Mill Creek budget ‘excellent’

  • Jana Hill<br>Mill Creek Enterprise editor
  • Thursday, February 21, 2008 12:08pm

For Mill Creek taxpayers, its mostly good news this year, with the bad news looming in years to come.

City officials plan to maintain services at current levels and increase property taxes 1 percent in the proposed biennial budget. The $27,560,516 preliminary budget will be presented for public comment at a hearing Nov. 12. City officials are required to adopt a budget before the end of the year.

The city’s financial condition is described as “excellent” by city manager Bob Stow. The city weathered financial losses in recent years that included reductions in revenue from past tax cutting initiatives, and the loss of state sales tax equalization funding, granted to cities such as Mill Creek that lack a strong commercial tax base.

The city lost an annual revenue stream of $380,000 after Initiative 695-inspired tax cuts following the 1999 election, said Mill Creek finance director Joanne Gregory. The measure, intended to cut motor vehicle excise taxes to $30 was found unconstitutional, but lawmakers heeded the message of voters and cut the tax anyway. Two years later, Initiative 747 passed, reducing property tax to 1 percent of the previous year’s property taxes, or the implicit price deflator, whichever is less.

According to projections by the Association of Washington Cities, the city of Mill Creek will have lost $1,900,000 from that measure over a six-year period ending in 2007.

Those losses mix with the upcoming loss of development revenue, as the heavily residential community runs out of land to develop.

“Mill Creek is very residential. We don’t have a very strong commercial or sales-tax base at all. Sales tax has been heavily dependent on construction,” Gregory said.

She said about one-fourth to one-third of the city’s sales tax revenue is related to construction. With the amount of developable land running out in Mill Creek, future budgets will not look like this one.

“In our long-term financial plan, we show that the trend in expenses versus revenue gets greater and continues to decline at a significant rate in 2005, 2006 and 2007,” Gregory said.

To deal with a decline in development revenue, future biennial budgets for the city of Mill Creek will include service cuts, revenue increases, or both, Gregory said.

But for this budgeting session, things look sunny.

“We’ve received additional sales tax revenue. We’ll receive higher property taxes and at least for the next biennium, those will help us to maintain that level of service,” Gregory said.

New development in Mill Creek affecting this biennial budget includes 500 multi-family homes, 151 single-family homes and 212,306 square feet in office space, Gregory said. One-time development revenue from those projects will bring in $1,321,000 to the city.

That revenue from development along the Highway 527 corridor, as well as a 1 percent property tax increase will balance the budget without cuts in services, Gregory said.

Property owners will see varying impacts from that property tax increase, which is also affected by the assessed value of Mill Creek property overall, and the assessed value of each individual home.

Because the city depends on a revenue source that is scheduled to end, officials keep a higher reserve than most cities. Mill Creek’s budget reserve is 29 percent, compared to most cities with 10 percent of annual expenditures. Reserve funds can be used for operations or one-time capital needs, Gregory said.

The 29 percent reserve amount was tallied after a $2 million transfer to the Capital Facilities Fund for future use as determined by the city council. That money could be used to finish a park, or for some other capital expenses, Gregory said.

Other revenue sources include Lowe’s Home Improvement, scheduled to open in January in north Mill Creek. The project brought in $390,000 in one-time development fees, Gregory said. The store will continue to provide revenue with projected retail taxes of approximately $300,000 per year.

An increase in passport processing revenues will also add to Mill Creek’s coffers. This year, the city is projected to bring in $86,000 in passport revenue. In the next two years, that number is projected to be about $111,000 a year, Gregory said.

She said the increase is probably due to the fact that “we are so accessible.” However, she said, “at some point you’re going to saturate that market … I do anticipate it will drop off. I haven’t been overly optimistic in the budget” regarding passport revenues, she said.

Increased revenue and proposed increases do not offset the loss the city dealt with from past initiatives.

Election results from the General Election Nov. 5 will mean some changes for city budget-makers:

• Initiative 790 will change the governance structure for police and firefighters’ pension system. State officials say the employer contribution rate could increase 15.47 percent, costing Mill Creek $124,817 more in 2003 for pension costs. The measure was passing with 57 percent “yes” votes as of Nov. 6.

• Initiative 776 would limit motor vehicle excise taxes to $30. State projections show Mill Creek would lose $102,000 annually if the measure passes. The measure was passing with 55 percent “yes” votes as of Nov. 6.

• Referendum 51 is a 10-year transportation funding plan and a fuel tax increase. If it had passed, Mill Creek may have received an average of $31,206 annually. Voters adamantly rejected the referendum as of Nov. 6 with 61 percent voting “no”.

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