By Scott Murphy, Brenda Stonecipher and Jeff Moore / For The Herald
Our community has been devastated by the impacts of the coronavirus pandemic. The loss of life has been felt not only in our community, but across the country and around the globe.
While the downward trends in case counts and death rates have been encouraging, the impacts of COVID-19 continue to negatively affect our community: thousands of jobs have been lost and businesses are shut down or struggling to stay afloat.
The City of Everett’s finances have been severely affected as a result, forcing us to take decisive and drastic action.
To put Everett’s finances into perspective, it is important to understand some basic information. First, the revenue for general operations comes from three sources: property taxes, retail sales taxes, and business and occupation (B&O) taxes. Everett employs approximately 1,200 staff and has an annual operating budget of approximately $140 million. This budget includes essential public safety activities (such as the police and fire departments) as well as many other city functions including the parks department, library, planning department, Office of Neighborhoods, and the senior center; and behind-the-scenes operations, such as finance, information technology, human resources, and the mayor’s office). Separately, Everett also delivers revenue-generating services that are accounted for in separate enterprise funds (as opposed to the general operating fund). Examples of these services include: water and sewer, Everett Transit and Everett’s two public golf courses at Legion Park and Walter E. Hall Park.
Everett has faced budget challenges for several years due to an ongoing structural deficit (caused by a voter-mandated 1 percent annual cap on property tax increases and expenses growing at 3 percent to 4 percent per year). Consequently, even prior to COVID-19, Everett was projected to have a $12 million deficit by 2021.
Unlike the federal government, cities like Everett cannot have a deficit budget, so we can spend only funds that we earn in revenue. At times, we therefore make mid-year expense adjustments to account for declining revenue. Since 70 percent of Everett’s budget is comprised of payroll and related employee expenses, there are very few expense reduction options that do not affect employees and public services.
The closure of many businesses has led to an immediate reduction in retail sales and B&O taxes. In April, the city’s finance team projected the 2020 revenue hit to be approximately $14 million. With only eight months left in the year, we were faced with closing a budget shortfall equating to approximately 10 percent of our annual operating expense.
On March 18, the council approved a voluntary separation program presented by Mayor Cassie Franklin. Three top executives and approximately 50 additional employees accepted the offer to voluntarily leave employment with the city. This first step reduced the number of mandatory layoffs and will allow the mayor to reorganize without filling vacancies or to replace vacancies with positions at a lower salary level.
Then, on April 22, the mayor presented a series of proposed cuts to start rebalancing the budget. The proposal included provisions to keep the Forest Park pool and senior center closed through the end of 2021. Additionally, the public library would remain closed until the stay-home order allowed a re-opening, but then would be operated on a limited basis through the end of 2021.
Many of our beloved summer programs at the public parks (like the animal farm, Sorticulture, and Jetty Island ferry) would be cancelled, and Fourth of July activities would be eliminated, except for the evening fireworks show. While these cuts are not desirable for the long-term, they made sense for 2020, given that social distancing guidelines are expected to continue which would render them difficult to operate. Further proposed cuts included the layoffs or furloughs of more 150 city staff — primarily in the parks department — and permanent cuts to staff in finance, HR, IT, planning, Office of Neighborhoods, cultural arts, and the mayor’s office.
The City Council took action to approve these initial cuts, but the Council wanted to clearly communicate to the public that, while the implications of COVID-19 could extend into 2021, these cuts were only approved for 2020. Since the budget process for 2021 had not yet begun, it would have been premature to extend those cuts through 2021.
Part of the 2021 budget process will be to update the revenue forecast based on latest available information. To ensure transparency, the budget committee of the council will also be seeking input from the public in order to help establish priorities and determine which services are most important to our community. While it is likely that the financial impacts of COVID-19 will continue for some time, we are hopeful that some programs can be brought back in 2021.
The cuts we approved last month are not what any of us want for our city. We are working to build a community with a vibrant quality of life, which includes healthy neighborhood organizations, parks and recreation, cultural amenities, and activities for our residents and their families. Our commitment to our community is that we will continue to listen to your priorities and work collaboratively with Mayor Franklin to create a 2021 budget that strives to restore these quality of life experiences while recognizing that we must weigh them against all city services during this financial crisis.
We urge our citizens to advise and help us during this difficult journey. We know that together we will weather this storm and together will build a strong future!
If you wish to be notified of council meetings related to the 2021 budget, please sign up at Council@everettwa.gov.
Scott Murphy is chairman of the Everett City Council budget committee. Brenda Stonecipher and Jeff Moore are members of the budget committee.