Loading...
HomeMy WebLinkAbout1987-02-18 Economic Development Commission SummaryECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 - 7:00 PM Kenai Community Library Vince O' Reilly, Chairman AGENDA 1. ROLL CALL 2. APPROVAL OF AGENDA 3. APPROVAL OF MINUTES of February 3, 1987 , 4. REVIEW OF PROGRESS TO DATE 5. PRESENTATION OF NEW MATERIAL 6. PRESENTATION OF TESTIFIERS AND/OR SPECIALISTS b. Penny Dyer - Travel Industry c. Larry Simmons, Kenai Peninsula Borough - Finance Dept. 6. PUBLIC TESTIMONY 7. COMMITTEE DISCUSSION 8. PREPARE NEXT AGENDA 9. ADJOURNMENT (9:30 PM) ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987, Wednesday, Held, Kenai Community Library Minutes, Regular Meeting 7:00 p.m. Presiding: Vince O'Reilly, Chairman 1. ROLL CALL Present ,,, Vince O'Reilly Jim Carter Roseanna Shelden Bob Scott Barry Thomson Darren Bond Absent Jim Elson Mike Meeks (in Seward) George Miller Also in attendance: Two Kenai Central High School. members of the Quest Program from the 2. APPROVAL OF AGENDA ------ , , 6. (a) was changed to read Vern Lofstedt of Kenai Air and Southcentral, and Dick Swarner of the Kenai Peninsula Borough School District was added to the agenda. For the committees' information and advanced knowledge, Chairman O'Reilly indicated for the meeting of March 10th, a Mr. Dick Lenahan of the U...S. Department of Commerce to address the committee on ~'lnternational trade and what it means to Alaskans. He's been in that post in Anchorage for seven or eight years. Also, a Mr. Jim Weederman of the State Department of Commerce was heard from by Chairman O'Reilly. The purpose of asking someone from that department was to find out what other communities are doing along this line. Chairman O'Reilly wanted the committee to also be aware there would be a meeting the last part of March, early April and mid-April. That would give the committee three meetings before the May 1st deadline. Mr. Simmons asked to speak first on the agenda. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -2- 3. APPROVAL OF MINUTES ..- February. 3.., 1.98.7 The minutes approved subject to later revision to give the committee a chance to read. 4. REVIEW OF PROGRESS TO DATE Chairman O'Reilly: I do hope and it's becoming a matter of concern to me, we have to keep two things in mind to do. To see if we can get a photograph of the economy of the city; it's not our charge to do something about it, simply a photograph of it. Put it in presentable form to the council and then we have to address this question: should there be a commission, if so, what type of commission should we recommend? Not necessarily membership or anything like that. That's our two charges and I know it's beginning to be on my mind how to take the mass of materials that's been presented to us. I just tried a quick review, and we have rather an extensive presentation on retails sales, present population, population estimates, real estate covering; commercial, private, The city's situation. The Borough's situation. The airport, employment, unemployment. I just want the committee to understand, when we look at those three meetings, that we've got to be prepared to do some work on this and have an approach. I went back to the City and Borough of Juneau and what they did in their ad hoc review. I gained something out of doing that. They looked at it very differently. They look at it from the point of view, if there's a healthy government, that's as much as government can do. When it gets really keen involvement in the street on economic development, it just doesn't work. That may be an approach that we may wish to take. Committee Member Thomson: It's certainly a valid approach. Because I think we're getting a fairly good picture of what the economy is like now, and one thing that we should, I feel that we should emphasize when we have these people who give public testimony, is that we should quiz them very strongly on their thoughts for the future, because a lot of ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -3- · · what we're getting is really just a snapshot of what the economy's like this instant. And we know that in six to twelve months time, the economy's going to be different. It's either going to be worse or better. We need to find out the odds of it being one or the other and how it will be better, or how it will be worse, and what we can do to either accentuate or minimize that. That's my thoughts. Chairman O'Reilly: I'm giving myself notice and warning to be prepared to do some work on March 24th and those two meetings in April. To be able to get it in some intelligible form so that it can be presented to the council. NEW MATERIAL Chairman O'Reilly explained the committee's task to those present. PRESENTATION OF TESTIFIERS - SPECIALISTS a. Mr. Larry Simmons Finance Department. of the Kenai Peninsula Borough Mr. Simmons passed hand outs (attached to minutes) information to the committee members and explained: of The first page (pie chart) of Revenue FY 1987 of the borough just gives an indication of the make-up of the borough revenue. The intent was to indicate