City ends 2008 in ‘solid financial position’

The Mercer Island City Council approved its 2008 financial status report last month, noting that the city ended the year in a “solid financial position” with nearly $1.32 million in excess resources.

Revenues for the year totaled $22.6 million. Considering the poor economy, this puts Mercer Island ahead of most cities, the report stated.

Total actual revenues for 2008 were up by $1.16 million (5.4 percent) when compared with the budget. Approximately $455,000 of this came from unexpected, one-time sales tax receipts — a phenomenon that the city does not budget for, yet welcomes all the same.

“From time to time, we receive tax receipts from non-classified businesses; usually, these are trusts. We received $450,000 last year. There have been years when we’ve received nothing and years when we’ve received up to $900,000,” said City Finance Director Chip Corder, adding that the surplus will go toward capital projects in 2009 and 2010.

In comparison to 2007, however, total revenues were down by 1.8 percent, mostly due to extraordinary sales receipts and a significant decline in development-related fees in 2008.

Property taxes — a reliable source of revenue for Mercer Island — brought in the highest amount for 2008, at $9.4 million. Sales taxes brought in $3.7 million and utility taxes earned approximately $3.4 million. The latter was up by nearly 32 percent in 2008, relative to the amount budgeted for. Utilities increased by 4 percent, compared with last year.

The city also welcomed revenue increases from recreation programs and EMS fees, at 23 percent and 31 percent respectively. Contributing factors, the report points out, are increased 2008 rates and rentals for the Community Center at Mercer View, among other youth and adult recreational programs.

The EMS increase was directly affected by the six-year King County EMS levy passed by voters in November 2007. The levy is estimated to generate approximately $630 million over the next five years, and will cost about $120 per year for the average $400,000 home.

Last year’s budget was not immune to the drooping economy.

Licenses, permits and zoning fees were down last year by 17 percent, as well as the total valuation of all building permits issued in 2008. This trend will most likely continue, if not worsen in 2009. Corder has already planned for such a scenario. Although he has forecast revenue at $23.4 million, Corder questions whether this amount will be reached.

“What’s going on currently has never happened in my lifetime. Some folks say this [recession] could last three, four years. My concern is that we will most likely bring in less [than $23.4 million]. We’ll have to address this mid-year,” the finance director said.

Corder is being especially prudent with this year’s funds, leaning on the safer side of caution. If the city falls short of its $23.4 target, he has a detailed plan for budget cuts.

“We have a number of financial tools that we can pool. We’ve enacted expenditure freezes. We have a rainy day fund, which I’m trying not to use until 2010. If our revenues drop $600,000 to $700,000 below budget, I can absorb this through a series of cuts,” he said.

As for 2008 expenditures, the general fund ended 2008 under budget by about .7 percent or almost $154,000. This amount will be carried over to cover incomplete expenditures in 2009.

The majority of city funds go toward salaries, benefits and contractual services ($11.9 million, $3.5 million and 1.9 million, respectively). Together, these categories make up about 52 percent of the total general fund.

The city was over budget in salaries by 1.5 percent, according to the report. This is mostly due to the facts that 27 payrolls were processed last year instead of only 26 (a calender phenomenon that occurs every 11 years), that two police officer vacancies and three disabilities led to overtime pay, as well as one firefighter vacancy and another disability.

All of this leaves the 2008 general fund’s year-end balance at approximately $3.95 million. Of the $1.3 million in 2008 net excess resources, about $124,000 is available for the 2008 year-end transfer. Corder will identify potential uses for this money at the May 18 City Council meeting.

For a detailed report of all other 2008 year-end funds, visit the City Council’s Web site.

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