Cuts in city services are on the way, some Wichita officials say, in the wake of an increasingly gloomy budget picture driven by the stagnant housing market.
City staffers are spending this month trying to wipe out projected deficits of $2.4 million in the 2013 budget and $5.5 million in 2014, the result of a Wichita economy that has not recovered from the economic downturn that began in 2008. The city’s total budget this year is $549 million.
“It’s pretty grim,” Vice Mayor Janet Miller said this week. “People don’t want a tax increase, and I understand that, but people need to understand that the alternative is cutting services to taxpayers ... and it’s coming, no question about it.”
City Manager Robert Layton is leading an internal budget review process this month weighing options, including employee layoffs, a strategic hiring freeze and potential cutbacks in service and city office hours.
The city’s moribund housing market, with valuations flat or slipping slightly and new home construction at a near standstill, is one culprit for the budget issues, officials say. And with Boeing’s pending exit from Wichita preparing to dump hundreds of homes into the stagnant market, according to city and some real estate officials, there’s no optimism at City Hall for an immediate housing turnaround.
“What I’m hearing is that’s happening at the national level, but we’re not seeing any new construction in Wichita,” Layton said. “Home values are flat or slightly declining, according to our projections, so we’re seeing no growth whatsoever in our property tax base at a time when we were projecting some modest growth.”
“We’re coming back, but it’s happening slowly,” Mayor Carl Brewer said, calling the city’s belt-tightening “all part of a process we should be working on even in good times.”
One problem with the Wichita housing market is lag time, Layton said. It takes about 18 months for new construction tax growth to filter into the budget process.
“So even if robust growth was taking place right now, we’re not going realize any benefits until 14 or 15,” Layton said. “I am fairly pessimistic right now about our revenues for 14 and 15.”
It will be at least 2013 before home values head back up in Wichita, said Tessa Hultz, president of the Wichita Area Association of Realtors.
“Assessed values tend to be very sticky when coming down but much quicker to move upward,” she said. “ For many area homeowners 2012 was the first year of decline in valuations that had remained the same or gone up between 2009 and 2011. If the Wichita housing market continues to show stability through 2012 and median sales prices move above 2010-2011 levels on a consistent basis, we will likely see that reflected as early as the 2013 assessments.”
Council member Jeff Longwell isn’t ready to commit to cutting services, citing the city’s success privatizing some of those services and consolidating offices like Central Inspection with Sedgwick County.
“I still think there are efficiencies we can pick up with consolidations like Central Inspection before we talk about cutting services,” Longwell said. “There are a variety of other departments like that we need to look at.”
The city also hasn’t touched its $25 million reserve fund, Longwell said.
“I’m not advocating touching it, either,” he said, “but consider that the last four years have been four of the worst on record, especially the last two years when the budget fell flat.”
Layton and City Council members will spend the next two weeks weighing their options to balance the 2013 and 2014 budgets, with layoffs, furloughs and service cuts on the table. Already, Layton and city public works director Alan King have implemented a street maintenance plan using new road-sealing technologies instead of the costly “grind and overlay” process popular here for years, providing the same amount of street repair coverage at less cost.
Layton said he wants to avoid a repeat of the city layoffs of 2009 and 2010, and is instead looking hard at a “strategic hiring freeze” that would leave most of the city’s 200 currently vacant positions open. The city currently employs about 3,000 people. Its biggest expense is salaries and benefits for its employees, which cost $200 million, or 36 percent of the budget.
Layton and city officials plan to bring a 2012 budget draft to a joint district advisory board meeting the evening of June 27. In July, the preliminary budget will be taken to each of the DABs individually along with the Wichita Independent Neighborhoods group before a first draft goes before the City Council on July 17.
Miller wants to hear the public’s thoughts on potential service cuts before that first budget draft lands on her desk.
“We’re going to need to find out from the public the services and service hours they are willing to cut,” Miller said. “If people have ideas what they can live without or live with less of, now’s a great time ... because it’s coming.”