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