Proposal maintains city services, closes structural budget gap
The following is the complete text of Mayor Suzette Cooke’s mid-budget adjustment proposal for 2018. Cooke presented her budget proposal to the Kent City Council during a special meeting Tuesday, Sept. 26, 2017.
“Council President Boyce, Councilmembers, City staff and residents:
Today I present my final budget recommendations to you as your mayor. But before I go into detail, I wish to thank you for your engagement. We have been through some very rough financial times – and – we have celebrated amazing achievements as we have served the Kent community together.
When it comes to budgeting, the bottom line is – we get what we pay for. There is no free ride when it comes to a quality community. It takes your thoughtful policy-making, and the public’s willingness to invest in their current and future living standards, to attain our vision as “a safe, connected and beautiful city – culturally vibrant with richly diverse urban centers.”
The budget is the cornerstone of your policy-making. This is where we put taxpayers’ money to use; where we walk the talk.
In previous years, my budget proposals included deliberate strategies for smart growth of City programs with an eye toward the coming budget challenges beginning in 2019 – 2020.
The now anticipated loss of our Streamlined Sales Tax mitigation dollars from the State in 2019 – coupled with the known expiration of the Panther Lake Annexation Sales Tax credit in June of 2020, result in a loss of at least $10 million to the General Fund. For years we have called this our “fiscal cliff.”
My previous budget proposals have included new revenues, increases to current revenues, and redistribution of Council-restricted revenues to prepare for the fiscal cliff. You said:
- “no” to using of the City’s banked property tax capacity,
- “no” to implementing a Transportation Benefit District,
- “no” to increasing the Business & Occupation tax rate (currently one of the lowest in the state), and
- “no” to redistribution of the B&O tax for other general and capital uses.
Each year you chose to “kick the can” down the road.
While the solutions I proposed weren’t easy to adopt, those choices don’t become easier if service reductions become necessary because of a failure to act. The decision to use fund balances to cover necessary and ongoing needs, such as those of our parks system, is not sustainable.
Now, let’s talk about mid-budget adjustments for 2018.
My proposal for 2018 totals $330.5 million and is an increase of $40.4 million from the adopted budget. Most of the almost 14% increase occurs in funds other than the General Fund. These are dedicated funds where those resources are required to be used for specific purposes.
Within the $330.5 million total budget, $98.6 million is allocated to the General Fund – a 4% increase – or $4 million – from the adopted 2018 budget.
The proposed budget reflects my continued commitment to providing valuable government services in a cost-effective and efficient manner, continues progress on our strategic plan, and respects the priorities of our residents.
Even with the continued – albeit moderate – economic growth the City has seen over the past couple of years, baseline resources in the General Fund were unable to cover on-going operations. And, per my direction, few new funding requests were made – – -and I approved even fewer. The requests that made it into the mid-budget adjustments were heavily scrutinized in light of the structural deficit and fiscal cliff.
The proposed budget was developed using a realistic, yet conservative approach to revenues for the upcoming year. In cases where fund balance is being utilized to balance budgeted expenses, a thoughtful determination was made by comparing the current level of fund balance to the minimum level of fund balance necessary based on cash flows and any contingency requirements for those funds. Furthermore, the use of fund balance is restricted to pay for one-time only capital or major maintenance projects – and is not used for on-going operations.
My proposed budget required the closure of a $2.3 million gap in the General Fund. This gap is due to a “structural deficit.” The City’s share of property tax collections – our largest revenue source – is limited to growth of 1% per year. Inflation is 3%. This means we could have a status quo budget every year – with no new programs, no new police officers – and still be under water.
This is where the structural problem lies. Our largest revenue source is capped at a rate that doesn’t account for inflation or population growth – it goes above and beyond the fiscal cliff. This structural deficit affected us before the fiscal cliff – and will be with us after we resolve the fiscal cliff.
To close the gap this year, I am proposing to use the City’s banked property tax. The increase in our property tax will balance the proposed general fund budget and provide much needed ongoing resources for City operations. While raising taxes is never easy, the increase for a Kent resident with property valued at $300,000 will result in a $37 increase in annual property taxes.
For comparison, let’s look at our neighboring city Bellevue, a city with only 14,000 people more than Kent. Currently, a median-priced home in Kent ($275,000) pays $388 annually in city property tax. A median-priced home in Bellevue ($612,000) generates $698 annually.
