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City borrows from itself to cover 2004 deficit

Inter-fund loan to help current expense budget

Faced with a $75,000 budget deficit for 2004, the White Salmon City Council opted to borrow from itself to plug the fiscal gap.

During last week's council meeting, members voted 5-0 to authorize "an inter-fund loan from the wastewater reserve fund to the current expense fund."

City officials blamed the deficit on snow removal costs and expenses related to staffing needs in the Bingen-White Salmon Police Department.

White Salmon Mayor Linda Jones said the expenditures in these areas could not be foreseen when the 2004 budget was being prepared late last year.

"We had two police officers leave, and two more had to go to the Police Academy -- that's very expensive. Because of that, we had horrendous police overtime costs that were not budgeted for," Jones explained. "And we had snow removal at the beginning of the year that cost more than was budgeted."

However, some questioned why the city did not make the deficit public before last week.

"They have known about both of those factors for months," said Peggy Durkhee-Newman, a White Salmon resident.

Shirley Cox, vice chair of the city's Budget Committee, pointed out that the committee was not advised of the 2004 deficit until Dec. 14 -- the day before the City Council was scheduled to vote on approving the 2005 budget.

Cox, who has served on the Budget Committee for two years, said the 2004 budget was balanced when it was drafted in late 2003 and approved by the City Council. She was critical of the way the city handled the budget discussions.

"We didn't have a clue about 2004 being short," she said. "We should have known going into the budget process. Maybe they [city administrators] didn't know the exact figure, but they knew enough. Having to borrow money to balance the budget is not good fiscal accounting."

Mayor Jones said that when the city increased the sales tax two years ago, some of the projected added revenue did not materialize.

"We found that many businesses with White Salmon addresses aren't actually inside the city limits," Jones pointed out. "Once that was identified by the state, the projections for that income didn't happen."

The loan comes with a steep price tag, however: The city will have to pay 8.5 percent interest to cover the $75,000 loan from its wastewater fund. Over the seven-year term of the loan, the total interest the city will have to pay pencils out to be $26,853.

For 2005 alone, a payment of $15,000 will have to be made to cover the interfund loan amortization.

"It's not something we wanted to do, but we had no choice," said Mayor Jones. "If we end up selling the old library property, depending on what we get for it, we'll pay off the loan so it's not long term."

Although she voted for the measure, council member Penny White Morris was critical of the city for the process that put White Salmon in a financial bind. She warned that borrowing was no way to solve financial problems.

"We borrowed from ourselves to cover the deficit in the budget shortfall," said Morris. "The notion of borrowing money from ourselves is not an ideal situation. In the long run, it makes the problem worse."

However, Morris added that she believed the problem was not related to excess spending.

"There was a miscalculation. The expected revenue is not coming in. It really has nothing to do with spending," Morris explained.


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