that for FY 87, which is the year that we're currently in, we relied on 50% of our revenues coming from the state. Tax revenues were a quarter of what we generated to fund our fifty-six million dollar budget. The next page (bar chart) is the same type of information except that it shows a longer history. You can see that the legends at the top will indicate which bars pertain to which category. He went on to explain and related that the projection for 1988, next year, that the percentages dropped dramatically to 32%. The reason being, as Mr. Brighton has indicated to you apparently from last week, from viewing the minutes, he explained that we anticipated a reduced level of funding in the areas of revenue sharing, municipal ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -4- assistance and debt service, which looses about~7.2 million on those programs. Significantly, the difference will be made up of taxes on the project that I've made up here. We go from an average tax rate of around 17 to 20% up to 53%. The mill rates going from, in the last five years, 1 1/4 mills up to a projected, I think was projected at 8 1/2 mills. Committee Member Thomson: You'n~ saying in FY ~87 property taxes are going to equal about 13 million and in ~88 they're going to 30 million, a little over 30 million. So that means somehow you~r~ going to get two and half times as much revenue. How is that going to be done? Increase in taxes? Mr. Simmons: Correct. Committee Member Thomson: So we can look at 120% increase in taxes? Mr. Simmons: Yes, that's right. This projection, when I made up this particular bar chart, I think I had 10 mills or 8 1/2 mills, there's been some adjustments up and down since I've made this projection. The next page, however, does show the current projection. There is a lot of information on this sheet. It is typically included in our budget. It shows in the first column, under Actual FY 85-86, it shows where we were last year. The actual figures to where we ended up. We had a mill rate of 1 3/4 mills. We had expenditures of 4~47 million and the figure of the fund balance dropped bye6.8 million. The deficit, that means that we took in less revenue than we spent. We had a saving5 account, or fund balance of~19 million at the beginning of the year and at the end of the year we had~twelve. And as Mr. Brighton indicated to you in these minutes, that is because the assembly decided that rather than continue to build that fund balance, in anticipation of some future down fall in revenues, the decision was made rather to lower taxes. So, for several years here we've lowered the taxes from back in the late 70's at around 5 mills, we've lowered it down to 1 1/4, 1 3/4, 2 1/2, and what has happened there is we've spent more money than we took in. Particularly, last year. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -5- Then, the next column shows the budget for this current year, FY '87. We had a 4 mill rate, this is just the projection, the next column that starts with Budget 7/1/86 is the budget projection that we had at that time, 7/1/86. So that's the budget. We missed it. I always do. There's never been a budget projection that I've made yet that comes out the way I thought it would at the beginning of the year. Taxes; we are anticipating about $700,000. more in taxes than I had originally projected. The reason for that is, primarily, because we reserved 10% of the levy for uncollectible taxes. And it's turning out that it's not that high, so for the estimate column, FY '86/~87, that's where I think we're going to be at the end of the year. I made this projection, which was about a month ago. Significantly, sales tax, the projection has dropped $300,000., also, even more significantly, when you get down to the next category, which is State Shared Revenue, that first number having to do with about 22 million dollars, is the reimbursement for school debt that we get from the State. Now, this year, FY '87, we had a proration of 10%. We had originally projected that number at the 5% reduction from what we were entitled to, it's actually shaking out to be a 10% reduction from what we're entitled to, or $836,000. As you go down, interest revenue, we projected it at~5 million, at the time of this projection, we said it was going to be~6 million, if I made another projection today, I'd say it would be closer to~7 million. It's just that the further you get along into the year, the easier it is to project where you're going to be at the end of the year with the interest. It's a difficult projection to make, given the fact that interest rates rise and fall, I frankly, always try to estimate that on the conservative side. Basically, we come down to fund balance again. We further reduce the fund balance by another 2 1/2 million dollars and we move onto FY'87/88, where I'm projecting that both; we'll reverse the order of this a little bit. We at the ~orough want to be sure that we end up with adequate fund balance. To have, to be able to pay cash for our payroll. And pay cash for our payables and things like that, and we ECONOMIC DEVELOPMENT COMMITTEE February 18. 