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Kent City Council's budget vote to include new cable utility tax, higher permit fees
The Kent City Council will vote on a new cable television utility tax, higher developer permit fees and an increase in the city's internal water and sewer utility taxes when it considers the 2013-14 budget at 7 p.m. Tuesday, Dec. 11 at City Hall.
The council has had numerous workshops over the last couple of months to hash out a budget based on Mayor Suzette Cooke's preliminary budget presented to the council in October that included a proposed business and occupation (B&O) tax. Cooke also slashed 20 jobs on Nov. 1 to cut expenses and help balance the budget. Council members in October approved a B&O tax starting Jan. 1 that is projected to bring in about $5 million a year to help repair city streets.
"I expect we will pass it," said Council President Dennis Higgins in a phone interview Tuesday about the proposed $72 million a year general operating fund budget. "Some council members have objections to portions of it but I expect it to pass."
The mayor and council worked to come up with new revenue packages in an effort to improve the city's financial standing after Moody's Investors Services downgraded the city's bond rating in September for the second time this year.
"This is quite an accomplishment," Higgins said. "We are paying down debt, repairing our financial foundation and diversifying our tax base. With a better foundation, we will not have to be so reactionary in the future."
• Cable utility tax
The 6 percent tax on cable television bills will raise about $1.3 million per year. That money will help pay for information technology staff as well as computer hardware and software.
"I'm a cable subscriber and wish it was something we didn't have to do," Higgins said. "But cable television is somewhat of an optional expenditure. And a cable tax is something almost every other city in our area enacted a long time ago."
• Permit fees
The budget includes higher permit fees for developers. That's expected to bring in as much as $1 million per year.
"The general fund subsidizes the fees to encourage development," Higgins said. "But with the budget we're in we believe we should reduce the subsidy. It's reasonable to ask development to pay more of its way."
The city and developers split the permit costs 50/50. Under the new proposal, the developer will cover 75 percent of the costs and the city 25 percent.
The city spends about $6.5 million per year to issue permits and make inspections, said Fred Satterstrom, planning services director. In 2012, the city will collect about $3.2 million in permit revenue, roughly half of what it spends.
Satterstrom doesn't expect the higher fees to steer developers away from Kent.
"The City Council was concerned about this issue and asked staff to research the permit fees charged by Kent’s neighboring cities as well as cities the same size as Kent," Satterstrom said in an email. "Based on this analysis, we found that when compared to these other cities, proposed fees would not be out-of-line. While some fees may increase slightly and others more significantly, Kent would still remain competitive with comparable jurisdictions when it comes to permit entitlements."
• Internal utility tax
The internal utility tax is when the city taxes the revenue from its water, sewer and storm drainage funds. The funds are known as enterprise funds because all or most of the costs are paid for by user fees.
With the water and sewer funds in solid financial shape, the city plans to increase the 10 percent internal tax to 13 percent, said John Hodgson, city chief administrative officer. Two percent of that increase will raise about $1 million per year to help pay off city debt with a 10-year sunset clause on the increase.
The other 1 percent increase will raise about $500,000 per year to bring up reserves in the general fund. The council prefers to have about 10 percent of the pervious year's budget in a reserve fund and right now it's at about 4 percent. The tax is expected to help the reserve fund get up to 10 percent in three years when that 1 percent increase will end.
"They are in solid shape right now," Hodgson said about the utility funds.
Drainage, water and sewer fees already were set to increase next year even without the additional internal tax. Drainage rates will go up about 5 percent (down from a projected 15 percent increase that was to cover higher levee repair costs); water rates will increase by 3 percent as part of a six-year plan the council passed three years ago; and sewer rates will jump 4 percent.
"We look at it as responsible rebuilding of our foundation with debt paid off and reserves back where they should be," Higgins said of the internal utility tax increase. "It will show Moody's and other bond rating agencies we are responsible in money management."
Higgins said many other cities levy internal utility taxes, some as high as 20 percent.
Of the city's 10 percent internal utility tax, about 6 percent goes to the general operating fund, with a portion to streets and a youth fund. The council approved an increase last year to 10 percent from 6 percent with the additional 4 percent to go to the capital fund to pay for street and information technology projects.
As far as other cost-cutting measures, council members discussed possibly closing the city pool at Kent-Meridian High or reducing the city reserve fund but lacked support to take those steps, Higgins said. They also talked about operating deficits at the city-owned ShoWare Center and Riverbend Golf Complex but didn't come up with any proposals to reduce those deficits.
The council also decided not to go along with Cooke's initial, higher B&O tax proposal that generated revenue for the general fund as well as street repairs.
Voters in November turned down the city's proposal for a property tax levy increase that would have brought in about $29 million over six years, $18.3 million for park projects and repairs and $10.7 million for street repairs. City officials have yet to come up with a way to address those repairs.