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HomeMy WebLinkAbout09-15-1997 Special Council Mtg SPECIAL CITY COUNCIL MEETING MINUTES SEPTEMBER 15, 1997 I. Introduction The special City Council meeting was convened by Mayor Charles A. Booth at 5:30 PM in the Council work area located in the Mayor's Office. Councilmembers in attendance included Jeanne Barber, Fred Poe, Gene Cerino, Rich Wagner, Stacey Brothers, and Sue Singer. Councilmember Trish Borden was excused. Staff members in attendance included Fire Chief Bob Johnson, Finance Director Diane Supler, Financial Analyst Sherri Crawford, Parks and Recreation Director Dick Deal, and City Clerk Robin Wohlhueter. Mayor Booth noted that the purpose of the special City Council is to discuss the preliminary revenue forecasts and projections for 1998. Mayor Booth pointed out with sales tax revenue for 1997 exceeding original estimates and with the transfer of the City's Library to the King County Library District, the City's financial position remains stable for 1998. II. Review 1998 Budget Process Finance Director Diane Supler updated the Cj~Jncil on the 1988 preliminary budget process. Each department submitted recommendations for the 1998 budget. At this time Finance staff continues to analyze the information in order to project 1998 revenue for the City. Ms. Supler announced the Finance Department received a Certificate of Excellence in reporting from Government Finance Officers Association (GFOA) for its 1997 Budget. The 1997 Budget also received notable mention of an Outstanding Policy Document. Staff identified City accomplishments and where the City is going in the future. Ms, Supler formally recognized Financial Analyst Sherri Crawford for her efforts in the preparation of the 1997 Budget. III. 1998 Projected Revenue Forecasts Focusing on the General Fund this evening, Ms. Supler presented 1998 revenue projections. Most noteworthy is the change in sales tax revenue. In 1997 35% of the total revenue estimates came from sales tax. In 1998, estimates are smaller, property tax is up 1%, and the offset is coming in through other taxes. Special City Council Minutes Septernb.er 15, 1997 Page No. 2 Beginning fund balance for 1998 is estimated at $4,850,000, higher than normal. It reflects a number of projects that will not be complete in 1997. Funding for these projects are carried over to the 1998 budget. For example, the largest uncompleted project is the underground storage tanks in the amount of $600,000. Testing for soil is required and will cost the City an additional $100,000. In addition, it will cost the City $65,000 to hire a consultant to work on fire impact study. Ms. Supler highlighted what she referred to as a conservative comparison of taxes by category from 1997 to 1998 using a 2% growth factor and a 2-3% inflation factor. Property taxes reflect a small increase. The most notable change is the other utility tax category. Last year Municipal Research predicted a 5% decrease in utility tax due to the deregulation of Puget Sound Energy. Puget Sound Energy represents approximately $1.7 million of the $2.8 million in 1997. The City did not experience this decrease in 1997. In 1998, Municipal Research predicts a 1% increase in Puget Sound Energy. Other taxes reflecting an increase for 1998 include admission tax, gambling tax, and revenue from the Muckleshoot Casino. Ms. Supler explained that even though dollar amounts for admission tax and gambling tax are higher than 1998, staff did take into account a reduction as a result of a accident at Person's Bowling Alley. Ms. Supler reported staff has taken an aggressive approach in collection of gambling taxes reflecting an increase from $135,000 in 1997 to $'200,000 in 1998. Ms. Supler presented issues and recommendations with regard to the use of property tax revenue. Ms. Supler recommended the City use up the remaining property tax levy capacity, Currently, revenue is calculated at $3.02 per $1,000 of assessed valuation. She indicated if the City were to use the full 106% levy rate, the rate would be $3.25 per $1,000 of assessed valuation. Ms. Supler recalled because of the annexation to the King County Library District, the City gave up $.50 per $1,000 leaving the levy rate at $3.10. The City is now dependent upon any increase in assessed valuation of property. Mayor Booth noted this is stimulated by the loss of $1.7 million in sales tax for large equipment. The revenue projections for property taxes are preliminary numbers estimated by King County resulting in an overall decrease in the City's tax base. If the City were to stay at the same rate of $3.02 per $1,000 of assessed valuation compared to last year, the City would collect less property taxes because of the Special City Council Minutes September 15, 1997 Page No. 3 decrease in property assessed valuations. Ms. Supler explained it is difficult to pin point which businesses effect the decrease in assessed valuation of commercial property. Auburn's downtown area has been reevaluated by the King County Assessor's Office using the income approach which resulted in a decrease in property values for the downtown core area. Another reason for the decrease in assessed valuations results in 1997 legislation that eliminated intangibles or state assessed property from the tax rolls. Ms. Supler further explained Auburn and other surrounding