1987 page -6- think that about 10% of our expenditures is adequate fund balance. So, this~5.8 million here is about the minimum fund balance that the borough can have, and that is not all cash. A lot of that is receivables that we may or may not collect. So, where'5.8 million sounds like a lot of money, it's not all cash, and the 8orough does need a significant amount of cash to operate on a daily basis. Committee Member Thomson: How much is receivables? Mr. Simmons: I don't have the figure in mind. Committee Member uncollectible? Thomson: How much is the receivables, Mr. Simmons: We do reserve some of the receivable, so, I would say, all real property taxes receivable, its all taxes receivable, all real property taxes receivable are collectable. Because eventually we'll foreclose on the property and sell it. Personal property taxes receivable are basically about 75% uncollectible, would be my guess. Of course when it gets to that point, they are very difficult to collect, because it involves a suit against the individual and it's very costly. Receivables, in the general fund. are less than $500,000 , but that's less the allowance that we anticipate, which isn't necessarily reflected in the fund balance figure here. I'd like to explain the expenditure figure. These four or five numbers at the bottom of the page explain how I arrived at the numbers that I did for the FY ~87/88 projection. The delinquency rate again, I'm projecting it at the beginning of year to be 10%, so the actual levy of taxes will be approximately 10% higher than this 25 million dollar figure. Sales tax is projected to decrease by 10%. State revenues are per the governor's budget, which I think Mr. Brighton indicated to you, the primary problem that we have is in the area of school debt reimbursement. The Governor's budget proposes to reimburse us at a rate of 70% of our entitlement, of which on an 80% bond of reimbursement schedule, that means 56% of what we pay out. The Governor ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -7- did not understand that himself when Roy Barton was down there and told him that we understand that this is 70% of the entitlement towards 56% of the bond, and the Governor said no, that's not the way it is, but when Roy talked to the Commissioner of Education, he said, yes, that's the way it is in the budget. So, we don't know how that's going to shake out, hopefully it will come out higher than that, that we will get reimbursed at a higher rate than 70% of our entitlement. The fiscal ~87 expenditure figure, our appropriation of budget for this current year that we're in is the 56 million 220 thousand, but we're anticipating at least a one million dollar savings, if you will, we will not spend the totalS56 million, instead we'll be directing that we'll spend#55 million. Now that's due to the Mayor instituting cut back in the hours for the workers and minimize of travel and other cost saving measures that the Mayor's taken. Item #5 is of significance. It says that FY '88 appropriation is increased bye4 million for local effort and $500,000 for debt service. The $500,00 for debt service is definite. The~4 million for local efforts to the schools is of course, going to be up to the assembly. The current budget, as I understand it, would require~7 million, the current school budget would require a~7 million dollar in a local effort. Mr. Simmons asked for questions. He stated, I don't want anyone to think that this is in anyway cast in concrete, it is not. This is just a projection, it's a pre-budget projection. We haven't even got into the budget process yet. We're into the budget process, the departments have to turn in their budgets to the Mayor tomorrow, but we don't really know if this 58 million dollar level of expenditures is ball park or not. I would guess that it's fairly close. And, if we had 58 million dollars in expenditures, for next year, it would require an 8 1/2 mill rate to generate adequate revenues to cover expenditures. Chairman O'Reilly: That still would mean a dip into reserves? ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -8- Mr. Simmons: Yes, a 4 million dollar dip into reserves. Taking fund balance down to the bare bones minimal level, in our opinion. It's going to be a challenging year for the borough and school district and any government, and it will be frustrating for the tax payers and tax collector. Mr. Simmons passed out a couple more hand outs (attached), of sales tax data. The reason for the top sheet is for the titles next to the codes. These are called SIC codes. The first one is 00100 on the top left, under division A. These are a standard industry code for the State. It's issued by the State in business licenses. We have in the last year or so, categorized all our sales tax accounts by these SIC codes, so that it gives a better break down of where the sales are occurring. What types of industry and so on. Chairman O'Reilly: Question on 8600, Member Organizations in Homer, $16,797,349, what would that be? Mr. Simmons: I don't know what