Budget gaps projected for city

When it comes to being better informed about Shoreline’s future financial projections, perhaps there really is no better way to spend a Friday night.

About 30 residents attended a two-hour forum on Friday evening, Feb. 24. The event was organized by Sustainable Shoreline members, who felt that residents needed to get accurate information on gaps in the city’s operating budget, anticipated to start in 2008 and extending into the future.

The six-year operating budget financial forecast shows an anticipated 2008 budget gap of $762,000 and a 2009 budget gap of $1.1 million. Future annual budget gaps grow to $3.5 million by 2012.

“None of this is a surprise, but it’s now coming to a point where decisions have to be made,” said city finance director Debbie Tarry. “That’s why there’s more interest in it, because we’re in the decision making stages.”

By state law, the city must adopt a balanced budget. Therefore, even though forecasts project budget deficits, changes must be made in order to maintain a balanced budget.

The city’s budget policies require that ongoing expenditures be balanced with ongoing revenues. And although the city has $9.6 million in reserves, the funding can’t be used to balance the city’s operating budget in the long term.

A handful of Shoreline City Council members attended the meeting, as well as a few city staff members. Tarry gave an overview of the city’s future budget projection.

It became apparent before the meeting, and even during the discussion at the meeting, that misconceptions about the city’s financial future already were surfacing, said Sustainable Shoreline chairperson Wendy DiPeso, who organized the event.

“In talking with people in the community, we heard comments like, ‘Why don’t they just not do the Aurora Corridor Project?’… But it doesn’t work that way. Those projects are funded differently,” said DiPeso. “And some people think we are responsible for the school district budget mess… not realizing it’s a different entity.”

At the meeting, some residents expressed that they would like an additional police officer in the city, said mayor Bob Ransom, who attended the forum. This isn’t feasible, he said, with the current budget projections and the fact that in previous years officers were added.

“We don’t feel this is the time to go spend additional money on a crime officer,” said Ransom, adding that burglary and most major crimes in the city have decreased.

The city’s operating budget is a combination of the city’s general and city street funds, which are combined as both depend on general tax support. The operating budget funds public safety, enforcement of local codes, park and facility maintenance, recreation and cultural activities, street and right-of-way maintenance, planning and community development, development plan review and building construction inspection, community communications and support services.

“There’s not much left in the existing operating budget that we could cut without cutting programs,” said Tarry. “So that’s the question for the council.”

The projected budget gaps are a result of an imbalance between revenues and expenditures, primarily because expenditure growth is projected to outpace annual revenue growth. During the six-year period of 2007-2012, operating revenues are projected to grow about 2.3 percent annually while expenditures are projected to grow an average of 4.2 percent annually.

“It’s something that we’ve been aware of for a long time; we’ve been talking about it,” said Tarry, adding that service efficiencies have been undertaken to help close the gap, which include contracting with Yakima County Jail to house prisoners at a lower rate, changing city employee health benefits and altering the payment method for police canine services.

Some factors contributing to increased expenditures include inflation of 2.6 percent over the next six years related to salaries for city employees, professional service contracts and intergovernmental contract increases, a 5 percent annual increase in the police contract and increase in jail costs of almost 6 percent annually.

To balance future budgets it will be necessary to either reduce expenditures, increase revenues or undertake a combination of both strategies. To close the projected budget gap for both the short-term and long-term, several options have been identified:

• Short-term: Options include increasing the cable utility tax rate from 1 percent to 6 percent, implementing the Seattle City Light distribution contract payment at 3 percent in 2008 and an additional 3 percent in 2009, reducing the general fund contribution to the capital fund and reviewing the existing budget for any further cost savings.

• Long-term: The primary option is to pursue a levy lid lift for 2009. The city’s property tax rate has fallen since 2002, a result of assessed valuation growing more rapidly than the city’s property tax levy increases. In 2007 the city’s levy rate is approximately $1.10 per $1,000 valuation. The city could assess up to $1.60 per $1,000 valuation. If approved by a majority of Shoreline voters, it could be effective in 2010.

The city’s long-term financial strategy will be discussed at the Monday, March 5 council meeting. City staff recommend that the council authorize an increase in the cable utility tax rate from 1 percent to 6 percent, as well as authorize the city manager to notify Seattle City Light of the city’s intent to collect a contract fee on the distribution portion of electric revenues collected from Shoreline rate payers.

Staff also is recommending $78,000 in base budget reductions, to be effective mid-2007 and $47,000 in revenue changes associated with facility rentals, adult recreation programs and right-of-way permits in 2008.

“We’ve been hit with things before; the city has always looked ahead, anticipated the problem and either cut back or raised fees,” said Ransom, referencing Tim Eyman initiatives that resulted in lost city funding. “And that’s what we will do now; we will find a way.”