Fairbanks in a financial jam as state support declines

Declining state support has Fairbanks city and borough government up against a financial wall. That was the message Tuesday from local officials to the chamber of commerce.

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“BAM! This is what the state’s done to us as far as finances,” city chief of staff Mike Meeks said.

Meeks said the city has seen state assistance drop from an average of $1.7 million annual to $866,000 this year — and it’s expected to further dwindle.

“If you assume we’re going to zero, what’s the next step?” Meeks asked.

Noting that the city is already under-funding infrastructure maintenance, and that the police department is operating short staffed, Meeks said the administration and council have spent months looking for things to cut and the public has not come forward with any ideas, except for tapping the city’s permanent fund.

“That permanent fund is sitting about $128 million, and it generated $4.6 million in cash that we use to fund this government,” Meeks said. “If you did not have that money, that means you would not have that $4.6 million and we would be coming to you saying, ‘We’re either gonna cut services, or we have to raise your taxes $4.6 million.”

The Fairbanks fund was set up with money from the sale of the city’s municipal utilities in the late 1990’s. It’s primarily invested in bonds and equities.

Meeks said the situation has inspired a proposition on the October 3rd municipal ballot that asks voters to approve replacement of up to $1.7 million in lost state revenue sharing with property tax increases.

“We’re only going after what the state has done to us,” Meeks said. “We’re trying to make that up.”

The Fairbanks North Star Borough is also in a tight spot due to declining state support. Borough mayor chief of staff Jim Williams outlined a precipitous drop.

“Revenue sharing from the state has been very, very nice when we were fat with cash coming from oil money in the $4 to $4.5 million range, and then just plummets right off starting FY15 through to FY18,” Williams said. “That’s trending down towards zero right now.”

Short of voters increasing a cap that limits tax revenue, Williams listed a range of areas facing cuts, including public works, libraries and parks and recreation. Williams said the biggest long term issue is not saving for infrastructure maintenance and replacement, largely covered by the state in the past.

“So the question is, under the old business model which obviously isn’t working now because the state’s running out of cash, how are we going to finance this going forward?” Williams said. “Because we’re gonna have to pay the piper.”

Williams lists numerous borough facilities, including school, park and fire service infrastructure that are aging out, and will need replacement at a cost estimated at between $306 hundred million.