Fourth of July fireworks, graffiti removal and most of the city’s IT department are a few of the programs and services at the margin that could be trimmed from the city budget in the next two years, city officials said at their most recent meeting to discuss a growing “record deficit.”
“I think we have to make these really drastic cuts in expenditures,” Councilwoman Jessica Greenway said at a special City Council study session June 5. “That is the only way that I am going to feel responsible … (to) ask Kirkland citizens to pay more tax when their incomes are down and costs are up.”
The cuts to “one-time expenses” — such as the fireworks — were only one part of a comprehensive look by the City Council at the city’s finances. The city is working on finding a balanced 2009-2010 biennial budget. As promised, city manager David Ramsay and finance director Tracey Dunlap returned last week with a more detailed framework for raising taxes and cutting programs than one presented May 29. Before the pair reviewed the revised options, however, they revealed that the deficit projection for the next two years is moving upward, saying the city now faces a $14 million gap in future funding.
Ramsay’s new figures seemed to leave the Council wondering where to start — and when to stop — making cuts.
“The economy is shifting so fast, no one seems to know where it’s going to go,” Mayor Jim Lauinger said.
Sales-tax receipts down 9.5 percent
Dunlap and Ramsay said the increasing deficit numbers are related to ever-weakening sales tax revenues. One of the city’s largest sources of income, sales tax receipts are now down 9.5 percent since last year. If the total is normalized and the trend continues, the city expects to fall over $1 million (6.8 percent) short of its 2008 budget projections. Dunlap said the decline is due in part to a slowing development scene (housing and new businesses) and a sagging national economy, which many experts believe is in a recession.
In the future, the falling revenues will be exacerbated by the departures of two car dealerships — Toyota of Kirkland and the Green Car Company — and two new Costco locations in Bellevue and Redmond (set to open in late 2009), which will likely draw away Kirkland customers.
“We need to maybe re-look at the format of how we are budgeting … (We’ve relied) heavily for many years on sales-tax,” Lauinger said. “Maybe we need to, in a good year, just budget sales tax for capital projects.”
Most council members agreed.
“In the long-term, we need to look at not spending all of our money in the future,” Councilman Tom Hodgson said.
Dunlap also offered council members a negative-growth sales tax forecast, predicting revenues from that income stream would stay below 2007 levels. Several on the Council immediately included the figure in their deficit projection, estimating an overall deficit of up to $17 million.
Taxes and cuts recommended
Looking for a way forward, Ramsay proposed the city would raise $5.8 million in additional taxes over the next two years and cut services by $5.5 million. He also hoped to find an additional $2.7 million by changing certain policies and tapping into city reserves. Some of the heaviest cuts would be made to a portion of the budget identified as one-time expenses. Ramsay called for cutting nearly two-thirds of programs there.
Deputy Mayor Joan McBride, frustrated by the proposed cuts, complained about the apparent disconnect between Kirkland residents and City Hall.
“We’re in a culture that believes you don’t have to pay for your services,” she said. “(Initiative) 747 came from the notion that people don’t have to pay for their freight anymore. That’s why we’re in this situation … It’s not sustainable.”
The tax increases were proposed in three parts: First, banked levy capacity could allow the city to raise property taxes slightly more than 1 percent. Second, Ramsay recommended a 3-percent increase to city utility taxes and changing business fees to a “head tax,” which charges employers a uniform rate for each new employee hired (similar to a formula used by Redmond). Both changes only need approval by a Council vote.
Finally, he proposed putting a 1.5 percent tax increase on private utilities — such as electric, gas, telephone and cable — before the voters in 2009.
The city is also working behind closed doors on a collective bargaining strategy with the city’s employees. The Council, who are considering pay cuts of their own, may ask city workers to share in the burden of cutting costs. Various city departments are expected to begin reviewing budget plans on July 2.