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HomeMy WebLinkAbout02-19-2019 SPECIAL CITY COUNCIL MEETINGSpecial City Council Meeting February 19, 2019 - 6:00 P M City Hall Council Chambers A GE NDA I .C AL L T O O RD E R I I .D IS C US S I O N IT E M S A .Funding Options (Coleman) I I I .AD J O URNM E NT Agendas and minutes are available to the public at the City Clerk's Office, on the City website (http://www.auburnwa.gov), and via e-mail. Complete agenda packets are available for review at the City Clerk's Office. Page 1 of 32 AGENDA BILL APPROVAL FORM Agenda Subject: Funding Options (Coleman) Date: February 12, 2019 Department: Finance Attachments: Revenue Options Budget Impact: Administrativ e Recommendation: For discussion only. Background Summary: The General Fund operating budget is experiencing a revenue shortfall due to several factors that include not just the revenue side of the equation but also increasing demands on the expenditure side. Revenue impacts include the State discontinuing mitigation funding for Streamlined Sales Tax (SST) and the sunset of the sales tax annexation credit. The annual impact on the General Fund for these two revenue streams alone is $4,000,000. Another large revenue impact is the property tax cap. This revenue represents 30% of the total General Fund operating revenue and the annual growth, or levy, is limited to a 1% increase each year or $220,000 for 2020. Expenditures, however, continue to increase primarily in the public safety and homeless services and sheltering areas. Annual increases are expected to exceed 5%. In the 2019/2020 budget, the City is continuing to provide essential public safety services, meet contract obligations surrounding these services, and provide expanded homeless services. To balance the 2019/2020 budget, sales tax dollars normally used for the City street program were retained in the General Fund ($3.5 M); contra expenditure accounts were utilized to recognize unused budget dollars from staff attrition ($3.5M); and a transfer of reserve funds from the Cumulative Reserve Fund to the General Fund is scheduled in 2020 ($4M). The measures taken in 2019/2020 General Fund operating budget are not sustainable for future budgets. The presentation will focus on increases in existing and/or new revenues, and whether the increases require a vote or may be increased solely with Council authority. Rev iewed by Council Committees: Councilmember:Staff:Coleman Meeting Date:February 19, 2019 Item Number:DI.A Page 2 of 32 Page 3 of 32 General Fund Operating Revenue Options 1/28/2019 City of Auburn Page 4 of 32 Discussion Points 2019/2020 Budget Budget deficit driven by lower revenue projections and higher expenditures Six Year Forecast Revenue trends Expenditure trends Fund balance Current Revenues Increased with Council Action Current Revenues Requiring Voter Approval New Revenue Options via Council Action or Voter Approval Levy Lid Lift Primer B&O Tax Primer 2 Page 5 of 32 Actions Taken to Balance 2019/2020 General Fund Operating Budget Sales tax dollars normally used for the City street program were retained in the General Fund ($3.5 M); Contra expenditure accounts were utilized to recognize unused budget dollars from staff attrition ($3.5M); Transfer of reserve funds from the Cumulative Reserve Fund to the General Fund is scheduled in 2020 ($4M). 