With reassurance from outside experts that more revenue is needed for the city of Mercer Island to maintain service levels and bring up reserves to a best-practice level, the city council voted 6-1 on July 10 to go to voters in November with a property tax levy lid lift.
Council will host a first reading of the ordinance, and public hearing, on July 17. A second reading and adoption will be held on July 24 and council will work to appoint citizens to write pro and con statements for the ballot before the end of the month.
Council member Tom Acker was solidly against a levy. Deputy Mayor Salim Nice said he changed his thinking after looking at an external review of the Mercer Island’s forecasting model, which concluded that the city’s contingency fund should be seven percent higher than where it is currently.
The city’s consultant, Management Partners, said that while many cities set their contingency fund at 17 percent of annual general fund revenue (which would last two months if they run into financial trouble), Mercer Island’s is at 10 percent. They also advised the city to plan for a recession, as they usually occur every seven years.
Before the review, Nice recommended bridging the gaps in the city’s 2019-20 biennial budget with reserves and one-time money and continuing to evaluate the long-term “structural deficit.” He said that he found a few optimizations in the general fund, but that there is no “smoking gun” to solve the financial challenges.
“We’re at a point where we have more choices than we will two years from now,” he said. “While I see a path forward that doesn’t ask for a levy, I don’t recommend it.”
A month ago, city manager Julie Underwood delivered her recommendation that the council ask voters to consider a six-year levy lid lift by placing a measure on the November general election ballot.The measure would “lift” the city property tax levy lid and reset the current property tax rate of $1 per $1,000 of assessed valuation to $1.22 per $1,000 of assessed valuation in 2019.
It was also supported by 74 percent of members in the Community Advisory Group, comprised of 23 Mercer Island citizen volunteers who met several times in recent months to review the city’s financial challenges.
Nice made the motion to set the levy lid lift at $1.25 per $1,000 of assessed valuation in 2019, with a 5 percent increase each year until 2024. He also moved that the council establish a financial sustainability plan, per the consultant’s recommendation, and have a mechanism for transferring savings achieved by that plan into the contingency fund. It would cost the average Mercer Island homeowner about $300 in the first year.
Council members Dave Wisenteiner and Wendy Weiker — who said previously that they would support a smaller, “micro” levy that would fund things like mental health counselors and other community safety net services — voted in favor of the motion, as did Mayor Debbie Bertlin and council members Bruce Bassett and Benson Wong.
Acker said that the solution to the city’s financial challenges should involve cost containment and business improvement opportunities, along with a review of upcoming capital projects, and noted concerns about voter fatigue.
Underwood also recommended other revenue enhancements, including raising the B & O tax and maintaining the utility tax increase, though Nice said he wouldn’t support that. He said council may have to resort to those measures, which don’t require voter approval, if the levy fails.
Nice said that the levy is ultimately a quality of life issue, and about fully funding all of the things Islanders care about. Without new revenue, Underwood said there may have to be cuts to parks maintenance, Youth and Family Services, special events and other items.
“I grew up on Mercer Island, my wife grew up on Mercer Island and we have a son who’s growing up on Mercer Island,” he said. “I want the future for him to be what we’ve had. I don’t want it to be a lower level of service or lower quality of service.”
The city posted a press release on the decision on July 11, and advertised the need for volunteers for the pro and con committees. A citizen group, Mercer Islanders for Sustainable Spending, has already formed to oppose the measure.
“In our recent satisfaction survey, an overwhelming percentage of residents (79 percent) stated that they are satisfied with the quality of city services. Now, they will have a clear opportunity to reinforce that at the ballot box,” Bertlin stated in the release.
For more, see www.mercergov.org/FinancialChallenges.