I am not proposing any additional tax or fee increases in my budget outside of the use of banked property tax. When Council adopted the 2018 budget as part of the 17/18 biennium last December, you ignored the real threats from the fiscal cliff and provided very limited time for City leadership to thoughtfully plan for and address the coming impacts to the 2019/2020 budget. While I strongly disagreed with that decision, my proposal honors your wishes.
My 2018 proposed budget continues to fund current City services and programs at their current level, adjusted for necessary increases for inflation, workload, and labor cost changes and contract requirements. New initiatives or expansion of current programs and services were based on need, the value to the public, and Council policy. Importantly, the strategic operational expenditure increases included in the budget are backed by sustainable revenues.
Changes include the addition of necessary FTEs (Full Time Equivalents) to improve City operations, adjustments to our insurance and healthcare funding, and wage increases for staff based on labor contracts and our recent salary survey.
Significant changes include:
- A 20% medical rate increase paid by departments. The City has experienced a significant and sustained increase in medical claims costs. As a result, the fund balance in the Employee Health & Wellness Fund is being used too quickly and is putting that fund in jeopardy. Further rate increases in 2019 and 2020 may be required to meet fund balance needs.
- Wage increases for the City’s non-represented, AFSCME, KPOA and Teamster employees based on the 2017 non-represented salary survey and labor contracts.
- A 10% rate increase for the City’s Liability Insurance Fund paid by departments to ensure adequate funding for the insurance program.
- An increase of 2.9 Full Time Equivalent staff split between the General Fund and Street Fund. Roughly 68% of the costs for these positions are covered through reductions in other line items or by increased revenues. The net result is an addition of two staff.
- In partnership with the YMCA, the budget sets aside $9 million to fund the City’s share of costs to construct a YMCA, and make needed improvements at its home at Morrill Meadows Park. An additional $1 million for the City’s share of the project is anticipated to come from the State’s Capital Budget – whenever that is adopted.
- A limited modernization of the Council Chambers to complement the new technology installed this year, including modular furniture that will broaden the use of this space, allowing us to host larger community and regional meetings.
- Funding for the long overdue replacement of the City’s Fuel Island.
- An increased allocation for the replacement of City vehicles which have been kept in service long past their scheduled replacement.
- Additional funding for needed street projects on South 212th and on James Street, as well as other Public Works projects in the Water and Sewer funds.
- Elimination of the previously approved new Communications Director position and the creation of a Communications Department.
While I’m eliminating the planned position and department, I’m still proposing we build a more effective communications program by adding a communications specialist that will join the Community and Public Affairs Manager, the Neighborhood Program Manager and the Community Engagement Coordinator.
Planning for the near future, I also strongly urge you to take action on two tax measures. The first is to double the warehouse square footage tax which would generate roughly an additional $3 million dollars annually for capital and major maintenance projects for our Parks system. The square footage tax is separate from, and works in tandem with, our business and occupation tax.
The second is to place a police and criminal justice measure before voters to increase the City’s utility tax on providers of cable, electricity, natural gas, and telephones from 6% to 8%. Doing so would generate approximately $4 million annually and would provide enough funding to fully staff our City’s Police department and allow for additional prosecutors, public defenders, court clerks, police records clerks and corrections officers necessary to support a larger police department.
With the police staffing and workload crisis, I urge the new mayor and council to place the measure on the April ballot, which will require your affirmative decision in February.
Public safety must remain our highest priority. This mechanism would provide resources to further this priority and advance our efforts in providing public safety to our residents, employees and visitors.
While neither the square footage fee increase nor the police and criminal justice ballot measure technically are part of this budget adjustment, implementation of these options would allow us to address pressing issues before we arrive at the fiscal cliff, and lose at least $10 million in state-shared revenues.
I urge you to move the square footage tax proposal through committee and council this fall, and the future mayor and council to process the police and criminal justice measure starting in January, if not sooner.
The 2018 proposed budget is the culmination of an almost year-long collaborative effort among the Mayor, City Council, City staff and Kent residents. The City serves a growing and diverse population of 127,000 residents with a dedicated workforce that is committed to meeting the needs of the public. Under my watch, the City lived within our means while efficiently and effectively delivering the services and programs our residents expect.
I look forward to your deliberations.”
In the coming weeks, the council will review the mayor’s budget and consider possible changes. The council expects to finalize the budget in December.
Residents are encouraged to attend a public hearing on the 2017-18 budget adjustment on Tuesday, Oct. 17 at 7 p.m. in the Council Chambers at City Hall. More information about the city’s budget process is available at KentWA.gov/Budget.
[Source: press release from the City of Kent]