Wednesday, January 30, 2008

JR Costs Making City's Financial Woes Worse

The City of Bend is coming under increasing financial pressure as the development bubble has burst in the residential sector, with the commercial sector soon to follow. The city made large budget adjustments in December to try to prepare for this coming reality, but it the Dec. 31, Budget Detail Report shows a worsening of the situation.

Many of the individual budget funds had fallen short throughout the current fiscal year, which began July 1, 2007. This trend accelerated in December. Some individual funds and their percentage shortfalls in revenue are:

-Building Fund: -14% for year-to-date, -49% in December alone.
-SDC Revenue Fund: -12%, -64%
-Planning Fund: -46%, -44%
-Affordable Housing Fund: -33%, -73%
-Tourism Fund: +10%, -42%
-LID Debt Service Fund: -36%, -38%
-LID Construction Fund: -105%, -105% (yes, you read that correctly--a fund that was budgeted to have $100,000 in it actually is $4,818 in the hole)
-Transportation Construction Fund: -70%, -37%
-Airport Fund: +1%, -20%
-Cemetery Fund: -33%, -36%
-Water Fund: -10%, -34%
-Intra-Governmental Services: -28%, -39%

Even the General Fund was hit hard in December, coming up 15% short in revenue after weathering the previous six months OK.

How does Juniper Ridge affect the budget?

The biggest issue is the current Knife Ridge (that company run by Councilor Mark Capell's cousin) contract for improvements for the new Les Schwab Headquarters and other related expenses.

From the BURA Juniper Ridge Construction Fund, page 21 of the Budget Detail:

Resources through 12/31/07 are $3,601,597, all of which came from the Les Schwab land purchase. LS finally paid in December, even though they had been building since September. Anticipated resources through June 30, 2008 are $9,487,403, with the future revenues coming from Long Term Debt Proceeds of $7,650,000; Transfers From Other Funds of $1,662,000; and Private Developer Contributions of $470,000.

These numbers bode ill. Think about it.

#1--We are going to go over $7.5 million farther into debt, which is being guaranteed with the full faith and credit of the City of Bend because BURA tax revenues are nowhere near enough to cover it, and we only received an "A" rating on this debt issue. It is being sold about now, which is not a good time to be issuing debt as we are in a worldwide credit crunch. The only good thing is that interest rates are historically low so we probably won't have to pay too much of a risk premium.

#2--We are taking over $1.6 million out of city coffers that are already severely extended. We are already cutting back on public safety, our transportation construction is already down 70%, and recent snows are going to take a substantial additional unbudgeted transfer of significant funds. Where are we going to steal another $1.6 million from without hurting services even further?

#3--Under the best of scenarios, there will be no further land sales until the 3rd quarter of 2008. My personal feeling is that will be pushed another six months or so. So exactly who is a half-million dollars going to come from? And where is it going to come from if not from a private developer?

Looking at the Expenditures in this fund, we see that we are already over budget 41% for Personal (Personnel?) Services and that Net Available Working Capital is currently negative by over a million dollars, at ($1,376,282).

We are committed to over $12 million on this project, and are budgeted for over $14 million for this fiscal year. As we watch the city's revenues continue to meltdown in the coming months, this albatross may become an anchor on Bend's finances.

That fateful, illegally noticed last-minute meeting, where by a bare majority our City Council approved a one-sided purchase agreement with Les Schwab, may come back to haunt those who voted "yes" in the next election.