HomeMy WebLinkAboutReg 2010-04-05 Item 2C - Presentation - Budget Briefingf MTG. DATE
04/05/10
MTG. DATE
04/05/10
COUNCIL AGENDA SYNOPSIS
Meeting Date
04/05/10
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:ITEM INFORMATION
CAS NUMBER: 10-036
I ORIGINAL AGENDA DATE: APRIL 5, 2010
AGENDA ITEM TITLE Briefing on options for addressing budget gap.
CATEGORY Disatssion Motion Resolution n Ordinance ['Bid Award Public Hearing f f Other
Mtg Date 04/05/10 Mtg Date Mtg Dale Mtg Date Mtg Date
SPONSOR f l Council Mayor Adm Svcs DCD n Finance 1 1 Fire El Legal P&R Police PJV
Council review
SPONSOR'S During its February 2010 annual retreat, the City Council discussed a wide range of
SUMMARY options for addressing the Tong -term gap between anticipated revenues and expenditure
forecasts. Council identified a number of revenue and expense options it would like to
explore further, and requested that staff research these items and report back to the
Committee of the Whole in coming months. The attached memo identifies these items and
proposes a schedule for their consideration.
REVIEWED BY COW Mtg. CA &P Cmte F &S Cmte Transportation Cmte
U Utilities Cmte Arts Comm. n Parks Comm. Planning Comm.
DATE:
RECOMMENDATIONS:
SPONSOR /ADMIN. Briefing only.
Comm' 1"1 EE
COST :IMPACT FUND SOURCE
EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED
$N /A $N /A $N /A
Fund Source: N/A
Comments:
RECORD OF COUNCIL ACTION
ATTACHMENTS
Informational Memorandum dated 04/02/10
ITEM NO.
Mtg Date Mtg Date
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2
y City of Tukwila
TO:
INFORMATIONAL MEMORANDUM
Mayor Haggerton
Committee of the Whole
FROM: Steve Lancaster, City Administrator
DATE: April 2, 2010
SUBJECT: Options for Addressing Budget Gap
ISSUE
The Tukwila City Council devoted three days in February to studying the current budget
situation and implications for the Tong -term ability of the City to continue providing essential
services to the community. During this budget retreat, Council members expressed the
importance of taking a balanced approach to closing the current budget gap and setting the City
on a more sustainable financial path. This will require evaluating ways to both increase
revenues and decrease expenses. There was clear recognition that addressing both sides of the
equation will have real impacts on the cost and type of services we provide citizens, and on the
employees who provide those services. Council reviewed a broad range of revenue and cost
saving ideas, and identifies several for additional study. This memo will present a proposed
schedule for studying these issues.
BACKGROUND
Jim Haggerton, Mayor
Cities in Washington have been challenged in recent years by statutory limitations on property
tax revenue during a period when the cost of providing services has continued to grow. For
some time, the robust growth of the overall economy and significant new development in
Tukwila provided the ability to cope with these revenue and expense problems. However,
Tukwila's finances have been additionally hurt in recent years by implementation of the State's
"streamlined sales tax" system and by unanticipated expenditures related to problems at the
Howard Hanson Dam. With this difficult financial backdrop, the economic crisis of the past
few years has seriously affected the City's ability to continue operating as we have in the past.
An extended period of declining sales tax revenue and a dramatic slow -down in new
construction (with resulting stagnation in property tax revenue) require that the City take
action.
Temporary expenditure reductions for 2009 and 2010, a new utility tax on city -run utilities,
significant (and unsustainable) cutbacks in capital expenditures and a new solid waste utility tax
have provided some relief. However, even after these measures are considered, forecasts
show that the City will deplete its budget reserves "fund balance in 2013 or 2014 if it remains
on the current course.
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4
INFORMATIONAL MEMO
Page 2
Figure 1 illustrates the City's recent revenue /expenditure history (2000 -2009) and forecasts
revenues and expenses through 2015 based on current service and staffing levels and on what
now appear to be somewhat optimistic revenue forecasts and unsustainable capital
expenditure forecasts.
70.0
60.0 Passage of
Statewide 1%
property tax
50.0 limitation.
40.0
30.0
20.0
10.0
0.0
-10.0
-20.0
DISCUSSION
Total Revenue and Expenses Millions)
2000 -2009 Actuals, 2010 -2015 Projected
Passage of State
I streamline sales
tax legislation
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Global economic
crisis; recession
starts
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Revenues Expenses —Fund Balance
Negative Fund
Balance of
$11.6M projected
at the end of 2015
As illustrated, revenues and expenditures were relatively equal through 2004. From 2005
through 2007, revenues exceeded expenditures each year, allowing the fund balance (our
"bank account to grow over this period. However, in 2008 revenues declined while
expenditures continued to increase, requiring that the City draw from its fund balance. The gap
between revenues and expenses is forecast to continue to widen under current and anticipated
conditions requiring continued and growing "withdrawals" from fund balance. This situation
cannot be allowed to continue.