cities are working together to better understand why there has been a decrease in assessed valuation for commercial property. The working group has put together five case studies to present to King County. Last year the City of Auburn lost $32 million in the collection of manufacturing tax. Vacant land has also seen a decrease in assessed valuation. Commercial development of property is not getting on the tax rolls as quickly as it should. Ms. Supler presented property tax revenue in comparisons with other jurisdictions. Bellevue maintains the lowest levy rate compared to Auburn, Kent, Renton, and Seattle. Ms. Supler cautioned the Council in comparing property tax information with other jurisdictions. It can be misleading in that many cities have an excess levy, assessed valuations tend to be higher in other jurisdictions, or they may have a separate taxing authority such as separate fire and water districts. In Burien, for example, police services are contracted with King County but maintain a separate fire district within the incorporated area. Ms. Supler explained Referendum 47 will be on the ballot in November that has an excellent chance of passing. The components to the referendum which include, a reduction in the state levy by $4.72 per $1000 of assessed valuation, limitation of the 106% levy limit, and new method of determining future valuations. With regard to the 106% levy limit, the City is allowed to take the lesser of 106% or inflation whichever is smaller. Inflation is defined and is based on an increase in the implicit price stipulator for personal consumption expenditures for the previous 12-months as published by the Bureau of Economic Analysis. Last year it was 2.1% and in 1995 it was 2.4%. CPI for the Seattle area is 3.7%. A super majority is required to implement a 106% levy rate. Ms. Supler explained the City anticipates a 0% increased in revenue in 1998, and with the decrease in assessed valuations more dollars will be lost. Ms. Supler recommended the Council consider implementing a 106% levy rate for 1998. Special City Council Minutes September 15, 1997 Page No. 4 Discussion centered around a change that will occur in 1999 if Referendum 47 is approved by the voters. A limitation will be placed on the assessed value of property which could result in assessed values of property being less than the appraised value. When the assessed value grows by less than 15% per year, taxable valuation will not change. Ms. Supler expressed concern in evaluating property assessed valuations, managed by King County. For example, assessed valuations in Auburn are not available for 'review by staff during development of the 1998 budget. By law, King County is to provide numbers by August 31. This is due primarily to the heavy workload experienced by King County staff members. With regard to sales tax, Ms. Supler anticipated growth in 1998 because of the healthy economy. Growth in 1997 and 1998 is mainly due to special contracts the Department of Revenue has with Boeing. The Boeing Holding Company acquired equipment that was leased to all its facilities. When the manufacturing tax exemption was implemented, Boeing dissolved its holding company. They negotiated with the Department of Revenue to pay off sales tax owed on contractual leases. The City will benefit from this change over the next five years. Supermall revenues dropped approximately 17% compared to last year. This is mainly due to the closure of Incredible Universe. Grocery stores and automobile agencies have bene~ted from a healthy economy resulting in a higher collection of sales tax by the City. Because of the growth in the economy, Auburn has been able to offset the 1.7 million dollar loss from the manufacturing tax exemption. Under Licenses and permits, Ms. Supler reported business registrations have seen a big increase from 1996 to 1997. Business registration fees were increased from $5.00 to $25.00 and aggressively seek those businesses who are not registered. With regard building, plumbing, and other permits the City has seen a dramatic increase in revenues than originally budgeted. This is a result of increased development of single family housing. In 1998, anticipated revenue for licenses and permits remains conservative. Utility accounts have increased at a rate of approximately 50 per month. Ms. Supler further reported that intergovernmental revenue that includes a POL grant, motor vehicle excise, liquor excise, liquor profits, basic life support, and a category for other revenue. Liquor excise tax and liquor profits are held constant for 1998. Staff is optimistic that basic life support revenue will be voted to $.29 per $1,000 assessed valuation in November. Special City Council Minutes September 15, 1997 Page No. 5 Charges for services is an area the Council expressed interest in to increase revenue. Ms. Supler presented development issues surrounding the sale of maps/photostats, fire protection services, prisoner lodging, outside engineering, plan check fees, recreations classes, arts/senior programs, and other services. Ms. Supler reported staff is looking at imposing charges for the sale of maps, budgets, and other City publications. The City is limited by law charging for the time it takes to produce certain documents. Additionally, staff is looking at whether or not the City can include consultant costs, when a