Later this fall, voters on the Kenai will elect a new Borough mayor. Current mayor Mike Navarre has a few more things he’d like to see happen before that time.
He’s in Juneau right now, lobbying members of the legislature to find some sort of resolution to ongoing budget negotiations, but his Chief of Staff, Larry Persily, took his place Wednesday to lay out the administration’s plans for the coming months at a joint meeting of the Kenai and Soldotna Chambers of Commerce.
The big one is finding a way to stabilize a drawdown of the Borough’s fund balance. Essentially a savings account, it’s the cash on hand the Borough can use for any number of things. This year, about $4 million will be spent to bridge a funding gap in the budget. Persily says without more budget cuts or more revenue, that fund balance won’t last long.
“If you don’t have large-scale spending cuts or you don’t have new revenues, by the fiscal year 2021, which is not that far away, the fund balance will be negative, which is impossible. You can’t….well, I take it back. The state of Illinois has. They haven’t had a budget for years. They’re not paying their bills, they’re junk bond-rated on their debt, but realistically, you can’t go negative on your fund balance and we’re drawing it down. We’re pretending we’re the state. We have this fund balance, we have this savings and we’re spending it and unless you figure out some way to bring in balance and replenish it, you’re going to pass a line that you can’t pass.”
Over the years, the Assembly and voters have elected to take some revenue out of the budget by way of property tax exemptions or sales tax exemptions, and that hasn’t been a big problem. The difference was made up by high gasoline prices and their accompanying sales taxes or lots of industry investment in oil and gas properties. But that investment has plateaued. And fuel prices have been pretty low. A good deal for drivers, but not so much for the Borough’s finances.
A slight increase in the mill rate would help stabilize the decline in the fund balance, but that idea didn’t have much support among the Assembly this year. Another option the administration is pitching is a bed tax. The Kenai Peninsula Borough is one of the few areas of the state that doesn’t already do this. A third option would be to adjust the cap for sales tax. Since the Borough adopted a sales tax more than 50 years ago, the cap has stood at $500, meaning the first $500 of a transaction is taxed, but nothing more than that. Raising the cap to $1,000 could bring in more than $3.5 million a year.
And, Persily says, the budget panacea represented by the proposed AK LNG project isn’t something that should be counted on.
“Realistically, I don’t think the LNG project is happening in this decade. It doesn’t matter how much we want it, it just is not the cheapest gas out there in the world, and that’s what China buys, is the cheapest gas. I still think it will happen, but not in the next several years.”
Along that same line of thought, the chances of Agrium rebooting its operations in Nikiski are also pretty remote. Asked what areas of the budget might be left to cut, Persily noted the cool reception the idea of cutting hours at the landfill got during recent budget negotiations, suggesting that the easy cuts have already been made. Other, more difficult decisions will have to be made now or at the very least, poor decisions will need to be avoided.
“The Kenai borough, because it’s a second class borough, doesn’t have a lot of powers. There’s service areas, but the borough itself does landfills, schools, general government. It’s not like the Kenai borough has embarked on goofy-ass ideas like the Mat-Su has, with the ferry they finally sold to the Philippine Red Cross or the railroad that never got finished, the dock they keep fixing that has no business. The Kenai borough’s done a pretty good job.”
And that’s not a particularly surprising opinion from the outgoing administration. The question is, how difficult will it be to keep doing a good job with an economic outlook that doesn’t inspire much optimism.