Oak Harbor is prepared to weather the economic storm.
Amidst the nation-wide economic disaster, Oak Harbor’s self-proclaimed prudent approach to city finances is paying off.
“We’ve lived within our revenue from year to year,” City Finance Director Doug Merriman said.
Oak Harbor appears to be the calm in the eye of a fiscal storm, as other governmental entities are battling budget shortfalls. Island County is looking to fill a $2 million budget hole, for example, and Washington state is dealing with a monumental $8 billion shortfall.
Oak Harbor’s conservative financial measures resulted in a 21 percent reserve in the general fund, a far cry from the less than one percent reserve — about $15,000 — that greeted Merriman on his first day of work at the city in 1997.
Prior to 2001, the city did not include regular contributions to the general fund reserve in the budget. That same year, council approved a financial policy to set aside 1 percent each year until the city reached a reserve of 15 percent.
The city experienced an influx of building permits during the boom times of 2003 through 2005. Instead of “staffing up,” Merriman said city workers did their best to handle the increased demand.
With the rise in building permit applications, for example, came an explosion of revenue. Instead of spending the extra money, Merriman rolled the cash into reserves.
“I budgeted about 70 percent of what was coming in and held expenses down,” he said.
Five years after Oak Harbor approved its financial reserve policy, coupled with the bubbling economy, the city reached its goal of a 15 percent reserve.
“As a rule of thumb, cities should have a minimum 15 percent reserve in the general fund,” Merriman said.
Sensible investments are another reason behind the Oak Harbor budget’s even keel.
Several strategies are used to safeguard Oak Harbor’s investments, Merriman said, including long-term, pool basis and ladder investments.
In anticipation of declining sales tax revenues due to the recession, the city budgeted for 6.7 percent less than was received in 2007.
According to state figures, Oak Harbor’s sales tax revenue for 2009 is currently 6.6 percent behind 2007 revenue.
“We’re handling it OK,” he said.
In addition to frugal budgeting, Merriman did not include the 1 percent reserve fund provision in the 2009/2010 budget.
When asked if the city plans to revise its 2009-2010 budget, Merriman said he’d like to have more data before going into a budget review.
“We budgeted down,” he said of the city’s decision not to fill “five or six” vacant positions.
While Oak Harbor is unlikely to contribute to the reserve fund this year or fill vacant positions, Merriman hopes the 21 percent general fund reserve will buffer the city from real economic hardship.
