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Snohomish County executive predicts lean year

Aaron Reardon warns that Snohomish County may have to dip into its rainy-day fund

By Jeff Switzer
Herald Writer

EVERETT -- Tougher financial times are on the horizon this year and next for Snohomish County government, Executive Aaron Reardon warned this week.

It isn't clear how dire the problems might be, but next week a quarterly financial report is expected to show this year's tax revenues aren't meeting spending projections.

"It will show a decrease in revenues as a result of a drop related to real estate and investment income," county finance director Roger Neumaier said. "Because of how well we've positioned … ourselves, these decreases are manageable, but we all need to maintain fiscal discipline."

Reardon already is warning that county government might face cutbacks in the 2009-10 budget, which is being prepared now.

"Every year during the budget process we've said, 'Some time it will rain,' " Reardon said. "We knew there would be a downturn in the economy in 2009, that's why we put money in the rainy-day fund and built up the surplus. 2009 has always been identified as a rainy year because of the cyclical nature of the home-building market."

How much of the $32 million in savings might need to be used will not be known for months.

Reardon's comments came as he criticized the County Council for hiring more staff policy analysts. It also comes just weeks after cutting dozens of vacant jobs in the building department. Layoffs were avoided by transferring nearly 30 building department employees to review public works road projects.

His forecast also comes as Reardon replaces his economic development director, Steve Pottle, who has been in the job since 2006 and earned about $100,000 a year. Donna Ambrose, Reardon's former spokeswoman, takes over the job Tuesday. She worked for Reardon in 2005 and 2006.

A drop in the number of building permits and a $4.4 million shortfall in fees forced the changes for the building department.

What Reardon's forecast means for property taxes is up in the air.

"Potentially 2009 is the rainy day, but we don't know what the executive is going to do," said County Councilman Brian Sullivan, finance chairman. "Is he going to propose a 1 percent increase or propose a 1 percent decrease? The executive is preparing the 2009-2010 budget, and historically he doesn't share information over the budget until he hands it over to the council."

Tax revenue directed to the county's $210 million general fund pays for law enforcement, courts, parks and other services. It includes $32.8 million in reserves -- about 16 percent -- to cover ongoing bills, payroll and emergencies.

Sullivan said he doesn't believe the county really has that much money in savings.

He disagrees with some of Reardon's financial assumptions and said he plans to introduce a stricter rainy-day reserve for the county.

The County Council moved this week to steer $342,000 towards adding four new staffers whose jobs would include analyzing the county's $700 million-a-year budget.

This year's pending financial crunch is manageable without layoffs or cuts in service, Reardon said, but not if the council spends money that wasn't budgeted.

Republican County Councilman John Koster, who also is opposed to adding staff, said the county should rein in spending. Taxpayers are facing $4-a-gallon gas and higher food prices and don't need to pay higher property taxes to cover shortfalls in county government, he said.

General property taxes paid to the county haven't risen in several years, and last year were reduced 1 percent, or $675,000. The move put about $2 back in the average property owner's wallet.

Each of the past 27 years, officials increased property taxes in unincorporated areas to pay for roadwork.

It's clear the real estate market is down, council chairman Dave Somers said, which affects county real estate and sales tax revenues. He's looking forward to getting new numbers from the finance department.

"All around, it's going to be a lean year," Somers said. "We're going to have to look at what happens this summer and fall and make projections accordingly.

"Things have slowed down and we're going to have to deal with it. We'll make do with what we have."

Reporter Jeff Switzer: 425-339-3452 or jswitzer@heraldnet.com.