Depreciation: It’s a red herring in debate over sales tax on food
uring this ongoing debate about
raising food taxes, our city council keeps bringing up the issue of adequate funding for the city’s depreciation reserve accounts. In my opinion it is horribly distorted and here’s why. The entire purpose of a reserve account for equipment and facilities is to fund future repairs and replacement. Homer also has a multi-million dollar reserve account for operations and salaries if tax revenue should drop suddenly. Up until a few years ago we didn’t have a whole lot in these accounts.
But a movement spread across the country amongst municipal accountants who determined that cities should provide more of their own money instead of counting on the state and federal government. We adopted that and started socking money away. Millions came out of our tax revenues and now simply sit in a financial institution earning low but secure interest.
It seems reasonable except that somewhere along the way cities forgot why they went to the state and feds in the first place.
It was because they couldn’t afford large projects without either subsidies or outright government grants. Our harbor, dock, water/sewer system, roads, things for the fire and police departments, the list goes on. It wasn’t bad that we took money from the government — it is ours after all — some of it anyway. What is wrong is that we took so much for things that we cannot afford to replace on our own.
But we’re being told now to save as though we could.
Our water/sewer system and harbor are easy examples. The water/sewer enterprise problems are of our own making but the harbor was given to us, along with millions of dollars, by the state when they realized it was a losing proposition for them.
We continually add to the water and sewer system through greatly subsidized loans from the state. Due to the increasingly seasonal nature of Homer we have not realized the efficiencies we had hoped for by its expansion. We end up putting more and more money into depreciation reserves for it without any consideration whatsoever if Homer can afford a system this large on our own. But we knew that a long time ago — that’s why we went to the feds and state in the first place — for the subsidized loans.
The harbor is probably Homer’s greatest single economic chip. After years of expensive litigation over dock construction problems, that enterprise fund is pretty stable and its reserves are growing slowly.
But the long term outlook for the harbor and dock is that it is too big for us to keep up without either huge state/federal subsidies or vastly increased contribution from city residents who are not necessarily harbor users. Right now the city council is getting ready to saddle the harbor users with a $3 million bond without a public vote.
It is unfair to threaten us with a tax increase over this depreciation reserve issue when we aren’t the ones responsible for the city budget and certainly not responsible for the city’s decision to sock millions of dollars into reserves when it’s not even a law to do so.
It is unfortunate that our city council cannot seem to broaden its discussion about the scale of city services. It is more unfortunate that they would rather face the anger of the public by raising food tax than to confront the city administration about making some hard choices. But it is the most unfortunate when they confuse their job with ours. It is not our job to decide for the council what to cut and what to save like some of them apparently think we should. And it is certainly not their job to tax us more. We already said no to winter food tax.
City depreciation is not on the grocery list of a poor person.
Mike Heimbuch is a longtime Homer resident and former Homer City Council member.
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