As a Kent resident, Denton Hanford’s worried that city officials could put the city budget in a deep financial hole because of what he called an “unrealistic” projection of an increase in sales tax revenue for 2009.
“Not only is their original budget unrealistic, their projections at this point are unrealistic,” Hanford said during an interview last month. “I feel had they been looking forward they would not have to cut as deep as they will have to. The number of layoffs could be less with more realistic budget projections.”
Kent Mayor Suzette Cooke announced plans in early September to propose $3.1 million in job and service cuts when she presents her 2010 preliminary budget in mid-October to the City Council.
City officials expect a balanced budget at the end of 2009 partly because of an anticipated increase in sales tax revenue for the second half of the year compared to the first six months. The city generally receives about 20 percent of its overall revenue from sales taxes.
Bob Nachlinger, city financial director, disagreed with Hanford’s predictions. Hanford also appeared at a recent City Council’s Operations Committee meeting to share his budget concerns with the committee as well as Nachlinger.
“Denton and I have different assumptions about what will happen with the economy,” Nachlinger said in a phone interview last month. “He assumes a further decline. I assume we’ve hit bottom and actually things are trending upward rather than downward.”
Hanford, a retired Boeing executive who has lived in Kent for nearly 40 years, said he started to closely watch the city budget last December after the Council voted 4-3 to adopt the budget. Hanford has analyzed city monthly financial reports for the last several months as well as the overall 2009 budget. He also has looked at Wall Street Journal economic forecasts.
“I noticed they projected no decrease, but a 9 percent increase in sales tax revenue (to $20 million from $18.4 million) for 2009 compared to 2008 and that struck me as ludicrous,” Hanford said. “That shows a lack of foresight to present a preliminary budget in December and make that projection.”
So far through June, the city has collected $7.2 million in sales-tax revenue. Nachlinger predicts that sales-tax revenue will reach $18 million by the end of the year by taking in an estimated $11 million in the second half of 2009. That $18 million is still 10 percent less than the projected $20 million in sales tax revenue for this year.
“The sales tax generally comes in higher the second half of the year from the first half,” Nachlinger said. “The second half is better because you have back-to-school sales, when people spend a lot of money, and then you have Christmas.”
Nachlinger said the economy shows other signs of turning around. He said that includes a decline in the state unemployment rate in June from 9.6 percent to 9.4 percent and a national increase in the consumer confidence rate that can lead to more consumer spending.
“I’m still anticipating a balanced budget,” Nachlinger said. “We’re doing our forecasting based on the last five years’ worth of data. I’m anticipating growth in the economy in the second two quarters of this year.”
“Citizens have a right to do that,” City Chief Administrative Officer John Hodgson said, of Hanford’s criticisms. “But Bob (Nachlinger) uses regional and national forecasting institutions to track what the forecasts might be.”
Despite so much analysis of financial predictions, Nachlinger said it’s possible Hanford could be right about a decline in sales tax revenues the rest of the year.
“He could be right,” Nachlinger said. “I don’t think so, but I’ll be the first to admit that he could be right.”
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