Kent City Council, mayor plan new revenues, expenditure cuts to address upcoming budget shortfall

The Kent City Council and Mayor Dana Ralph have come up with a plan and several options to address the city’s loss of about $10 million a year in state revenue over the next couple of years.

Chief Administrative Officer Derek Matheson sent the following email on Wednesday to city employees to summarize the plan by the mayor and council after their retreat last Friday at the The Platform Apartments rooftop meeting room in downtown Kent:

“Last Friday, Mayor Dana Ralph and the Kent City Council held a half-day retreat with the Mayor’s Leadership Team to follow up on a Feb. 3 retreat discussion about the fiscal cliff.

The mayor and City Council talked about the options available to manage the shortfall of $10 million a year caused by the loss of streamlined sales tax mitigation (starting in 2019) and the expiration of the Panther Lake annexation tax credit (in 2020). The city also has a structural budget deficit of about $2 million a year because our expenses grow at a faster pace than our revenues.

The mayor and City Council agreed to use a three-pronged approach to address the fiscal cliff and structural deficit:

• Increase revenues

• Reduce expenditures

• Reallocate revenues and/or expenditures between funds

Specifically, the mayor and council agreed to the following options to mitigate the fiscal cliff, including:

• Eliminate the sunset of a 2 percent internal utility tax, starting in 2019.

• Move most sales tax revenue from the capital resource fund to the general fund, starting in 2020.

• Move a 4 percent internal utility tax from the capital resources fund to the general fund in 2021.

• Move eligible costs to the criminal justice fund, starting in 2021.

• Avoid adding new positions or otherwise increasing expenses unless absolutely necessary.

There are two additional options that the mayor and council could implement:

• Raise the business & occupation tax and square footage tax to maximum allowable rates and place the new revenue in the general fund.

• Add a $20 vehicle license fee (through a Transportation Benefit District).

There are two further solutions the mayor and council could implement through a ballot measure:

• Increase the sales tax rate by 0.2 percent to generate approximately $5 million revenue.

• Allow property taxes to be raised more than the 1 percent per year allowed by state law (“levy lid lift.”)

Even with these options, it will still be necessary to reduce expenditures, but the mayor and council’s agreement to increase revenues and reallocate funds will significantly lower the amount of expenses that must be reduced.

As we said before, the fiscal cliff is a challenging situation. It will take hard work and sacrifice to come up with viable solutions. Throughout this process, we are committed to being transparent internally and externally, and the mayor and city council are committed to working together to find the best solutions for the city.

We are hosting three community meetings over the next several months to share this information with the public:

• Tuesday, March 27, 7 p.m., Trinity Church (3807 Reith Road)

• Saturday, April 21, 10 a.m., Sunrise Elementary (22300 132nd Ave. SE)

• Thursday, May 3, 7 p.m., Senior Center (600 E. Smith St.)

Mayor Ralph will present her 2019-2020 budget to the council in the fall. The council will review the proposal and vote on a budget in December.