When the Spokane City Council passed the 2023 budget in late December, its members thought they'd found the money to pay the steep costs of operating the Cannon Street and Trent Avenue homeless shelters. It was only a patchwork fix, they knew, but they hoped it would be enough to get the city's shelter system through at least another year.
They only had to wait three days to learn how wrong they'd been. That's when Mayor Nadine Woodward's administration told them just how much the new operator and higher-than-expected attendance at the shelters were costing the city.
"We are scrambling to find the loose change underneath the couch cushions to get us through 2023," says Matthew Boston, the council's budget director.
It's not like nobody knew there was a budget crisis waiting to happen. In a September interview, City Council member Michael Cathcart noted that the projected costs for the Trent shelter had already doubled from what council originally was told.
"I cannot in good conscience vote to put us in an unsustainable position," Cathcart said then. "We have no ability to pay for these costs going forward. None."
But the crisis turned out to be worse than even he anticipated.
Today, the costs have effectively doubled again, with the operational costs of the Trent shelter exceeding $13 million a year. Even now, Council member Betsy Wilkerson says, the city is a month or two behind on paying the shelters' operator, the Salvation Army.
Cannon Street is only funded through May. After that, the city is considering closing it — at least temporarily — and moving its 70 to 80 shelter residents to Trent. That would bring the Trent shelter close to its maximum capacity of 350 — hitting the ceiling of its winter surge in April.
And yet those cuts alone aren't nearly enough. A memo the Woodward administration sent to the council last week concluded that even if they close Cannon and get $100,000 more from the state, they're still about $3.9 million short of continuing to fund the rest of the shelter system this year.
Next year? They're more than $10 million short.
The shelter system is in danger of collapse. Spokane's city-funded shelters had been built on the shaky foundation of shifting sand — temporary state and federal COVID grant dollars — and the tide is coming in.
"At this point, I don't know how we're going to do it, without going back to the well and making some cuts elsewhere," says Wilkerson.
And yet this is an election year, a time when politicians are often wary of considering — or even discussing — something as politically fraught as budget cuts.
THE PRICEY OPERATOR FACTOR
So what went wrong? First of all, there was the whole embezzlement thing.
Both shelters had been run by the Guardians Foundation, a controversial but low-cost operator. But after the foundation said in September that its financial officer stole over $100,000 from the nonprofit, the city found financial discrepancies stretching back 18 months.
The Guardians were given the boot, and in came the Salvation Army, which had previously been passed over because its bid was much more expensive.
"They provide benefits and some other things that potentially the Guardians did not," says Eric Finch, the city's chief innovation and technology officer. For instance, the Salvation Army upgraded the meal quality, but that made food costs more expensive.
Wilkerson says that almost a quarter of the Salvation Army's costs are administrative.
"That's an 'ouch,'" Wilkerson says. "The administration was supposed to try to negotiate that down. That didn't happen."
The Salvation Army turned down multiple requests to comment for this article and instead referred questions to Brian Coddington, Woodward's spokesman. (Salvation Army leaders did, however, attend Woodward's re-election fundraiser last week in full regalia.)
THE BAD PLUMBING FACTOR
At the same time, however, the Trent building lacked basic shelter features, like kitchens, showers, bathrooms, washers, dryers, showers — and even sinks. That not only made the Trent shelter a more miserable place to stay — it made it more expensive, too. The shelter's portable sinks, outhouses and disposal of dirty water cost at least $90,000 a month, Finch says — over $1 million a year.
The City Council knew the building was inadequate when the shelter was launched — but the city didn't have enough money on hand to pay for the upgrades. So like a person living paycheck to paycheck, the city's inability to afford a fix will end up costing it more long term.
"We just have to bite the bullet, get the improvements done," Finch says.
THE BAD BUDGET FACTOR
According to the city's former chief financial officer, Gavin Cooley, the city broke a fundamental rule of budgeting.
"Don't use one-time dollars for ongoing expenditures," Cooley says. "It was always an easy budget principle for me to discuss with the general public, because everybody understands."
He says the city's current CFO, Tonya Wallace, has been generally worried about that one, too.
Homelessness services funding, Finch says, is a complicated tangle of 22 different interconnected sources, each with its own catches and caveats. During COVID, the amount of available state and federal funding went up from about $20 million to about $60 million, he says. As that dwindles, simply keeping the status quo would cost the city a fortune.