it is, I will check on that and report back to you. The top page is the thing that should be of interest to everybody. Through the third quarter, which showed, if we're talking about Kenai, a 9.7% decrease, but look at the fourth quarter, which is at the bottom of the three tiers of information, it shows the percentage changes. Over the year, Kenai is down 14.16%, whereas the total borough is down 3.15%, but the trend is down. The third and fourth quarters, we're seeing a tremendous drop. Chairman O'Reilly: Kenai,~27 million, that's total gross sales, and 1% of that goes to the Borough? Mr. Simmons: Yes, in sales tax, 40% goes to the 8orough, 60% goes to the ~ity. Of a sales tax dollar generated in Kenai, there'-s a 5% tax, 3% for Kenai, 2% for the ~orough. You cannot multiply 5% times these figures and come up with sales tax dollars to the city or the borough, these are gross sales. They don't have any relationship to taxable ECONOMIC DEVELOPMENT COMMITTEE February 18. 1987 page -9- sales, because we have the situation where we have sales in resale, we have a $500 maximum on each individual sale and all these items that figure into gross sales. Penny Dyer: How much delinquency do you have on sales tax? Mr. Simmons: It's an unknown figure in reality. The situation with sales tax is that it is a voluntarily, so to speak, reported tax. If a person or a business doesn't file, then we don't know how much they owes us. Penny Dyer: But those that file? Mr. Simmons: Those that file we have 1.5 million dollars outstanding. Of that 1.5 million we have $500,000. that we have obtained judgments on, that we cannot collect. In other words, they've either skipped, or their bankrupt, or its a situation along those lines. We have another $175,000 that are currently on plan with us. We have another $800,000 out of million that are still delinquent. A lot of bankrupt. a pay~me t that ~175 those are Penny Dyer: Do you think a possible revision on collection method is called for? the Mr. Simmons: I think what it takes, probably doubling my staff, or tripling my staff, particularly the audit staff and the collection staff. We have 4300 accounts. We have two delinquent accounts people, and we have two auditors and a clerk. Committee Member Shelden expressed her views on the sales tax collection and what it involves in her business, and the reaction from her customers regarding sales tax collection. Committee Member Thomson suggested a sign be put up in the business, and perhaps the ~orough could send out a certificate to indicate the people who have paid their taxes on time. Businesses could put this certificate on the wall of their business for people to see. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -10- Mr. Simmons: Excellent idea. An idea like that has just been unveiled, that was proposed to him, and he is going to try and push it. He would like to talk to the chambers and enlist their support. The idea is to modify the existing sales tax registration form, which you have hanging in your business, and modify that. It will contain the same information, except that, it'll have little squares for stickers and when you pay your tax on time and file it, paid up current, we'll send you a sticker tO put on that registration that says paid through this quarter. Committee Member Shelden: Isn't that going to be another expense to the borough? Mr. Simmons: It'll be a expense to the ~orough, but we're hoping that it will allow the citizen to be more involved in the sales tax. To know that the businesses to buy from, is in fact paying their tax. And, if that is the case, it would pay for itself. Mr. Simmons went on to say if the public gets involved and doesn't buy from businesses that don't pay their tax, that's an answer to the sales tax. Committee Member Shelden: Do you think we'd be better off without it and increase the mill rate. Mr. Simmons: From the ~orough's prospective, 60% of the assessed value in the Borough is billed to places outside of the ~orough. We collect 6 million dollars in sales tax a year, roughly. Mr. Simmons: Gross Sales by quarters; sheets~ were handed out. The next couple of pages are the details. What you have on the first page is the sales data by SIC code. The next page shows the percentage comparison. If you want to know what is happening where and what type of industry this is the only thing I'm aware of that will help you along those lines. It's not 100% accurate. If you see a tremendous change that doesn't look right, it was probably a classification change on the business, rather than a change in the actual receipts. Look at the broad category, rather than the individual. