The Kent City Council might use reserve funds, count on higher sales tax revenue or raise property taxes to resolve a $863,000 city budget gap for 2016.
Mayor Suzette Cooke proposed earlier this fall another jump in the city property tax rate next year to bring in additional revenue, at the cost of about $20 per year for the owner of a $300,000 home.
The council debated at a workshop on Oct. 20 whether to go with the mayor’s proposal or come up with its own plan. Council members discussed possibilities but didn’t reach any conclusions. They are scheduled to meet again on Nov. 10 as they work to approve an adjustment to the two-year budget by Dec. 8.
Cooke wants to use what’s known as banked capacity to raise property taxes higher than the 1 percent state cap. Kent has saved about $6 million in banked capacity because the city reduced its property tax levy by $1 per $1,000 assessed valuation in 2011 after voters in 2010 approved the formation of the Kent Fire Department Regional Fire Authority (RFA). The RFA levies a property tax of $1 per $1,000 assessed valuation.
“Our first option would be to use the banked capacity,” City Finance Director Aaron BeMiller told the council at its workshop. “The second option would be to increase sales tax (revenue estimates for 2016) by about $430,000 from what we have budgeted and use banked property tax capacity of about $430,000.”
BeMiller explained how well city sales tax revenue has done.
“We’re doing very, very well on sales tax in 2015,” he said. “Our estimates now is we are going to exceed the budget number by somewhere above 10 percent. That’s about $1.4 million in sales tax we are going to receive this year over what we budgeted.
“If we go up and use the full $430,000 in sales tax for 2016, that would put us at about 99 percent of our 2015 estimated collections, which is OK, but we are having a very good year. To the extent that 2016 continues on this good path or maybe even gets a little bit better, we’ll be fine. But to the extent it starts to break down a little bit, we could have difficulties.”
City staff estimates sales tax revenue this year at $23.3 million, a $1.4 million increase over the initial budget estimate of $21.9 million.
Banner years for commercial and housing construction projects boosted the sales tax revenue, but BeMiller warned the council about counting on sales tax revenue to cover budget deficits.
“Sales tax can be volatile,” said BeMiller, who added $430,000 would be his limit about how much of the higher revenue to spend.
Council President Dana Ralph asked BeMiller to clarify if he feels the city can “reasonably expect” to hit that figure of $430,000.
“That is the exact statement, reasonably expect we could be there,” BeMiller said. “Hopefully, we will be a little bit better.”
The council also asked staff to look at other budget balancing options, including using a one-time transfer out of the city’s fund balance to cover the deficit.
A transfer of $863,000 out of the reserve fund would still leave the council at its goal of a fund balance at 10 percent (or about $8.5 million) of the city’s general fund budget, BeMiller said. He recommended against that option in order to keep the reserve higher for budget hits in years ahead.
Ralph said she is considering the increased sales tax revenue and one-time money out of the fund balance to cover the budget gap. She said the council needs to come up in the next few weeks with specific proposals.
The council also discussed cutting a planned eight new job positions for 2016. Those jobs include three police officers; an information technology project manager and an IT software engineer; two parks operations maintenance workers; and a public works signal technician. The job cuts would save about $822,000.
Job cuts, especially the elimination of three police officers, didn’t sit well with the council.
“I’d like to go on record to say that would be ridiculous for us to even consider it,” Berrios said as the police department tries to get up to full staffing. “We just can’t afford to continue to have our guys (police) running overtime. That is a tremendous amount of stress on individuals out there being asked to make critical positions in a split second.”
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