City's financial situation 'bleak'; job cuts possible

City officials say they have done almost all they could by now to close the revenue expenditure gap that has been widening steadily over the last decade, owing to voter-led initiatives, economic turmoil and other factors.

Last Monday, Auburn City Council members discussed a budget amendment that would freeze 16 vacant city positions, leaving them authorized but unfilled, saving the city $1 million.

That amendment, which could come up for a vote as early as the March 16 Council meeting, would be in addition to the 22 positions the city already has frozen. City officials say they will continue to "scrub" the budget and eliminate $800,000 worth of projects and services.

But should the amendment pass, Mayor Pete Lewis said the city would then be out of cost-cutting options. There would nothing left to cut — nothing but city jobs.

"If our economic condition continues to deteriorate, we will have no other choice but to look at eliminating positions," Lewis wrote in a Feb. 27 memo to city employees.

Cuts are not inevitable, said Councilwoman Sue Singer. The economy could improve. Sales tax revenues could rise.

But if the situation doesn't improve, Lewis said, the city would have to bite the bullet.

That is certainly not the type of news city employees like to get and no mayor likes to give.

But Singer said external events have forced the city's hand.

Like other cities throughout the state, she said, Auburn began to lose the ability to raise money about 10 years ago, owing to a number of factors, including:

• Downturns in the economy.

• I-747 — Approved by state voters in 2001, this initiative limits property tax levies to 1 percent of annual growth. It also impacts funding for counties and special districts like fire and library districts that provide services to city residents.

• I-695 — In 1999 the people of Washington approved the “$30 License Tab Initiative," which repealed the Motor Vehicle Excise Tax (MVET) and replaced it with a flat $30 annual fee on private cars and trucks. Shortly after that, the measure faced a court challenge. To make sure that the voter's choice was honored, the Legislature passed and the governor signed a bill enacting I-695's main tax-cutting provision.

According to the Association of Washington Cities, cities throughout the state have lost more than $100 million per year to repeal of the MVET. Some cities lost more than 10 percent of their annual revenues.

• The manufacturing exemption on industrial sales tax.

• Streamlined sales tax — Under the point-of-delivery sales tax system, called "Streamlined Sales Tax" or SST, regardless of where a sale occurs, the point of delivery will determine the sales tax rate and what city will collect the sales tax monies. Previously, sales tax was calculated based on where an item was purchased.

"Streamlined sales tax had a double-edged sword for us," Lewis said. "Not only did it affect us as far as current revenue, we were supposed to be partially mitigated for that. But the worst part about SST is that any new industrial warehouse manufacturing business is not covered. So the largest industrial area north of Los Angeles has no reason or incentive to have another warehouse distribution manufacturing complex. In fact, it is a disincentive for us to have one."

Over the last 10 years, Lewis said, the city has lost an aggregate total of $28.6 million in general fund money.

All of this at a time when such items as health care, and basic and mandated services have stretched city revenues beyond the breaking point.

"We've cleaned house, we've cleaned programs," Lewis said. "Any further deterioration from the income levels we see now will leave us with no other alternatives but employees."

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