With an economic recession affecting the city’s outlook, Kirkland City Council readjusted their priorities and adopted a scaled-back 2009/2010 biennial budget at their Dec. 16 meeting.
Flush with cash from sales-tax revenues and an active construction industry in years past, the nationwide economic slowdown has eroded the city’s two best — and most volatile — sources of income. Borrowing a phrase from England’s Queen Elizabeth II, Mayor Jim Lauinger summarized the city’s financial troubles as part of an “Annus Horribilis.”
He and Council member Mary-Alyce Burleigh criticized a number of “regressive” tax initiatives that shifted the tax burden away from more affluent residents and limited the ability of cities to increase local tax rates.
“Probably the most important thing we could tell all of our legislators,” he said, “is for goodness sakes, do something about the taxation structure in this state.”
City officials adopted a three-pronged approach to balance the city’s budget for the next two years: Reduce spending, increase taxes and both dip into a rainy-day fund and eliminate one-time expenses.
In what several council members called a “moving target,” the city’s third biennial budget has proven to be a best estimate. When the last biennial budget was proposed in 2006, officials estimated the city’s overall budget at $318,347,331. It is now at $367,334,612, due to a number of unanticipated expenses, revenue declines and inflation. The new budget, slated to cost Kirkland $366,418,627, is actually less than the previous budget, but is expected to increase in size. The budget also assumes that taxpayers will approve a 1.5 percent tax increase on private utilities at some point in 2009, raising about $2 million. If passed, the total increase in local taxes (along with other tax increases) is estimated to rise about $120 per household.
The general-fund portion of the budget, which pays for most of the city’s day-to-day operations, would cost $124 million. According to city finance officials Tracey Dunlap and Sandi Hines, the increases are due principally to accounting changes, employee budget and wage increases and increased funding for select city services. City Council previously asked City Manager David Ramsay to propose up to 8 percent in service cuts,but some of those cuts were scaled back by the Council, including the restoration of an EMS levy and two employees set for layoffs. No regular city employees were laid-off as a result of the budget cuts.
“There’s a lot of uncertainty in this budget,” Dunlap said. “The Council will have to revisit it again and again throughout the year — and that’s true for the larger economy, not just Kirkland.”
The proposal to increase business taxes drew little interest at two open-house meetings the city held in September, with fewer than six members of the audience attending the presentations. The business license fee will change to charging businesses based on the business’s number full-time employees. Some businesses, such as Ford of Kirkland — a dealership with nearly 70 employees — will see their taxes increase from $1,600 to $6.600 per annum, a 410 percent increase. As several major financial companies and banks failed — including Seattle-based Washington Mutual — and credit dried-up, the change in the economic climate became obvious and resistance to the business tax began to build. Greater Kirkland Chamber of Commerce Executive Director Bill Vadino actively encouraged business owners to attend Council meetings, including Todd Johnson off Lee Johnson Chevrolet, the oldest business in Kirkland.
“They’re balancing the budget on the backs of the business community,” Vadino said.
Kirkland Reporter Staff Writer Kendall Watson can be reached at 425-822-9166, ext. 5052, or kwatson@kirklandreporter.com.
