State cuts to city of Kent may be less than feared

The Kent City Council heard as close to good news as it gets in this economy.

Chief Administrative Officer John Hodgson reported at the council meeting Tuesday night the city may be looking at about $1 million in cuts from the state rather than a staggering $10 million.

The House Ways and Means Committee Chairman Ross Hunter, D-Medina, released a budget Tuesday that will be voted on by the committee before making it to the floor. It is expected to be voted on Monday by the full House.

The state Senate has not released a budget yet. Hodgson wrote in an email, “After the Senate has finalized their budget then the negotiations start.”

According to Hodgson, the budget currently in the House “includes full funding” of the streamlined sales tax mitigation and annexation sales tax credit. Both sources of funds for Kent were on the chopping block in Gov. Chris Gregoire’s proposed budget.

The annexation sales tax credit was used by the city in the 2010 Panther Lake annexation to help the city provide services to the area.

Streamlined sales tax mitigation for the state helped the city offset some of the lost revenue when sales tax revenue was transferred to destination rather than where the product originated from or was shipped. Because Kent has such a large distribution warehouse district, the city was hit hard when the streamlined sales tax system began taking effect in 2008.

An example from the state Department of Revenue website is, “…. if a customer in Issaquah buys a couch from a retailer in Seattle, and that couch is shipped to the customer from a warehouse in Kent, Kent gets the local sales tax revenue on that sale (prior to the enactment of the streamlined sales tax system; Under the destination-based sales tax that most states use, the tax would go to Issaquah.”

Hodgson estimated if the city lost both the streamlined sales tax mitigation and annexation credit it could be a $10 million hit for the city.

The House budget was still not all roses and sweets for Kent.

Hodgson informed the council members the city is looking at about a $400,000 loss in liquor tax revenue due to the change in sales after the passage of Initiative 1183. The initiative was approved by voters in November closing state liquor stores and allowing private businesses to sell liquor.

Hodgson also said the House budget cut “$618,000 in criminal justice funding and $45,000 to the courts.”

Even with the annexation credit and streamlined sales tax mitigation restored, Hodgson stated the city is looking at cutting more than $1 million from the budget.

“There are going to be some tough decision ahead,” Hodgson said.

The city has cut many programs and laid off employees in the years since the Great Recession began in 2008, including about 10 during the 2012 budget cycle.