To a certain extent, shelter funding has always been built on the unstable ground of grant funding — but never at this level. City Council President Breean Beggs says local spending on homelessness is "maybe 10 times more than in 2016."
"It's huge," Beggs says. "We're not set up for that."
But the mayor and council largely agree that the homelessness crisis had grown to a point where they had little choice but to break the budget rules in a big way.
On any given night, there are 300 people staying at the Trent shelter. "Would the better option be to let them be on the street?" says Woodward. "I don't think so."
THE HOMELESSNESS SURGE FACTOR
Last fall, however, the city wasn't planning on 300 guests at Trent.
At the time, the city assumed that only 150 beds, plus room for the occasional surge, would be needed at the Trent shelter — which seemed overly optimistic. All city officials had to do was count the number of people living in Camp Hope, which had over 600 at its peak.
Obviously, homelessness itself isn't new. Previous mayoral elections have turned on such issues as policing, utility rates, a downtown parking garage or alleyway garbage truck pickups. But until Woodward ran in 2019, never homelessness.
To a certain extent, Cooley says, homelessness has increased, not in spite of Spokane's successes, but because of them. Ironically, he says, cities with high poverty rates often have lower rates of homelessness. It's when the surge of those who want to live in your city overwhelms the amount of housing you have available that you get a huge spike in homelessness.
"A city our size shouldn't have to operate this many overnight shelter beds," Beggs says. "We have too many, but we don't have enough."
That's because Spokane doesn't have nearly enough housing. In other words, the biggest costs can be traced back to decisions that city leaders made years — even decades — ago.
A PLAN, OF SORTS
"It is perilous," Beggs says, but there is a way forward, at least for now.
He says the Legislature has given the city the temporary ability to use criminal justice sales tax funds and real-estate excise tax funds from property sales. That could help pay for the Trent shelter, but at the cost of other potential projects, like street upgrades.
After Cannon closes, Beggs says, it could be reopened as a medical shelter, funded with Medicaid dollars, serving those with serious physical or mental health conditions.
While the city is in talks with the county and other local governments about a regional approach to homelessness, county Commissioner Josh Kerns says there are no current discussions about the county contributing additional funding for shelter.
Like the council, Woodward says the city needs to look to the Legislature for additional help.
"Cities have said, across the state, that they cannot continue to fund these challenges on their own," Woodward says.
Lisa Brown, Woodward's main opponent in this year's mayor's race, criticizes the city administration and Spokane County for passing up what she sees as major opportunities to apply for additional grant funding from the state.
Both candidates, however, hope that by investing more in transitional and affordable housing — which is generally cheaper than shelter funding — they'll chip away at the number of people who need shelter to begin with.
"I just don't think we need to continue to create these kinds of beds," Woodward says. "We need to focus now on the housing part."
WE DON'T TALK ABOUT BUDGET CUTS
Woodward says the City Council has failed to decide how it's going to fund the Trent shelter moving forward.
"We asked them to make a decision on multiple occasions, and there just wasn't any movement there," she says.
But despite making homelessness her central reason for running for mayor in 2019, Woodward has declined to take a stand on several key questions herself, including what should happen with the Cannon shelter.
Shelter funding, to be clear, is just one piece of a budget forecast littered with land mines and time bombs. The city has signed labor contracts that include big salary increases that will impact its budgets for years. The growth of sales tax revenue has slowed.
That's exactly why City Council members were anticipating a planned four-hour budget meeting last week with the mayor and her staff — to start having those tough conversations.
But the day before the big meeting, Woodward pulled out.
"My understanding is that the mayor's office didn't want to talk about either revenue enhancements or cost cuts," Beggs says.
While Woodward claims she pulled out to give the council time to "digest" the latest shelter cost projections, she acknowledges that she won't listen to talk of cutting the city budget.
"I made it very clear with many members of council that that's not a conversation that I wanted to have," Woodward says. "You start talking cuts within the organization, what do you think that does to the morale of the employees?"
But the longer the city waits, counters the more fiscally conservative Cathcart, the uglier any necessary cuts will be.
"We can't spend our way out of this crisis," Cathcart says. ♦
The original version of this story cited an incorrect day of the week that Salvation Army officials attended a Nadine Woodward fundraiser.