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -11- The 1986 data is probably about 95% complete. In other words 95% of the sales tax that we're going to get is included here. All that we process is that which was filed on time. There will also be maybe a 5% maximum that was filed late. There will be a publication all the registered sellers which will also show their status. If there is a balance due greater than $100.00, they are going to be listed as having a balance due. Further discussion by the ~ommittee ~embers and Mr. Simmons continued regarding sales tax. Chairman O'Reilly: Service districts or road districts, is there anything that you can get for us that could be a major user of Borough revenues other than the school and things like that, but what we're trying to identify is there something out there that concerns those in the Borough; look out for 1992, because all the roads have to be maintained by the ~orough or something like that? Mr. Simmons: We're fast approaching that because we have four road service areas which currently are funded by the State at $2,500 per mile, subject to appropriate of course. My feeling is that that is going to be funded less and less. Under Governor Cowper's proposal it's funded at something like $1,800 per mile, so there won't be as much money available to do our road maintenance in those four road maintenance service areas, which are strictly outside of the cities. Chairman O'Reilly: Do we have the same thing for emergency medical districts? Mr. Simmons: They're primarily funded by tax revenue now. The only other one that we're looking at is that Beluga ~oal project and port harbor project. I don't think the ~orough would suffer any kind of revenue drain, hopefully we'd have a revenue generator. Committee Member Thomson: You say that there is 90% compliance? ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -12- Mr. Simmons: No. I say that we collect 90% of the available revenue. I wouldn't say that there is 90% compliance. The reason is because it's the big businesses that generate the majority. b. Dick Swarner of the Kenai Peninsula Borough School District. _ _ Dick Swarner: I'd like to talk about the schools and probably the State government as well. As I view it those can have major impacts on the economy down here. I think maybe some of it has already began, with the uncertainty, that when we released our initial preliminary budget figures .... I've had car dealers tell me, school teachers aren't even coming in to look at automobiles anymore. Which I thought was an interesting comment. With the activity cut, that was thrown out t. he Monday night, another comment was made by Mark Winston, he said my business may fold up, I sell a lot of football shoes and tennis shoe and everything else. So, it's those kind of things. We're down to the point now, the cuts that we sustain this current year, which is about 6.8 million dollars, we cut out of the budget. We took a lot dollars out of there that were not community or didn't stay in the community. We chopped out all the capitol equipment. We trimmed back our supplies. We trimmed back our consulting fees. Those dollars were not here in the community and I don't think the community saw the impact of the reductions that we made. Now we're down to the point that our reductions are basically going to be in salaries or bodies. That will have an impact on the community. Those dollars, as I view it, stay in the community. In order to come to last years' 8orough appropriate level, we're talking in the neighborhood of 6 to 7 million dollars in reductions. Out of that you're probably talking between 5 1/2 - 6 1/2 million in payroll or associated costs, and the extra- curricular reduction of this product. Teachers get stipend for that. They take home some payment, they'll go buy a television set, new automobile or what ever. We cut back on activities, that's going to cut back on Laidlaw bus operation, that's another local dollar. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -13- Just to follow up on Larry (Mr. Simmons), an interesting point. We have a 3.4 billion dollar tax roll as of last January, and the top ten compa~nies which are your oil companies, pipe line company, pay~l'2 billion and with this 60% I took and deducted that off and I came up with 2.1 billion dollars worth of tax properties, 60% of that is 1.3 billion paid by folks who do not reside on the peninsula and then you take that a break it down and you end up with about ~852 million on the assessed value, is paid by local residen~3~ or about 25% of the tax. You apply that to our school budget, 19.1 million dollar request from the ~orough, 25% at 4.8 million, that represents 10% of school district budget. I guess what I'm saying is that the dollar that we spend in the school district, I think has about the same effect economically in the community as a fishing dollar, or as an oil dollar, or whatever, those dollars are coming in, 90% of it is outside money. Chairman O'Reilly: In other words, what you're saying, of all school costs, only 10% of the revenue for that comes from the real property? Mr. Swarner: Real and personal property. If we go back onto the sales tax, I would agree with Larry, the sales tax, the majority of that, those of us who live here, pay that. The amount the tourist brings in probably a minimal amount. As far as the enrollments are concerned, we monitor those things, with the exception of a couple weeks, we seem to following about the same kind of a pattern as we did