During its February budget retreat the City Council reviewed a wide range of possible measures
for closing the budget gap. These measures can be thought of as falling within three categories:
Revenue Options, Program Reduction Options, and Cost of Compensation. Council expressed
the importance avoiding over reliance on any of these categories, indicating that a balanced
approach is strongly preferred. Council members identified several specific and some more
general ideas for increasing City revenue and decreasing expenditures. Staff has been asked to
investigate these ideas and report back to the Council Committee of the Whole over the next
INFORMATIONAL MEMO
Page 3
few months. Staff recommends the following schedule for reporting to the COW on the
various budget ideas identified at the February retreat.
Revenue Options. For each revenue idea, staff will provide an estimate of revenue potential
(as well as any associated costs) and impact on residents and /or businesses. Decision processes
and timing issues will also be described.
REVENUE IDEAS
Utility tax on City -owned
utilities
Increase business license
fees
Revenue Generating
Regulatory License
1 TBD license tabs
Surplus City property
Property tax levy lid lift
EMS levy
Planning fees
TBD sales tax
1
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DESCRIPTION
Increase current tax by 1% (to 11
reduce to 7% following sunset of original
tax (end of 2012).
Graduated fee schedule based on
"number of employees" categories.
Per employee fee in addition to basic
business license fee
$20 /year license tab surcharge.
Identify properties that are surplus to
City's needs and evaluate potential sales.
Temporary lifting of statutory limit on
property tax. Voter approval required.
Increase property tax by $0.10 per $1,000
of assessed value dedicated to emergency
services. Voter approval required.
Prior analysis indicates the City is not fully
recovering its permit processing costs.
Increase sales tax by 0.2% dedicated to
transportation related expenses. Voter
approval required.
1
COW
MEETING
4 -12 -10
4 -12 -10
4 -12 -10
4 -12 -10
4 -26 -10
4 -26 -10
4 -26 -10
4 -26 -10
4 -26 -10
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INFORMATIONAL MEMO
Page 4
Program Reduction Options. For each cost saving idea, staff will describe the impact on
services provided to internal and external customers (residents and businesses). Staff may also
describe alternative means of achieving budget savings equal to those indicated below.
1 PROGRAM REDUCTION
1
City Council
Mayor's Office
Boards and Commissions
Community
Development Dept.
Information Technology
Dept.
1 Municipal Court
Human Services
Parks and Recreation
Dept.
1 Foster Golf Course
Public Works Dept.
Police Department
Fire Department
1
DESCRIPTION
Reduce "Other Services and Charges" and
"Supplies" by 10% ($5,000).
Reduce overall budget by 10% ($125,000).
Reduce budgets for Sister Cities, Equity
Diversity Commission and Arts
Commission 50%
($27,500).
Reduce overall budget by 10% ($300,000).
COW
MEETING
5 -10 -10
5 -10 -10
5 -10 -10
5 -10 -10
Reduce overall budget by 10% ($112,500). 5 -10 -10
1 Reduce overall budget by 0.5% ($6,000). 1 5 -10 -10
Evaluate CSC program for potential gaps/ 5 -10 -10
duplication.
Reduce general fund subsidy (excluding 5 -24 -10
Golf and Pool) by 10% ($448,000).
Reduce general fund subsidy by $62,000. 1 5 -24 -10
Reduce general fund operations 5 -24 -10
expenditures by 5% ($375,000).
Reduce budget (excluding Patrol, 6 -14 -10
Investigations and Traffic) by 2%
($93,000).
Reduce overall budget by 2% ($204,000).
6 -14 -10 1
1
1
Cost of Compensation. The City Council has recognized that the City will not be able to return
to a sustainable Tong -term financial situation solely through the revenue and cost reduction
measures identified above. Parallel to the schedule of COW briefings, the City Administration
will be undertaking discussions with the City's represented and non represented employee
groups regarding the overall cost of employee compensation.
Implementating some of the service or program reductions listed above will likely result in a
reduction in City staffing levels. Additional staff and service reductions could be necessary if
the measures described above do not result in sufficient savings. City Administration has
scheduled meetings with employee representatives and with non represented employees to
explore employee interest in measures to reduce the City's overall cost of employee
compensation. Depending on employee interest, this may help to retain as many jobs as
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INFORMATIONAL MEMO
Page 5
possible and preserve important services to the community. Since employee compensation
accounts for nearly three fourths of all general fund expenditures, it is imperative that we
explore such options.
RECOMMENDATION
No action necessary. Provide staff with feedback on the proposed schedule and topics for
future Council consideration.
w: \2010 infomemos \budget brief apr52010 with graph.docx