The February 23rd City Council meeting focused almost entirely on the budget deficit, and the levers that Council could pull to address it.

Full agenda with budget presentation: https://kenmorewa.portal.civicclerk.com/event/28/files/agenda/2769

CONSENT AGENDA

Passed unanimously

NEW STAFFShelby Ball - new plans examiner and inspector

Tshilaba Verite - senior budget and fiscal analyst

Michelle Kang - interim assistant to city manager, limited duration in budget

FINANCIAL FORECAST & REVENUE OPTIONS

This meeting focused on the budget and revenue options. City Manager Kilgore and our Finance Director Melinda Merrill presented. This was a study session, so staff was looking for direction and discussion from the council on priorities.

In the next few years our budget will “Cross the line” and the amount that the City will be able to place in reserves will fall below the 20% threshold, then the budget will fall into deficit. Council was asked for direction and feedback on how to address the budget deficit. The three lever options to address the gap are: 1) new revenue, 2) reduce cost/improve efficiencies, or 3) revisit drivers.

Model showing high expense/recession scenario

The financial sustainability plan (FSP) taskforce previously recommended several priorities: 1) address public safety cost, 2) ensure sustainability of parks (Lakepoint has earmarked funds for purchase, but no ongoing maintenance, for example), 3) improve efficiency. They also recommended three separate ballot measures to raise revenue.

Council has taken action on many of the recommendations from the FSP. KAPE (Kenmore Automated Photo Enforcement – speed cameras) is one of those items, but predicting revenue has been a bit of a moving target due to court costs. There is currently being considered at the State level that would change the way that funds from traffic cameras are allocated to the cities.

Current expenses are increasing 5-8% and revenues are increasing 1-5% (gambling is the 5%). There are concerns that make the forecast squishy (AI job loss, soft real estate market) and staff presented several different versions of our budget forecast, including a recession version. Our largest source of revenue is property taxes; our largest expenditure is public safety. With regular expenditures and no recession, our budget crosses the line (falls below reserve targets) late 2029. With high expense, recession scenario, the line crosses in late 2028.

Our previous City Manager broke the budget into CORE, BASIC and ENHANCED buckets. The “Love Where You Live” survey gave community feedback on priorities, and the top buckets (safety, maintaining parks) were so strong that the pollster does not believe that we need to re-survey. The community said to do a combination of cuts and new tax revenues.

If we add a new revenue source this year we need a minimum of $2.4m/yr of revenue to balance the budget (temporarily). Mayor Herbig offered, for context, that when he first started on council 12 years ago “the lines were crossing in a few years” – this is always what we are looking at a few years out, and this is a different situation but it’s always something that we need to be mindful of.

Staff presented multiple revenue options: some can be approved directly by council, others have to be voter approved. There are still items from the FSP that the council can act on without voter approval (vehicle tab increase, utility tax increase, surface water utility tax increase, public safety tax increase, transportation sales tax already going in).

DISCUSSION

CM Culver indicated that he believes we are in/heading towards a recession. He suggested a few revenue ideas: he wants an analysis of B&O tax being expanded into other industries. RCW 82.14.530, 0.1% affordable housing sales tax, which would have to be voter approved. RCW 82.14.540 is a fraction of a percentage and another sales tax option. He also asked staff what our debt capacity is.

CM Adman referenced polling that said people favored some combination of tax and cuts. He voiced that he does have a preference for some revenue generation. He asked if there’s a limit on how much can be collected on the levy lid lift. CM Loutsis says the state limit is $10 for taxes, local municipalities have $5.90 max for everything that we share [this is per $1k in assessed property value].

CM O’Cain suggested that although we are happy with our position as a contract city, other cities have approached us about combining public safety but we might want to look into this. She also mentioned that the metropolitan parks district (MPD) is a variable and that the changes can be councilmanic [there was some contradiction on this during discussion].

CM O’Cain also asked what it would take for development and growth to contribute to the budget deficit. How do we get to a place where we get to not just getting money from individual taxes?

Mayor Herbig said that renewing contracts periodically is good policy, and that he would like to get ahead of this and institute a councilmanic .1% tax this year.

CM Marshall voiced concern over legal liability if we bring some of our services, such as public safety, in-house.

DM Sasson repeated other praise of staff, as well as CM O’Cain’s vision looking towards the future growth of Kenmore. She voiced support of councilmatic action this year, and said the things that we often categorize as “enhanced” services are often those who benefit the most vulnerable in our community. She feels some of these are basic.

STAFF & COUNCIL REPORTS

City Manager Kilgore said they opened public works center bids, they are in range of planned budget estimates (a rare occurrence).

CMs Marshall, O’Cain, Adman and Mayor Herbig voiced praise for city staff.

CM Loutsis said that there was language in the NPRSA levy that would allow for cost-sharing for facilities that are for the service of seniors. Right now, Kenmore is the only one that would qualify for this since we have a Senior Center. They are working on the policy currently and he would like feedback.

DM Sasson was selected to represent Kenmore on KCRHA Continuity of Care Board. Lastly, anyone interested in housing options, NUHSA Housing Committee hosted two speakers last week talking about social housing.

EXECUTIVE SESSION to consider acquisition of real estate.

Feb. 23 Council Meeting

Stream Buffers