last year, which indicates to us that there's not a great exodus of people. I talked with the real estate folks this last month, and they had a good month. I think the one thing about the school budget is, if we go with the 6 1/2 million dollar cuts or whatever, we have a lot of folks that move here and stay here because of the school system. Major companies look at your school system, the number one factor, it's not taxes, which surprised me, but the schools is the number one factor and folks locate their businesses into an area. I think with the cuts taking out 6 1/2, 7 million dollars out of this budget, we're ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -14- probably going to end up with, what I call a mediocre school system, and as a result our community probably won't be as attractive to the folks that move here. We have folks that work in Anchorage and live down here, and commute back and forth, just because of the school system. I think we're probably going to see a slow down, but I think we're probably going to still experience growth. Tourist industry is strong down here. I don't see that diminishing. We have the fishing industry that's always been steady, and I don't anticipate too much of a change there. The prison in Seward is certainly an economic boom over there, although that's been delayed and we may have to go back in and take a look at our enrollment projected there. The Governor's recommended holding off on that. There's a lot of "ifs" out there yet. I would anticipate that Wildwood will probably end up being expanded, my guess, long term scheme of things. Committee Member Thomson: Are you saying that the Seward Prison may not be completed in the foreseeable future? Mr. Swarner: The Governor has recommended a July 1988 opening, we were anticipating an October '87 opening in our budget. So if that's delayed until July, we're not going to see the impact of students over there. But that saves us $750,000 per month by not opening, by what the Governor says. The other factor that could effect us would be what the State plans on doing with their budgets and how many people they lay off and in what areas. We escaped that in the initial go around, I doubt if we'll escape that this time. Committee Member Scott: The national average per student was $3,400, the Kenai Borough's average per student is $8,700, how does that compare to the rest of the State? Mr. Swarner: I don't think it's $8,700. It's right around $7,000 per student. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -15- Committee Member Scott: of the State? And I'm talking about Anchorage? How does that compare with the rest not talking about the bush, I'm Mr. Swarner: Anchorage, $6,700 - $6,800. the other day, their figure was Committee Member Shelden: You think student here in the-borough? it costs us $7,000 per Mr. Swarner: When you add in the debt service. Committee Member Bond: And that's just the educational portion, that doesn't include the maintenance and all that's included in the ..... Mr. Swarner: No, that includes everything. As far as what these budget reductions mean, if you want to take all the teachers, we talking about the whole, you're talking pretty close to 155 teachers out of a total teaching staff of about 580, is what we've got on the payroll now. And out of that amount, probably two-thirds of them would be in this central peninsula area, North Kenai, Kenai, Soldotna, Tustemena, Sterling. Committee Member Thomson: What is the situation as far as the teachers and their contract is concerned? Can you layoff a teaCher, or fire them, or I keep hearing the story, we have a contract? Mr. Swarner: We can pink slip any non-tenure teacher. Committee Member Thomson: It only takes one year to be tenured? Mr. Swarner: First day of the third year. Committee Member Thomson: And what percentage teachers are tenured? Pretty high percentage? of your Mr. Swarner: Probably two-thirds are tenured. We can lay- off. That's what we'll have to do, unless some more money ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -16- comes from somewhere. If we don't get more State revenue or if the Borough Assembly doesn't appropriate enough money and we don't have contracts out of the way, settlements; come this spring, I'm sure we'll be sending out pink slips. That's the only alternative we have to it. That in turn, if that ends up being an eventuality, that in turn can really mess up your educational system. We'll probably end up with teachers, teaching out their areas of expertise. We can't lay-off a tenured teacher. Discussion followed regarding teachers, contracts, lay-offs and the pro and cons surrounding these areas. Chairman O'Reilly: Is the danger of cuts from the State more severe in the payment on the bonded debt more compared to the foundation formula? Mr. Swarner: Probably be better off if we got the commitment on the bonded debt for t~e 80% reimbursement rather than the foundation. Then the~re definitely looking at 2 mills. We're looking at 2 mill~ on operations and I suspect before we get finished with this, 'there will be