City wrestles with pending budget shortfalls

Auburn faces grim financial outlook as the council looks for possible solutions

In 2019, the city of Auburn is still capable of providing essential public safety services, meeting contract obligations tied to these services and providing ongoing and expanded human-homeless services.

But as Financial Director Shelley Coleman told the City Council Monday evening, the city’s revenue-versus-expenditure outlook looks grim going into the next decade, and with each passing year after that, the outlook is dire.

By 2024, the city will be $36.5 million dollars or more in the red, and Coleman said, methods it has used until now to balance the budget cannot be sustained in the long term.

City officials know they can’t ignore the problem.

But how will they address the shortfall when to a greater or lesser degree, every possible solution sticks in the collective craw?

Should they lift the levy lid one time, or long term by council action alone?

Impose by council action alone, again without a public vote, the city’s first ever business and occupation tax?

Put a tax proposition to Auburn residents, or raise utility rates?

As councilman John Holman explained, the city will either have to raise revenues, cut programs and lay off personnel, or effect some combination thereof?

Whatever course the city charts, Holman insisted it must involve the public.

“We have a budgetary shortfall coming up, that’s very evident. I think it behooves us as a city council to start involving the citizens in making that decision, rather than a councilmatic (council-alone) decision, like a B&O tax. I think that to get citizens involved and vote to continue the types of services we have become accustomed to, we need to build a case for them.”

Coleman laid out the key factors that are bringing on the projected deficits:

• Olympia’s discontinuance of Streamlined Sales Tax revenue effective this September. The city anticipates this alone will have a projected $4 million impact over the biennium;

• The 1 percent property tax cap, which is critical as tax accounts for 30 percent of general fund revenue;

• Labor and benefits growing at a rate faster than current inflation;

• Public safety contracts increasing 10 percent and more from year to year;

• The increasing costs of programs for homelessness services;

• The increase in police salaries; and

• Medical benefits, which increased 10 percent from 2018 to 2019.

Among current revenues with increased capacity that do not require a vote of the people to raise taxes on are the internal water utility tax, the sewer utility tax, the stormwater utility tax and the garbage utility tax, all of which the city owns, Coleman said, and none of them has a statutory cap on what the city can levy. Today, it’s 7 percent on those four city-owned utilities, with 1 percent going to the arterial street preservation fund, and 6 percent earmarked for the general fund.

One large revenue impact is the property tax cap. This revenue, which represents 30 percent of the total general-fund-operating revenue and the annual growth, or levy, is limited to a 1 percent increase each year, or $220,000 for 2020.

To increase the revenues that the city now has in place, such as the electric tax, would require a 50 percent plus 1 public vote. A 1 percent lift of the property tax levy lid would generate $220,000, Coleman said, an increase in the electric tax would generate about $3.6 million for the general fund.

The city can levy .1 percent on sales tax for public safety with a 50 percent plus one public vote.

The council could enact on its own a business-and-occupation tax, which would be worth $5 million a year for the city, Coleman said.

To balance the 2019-20 budget, Coleman said, the city kept in the general fund $3.5 million worth of sales tax dollars it normally uses for the local street program, which is funded with real estate excise tax dollars. The city also had to put $3.5 million into contra expenditure accounts, which it used to balance the budget.

The city has scheduled a $4 million transfer of reserve funds from the cumulative reserve fund into the general fund to balance the budget in 2020.

That transfer, Coleman said, brings revenue up to $75.3 million. If the city were to remove that $4 million, she said, revenue in 2020 would be less than what it was in 2019.

Holman strongly opposes the imposition of a business and -occupation tax, which he called a disincentive to job-bearing businesses that may consider coming to Auburn. Holman said a local CEO told him he’d relocated his business to Auburn in large part because it didn’t impose a B&O tax.

Whatever the solution, Councilman Claude DaCorsi agreed it is essential to involve the residents of Auburn in reaching it.

“We need citizen involvement; no matter what we do, it affects citizens,” said DaCorsi. “A B&O tax will impact citizens because ultimately, businesses will pass that cost down (to consumers).”

City attorney Steve Gross added a caution.

“If we impose a business and occupation tax based on gross receipts, it is subject to referendum under state law,” Gross said.

“We are about 30,000 people more in our city with about the same number of employees we had before the recession, so we’re pretty lean there,” Mayor Nancy Backus told the council last month. “So. when you talk about cutting programs, you are talking people. And if you are talking about increasing revenues, you are talking about impact on the residences and the business owners of this community.”

More in News

KCLS boycotts Macmillan Publishers’ eBook embargo

The King County Library System (KCLS) will no longer purchase newly-released eBooks… Continue reading

Patch patrol

Kiran Ahluwalia and her daughter Kaia, 1, look at pumpkins with their… Continue reading

Expect lane closures, disruptions to both directions of traffic on Kersey Way | UPDATES

On Monday, Oct. 21, through Friday, Oct. 25, construction work by Pavement… Continue reading

Auburn native serves half a world away with the U.S. Navy ‘Seabees’ in Guam

By David Wyscaver, mass communication specialist 1st Class (SW), Navy Office of… Continue reading

Kent Police Officer Diego Moreno. COURTESY PHOTO, city of Kent
Monstrous Halloween food drive planned to scare hunger in Auburn

Effort made in honor of late Kent Police officer, Auburn resident

The 93-year-old Auburn Avenue Theater remains a popular place for entertainment, with 270 seats in the house. REPORTER FILE PHOTO
City to buy historic Auburn Avenue Theater

Purchase is for $650,000, plus one of the two years left on the lease

Flying Fish: Lake Sammamish kokanee move to Orcas Island

It’s part of a program to preserve the unique freshwater salmon species.

City council holds public hearing tonight to consider changes to street, road projects

City leaders have set their eyes on building a new, $1.65 million,… Continue reading

Auburn Vietnam Memorial to receive funding

The Governor’s Veterans Affairs Advisory Committee (VAAC) has selected the American-Vietnamese War… Continue reading

Most Read