consultant has been used to publish a document, in publication of that document. Fire protection services account for services provided to Algona. Prisoner lodging accounts for payments received from Pacific and Algona for lodging prisoners on a short term basis. Outside engineering fees reflect fees recovered when an outside engineer firm assists the City but paid by the developer. Ms. Supler summarized plan check fees, recreations classes, ads/senior programs, and other fees. Councilmember Poe drew attention to computer screen showing revenue for licenses and permits that includes building permit and plumbing permits. Mr. Poe suggested that plan check fees are all items you collect from citizens who are building buildings. Plan check fees are generated from building permits. Mr. Poe questioned why building permits, plumbing permits, and plan check fees are not under one category, Charges for Services. He feels building permit fees pay for inspection services, plan check fees pay for staff to check plans, and plumbing permit fees account for a plumbing inspector. Ms. Supler responded that the State Auditor's Office directs the accounting authority for each individual revenue account. For management purposes Ms. Supler indicated it can be shown together. Ms. Supler further highlighted there is an increase this year in revenue collected for plan check fees. Councilmember Cerino raised a question with regard to fire inspection services. Fire Chief Bob Johnson indicated inspection fees are contracted. Mr. Johnson indicated fire inspection fees generate approximately a half full time employee on an annual basis. Ms. Supler recognized that fire service fees may be calculated with building permit fees. This component will be considered when an impact fee study is conducted. Miscellaneous revenue includes fines and penalties, interest income, rent, Supermall Officers, and miscellaneous. Revenue for fines and penalties is reduced by $11,000 to $12,000 showing a conservative figure due to the election of a new court judge. When Auburn went from Aukeen District Court to its own Special City Council Minutes September 15, 1997 Page No. 6 municipal court, outstanding unpaid traffic tickets were turned over to a collection agency. In 1997, the collection agency succeeded in collecting approximately $30,000 of unpaid traffic tickets from Aukeen District Court. Ms. Supler discussed anticipated revenue projections for interest income, rent, supermall officers, street and miscellaneous. Ms. Supler predicted economic growth to remain at two to three percent. The interest rate may go up in the 4th quarter by 25 basis points. Today, Auburn is experiencing what Ms. Supler's describes as a Goldilock's environment, "not too hot [no inflation], "not too cold" [growth is growing at a good rate], "but just right". In summary, Ms. Supler reported changes in revenue for 1995-1996 at an increase of 12%. In 1996-1997 revenue increased 1%, and in 1997-1998 it is estimated at zero percent. Overall, revenue projections are estimated at $300,000 between 1997 and 1998. Zero unemployment in King County has offset anticipated downturns in 1996-1997. Staff continues to budget conservatively for 1998. After adjustments for a healthy economy, revenues will level off. Ms. Supler anticipates Auburn will end its year in a healthy position. It is her hope that in 1998 the City can not only fund maintenance and operations but also fund recommended program improvements for the departments. IV. Summary and Discussion Councilmember Wagner questioned the commitment of the Beginning Fund Balance of $4.8 million. Ms. Supler explained approximately $1 million is committed, but may be more if there is a settlement on a contract for long term nursing home care for LEOFF I officers. In addition, there are projects such as underground storage tanks that will not be completed. Mayor Booth added that it is wise to maintain a strong cash position for salaries in the first quarter of the year. Ms. Supler pointed out the City will not be funding for library services saving approximately $700,000. Ms. Supler urged Council consideration of one time capital expense rather than a capital expense that has ongoing long term obligations. Councilmember Poe raised a question with regard to the budget projections for the Library such as debt payment assuming there is an inside levy. Ms. Supler responded there is not an anticipated date to issue debt for the Library. Mr. Deal interjected that it will probably be in the summer. Master site planning for the Library is currently underway and should be complete in approximately six weeks. Design and permitting will begin with ground breaking in the fall of 1998. Special City Council Minutes September 15, 1997 Page No. 7 Working with a finance team, Ms. Supler indicated she would need about a 60 day lead time to issue debt. Ms. Supler further explained that if the City issued debt in July an interest payment would be due in December with an interest and principle due one year later from the date of the issuance of the debt. Ms. Supler explained a preliminary budget will be available at the end of October, 1997. 1998 Budget workshops will be held on November 5 and 6, 1997. V. Adjournment The meeting adjourned at 6:51 PM. Approved this 6th day of October, 1997. Charles A. Booth, Mayor Robin Wohlhueter, City Clerk 97m9-15A