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.
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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
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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.
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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.
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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
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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.
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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