As recently as January, West Linn City Manager Eileen Stein was deeply concerned about the outlook for the city's upcoming 2018-19 biennial budget.
Initial projections showed that the city would end the upcoming biennium — a two-year period for which the City budgets — with a General Fund balance of just $4,000 over the established contingency policy. It also appeared that in five years West Linn would actually face a deficit of about $60,000.
"That assumed we had already burned through our contingencies and everything," Stein said. "And the deficit was primarily driven by assumptions we were making about our contributions to the PERS (Public Employees Retirement System). So I started off the year very concerned that we had a major budget reduction exercise to go through."
Stein began instructing various city departments to examine their budgets and prepare for cuts. Yet soon thereafter, a closer look at the numbers provided a much sunnier outlook. By late April, the proposed $93.8 million budget Stein presented to the Citizen's Budget Committee indicated a continuation of the status quo — and the avoidance of any sort of deficit in the near future.
The proposed budget comes in somewhat leaner than the 2016-17 budget, which was just over $98.2 million.
"The City's financial plan for the 2018-19 biennium provides for the essential public services that contribute to our high quality of life," Stein wrote in an introductory message to the budget committee.
The outlook changed when the City gave a closer examination to upcoming PERS costs.
"Cathy (Brucker), our interim finance director, started getting into the (budget) assumptions and examining certain things," Stein said. "And she and I were very pleased to find that our prior finance director had been very, very conservative when it came to estimating budgeting in PERS areas. ... We were overstating what our future PERS projections were going to be.
"Just revising that assumption alone erased $400,000 of our projected $1 million cost increase — not for this biennium but for the next biennium."
In the end, a projected $60,000 deficit turned into an expected $183,000 ending fund balance by 2022.
"It's not 'good' because that's still a pretty low amount of money to end your fiscal year with, but at least we're not in the red anymore," Stein said. "I feel like we dodged a bullet for now, but we will obviously continue to monitor expenditures and look for cost savings and new revenues."
Indeed, while projected PERS costs may have been exaggerated, the City found that health care costs are rising faster than expected due to uncertainties related to the national health care system.
"We had to increase our estimates in terms of health care costs from 3 percent to 8 percent," Stein said, "and indeed it might actually be higher than that as we're starting to learn more — possibly as high as 15 percent."
The proposed budget accounts for 130.48 full-time equivalent (FTE) staff positions — technically a 3.3 FTE increase from the prior budget. Yet Stein says this is actually misleading. While the prior budget funded several staff positions, a closer look at the books showed that they were not factored into the overall FTE count. Thus, after accounting for that error the city is actually subtracting .2 FTEs.
On a per capita staffing basis, West Linn remains among the region's leanest with about five FTEs per 1,000 residents. By comparison, Lake Oswego has about nine FTEs per 1,000 residents.
"In the materials and services area, essentially the budget is reflecting a status quo — continue on current service levels," Stein said. "But it's getting harder to meet current service levels in Parks and Recreation and library service area. The need to do more programming and meet expectations around services and programming — it's happening at the expense of facilities maintenance."
Still, the proposed budget includes funding for a number of capital outlay projects including improvements on Highway 43, the completion of the new Bolton Reservoir, street, water and sewer maintenance and improvements at parks.
"We pretty much spent down our water SDC (Systems Development Charge) fund, and are completing (the Bolton Reservoir) with our water fund," Stein said. "That will impact the ability to do waterline replacement projects ... we're going to do it to a lesser degree than we have in past years. But we'll still have the ability to do some waterline upgrades in certain areas."
The end of the upcoming 2018-19 biennium will also mark the expiration of West Linn's tax levy supporting a general obligation park bond that was approved by voters.
"We could request that voters renew the levy for a new list of projects yet-to-be-identified," Stein said. "We have about an 18-month window in order to get projects identified and get a bond measure out to voters to approve. ... That's something we'll have to be talking to the community about these next several months."
The renewal of the levy could fund a number of projects, including work at underutilized properties like the old Bolton Fire Hall and old City Hall, as well as a roof replacement at the West Linn Public Library and maintenance work at city parks.
Stein also proposed several new opportunities for the City to gain revenue, though none are included in the proposed budget. The City might begin indexing its fees and charges on a regular basis, for instance, or adopt a transient lodging tax to account for Airbnb rentals that are becoming popular in West Linn. Stein added that the City might also exploring selling Information Technology services to other cities or removing caps on certain fees.
"I have no authority to pursue any of these, but most importantly the budget is not built on these revenues being in place," Stein said. "So we have complete freedom to go and explore them."
The budget committee held its first meeting April 25. The committee will continue to discuss the proposed budget during a series of public meetings in May, and the City Council is expected to adopt a final budget in June.
The proposed budget can be viewed in full at westlinnoregon.gov/finance/proposed-bn-2018-19-budget.