not been raised to cover those payments.
Hahn says the borough’s surplus money is ‘slowly eroding away.’
“They’ve had enough extra cash leftover to be able to be freer and easier with decisions,” Hahn said. “And now they’re at a point where they need to make harder decisions to balance things out.”
At a committee of the whole meeting last week, assembly members and Mayor Mark Schaefer echoed Hahn’s fiscal concerns.
“I think we really need to put ourselves in check on what we can get done,” Schaefer said. “We can do some things, we can’t do them all. We don’t want to put our community in jeopardy by overextending ourselves.”
The assembly has only just begun its work on the budget and the numbers are likely to change over the next several weeks. The FY 18 budget ordinance is scheduled for introduction at an assembly meeting Thursday evening. It will then go to public hearings.
