Despite coming out of 2015 with a $1.1 million surplus, the Mercer Island City Council is considering going to voters in 2017 to ask them to pay higher property taxes.

This property levy lid lift could come in many forms. Finance Director Chip Corder laid out several scenarios at the council’s planning session on Jan. 23 to prepare the group for facing several tough budget decisions this fall.

Mercer Island is extremely reliant on property tax due to a “minimal” retail sales tax base, Corder said. High levels of development activity in 2015 — namely the permit fees and taxes paid by Legacy and the Mercer Island School District for their construction projects — have caused a big spike in revenues that can’t be counted on as ongoing funding sources.

Corder said he anticipated a decline in that spike, and the moratorium on downtown development hasn’t helped. The gap between revenues and expenditures is widening as the cost of business goes up. Property tax increases are effectively capped at 2 percent per year.

The council has taken a few looks at reducing expenditures, including reviewing compensation policies and conducting an audit of the maintenance department.

There are other options besides a tax increase, Corder said. The city spends 73 percent of its budget on personnel costs, and could look at reducing staffing levels. But Mercer Island currently has the lowest number of full-time employees per 1,000 population in King County. The council could also increase the Transportation Benefit District annual license fee.

Corder suggested using surpluses to bridge the gap for the next biennium. It’s a “temporary fix that buys time,” Corder said.

Mercer Island currently has two levy lid lifts on the books — one for parks that ends in 2021 and one for fire services that ends in 2023.

If another lift were to be proposed, it would likely be voted on during the 2017 primary election, Corder said. It would pass with a simple majority (50 percent plus one) and cost the average household — $900,000 home assessed value on Mercer Island — $21.75 per month, according to Corder’s preferred scenario. Currently, Island residents pay an average of $167 per month to the city, and $205 to Puget Sound Energy, $225 to Comcast and $234 to Verizon.

If voters say no, the city could be facing a huge deficit at the end of 2017. Funding for “low priorities of government,” like mental health counselors in schools and field maintenance, could go away. Corder said going to voters is “always a gamble” — one that prompted council members to ask if it would be prudent to go to voters this year and get another shot next year if the levy lid lift is rejected.

Mayor Bruce Bassett said that because the city is coming off a contentious election year, sitting on a surplus and facing a community with seemingly low confidence in its government, the tax increase could be a “hard sell” this year.

The city also has $2.34 million in its rainy day fund, and if development activity continues at its current pace, “that would erase the deficit,” Corder said.

Deficits are projected in the General Fund, Youth and Family Services Fund and Capital Improvement Fund, and the city also needs money for a fire apparatus replacement and a new IT position.