some reductions. We've used the supply formula and that amount has stayed the same for the last three years and this year we cut it 15% so I think, we've absorbed four years of inflation and then reduced downward. Our schools are well supplied and well equipped. But, we probably can get along with reduced areas for a couple of years, but, down the road you're going to pay for it. I think we've got it down, we allocated supplies, teaching supplies, auto supplies, custodial supplies, are on a formula based on a per student basis, then we took all the other items in the budget and added them up and said cut 15% of this; which is the travel, postage, telephone, repairs and what not. I end up with a couple elementary schools, Sears, Redoubt; about the minimum amount they can operate on is about $17,000 and some people were down to $15,000. Teachers; we've already eliminated twenty-three positions. The last school board meeting, they eliminated four and a half administrative positions. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -17- Penny Dyer: does that salary? When you talk about 81% of your budget salary, include both the teaching and administration Mr. Swarner: Yes, and fringe benefits. Discussion on the ~ommittee ~embers. budget process continued with input from Chairman O'Reilly: If some 20 million dollars from the State, to pay the bonded indebtedness, the 8orough's budget, not the school budget? i s coming that ' s in Mr. Swarner: Total supplies for the district 2.9%. amounted to Chairman O'Reilly: What's the total school budget? Mr. Swarner: Foro,~_erations next year we're looking at 48 million, 182. ~~,l~,ooo~ Committee Member Shelden: What's included under operations? Mr. Swarner: Running the schools, everything except for the maintenance and insurance that the ~orough pays for. And bonded indebtedness. Penny Dyer: How many schools? Mr. Swarner: Thirty-four, We have a few dollars for utilities. two of which won't the two new high be occupied. schools for Committee Member Carter: Two won't be, which two? Mr. Swarner: The two new high occupy until the fall of'88~. schools we don't intend to Committee Member Carter: When will it be on line? Mr. Swarner: The December, I think. scheduled contract completion is for They're pretty ~much on schedule right ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -18- now, but if you get off schedule it towards the end of the contract. Just to give you an idea, '85/86, which was the year we spent 48 million 128, which is next year's proposed budget, it's almost exactly the same 48,182, this year we got 45,750, what we're operating on now. The difference in there is that we had to pick up 1.8 million dollars on teacher's retirement and the other big factor on that is we picked up and additional $800,000 on pupil transportation, there's 2.6 million dollars. (copy of preliminary draft-Annual Budget 1987-88 for the Kenai Peninsula Borough School Budget attached for file) I think a lot of people are preaching doom and gloom and we're not seeing that kind of gloom and doom, quiet frankly. We not seeing it in school enrollments. Kids are still there. We start out and peak in the first week in October, and drop down, in the spring, start picking up. We've lasted, we're parallel, about what we did last year in schools, as far as enrollment. We may have to go back in and revamp our enrollment projection, but I wouldn't see us dropping around more than 100, 120 students from our projection out of a total of 8838. Used to be Alaska lagged behind the ~8 in the trends. Particularly in population, that's not happening anymore. We follow the national trend. Birth rate increases, and that's one thing that folks need to remember is that you see them out here, there's a lot of little small guys that will be coming into the school system. And right now we have some fairly small classes moving through the system, and our kindergartens are coming in bigger and bigger every year. Statistically, on a national basis that trend is still there. About four or five years ago, is the first year the United States had a negative growth rate, now we're back into a positive growth rate, nationwide. And we're finding that those statistics are pretty true to us. .c. Penny Dyer - Travel Industr~ I really feel the private sector is going to survive thi-s. Because you've got people out there, business people, that if they can't make ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -19- it one way, they'll go with another. I think what's effecting us now, more than anything else, is the fact that our State government, and our Borough government, and our City government, are trying so desperately to straighten out their mess, and with all these threats of increased taxes, and what's going to happen to us, people aren't spending. They've got the money, but their not spending. I talked to people, for instance in the decorator stores, people come in and say, "I was going to renovate my house, I was going to re-do it, but I think I'm going to wait and see what the borough does to me, before I do this." And that's