For the moment, Ketchum is right on target with its projected budged, but before the 2007-2008 fiscal year is over, the city could face a $500,000 shortfall courtesy of the slowdown in new construction.
"I wouldn't press the panic button at this time," said interim City Administrator Jim Jaquet on Wednesday, May 14. "However, I think a freeze on all discretionary expenses would be a good move."
Jaquet's recommendation came on the final day of a two-day retreat for Ketchum officials this week in Hailey, at which the challenges facing the city were prioritized.
While improving communication with the public and further discussion of consolidation of the Ketchum and Sun Valley fire departments will likely be carried out over a number of months, the spending cuts will start immediately.
Though Jaquet said the half-million-dollar deficit is "probably on the far end" of what the city could encounter, he said steps should still be taken to provide at least a $300,000 cushion in the city's general fund to avoid dipping into reserves. One of the first steps in that direction is a hiring freeze, meaning the two recently vacated positions in the Police Department and one in the Streets Department would not be filled in the immediate future.
"There will be no difference in the level of service provided," Councilman Baird Gourlay said Thursday. "It just means that members of the two departments will have to put in overtime."
According to Gourlay, the downside of incurring overtime is that it could increase the propensity for police officers to "burn out." However, Jaquet said that if that becomes a problem, the council and mayor would have to reassess and possibly look to fill the positions before the next fiscal year.
"I would hope we don't have to wait until October, as it takes a while to recruit police officers, especially at the detective level," Gourlay said. "We should get a better idea of the city's economic situation over the next two months."
Combined, the savings on salaries from these three jobs amounts to about $65,000 for the remainder of the fiscal year.
That tactic was recently undertaken in Hailey, where two positions in both the street and planning departments were left unfilled in response to similar budget woes.
For both cities, the slowdown in new development over the past year meant a decrease in related revenue, such as that from building permits and inspection fees.
To make up the rest of the potential deficit, the mayor and council also discussed reducing the budgets for city departments from 3 percent to 6 percent, which could be partly accomplished through a decrease in travel and training expenses. Jaquet said a 3 percent reduction from each department would correspond to a total savings of around $250,000.
The majority of the shortfall, however, could be recouped through the collection of money owed to the city, most notably from the Wood River YMCA and the Blaine County Housing Authority.
Jaquet said that while the YMCA was exempted from building permit fees, state and local law require the payment of development-impact fees, of which the nonprofit organization owes $95,000. Those fees go to pay for the impact a new development has on city services, such as the fire, police and streets departments.
As well, Jaquet said the housing authority still has an outstanding debt of $147,000 owed to Ketchum. The authority's executive director, Jim Fackrell, said in an interview that the money came from in-lieu housing fees collected by the city and turned over to the authority. He said the authority, under the previous board of directors, had used it for operating costs when it should have remained in a reserve housing fund. He said the authority has about half the money on hand to repay to the city, and expects to collect the remainder through other fees.
The city would take in nearly $250,000 if collections were made from both the housing authority and the YMCA.
"It's time for (Mayor Randy Hall) to get out there in his black suit with his black briefcase," Councilman Larry Helzel joked.
Another possible source of income, which has been a source of discussion for a number of years, is the sales tax from building materials delivered to contractors in Ketchum. Jaquet said that when an out-of-town supplier, such as Home Depot, delivers material to work sites in the city, Ketchum is entitled to the sales tax, as that is technically the point of sale. Hall said that has been a difficult law to enforce, but that the city would start looking into ways to audit the contractors to determine and collect the tax.
With construction season just beginning, there's a chance that these conservative budgetary measures will be rendered unnecessary, but until the council can get a clearer picture, the belt will continue to be tightened.
"I'm not banking on a whole lot of building projects to come in, as the current economy is not at all conducive to them," Councilman Ron Parsons said during Wednesday's meeting. "However, if the money does come in, I'll be high-fiving all the way."