Anchorage Mayor Dave Bronson has vetoed much of the Anchorage Assembly’s proposed FY 2022 budget, a move that he says reflects his commitment to stop unsupportable city spending.
The mayor’s office said the Nov. 30 vetoes will put the city’s budget back under the tax cap by $110,000.
Bronson’s office defended the vetoes, saying they keep the budget in line with the mayor’s emphasis on “public safety, an economically prosperous and business friendly community, compassionately resolving the homelessness crises, minimizing service impacts to the public while seeking savings, re-organizing for more efficient and effective government, and aligning costs to better represent cost causer/cost payer.”
The mayor’s office claimed that the Assembly has based its budget on projected revenues without asking the city’s finance department to review or comment on the predictions prior to passing the budget.
“Without a valid funding source and with the new COVID variant and bond rating concerns, my administration cannot validate or certify the funding source increases that the Assembly attempted to provide for in their amendments,” Bronson stated.
Municipal Treasurer Daniel Moore explained his concerns.
“Specific to the two revenues, the recent announcement of the new Omicron variant discovered in South Africa late last week caused U.S. and Global investment markets to significantly decline in a single day,” Moore observed. “This new variant could very likely negatively affect projected revenues for both the MOA Trust and Room Taxes going into 2022.”
In a memo to the city’s Chief Financial Officer Travis Frisk, Moore made the following comments and recommendations concerning how to address the budget.
ALASKA WATCHMAN DIRECT TO YOUR INBOX
MOA Trust Dividend Revenue
Approximately, 1.5 weeks prior to the announcement of the Omicron variant the MOA Trust’s market value was $444.9M and it had annual YTD return of approximately 10.9%. After last Friday’s steep decline in the markets tied to the Omicron announcement, the MOA Trust’s market value declined in a single day by $8.2M and its YTD return reduced to 9.0%. Using the MOA Trust dividend projection model, the most recent projected 2022 dividend prior to the Omicron announcement was $19.1M. After last Friday’s news, the projected 2022 dividend declined $200K to $18.9M. The Assembly’s omnibus budget amendment assumed a 2022 Trust Fund dividend of $19.3M which is $400K short of the updated projection done post-Omicron announcement.
Room Tax Revenue
Given what the MOA experienced in 2020 when Room Taxes were severely impacted by the initial effects of COVID-19 (i.e., a 56% revenue decline in budgeted 2020 revenue), the Finance Department recommends exercising significant caution in projecting 2022 Room Tax revenue in light of the recent announcement of the Omicron variant. Room Tax revenue cited in the Mayor’s Proposed Budget is $24.5M for 2022. 2021 Pro Forma Room Tax revenue is currently projected to be $27.5M. Given the uncertainty that Omicron may have on future 2022 summer travel plans, it would be inadvisable to assume that 2022 Room Tax revenue would exceed 2021 revenue by several million dollars as the Assembly assumed in its omnibus budget amendment. Until more is known about the potential negative impact of the Omicron variant, 2022 budgeted revenue should remain conservatively budgeted at $24.5M as cited in the Mayor’s Proposed Budget and should be further revisited and potentially adjusted as part of 1st Quarter 2022 budget revision.
