Win Gruening: City budget grows, while Juneau doesn’t

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By WIN GRUENING

In what historically has been a perfunctory exercise, Juneau’s city budget deliberations this year could be just the opposite. Facing a multi-million-dollar deficit, a stagnant economy and population, declining school enrollments, and the expiration of federal and state pandemic support, the Juneau Assembly has some critical choices to make that will affect Juneau taxpayers for many years to come.

Yet, when the Assembly recently approved the introduction of a staff-recommended ordinance to increase the property tax millage rate next year, you have to wonder whether our assemblymembers understand basic economics.

As a backdrop, Juneau businesses are emerging from two years of struggles to stay afloat after pandemic-related losses.  Property taxes have already climbed dramatically due to increased assessments.  Cost of living components remain high, housing prices continue to rise while supply tightens.  Several long running businesses have already thrown in the towel or are on the verge of shutting down. The most recent ones mentioned are Rejuvenation, the Southeast Alaska Animal Medical Center, Juneau Mercantile and Armory, and possibly J & J Deli.

Instead of addressing these immediate issues, the Juneau Assembly is focused on raising taxes even more to help fund two mega-projects totaling over $100 million.  At the same meeting the Assembly proposed a property tax increase, they also introduced an ordinance for $6.3 million for initial funding to build brand new offices for city staff.  That project is estimated at $27 million but could go higher.  Last month, the Assembly approved $2 million to advance the Capital Civic Center/New JACC project that has an initial guesstimate of $77 million.

Neither project has any kind of a firm price tag nor have they received voter approval.  In fact, in the Capital Civic Center’s previous incarnation (the New JACC), voters soundly rejected contributing $4.5 million to the project.  But since the city has taken over the venture by combining it with a renovation of Centennial Hall, the sky is the limit.

To be clear, if Juneau’s economy and population were expanding, consideration of projects like this might make sense.  But the only thing growing seems to be the city budget.  Eventually, this results in even higher taxes and will necessitate balancing the budget with savings. 

Obviously, inflation is playing a part in budget deliberations this year.  But the Assembly takes for granted that whatever we spent last year is the base and increases get added to that.

Proposed budget increases are partially offset by higher projected revenues from the recovering visitor industry and rising property values – resulting in a deficit of around $4 million  – if property taxes are not increased as recommended. Notably, however, the budget does not forecast any negotiated wage or benefit increases. The city is currently bargaining with all three labor organizations, and the Assembly alone has the authority to authorize increases. Any pay or benefit increases awarded by the Assembly could deepen the deficit by as much as several million dollars.

The argument that the pandemic is at the root of Juneau’s difficulties doesn’t hold water. Ironically, the $47 million in federal pandemic support that flowed into the general fund is the only reason the city has such a high reserve balance. The question that needs to be asked is how can these reserves best be used?  

Using savings to disguise deficit spending or adding debt to finance speculative expenditures on government-owned facilities does little to stabilize or grow Juneau’s economy, yet that seems to be where the Assembly is headed.  

Serious discussions of expenditure reductions, facility consolidations or closures, elimination of tax exemptions, along with targeted use of savings to help lower the cost of living and grow the economy are rarely heard.

City Manager Rorie Watt believes the municipal budget has a structural deficit – one that cannot be solved with one-time expenditures. As he has correctly pointed out in his budget message, “the Assembly can only balance the budget by reducing expenditures or expanding revenues.”

Juneau residents need to weigh in during Assembly Finance Committee budget discussions during the next month if they want to impact the result. Growing the budget without corresponding growth in the community and economy isn’t the answer.

That’s been proven.

After retiring as the senior vice president in charge of business banking for Key Bank in Alaska, Win Gruening became a regular opinion page columnist for the Juneau Empire. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is involved in various local and statewide organizations.

10 COMMENTS

  1. It’s astounding the amount of spending going on right now in Juneau. Huge homeless shelters, a planned palatial city hall, a gondola at Eaglecrest ski area, and add to this many recently purchased commercial real estate properties. It’s typical Liberal mind think, just raise taxes. They want to eliminate tax on food so they’re going to increase the sales tax from 5% to 9%. All this is becoming very scary.

    • Well, at least they haven’t floated building yet another unneeded new school or another ice rink or replacing the downtown pool……

  2. Sounds like a bunch of drunken sailors on a spending spree, oh oops I’m sorry it’s just liberals at work here, nothing to see, move on.

  3. CBJ will have the new JACC no matter how many times we say no. Gotta be able to host drag shows 24/7/365.

    In fairness, Juneau Armory was doomed the day CBJ decided to ship the homeless to the new flop house next door. That bonehead decision probably has doomed Nugget Mall, Coastie Cutters, and the businesses in Jordan Creek. It wasn’t the out of control spending which caused this nightmare.

    CBJ is gonna continue raising taxes until the tax base collapses. Come to terms with it.

  4. A few quick comments on the above comments.
    1 The Eaglecrest gondola is actually a sound business decision to move to eliminate the CBJ subsidy.
    2. It was interesting to see that the City Manager point out the the current school system is unsustainable.
    3. It’s a shame we have no one able to design a new center that encapsulates the current JACC.
    4 The JACC has a new roof, all new upgraded electrical and is solid as a rock. Just rip out the moldy floor.
    5. The commercial office and retail space is being completely hollowed out downtown. Count the vacancies.
    6. Now an additional 30,000 feet of in town class A space just became available. Time for a reset perhaps.

    • In fairness, the JACC stinks due to poor ventilation and the event supporting accessories (tables, chairs, curtains, ect are all old and in terrible shape.

      Let’s fit forget it’s time as a morgue in the 70s (I think).

      The costs of refurbishment will easily take JACC to the point of cheaper to tear down and start over.

      The better question is, do we need the JACC? Every time it’s asked, we speak clearly. No.

      A better use of the money, if it must be spent, is an addition to Centennial Hall. Add a second floor to the classroom section during renovation and boom. Problem solved. Plus more public parking.

  5. I’m told by some of the people who have vacated downtown rents are being jacked up beyond what’s reasonable to pay.

    Many by out of state/country ownership who have no clue about the economic reality of CBJ. Most of those businesses are closed half the year. Money can’t be made off tourists when they are not in town

    • Since you do not use your real name I cannot speak to your qualifications but your statements cause them to be suspect. I and several of my friends who are all large contractors with decades of experience all agree that refurbishing the JACC would be far cheaper than tearing it down and replacing it. Dot period end. We are familiar with the building.
      In regards to downtown I have spoken with many building owners and there appears to only be one that has jacked up the rents. Consequently their retail space is all empty and the upper floors barely rented. Everyone else I have spoken to has held or reduced their rents.
      You should not present speculation as fact.

  6. Downtown is a vacant wasteland because the majority of the properties are leased to seasonal businesses. Young entrepreneurs that have grown up in Juneau can’t afford to pay rent and compete with major cruise funded companies. Period dot end of sentence

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