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Explaining our city's financial picture | Mayor Cooke
At its final meeting of 2013, the City Council approved adjustments to the second year of our biennial budget. I'd like to respond to your Dec. 5 article mentioning the city's $1.9 million "surplus" in the general fund.
While this seems like really great news - news that we haven't heard since the recession began - it's important for us to keep this information in the proper context.
The city has 21 separate funds. Imagine them as 21 separate checking accounts. One of those accounts - the general fund - has a $1.9 million balance at the end of this year. However, another account - the capital improvement fund - is $8 million in the red. We borrowed against that fund in order to limit the cuts we had to make to city operations. The excitement about the general fund balance is dimmed when we look at the "overdraft" in the capital improvement fund.
To further complicate this situation, our revenues grow by only 1.5 to 2 percent per year, while expenses average 3 to 3.5 percent per year.
This is called a structural imbalance. In good years, like this one, we come out OK; but in bad years, like those during the recession, there's no financial cushion. This is why some of us consider the increased revenues we're seeing now as a temporary boost to our bottom line. Given the structural imbalance, the budget is unsustainable in the long term without new revenues, reduction in expenses, or a combination of both.
The proposal the council approved at its Dec. 11 meeting includes some new expenditures to meet priorities discussed during budget workshops, including an increase in fund reserves and continuing to pay down the debt.
That leaves $1.2 million unallocated to a specific purpose. My priority is to apply these funds to the "overdrawn checking account" we have in the capital improvement fund where our debt is.
At the end of the day, the "surplus" mentioned in your article is really not a surplus at all.
Post-recession, we all know this city has a lot of needs. We have a maintenance backlog, we have infrastructure needs and we have a debt bill that needs to be paid. Until these needs are met, a real surplus is not possible.
As you can see, our city's financial picture is complicated. While it's not as rosy as we would like, I am encouraged by the improving economy. I'm pleased with the Council's sound financial policies that direct us to save more and prioritize paying down debt.
Reach Kent Mayor Suzette Cooke at 253-856-5700 or email@example.com.