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$600,000 of budget cuts loom for Mercer Island
The Mercer Island City Council has approved raising property taxes by the maximum one percent and is expected to finalize its two-year budget next Monday without any drastic cutbacks, despite projected decreases in revenue and high inflation.
Finance Director Chip Corder characterized much of the changes as shifting job positions and funds, but did not propose any new hires for full-time positions or recommend cutting any jobs as a result of the declining local and national economy. According to Corder, the city’s bottom line for its general fund from 2008 to 2009 will be down by 3.2 percent but up 5.4 percent in 2010 because of inflation costs. Corder also recommended that the city cut spending in the general fund by $592,000 next year and by $442,000 in 2010 to balance the budget.
“Keep this bottom line,” Corder said in early November. “You will see some increases and some decreases, but keep this in mind. We have the budget carved out.”
During the Nov. 17 City Council meeting, the Council unanimously decided to accept the city manager’s recommendation to raise the property tax by the state-permitted maximum amount of one percent. Corder said that he had to rewrite his budget the same day that he presented it because the stock market crash and national economy significantly affected his revenue forecasts made in October. With those diminished forecasts, raising property taxes would be needed to balance the budget.
“Given the current economic downturn, which has impacted sales tax and development fees significantly, and the current rate of inflation as measured by the Seattle metro area (6.2 percent in June and August 2008), the proposed 2009-2010 budget includes a one percent optional increase in the 2009 regular levy,” the city document states.
In all, the city is expected to raise $10.4 million from property taxes in 2009. Nearly $1 million of that will go to maintaining Island parks as part of the levy lid lift approved in the Nov. 4 election. Two years ago, City Manager Rich Conrad recommended not raising the property tax, but the Council decided to use the allowed 1 percent, a total of $147,000 toward new fire trucks. In all, the city banked $9.2 million from the regular property tax levy in 2008.
The city expects to spend a total of $127 million over the next two years, with a total of $48 million in the general fund for 2009 and 2010. The general fund constitutes the largest non-capital fund and provides for such basic government services as police and fire protection, street and park maintenance, recreation, and building and engineering services. In 2009, general fund expenditures are budgeted at $23.8 million, while in 2010 they are $24.9 million.
Other costs to be incurred by the city are for water service, sewer and storm water utilities. Salaries and wages make up 21 percent of expenditures.
Revenues down, utility fees up
The largest source of revenues for the city is from charges for services, which is largely generated from the water and sewer utility rates. For 2009 and 2010, respectively, the city is forecasting revenues of $69.6 million and $58.2 million. It is anticipated that the city’s water rates will be raised an average of 10.5 percent in 2009 and 10 percent in 2010.
Other service charges include recreation fees, counseling fees and Thrift Shop sales. The second largest source of revenue is the property tax paid by Island residents and businesses. Property taxes are budgeted at $10 million in 2009 and $10.2 million in 2010. Corder told Council members that the number of home sales expected in 2009 is only 240 in 2009 and 300 in 2010.
“That’s the lowest ever amount of sales expected this year,” Corder said of his forecasted real estate sales tax revenues.
However, the average sales price has “been peculiar,” Corder said and he does not see a decrease in the average sales price. The city plans to spend $3.9 million in street repairs during the next two years with a total of 19 projects. Funds for such projects come from property sales.
Sales taxes, real estate excise taxes, utility taxes, and state-shared revenues amount to $12.7 million in 2009. Together, these six revenues account for over 71 percent of the total city resources.
According to Glenn Boettcher, the city’s maintenance director, one significant increase in his department expected in the next two years is the result of successful biannual recycling events. While the recycling days have typically been funded through county grants, Boettcher said, the demand for what the city collects for electronics and onsite document destruction is leaving the city to pick up parts of the tab. Boettcher said that during the last event, held in October, the city disposed of six tons of confidential documents, 23 tons of scrap metal and appliances and a total of 122 computer monitors.