Though Mercer Island will end up with a $1 million surplus at the end of 2015, the City Council voted at its last meeting to raise property taxes by one percent in 2016.
“Looking ahead, the fiscal picture is less encouraging,” Deputy Mayor Dan Grausz wrote in an email update. “We also have some one-time financial needs such as addressing Town Center and hopefully Residential Development Code work and hiring the people we need to help us with Sound Transit negotiations.”
Councilmember Mike Cero voted against the increase, which passed 6-1.
The increase impacts the city portion (about 14 percent) of a resident’s overall property tax bill.
The surplus is driven by development activity, said Chip Corder, city finance director, and the biennial budget that was adopted in 2014 was balanced assuming a one percent optional increase each year. A $1 million deficit is still projected in 2017.
“[The surplus] is one-time money,” Corder said. “I can’t bank on it to fund ongoing costs.”
There are many funding needs: the city’s biennial citizen survey is expected to be conducted in January or February, Youth and Family Services (YFS) is facing a deficit, Mercer Island’s contribution to NORCOM went up by 25 percent and the moratorium could affect the city’s revenue stream.
Corder said that he has not yet factored the year-long moratorium on developments over two stories in Town Center into his budget projections for the city’s General Fund, but will do so before the Council’s January planning session.
He said that from a financial perspective, he is “very concerned” about the commercial moratorium, and now the Council is considering imposing a second one on residential development.
Corder said he was “sure there would be an impact in 2016,” making the potential need for a levy lid lift that year “all the more challenging.”
The Council discussed the possibility of a levy lid lift — a property tax increase that Islanders would vote on — at its 2014 planning session. Before raising revenue, councilmembers decided that they wanted to look harder at expenditures.
To that end, the Council is moving forward with a performance audit proposal for the city’s maintenance department, Grausz said.
In addition to the one percent property tax increase, city utility rates (water and sewer) will increase about 5.3 percent in 2016.
Correction: A previous version of this story said that the city portion of a resident’s property tax bill is 23 percent. The impact of a one percent property tax increase for 2016 is $11.30 for the year on a home with a $900,000 assessed valuation, which is the median on Mercer Island in 2015.
Mercer Island is state’s priciest home market
The average sales price for a home on Mercer Island is $1.2 million, said Chip Corder, city finance director.
The Coldwell Banker Home Listing Report for 2015 shows that that price lands Mercer Island at No. 23 on the list of Washington state’s most expensive housing markets, while Centralia is the most affordable city.
The report ranks some 2,700 markets across the U.S. based on the average listing price of a four-bedroom, two-bathroom home in each area.
The average listing price for such a house in Washington is $404,638, placing it eighth among most expensive states. Hawaii, where the average price is $654,648, came in first.
On Mercer Island, the average price for a four-bedroom, two-bath home is $1.06 million. Bellevue, Redmond, Sammamish and Kirkland rounded out the top five.
The average listing price in Centralia is $181,067. Spokane Valley, Spokane, Spanaway and Kelso round out the five cities in the state with most affordable housing.
Despite its million-dollar average, Mercer Island didn’t crack the top 20 most expensive markets in the U.S.
The report removes outliers such as pricey Medina and Clyde Hill. All cities compared had to have at least 10 four-bedroom, two-bath listings.