what's effecting our economy as much as anything. People are just at a stand still. They're afraid to travel. They're afraid to redecorate their home. They're afraid of everything. And if we could just get, get the State to settle on their budgets. The borough to settle on theirs. The private sector will get on with it. For instance, I've got a space in my building, that's empty, that no one's even looking at to lease. Okay, I could go, I'm paying the bank for that by the way, I could just go and keep supplementing those payments on that building, and just spend that money supplementing those payments. I'm not going to do it. I'm going to open another business in that building. I figure that dollar that I'm just going to be spending on the bank, could just as well be put to use. It's only drawing, what, 5, 5 1/2% at the bank. I'm just saving it to give back to the bank. This is what the private sector is doing. There's a potato chip factory in Palmer that's just opening. This was a group of men that had a warehouse that wouldn't lease. So they put together a deal and sold stock in it and they're going to use the product for that. The private sector is going to survive this thing. What we can't survive is the gloom and doom from the government. Committee Member Bond: The problem is that it's going to take the private sector to catch up with the kinds of dollars that have funneled into the economy from the government. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -20- Penny Dyer: Sure it is and I realize that, but, I really do feel that, what I'm getting at is the adverse publicity is killing the private sector. This is what we have to do a turn around on. Mr. Swarner: I sense that within our organization. Folks are just not making major purchases. Number one, they don't know if they're going to have a job next year, the non- tenured folks. And number two, is that the rest of the folks don't know what they're going to be paid. They don't know if it's going to be a 5% reduction, 10% reduction or do they get their step increases or whatever. So, I think that folks are holding onto their money. Penny Dyer: I say let's get on with it. We did not sell anymore one way tickets this year than we ever have, for people leaving the area. We did have kind of a survey by " . "No, we're going down and asking, are you moving outside9" buying a camper or truck and we're driving back." There has not been that many. The moving companies came out with a figure just last week, and 68% of their business is still people moving in. Committee Member Bond: To emphasis Penny's point about savings, my best bank account has increase~ from last year at this time, has doubled. My checking accounts have decreased a milli.on and a half--two million dollars. They haven't decreased nearly to the rate that first investment accounts, savings accounts have increased. And that really does point to the fact that people are saving their money. Penny Dyer: I~been kind of doing a survey of this because I got so tried of the doom and gloom in the community. And it's going to kill the business community if some of this doesn't ..... because if people are just saving their money, the rest of us may just as well forget it and go home. As far as the travel business is concerned, it's up to where it was last year. And it was up last year over 1985, and that's with more competition. This is another thing we cease to admit, there's more competition out there. Look at the businesses that came in over the last two or three years. There's more competition and that's going to spread it. ECONOMIC DEVELOPMENT COMMITTEE February 18, 1987 page -21- Another thing I object to is positions such as, the School Superintendent, or whatever, why should we reward somebody to live in Alaska. We think that we've got to pay them all of that big money just to come to Alaska. Why should we reward somebody to live here. The rest of us are here because we like to be, and I think the time has come when we quit rewarding people to come to our beautiful State. If I've got a suggestion for your committee, I think one of the best things you could do is to present a positive side. You have to be realistic, I don't mean go around and being a bunch of Pollyanna's, but I don't see us surviving if we don't get rid of some of this attitude. And it's not as bad as they're making it. The whole effect, that's effecting people spending is also effecting the businessman, he's pulling in. He's not expanding. My business, when I opened in 1971, increased almost every year, like 20 to 30%, you can't continue to do that. You go down to Texas, you cannot take an economy that's fueled so fiercely and not feel the impact when it suddenly shuts down. And a lot of people hurt with that, but you've got to admit, we really rode high on the hog for a long time and now we're holding level. And that's fine. Chairman O'Reilly invited Penny Dyer to attend the March 10th meeting. ADJOURNMENT The meeting was adjourned at 9:45 p.m. Niva-A'.-- Ab-U'r-tO ............... dba/Niva's Clerical Services for the City of Kenai