Kent Mayor Ralph’s city budget proposes higher B&O taxes

City business and occupation taxes will go up and five jobs will be cut to compensate for projected lost state-shared revenue under the 2019-2020 budget proposal by first-year Kent Mayor Dana Ralph.

But Ralph made it clear in her speech to the City Council on Tuesday evening at City Hall that as part of her $214 million general fund budget ($107 million in 2019), she plans to add three police officers in each of the next two years as well as implement a program for officers to wear body cameras.

“The loss of state-shared streamlined sales tax mitigation revenues beginning in 2019, coupled with the expiration of the Panther Lake annexation sales tax credit in June 2020, will result in a negative impact of over $10 million, or roughly 10 percent, to the city’s general fund revenues,” Ralph said. “The city has termed this impact the ‘fiscal cliff’ to describe the magnitude of the loss.”

Ralph’s proposal includes an increase in the B&O square footage tax in 2020 to bring in an additional $3.4 million to the general fund. The council already approved in 2017 an increase in the square footage tax that will bring in $2.6 million in 2019 to help fund parks projects. The council first approved a B&O tax in 2013 to help pay for street repairs. The tax is expected to produce about $11.5 million in 2019 and $14.9 million in 2020.

“The B&O increase in 2020 is the first of four planned increases between now and 2028,” Ralph said. “The decision to increase taxes is never easy and the decision to do so was not taken lightly. The proposed changes to the B&O rate structure are based on the city’s long-term economic development plan and include different rates depending on the business type.”

The proposal maintains a threshold of $250,000 for businesses before the tax kicks in and institutes a cap of $20 million on gross receipts from retail sales, Ralph said.

City officials expect to lose late next year from the state about $5 million a year in streamlined sales tax mitigation, although city leaders hope the Legislature still will give Kent at least some mitigation funds. The funds were set up by the state to help compensate Kent for revenue lost when legislators changed the state in 2008 from an origin-based system for local retail sales tax to a destination-based system, taking away city tax revenue from its many warehouses.

Kent will lose about $4.7 million per year in annexation sales tax credit that ends in June 2020 for the 2010 Panther Lake annexation. The state set up a 10-year funding program to help the city take on more residents.

While public safety’s budget will increase with additional officers, reductions in all other departments total $2 million. Jobs to be cut in the next two years include the mayor’s executive assistant, a Finance Department administrative assistant, a Parks Department maintenance worker, a Municipal Court security officer and a Human Resources analyst.

The budget includes a $1.2 million increase in permit and plans review revenue – not from higher rates but from an increase in construction projects in the city. Ralph also proposed moving $470,000 of the annual sales tax revenue from capital projects to the general fund.

In several community budget meetings earlier this year, the mayor said residents wanted public safety to remain the city’s first priority. Ralph plans to use an estimated $1.5 million in 2019 from the city’s school zone traffic cameras and the proposed red-light traffic cameras to pay for officers to wear body cameras and the ongoing car-per-officer, take-home program. Police will start a body camera pilot program in October with 10 cameras.

If all officers wear body cameras next year, the city will need to add three positions as part of the program. Kent will hire a camera technician, a prosecuting attorney and an administrative assistant in the clerk’s office (to help handle public disclosure requests).

After Ralph’s 22-minute budget presentation, the council had about a 30-minute workshop to discuss it. Councilman Les Thomas raised the only questions, including asking why the mayor favors adding red-light cameras because she had opposed them in the past when she was on the council as simply a method to raise revenue.

“I really do think it is a revenue versus safety, and there’s not a lot of proof,” Ralph said about whether the cameras reduce crashes. “But we have heard from the community that people are looking for sin taxes, if somebody does something wrong, they should pay for it. It is an untapped source of revenue.”

The council’s Public Safety Committee in July approved a feasibility study about whether to install red-light cameras at certain intersections. Police Chief Rafael Padilla is expected to report back to the committee in October with results of the study by Arizona-based American Traffic Solutions (ATS), Inc. ATS runs the city’s school traffic camera program and would operate the red-light camera plan.

The council will have a budget workshop Oct. 6 and has several other meetings scheduled over the next two months for any changes it might want to make. The council is scheduled to vote Nov. 20 on the budget.