A phrase like “hold-the-line budget” no longer captures how rough things are out there.

Like other cities, Auburn is not only reeling from the recession, it is dealing with zero growth in the business sectors that have changed their sales tax reporting to point of sale, said Auburn Finance Director Shelley Coleman.

The upshot is that since 2008, the City of Auburn has realized a 20-percent, or $4 million reduction, in sales tax revenues. It has also witnessed a 50-percent decrease in development fees. Accordingly, Auburn’s 2010 budget isn’t concerned about cutting frills, but rather it’s focused on maintaining essentials like the level of service for police and for public safety operations like streets and lights.

“It’s a preservation budget,” said Auburn Mayor Pete Lewis. “It’s about preserving what we’ve gained as best we can for the next four or five years. I do not expect to see sales tax gains of more than 1 or 2 percent a year for the next four or five years.”

Coleman said that since 2008, the City has responded to the crises by reprioritizing projects, reduced spending and evaluated all programs and services to create more efficiencies. It also has eliminated redundancies and in some cases, cut programs completely to balance the budget.

Significantly, the City also has frozen 33 positions as they became vacant and laid off 24 employees. But more layoffs are ahead.

“There will be layoffs,” Lewis said. “I have to wait on that because the police and the machinists, the last of our seven bargaining units, take their vote on (Wednesday, Dec. 16), and either they give concessions or there are additional layoffs. I’m at the end. I have nothing left. We either get the concessions, or we have to cut.

“… I don’t want to cut police,” Lewis continued. “I hope that they are going to go along with the package. All of our bargaining units are in the last year of their contracts, and I’ve already told all the employees that there will be no raises in 2011 or 2012, none, zero. We’ve got no money because costs are still going up 2 or 3 percent per year, and we don’t have an income to match that.”

The streamlined sales tax or SST, which the state implemented three years ago to tax sales over the Internet, factors into the city’s woes. Before SST, when a company made a product and somebody bought it in Auburn, the city received the sales tax. Under SST, however, the city in which the person sat down when he or she purchased the item over the Internet gets the sales tax.

Recognizing the financial hardship that SST would impose on cities with large manufacturing bases, the state of Washington set up a mitigation fund, which takes into account all the companies across the United States that are expected to voluntarily send sales tax money to the point of sale. Auburn lost about $2.6 million to SST, and it is receiving about $2 million in mitigation funds.

The mitigation is expected to decrease as out-of-state sales taxes are received to supplant mitigation receipts. But the state already has decreased the mitigation. Auburn’s share dropped to $1.9 million as of Tuesday, and Gov. Christine Gregoire is proposing to eliminate it completely from the 2010 budget.

The City of Auburn has been able to tap $1 million of the estimated $3.8 million in banked capacity it has accumulated and combine it with the 1 percent it is allowed to levy under Initiative 747 over last year’s figure to maintain critical services. The levy also allows the City to continue with the Save Our Streets program that was the result of the levy lid lift voters approved in November 2004.

Because the City has this banked capacity — meaning it did not ask for all the tax revenue it was entitled to in past years — the state doesn’t hold it the 101 percent limit.

Coleman said the banked capacity was created with the voter-approved Valley Regional Fire Authority and the annexation of Lea and West hills in 2008.

The City Council on Nov. 16 passed Ordinance 6274, a property tax increase of 8.7 percent. Because of decreasing home values of approximately 12 percent in the City of Auburn, the estimated annual impact on a home assessed for $300,000 in 2009 and reassessed at $265,000 in 2010 is $38 per year or $3.16 a month, Coleman said. The owner of a home that was assessed at $250,000 in 2009 and reassessed at $220,000 in 2010 will pay an estimated annual $31.61 or $2.63 monthly.