The Kent City Council received some much-needed good news at a Tuesday workshop when the 2017 Year-End Financial Report showed a general fund reserves balance of $20.6 million.
The reserves were boosted in part because tax revenue came in higher than projected by Finance Department staff. The city received $21.1 million in sales taxes, $1.3 million above budget; $19.6 million in utility taxes, $700,399 over budget; and $22.9 million in property taxes, $217,534 above budget.
“All in all it is a very positive report,” City Finance Director Aaron BeMiller told the council, which was disappointed at the April 24 rejection by voters of an utility tax increase to help pay for 23 more police officers.
First-year Mayor Dana Ralph and the council also must deal in the upcoming 2019-2020 budget plans with the fiscal cliff – the city’s loss of state-shared revenue. That amount could hit $10 million over the next couple of years as the state’s Panther Lake annexation sales tax credit to Kent expires. The Legislature also plans to cut its budget by taking away the streamlined sales tax mitigation that helped compensate the city for revenue lost when legislators changed the state in 2008 from an origin-based system for local retail sales tax to a destination-based system, gutting the tax revenue Kent received from its large warehouse district.
”It was a strong year,” BeMiller said about 2017. “The city is better set up to address the coming fiscal cliff. We know the fiscal cliff is coming, and it’s hard to keep that in everyone’s mind. We are doing what we should be doing to prepare, but we do know that we have a lot more work to do coming up for the 2019-20 budget process.”
The city ended 2017 with $20.6 million in general fund reserves, which is 20.8 percent of the general fund budget. City staff projects that fund will hit $21.7 million by the end of 2018.
Back in 2013, the city’s reserves fund included only 4 percent of the general fund budget.
“When Council President (Bill) Boyce and I came on to council six years ago, our reserves – it was a scary picture,” Ralph said. “Through absolute diligent work by the finance department, administration and this council, we are in a position that I don’t think any of us would have ever imagined.
“Going into the fiscal cliff keeps all of us up here awake at night, but if we didn’t have this foundation it would be a whole lot worse. … Going into the next budget cycle, it’s going to make a huge difference.”
Ralph said cuts to services and staff will need to be made in the next budget with loss of state-shared revenue, but the cuts would be much deeper if city officials and staff had not worked to get reserves built up.
City leaders added several new taxes and fees since 2013, decisions Ralph said were tough and not popular with everyone. That included a new business and occupation tax that started in 2013 to help pay for street repairs. The tax brought in $9.1 million in 2017.
BeMiller credited city staff for keeping costs down in 2017.
“All of the departments are doing a really good job of living with what we budgeted and staying within our means,” BeMiller said. “They match our city’s budget philosophy that we want to be realistic, however, we want to be a little bit conservative on our revenue estimates which then dictate our expenditures.”
Councilman Dennis Higgins wants residents to know about all of the budget work.
“A well-run operation doesn’t usually make the headlines in the paper, right? You usually read things that draw attention,” Higgins said at the workshop. “I wish there was some way to spread the news to our residents and businesses about how well-run our financial department is because that is the most important story. You can focus on nitty-gritty little details and that gets headlines and gets clicks and I understand that.
“But the most important thing for our people to know is how well-run our finances are and how responsible we are being. I sure wish there was a headline that you could write about that.”
Ralph followed up the comment by Higgins.
“Councilmember Higgins is right,” she said. “This is the story our residents need to understand. It’s not all of that flashy stuff. It’s we are doing the right thing and we have been doing the right thing year over year and that’s how we got here – plain old hard work.”