Mill Creek budget calls for tax hike

MILL CREEK — The city is calling for higher taxes in 2015, but the greater revenue amounts to no more than a drop in the bucket for the proposed two-year budget, which has spending exceeding income by about $2.7 million.

People can weigh in before the City Council makes a decision on the proposed budget at a public hearing at 6 p.m. Tuesday at City Hall.

City Manager Ken Armstrong drew up the biennial budget before he was put on paid leave last week. The council intends to fire him at the end of December.

Finance Director Landy Manuel is expected to present the budget to the council on Tuesday. He was appointed acting city manager.

The budget plans for expenditures at $26.4 million, with $23.7 million in revenue.

“This gap isn’t as much a spending problem as it is an issue of insufficient revenues,” Armstrong said in an interview before he was put on leave last week.

The city’s main sources of income are property and sales taxes. Armstrong likened Mill Creek’s reliance on those revenue streams to a two-legged stool that can’t stay upright on its own. Counting on so few sources leaves the city without many options, particularly when the economy is down, he said.

To add cash to the city’s coffers, the council in November approved a property tax increase of 2 percent for 2015. The city estimates that the owner of a $450,000 home with an average increase in property value will pay about $25 more next year. Property taxes have increased by 1.00 percent to 2.85 percent in Mill Creek each year since 2011.

The council also recently approved a 12.3 percent rise in the emergency medical service levy for 2015. That will amount to another $24 per year for the owner of a $450,000 home, according to city estimates.

The two increases combined amount to $242,700 in additional revenue each year for the city’s budget. There are no other tax or fee increases planned for 2015.

In the future, Armstrong said, the city might have to consider new revenue streams, such as implementing utility taxes, to balance the budget. The former city manager pointed out that Mill Creek is one of a few cities in the area that doesn’t charge taxes on utilities.

Additionally, Armstrong said, implementing city car-licence fees or creating a transportation benefit taxing district might help balance Mill Creek’s budget.

Meanwhile, Mill Creek is running out of undeveloped land. In the past, the city has seen large windfalls from new construction fees.

In 2015, the city does not have plans for new development other than the housing which Polygon Homes is building at the East Gateway Urban Village along 132nd Street SE. Armstrong said the city can look forward to revenue from redeveloping aging commercial spaces.

“But it’s really hard to predict when that might happen or to what extent,” he said.

To avoid further depleting reserves, city staff members have given the council a list of potential cost savings in the proposed budget. If the council implemented all of the ideas, it would save the city $844,500.

One suggestion was to delay hiring an assistant city clerk, an engineer and a legal assistant for six months. That would save the city $137,500.

Other ways to conserve money include delaying the hire of a police officer or eliminating the city’s purchase of the Silver Lake Water property to alleviate crowding at City Hall.

The proposed budget has an increase in spending of more than 14 percent from the last biennium. Contributing to about half of the greater spending is a contract for services from Fire District 7, the cost of which is going up $1.6 million through 2016.

The city’s labor costs also contribute to the overspending, Armstrong said. Mill Creek expects to pay $500,000 more in benefits in the next two years. The city’s health insurance costs are going up by 5 percent. The state is mandating that the city’s contributions to retirement increase next year.

The city’s contracts with labor unions call for raises in 2015. Police are set to get 3 percent raises, while other union employees are to receive 1.5 percent pay bumps. Non-union workers are not expected to receive pay increases.

There are no cuts or additions to city services planned for 2015.

The City Council is expected to vote on the proposed budget for 2015 and 2016 before the end of December.

Amy Nile: 425-339-3192; Twitter: @AmyNileReports.

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