Kent City Council looks to excess sales tax revenue to solve budget deficit

Published 11:28 am Thursday, December 3, 2015

The Kent City Council plans to count on excess sales tax revenues to help solve a 2016 general fund budget shortfall.

That means no new city taxes next year. Mayor Suzette Cooke proposed a slight jump in property taxes next year to cover a $863,000 gap.

But the council expects on Tuesday, Dec. 8, to approve a 2016 budget adjustment using the higher than initially projected sales tax revenues to cover the deficit.

The council proposes to use $430,000 in excess sales tax revenue toward the budget shortfall.

It also will reallocate $433,000 of sales tax revenues from the capital improvement fund to the general fund to cover the remaining deficit.

“This would take the place of the mayor’s proposal,” Council President Dana Ralph said last month at a council budget workshop.

The council’s Operations Committee voted 3-0 on Tuesday to recommend the full seven-member council approve the budget next week.

Cooke had proposed another hike similar to last year in what’s known as banked capacity to raise property taxes higher than the 1 percent state cap.

Kent has saved about $6 million in banked capacity because the city reduced its property tax levy by $1 per $1,000 assessed valuation in 2011 after voters in 2010 approved the formation of the Kent Fire Department Regional Fire Authority (RFA).

The RFA levies a property tax of $1 per $1,000 assessed valuation.

The mayor’s proposal would have cost about $20 per year for the owner of a $300,000 home.

City Finance Director Aaron BeMiller told the council he’s comfortable the sales tax revenue in 2016 will come in higher than the 2015-16 budget had projected.

BeMiller estimates sales tax revenue to bring in about $18.4 million in 2015 to the general fund, which is 8.4 percent above the budgeted amount of $17 million. He projects the higher revenues to continue in 2016 because of a stronger economy.

The city uses about 70 percent of sales tax revenue for general fund costs and about 30 percent for capital improvement projects, such as streets, parks or facilities.

For next year, the council plans to keep about 2 percent more of the sales tax revenue in the general fund to help cover the $863,000 budget shortfall.

“It’s a one-time fix knowing going into 2017-18 budget conversations that all bets are off the table …it fixes us for 2016,” Ralph said.

Council members also plan to change, as proposed by the mayor, how it distributes internal utility tax dollars that help fund information technology (IT) and street capital projects.

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.

The city’s utility funds are in solid financial shape, so city officials use that money to cover other costs.

Rather than splitting $2 million from the internal utility tax between IT and streets, $1 million would go to IT but the other $1 million would be divided evenly between parks projects and the Meeker Street Corridor project.

The parks money would be used to help expand the city’s Morrill Meadows Park property on the East Hill as part of a partnership with the YMCA to build a recreational facility in the next several years on the site.

The Meeker Street Corridor project involves city plans to make the street a gateway between downtown and the Riverbend Golf Complex with improvements to the street and development along the road. The funds would be used toward design and construction costs.