EVERETT — Mayoral candidate Ray Stephanson has made his criticisms of Mayor Frank Anderson’s 2004 budget the centerpiece of his campaign, and he has contrasted Anderson’s spending policies with the financial stewardship of one of Stephanson’s key supporters, former Mayor Ed Hansen.
But a look at the 2004 budget and at budgets prepared under Hansen show that some of the charges Stephanson has made in campaign mailings and in interviews with The Herald are not accurate.
Stephanson recently told The Herald, "For the first time in nine years, the city is projecting to use cash reserves to balance the budget. It’s a departure from what we’ve done before."
But the Anderson administration is planning to increase the amount of money it has in reserve funds, not decrease it.
Anderson does plan to spend some of the city budget surplus, but that wouldn’t be the first time that’s been done over the past nine years. In two of his eight budgets, Hansen proposed spending part of the surplus, and in 1995, 1999 and 2000, he actually did so.
Stephanson said that, no matter what he has said, the broad point he was trying to make remains the same: "They’re spending more money than the revenue that’s coming through the door."
Hansen agreed, saying that spending part of the surplus this year sets a bad precedent. If the city doesn’t cut spending this year, it will be forced to institute more drastic cuts in the future, he said. In his first week in office as mayor, Hansen said, he laid off 45 employees in an effort to cut spending and restore the city to financial health after his predecessor, Pete Kinch, had been too lax on spending. Anderson said that he doesn’t believe layoffs and service cuts are necessary when the city has a $22.3 million surplus. The operating budget for 2004 is $96 million.
Stephanson’s campaign tactics have come under fire during three consecutive City Council meetings.
Earlier this month, four City Council members accused Stephanson of deceptive campaigning for claiming that Anderson is forecasting growing budget gaps over the next five years. City budget director Travis Earl, who was hired by Hansen as city auditor, said the so-called "strategic" projections are not what the city realistically expects will happen. They are tools so city officials can develop policies early on to avert deficits, he said.
Hansen’s long-term strategic budgets also showed deficits. For example, a 1998 strategic budget outlook showed an $8.3 million deficit in 2003. But the 2003 budget is balanced, as required by law.
At Wednesday’s council meeting, Councilwoman Marian Krell mounted a white cardboard sign on the dais to explain the difference between reserves and "cash carried forward" — also known as the surplus. She accused Hansen of "misleading" voters by stating in an advertisement in The Herald on Tuesday that the city is planning to spend money from its reserves. The budget clearly shows that Anderson is planning to spend money from its surplus.
In the ad, Hansen, who is now general manager of Snohomish County PUD, states, "To fund his spending increase, Frank Anderson proposes using $4.6 million in City reserves, an action I consider inadvisable and dangerous to Everett’s long-term financial health."
Hansen acknowledged Friday that, in reality, Anderson is not proposing to use city reserves to balance the budget.
"That’s not technically correct," Hansen said. "I concede that. They’re using cash carried forward. But I don’t think the average citizen knows the difference."
Cash carried forward is the amount of money the city has left over each year. There are several types of reserve funds. The "rainy-day reserve fund" is for financial emergencies and is currently funded at the maximum amount allowed under state law for such funds: 37.5 cents per $1,000 assessed valuation, or about $3.1 million.
Other reserve funds include one for construction projects and another for insurance costs.
One of Stephanson’s concerns is that, by taking money from the surplus, Anderson isn’t leaving enough money aside in case the Everett Events Center loses money. The city is liable if that happens.
But Anderson last year established a special reserve fund for potential emergency funding of the events center. He began the fund with $1.2 million and proposes to add $500,000 in 2004 and $500,000 in each of the next several years after that.
Anderson said Hansen and Stephanson have been "totally misleading" in their comments on his budget.
Anderson, who was a city councilman when Hansen was mayor, said he supported Hansen’s economic policies.
"He did exactly the right thing," Anderson said. "But we’re doing exactly what Ed Hansen did, and now they’re trying to twist this around to make it seem like I’m bankrupting the city."
In fact, Anderson said, during most of his years as mayor, Hansen had the luxury of developing budgets during an economic boom, while Anderson has faced the challenge of putting together budgets during a recession.
Stephanson said his claim that Hansen never dipped into the surplus came from the former mayor.
"I think Ed Hansen needs to respond to that," he said. "It’s my understanding from my conversations with him that expenses never exceeded revenues."
Hansen acknowledged using part of the surplus while mayor. But he said his goal was to always increase the surplus. Under Hansen’s tenure, the surplus grew from $3.9 million in 1994 to $12.8 million in his 2002 budget. And Hansen said that in the two years he proposed spending part of the surplus and the three years he actually did so, his goal was primarily to increase the levels of reserve funds.
But Anderson is also using the surplus to add to reserve funds. The city next year plans to spend $4.6 million of its current $22.3 million budget surplus. All of that surplus money — plus an additional $5.6 million — will be used to shore up reserve funds, Earl said.
Reporter David Olson:
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