3 Page 6 of 32 What is Causing the Budget Deficit? The State Legislature has discontinued Streamlined Sales Tax (SST) revenue effective September 2019. Impact: $4M over the biennium. Property tax cap of 1%. Property tax is 30% of General Fund revenue. Cost of Labor and benefits is growing at a rate greater than current inflation, @ 2.8% (Seattle, Tacoma, Bellevue CPI December 2017 to December 2018) Public Safety contracts are increasing 10%+ from prior year. Increasing costs/programs for homelessness services. Young police force, salaries increasing for COLA’s + Step increases or at an average expected rate of 5.5%. Medical benefits increased 10% from 2018 to 2019. 4 Page 7 of 32 General Fund Revenue Forecast 2019 -2024 2019 Adopted 2020 Adopted 2021 Forecast 2022 Forecast 2023 Forecast 2024 Forecast Beginning Fund Balance 18,037,042$ 12,394,863$ 11,558,325$ 3,103,534$ (7,340,247)$ (19,674,050)$ Revenues: Taxes 55,203,500 55,906,100 57,074,800 57,964,900 58,977,900 60,004,300 Licenses and Permits 1,837,900 1,838,800 1,886,500 1,889,200 1,891,900 1,894,600 Intergovernmental 5,782,600 4,132,160 3,835,300 3,807,900 3,815,100 3,822,400 Fees and Charges 6,952,280 7,030,580 6,950,480 7,067,880 7,189,080 7,314,180 Fines and Penalties 859,500 863,800 865,900 867,900 869,900 871,900 Other Sources 105,906 106,527 99,000 99,000 99,000 99,000 Miscellaneous 1,404,300 1,371,900 1,220,900 1,100,200 1,108,800 1,117,500 Transfer from CRF in Othr Srcs)- 4,000,000 - - - - Total Revenues 72,145,986$ 75,249,867$ 71,932,880$ 72,796,980$ 73,951,680$ 75,123,880$ 5 Page 8 of 32 General Fund Revenue Forecast 2019 –2024 6 Page 9 of 32 General Fund Expenditure Forecast 2019 –2024 7 2019 Adopted 2020 Adopted 2021 Forecast 2022 Forecast 2023 Forecast 2024 Forecast Council and Mayor 1,150,079$ 1,184,746$ 1,216,846$ 1,249,946$ 1,284,081$ 1,319,291$ Administration 3,693,134 3,761,081 3,698,723 3,797,760 3,899,751 4,004,797 Human Resources 4,506,052 4,789,415 4,915,098 5,044,347 5,177,273 5,313,996 Finance 3,533,140 3,729,078 3,839,502 3,953,878 4,072,370 4,195,151 City Attorney 2,795,950 2,934,072 3,017,347 3,103,429 3,192,429 3,284,461 Community Development 4,746,823 5,002,072 5,146,151 5,295,148 5,449,257 5,608,684 Jail - SCORE 5,001,000 5,001,000 5,251,050 5,513,603 5,789,283 6,078,747 Police 28,921,479 29,865,874 31,721,978 32,706,749 33,728,140 34,787,718 Public Works 4,031,925 4,433,811 4,564,872 4,700,573 4,841,106 4,986,670 Parks and Recreation 12,878,201 13,235,846 13,598,206 13,890,328 14,274,725 14,671,329 Street Department 4,041,472 3,987,177 4,099,023 4,214,441 4,333,564 4,456,527 Non-Departmental 3,988,910 4,662,233 3,494,979 3,604,578 3,718,523 3,837,002 Contra-Expenditure (in ND)(1,500,000) (2,000,000) - - - - Total Expenditures 77,788,165$ 80,586,405$ 84,563,775$ 87,074,780$ 89,760,502$ 92,544,373$ Ending Balance 12,394,863 7,058,325 (1,072,570) (10,850,370) (22,159,192) (35,079,685) Residual/Unused Budget 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 Revised Ending Balance 12,394,863 11,558,325 3,427,430 (6,350,370) (17,659,192) (30,579,685) Page 10 of 32 General Fund Expenditure Forecast 2019 –2024 8 Page 11 of 32 Summary of Revenues, Expenditures & Fund Balance 2019 -2024 9 Page 12 of 32 What is Causing the Budget Deficit? The State Legislature has discontinued Streamlined Sales Tax (SST) revenue effective September 2019. Impact: $4M over the biennium. Property tax cap of 1%. Property tax is 30% of General Fund revenue. Cost of Labor and benefits is growing at a rate greater than current inflation, @ 2.8% (Seattle, Tacoma, Bellevue CPI December 2017 to December 2018) Public Safety contracts are increasing 10%+ from prior year. Increasing costs/programs for homelessness services. Young police force, positions increasing for COLA’s + Step increases or at an average expected rate of 5.5%. Medical benefits increased 10% from 2018 to 2019. 