With tax revenues up and expenses down, the city of Kent finished 2022 about $9.5 million (8.3%) above budget for its general fund.

“It’s good news when compared to budget,” said Paula Painter, city finance director, in her 2022 year-end report June 20 to the Kent City Council during its workshop.

The 2022 actual budget was $122.9 million compared to a budget of $113.4 million, according to city documents.

“In 2022 our tax revenue came in better than anticipated,” Council President Bill Boyce said during his report at the regular council meeting. “Our sales tax remained strong in 2022 and the B&O tax remained strong in 2022. The departments are trying to make sure they are watching expenses which came in under budget.”

Sales tax revenues came in at $27.9 million in 2022, $6.9 million or 33% above the budget forecast of $21 million. The other big gain came from utility taxes, which produced revenue of $21 million in 2022, $1.5 million or 7.9% above the budget of $19.5 million. Higher revenue from electric, gas and garbage fees boosted that number.

Other tax revenue also increased, including $19.5 million from the B&O tax, up $417,633 or 2.2% from the forecast of $19.1 million. Property tax revenue was $32.8 million, up $383,576 or 1.2% from the forecast of $32.4 million.

“When we put the 2022 budget together in 2021, we still had uncertainties about the impact Covid would have on revenue so we were conservative on the budget,” Painter said to the council about the lower revenue forecast for 2022.

Painter said the budget numbers were adjusted somewhat for 2023 in an attempt to bring the revenue forecast closer to the actual numbers.

Boyce thanked the city financial staff for its work.

“It was an outstanding report from the finance team and kudos to them and all of the outstanding work they have done,” Boyce said.

Sales and B&O tax revenue also were up from 2021. Sales tax revenue came in $3.1 million higher in 2022 than 2021 while B&O tax revenue was up $2.45 million, according to city documents.

Expenses made a difference in 2022, partly because of a city staffing shortage.

“Overall, we have under spent budget by 6.18%,” Painter said. “We had a savings of about $1.8 million in salaries and benefits, mainly because of vacant positions and the difficulty of getting positions filled.”

A total of $62.7 million was spent on salaries and benefits in 2022 compared to a budget of $64.5 million. Spending on supplies and equipment as well as services and allocations made up the rest of the savings.

As far as year-to-year differences, salaries were up to $45.8 million in 2022 compared to $41.8 million in 2021, a 9.5% hike. Painter said salaries were up because of cost of living adjustments (COLA) in contracts.

The higher revenue and lower spending means the city’s general fund balance increased again. The fund balance in 2022 hit $51.5 million, up from the 2021 balance of $47.6 million. The council several years back required a fund balance of 18% of budget to cover unexpected expenses or lower tax revenues. The 18% requirement would be $23.5 million for 2022, so the city has excess reserves of $28 million.

Painter, however, reminded the council because of the budget structural imbalance where expenses exceed revenue due to the 1% limit on property tax increases each year, city leaders eventually will need to tap into fund balance to help cover expenses.

Good start to 2023

The council received the May 2023 financial update that shows sales tax revenue continues to be higher than anticipated so far this year.

Sales tax revenue is 4% higher than last year and if it continues to come in at that rate it will be at least $1 million over budget for the year, according to a report from Michelle Ferguson, city budget manager.

Ferguson said utility taxes, electric, gas and garbage also are producing higher revenue than budgeted due to a Puget Sound Energy (PSE) rate increase in November 2022 that increased city utility taxes.