10 Page 13 of 32 Current Revenues with Increase Capacity -without a Vote 11 Current Revenue Sources Comments Authority Cap Water Utility Tax 1% to Arterials; 6% to General Fund Council No Cap Sewer Utility Tax 1% to Arterials; 6% to General Fund Council No Cap Storm Utility Tax 1% to Arterials; 6% to General Fund Council No Cap Garbage Utility Tax 1% to Arterials; 6% to General Fund Council No Cap Gambling Tax Card room tax @ 4%Council 12% Business Licenses Rate increased to $100 1.1.2019 Council No Cap Park and Rec Fees $3.3M in Revenue Council No Cap Permit Fees Activities are funded, no increase Council Cost Planning/Development Fees Some rate increases 1.1.2019 Council CostPage 14 of 32 Revenue Capacity –Current Revenues Council Authority 12 Current Revenue Available Sources Comments Capacity Water Utility Tax Each 1% levied generates 160,000$ Sewer Utility Tax Each 1% levied generates 273,000 Storm Utility Tax Each 1% levied generates 108,000 Garbage Utility Tax Each 1% levied generates 130,000 Gambling Tax Current 4% generates 210,000 Business Licenses $100 fee effective 1.1.2019 generates 400,000 Park and Rec Fees $3.3M in Revenue Permit Fees Activities funded, no increase at this time Planning/Development Fees Some fees increased 1.1.2019 Page 15 of 32 Revenue Outlook with an Additional 2% ($1,342,000) Utility Tax 2019 Adopted 2020 Adopted 2021 Forecast 2022 Forecast 2023 Forecast 2024 Forecast Revenues: Taxes*55,203,500 55,906,100 57,074,800 57,964,900 58,977,900 60,004,300 Licenses and Permits 1,837,900 1,838,800 1,886,500 1,889,200 1,891,900 1,894,600 Intergovernmental 5,782,600 4,132,160 3,835,300 3,807,900 3,815,100 3,822,400 Fees and Charges 6,952,280 7,030,580 6,950,480 7,067,880 7,189,080 7,314,180 Fines and Penalties 859,500 863,800 865,900 867,900 869,900 871,900 Other Sources 105,906 106,527 99,000 99,000 99,000 99,000 Miscellaneous 1,404,300 1,371,900 1,220,900 1,100,200 1,108,800 1,117,500 Transfer from CRF in Othr Srcs)- 4,000,000 - - - - 2% additional water utility tax 320,000 326,400 332,928 339,587 346,378 2% additional sewer utility tax 546,000 556,920 568,058 579,420 591,008 2% additional storm utility tax 216,000 220,320 224,726 229,221 233,805 2% additional garbage tax 260,000 265,200 270,504 275,914 281,432 Total Revenues 72,145,986$ 76,591,867$ 73,301,720$ 74,193,197$ 75,375,821$ 76,576,504$ 13 Page 16 of 32 Revenue Capacity –Current Revenues Voter Approved Revenue Current Revenue Available Manual pg.#Sources Comments Capacity 8 Property tax Levy Lid Lift - 1% generates 220,000$ 17 Electric tax 1% generates 715,000 18 Natural gas tax 1% generates 185,000 20 Telephone tax 1% generates (revenue stream declining) 200,000 14 Page 17 of 32 New Revenue Options With a (V)ote or (C)ouncil Action Additional Revenue Authority Available Sources (C)ouncil (V)ote Comments Capacity Public safety sales tax V 50% + 1 .1% levy on sales for public safety- auto sales exempt $1,400,000 Business & Occupation:C Various types $5,000,000+ Levy lid lift V 50% + 1 one year and multi year options; 1% lift generates $220,000 Excess Levy V 60%For capital use only Cost of Debt Service 15 Page 18 of 32 Two Types of Levy Lid Lifts -Voted Single-Year Lift Exceed 1% annual limit 1 year Lift may be temporary or permanent May be used for any purpose No supplanting limitations Must not exceed statutory rate (current allowable levy rate per $1,000 of assessed value) Multi -Year Lift Exceed 1% annual limit for up to 6 consecutive years Lift may be temporary or permanent May be used for any purpose – ballot must state purpose(s) Must not exceed statutory rate (current allowable levy rate per $1,000 of assessed value) 16 Page 19 of 32 17 Page 20 of 32 18 Page 21 of 32 Multi Year Levy Lift (City Option Only) The City may do a voted 6 year levy lid lift. The first year is a fixed dollar amount. The subsequent years are lifted by a fixed percentage generally tied to an index, i.e. CPI. The levy lift may either be permanent or temporary. 19 Page 22 of 32 20 Page 23 of 32 21 Page 24 of 32 Business and Occupation Taxes (B&O) Forty four (44) cities levy B&O taxes; Cities must use the B&O tax model ordinance which contains certain mandatory provisions intended to provide uniform methodology; Taxes are generally levied on the gross receipts of business entities, up to .2%; Common tax categories are Retail, Manufacturing, Services, and Wholesaling; Tax rate may vary among categories but must be applied uniformly within each category; 22 Page 25 of 32 Business and Occupation Taxes (B&O) (cont.) Cities' are not restricted on collecting a business privilege tax on any other basis; such as square footage tax, full time employee equivalents, graduated annual license tax or any other tax calculated on a basis other than gross receipts; Lead time for implementation should be 9 –12 months depending on complexity of tax structure; Estimated revenue from a .2% tax rate is $6.6M; Estimated revenue from a square footage tax would be approximately $225,000 based on a levy of $.01 per square foot. Revenue on $.10 per square foot would be approximately $2,500,000. And so on. 23 Page 26 of 32 Square Footage Tax (@90%) Warehousing, Mini Storage & Manufacturing 24 Mini Warehousing Manufacturing Storage Totals Square feet 15,465,150 6,316,020 670,000 22,451,170 @$.01 170,980.0$ 63,160$ 6,700$ 240,840$ @$.10 1,546,515 631,602 67,000 2,245,117 @$.15 2,319,773 947,403 100,500 3,367,676 @$.20 3,093,030 1,263,204 134,000 4,490,234 Page 27 of 32 Business & Occupation Tax Rates 2018 Quarterly Annual Aberdeen 0.002 0.003 e 0.00375 e 0.003 e $5,000 $20,000 Algona 0.00045 0.00045 0.00045 0.00045 $10,000 $40,000 Bainbridge Island 0.001 0.001 0.001 0.001 $150,000 Bellevue 0.001496 0.001496 0.001496 0.001496 $160,000 Bellingham 0.0017 0.0017 0.0044 e 0.0017 $5,000 $20,000 Bremerton 0.0016 0.00125 0.002 0.0016 $160,000 Burien 0.001 0.001 0.001 0.001 $200,000 Cosmopolis 0.002 0.002 0.002 0.002 $5,000 $20,000 Darrington 0.00075 0.00075 0.00075 0.00075 $20,000 Des Moines 0.002 0.002 0.002 0.002 $50,000 DuPont 0.001 0.001 0.001 0.001 $5,000 $20,000 Everett 0.001 0.001 0.001 0.001 $5,000 $20,000 Everson 0.002 0.002 $1,000,000 Granite Falls** Hoquiam 0.00200 0.00200 0.00200 0.00200 $5,000 $20,000 City Manufacturing rate Retail rate Services rate Wholesale rate Threshold 25 (v) = voter approved increase above statutory limit (e) = rate higher than statutory limit because rate was effective prior to January 1, 1982 (i.e., grandfathered). *Kenmore's B&O tax applies to heavy manufacturing only. **Granite Falls repealed its B&O tax for all businesses other than extracting. *** Seattle changed its rates effective January 1, 2018. Page 28 of 32 Business & Occupation Tax Rates 2018 26 Quarterly Annual Ilwaco 0.00200 0.00200 0.00200 0.00200 $20,000 Issaquah 0.00120 0.00120 0.00150 0.00120 $25,000 $100,000 Kelso 0.00100 0.00100 0.00200 0.00100 $20,000 Kenmore 0.00200 *$5,000 Kent 0.00046 0.00046 0.00152 0.00152 $62,500 $250,000 Lacey 0.00100 0.00200 $5,000 $20,000 Lake Forest Park 0.00200 0.00200 0.00200 0.00200 $5,000 Long Beach 0.00200 0.00200 0.00200 0.00200 $5,000 Longview 0.00100 0.00100 0.00200 0.00100 $20,000 Mercer Island 0.00100 0.00100 0.00100 0.00100 $150,000 North Bend 0.00200 0.00200 0.00200 0.00200 $5,000 Ocean Shores 0.00200 0.00200 0.00200 0.00200 $5,000 $20,000 Olympia 0.00100 0.00100 0.00200 0.00100 $5,000 $20,000 Pacific 0.00200 0.00200 0.00200 0.00200 $5,000 $20,000 Port Townsend****0.00200 0.00200 0.00200 0.00200 $0 $100,000 City Manufacturing rate Retail rate Services rate Wholesale rate Threshold (v) = voter approved increase above statutory limit (e) = rate higher than statutory limit because rate was effective prior to January 1, 1982 (i.e., grandfathered). *Kenmore's B&O tax applies to heavy manufacturing only. **Granite Falls repealed its B&O tax for all businesses other than extracting. *** Seattle changed its rates effective January 1, 2018. **** Port Townsend and Renton changed the minimal threshold in 2018 Page 29 of 32 Business & Occupation Tax Rates 2018 27 Quarterly Annual Rainier 0.00200 0.00200 0.00200 0.00200 $5,000 Raymond 0.00200 0.00200 0.00200 0.00200 $5,000 $20,000 Renton****0.00085 0.00050 0.00085 0.00085 $500,000 Roy 0.00100 0.00200 0.00200 0.00100 $5,000 $20,000 Ruston 0.00110 0.00153 0.00200 0.00102 $5,000 $20,000 Seattle***0.00222 v 0.00222 v 0.00427 v 0.00222 v $100,000 Shelton 0.00100 0.00100 0.00100 0.00100 $5,000 $20,000 Snoqualmie 0.0015 0.0015 0.0015 0.0015 $5,000 South Bend 0.001 0.002 0.002 0.002 $5,000 Tacoma 0.00110 0.00153 0.00400 e 0.00102 $250,000 Tenino 0.002 0.002 0.002 0.002 $5,000 $20,000 Tumwater 0.001 0.001 0.002 0.001 $5,000 $20,000 Westport 0.0025 e 0.005 e 0.005 e 0.0025 e $5,000 Yelm 0.001 0.002 0.002 0.001 $5,000 (v) = voter approved increase above statutory limit (e) = rate higher than statutory limit because rate was effective prior to January 1, 1982 (i.e., grandfathered). *Kenmore's B&O tax applies to heavy manufacturing only. **Granite Falls repealed its B&O tax for all businesses other than extracting. *** Seattle changed its rates effective January 1, 2018. City Manufacturing rate Retail rate Services rate Wholesale rate Threshold **** Port Townsend and Renton changed the minimal threshold in 2018Page 30 of 32 Park Impact Fee History –Capital Uses per Growth Management Act Year Revenue Expense interest Balance 2007 191,000$ 7,213$ 198,213$ 2008 7,000 5,858 211,071 2009 87,500 1,779 300,350 2010 10,500 75,000 742 236,592 2011 30,432 477 267,501 2012 10,500 10,924 543 267,620 2013 24,500 50,000 474 242,594 2014 154,000 254 396,848 2015 730,625 14,585 1,169 1,114,057 2016 3,753,098 84,511 14,634 4,797,278 2017 598,576 116,036 41,162 5,320,980 2018 390,250 210,447 100,334 5,601,117$ Park Impact Fees 28 Page 31 of 32 29 Questions? Page 32 of 32