By Shawn Hunstock
The Edmonds City Council’s adopted 2012 budget includes an estimated $66,678,984 in revenue. While $66.7 million appears to be a large amount of available resources for the City, a significant portion of it comes with restrictions on how the money can be spent, as illustrated below. Many of these restrictions are either legal or contractual, meaning the City Council has no discretion over how the money is to be used. Below is a table that shows all the budgeted funds for 2012 and the amounts that are restricted.
General Fund Restrictions
The General Fund is the general operating fund of the City and encompasses the major services provided by the City (excluding utilities): police, fire, parks and recreation, street and right of way maintenance, development services, legal, judicial, and financial services, and general administration. The General Fund has $33,006,588 of budgeted revenue for 2012, of which almost $8 million, or over 24%, is restricted for particular purposes. Of this amount, the largest restriction is the Emergency Medical Services levy, a revenue source that brings in approximately $3.2 million per year and, along with approximately $750,000 of emergency transport fees, can only be used for the provision of emergency medical services according to state statutes.
What does this mean for the City? Approximately 76% of the revenue in the General Fund remains unrestricted. This being said, two of the largest revenue sources, property tax and sales tax, comprising 55% of the revenue in the General Fund are flat or have been declining the last few years. Increases in property taxes, the City’s largest revenue source, are also limited by state statute to no more than 1% each year. Compared to the amount collected in 2007, estimated sales tax revenue for year 2012 has declined 14.8%. With 24% of the revenue in the City’s General Fund being restricted to particular purposes, and two of the largest revenue sources flat or declining, less discretionary resources are available to the City to address existing and emerging needs of its residents. Over the last several years, other fund balances have also declined which places even greater pressure on limited discretionary revenue within the City’s General Fund.
Restrictions in Other Funds
Most revenue in other funds also has restrictions on the use of those resources which is why the revenue is recorded in separate funds. For instance, the City receives approximately $840,000 in motor vehicle taxes and $600,000 of vehicle license tab fees, both of which must be used exclusively for transportation related improvements. The City expects to match that revenue with nearly $1.5 million of grant revenue in 2012 for street maintenance and improvements.
Examples of other significant restricted revenue include: over $24 million in utility revenue that must be used for operations, maintenance and capital investment for the benefit of utility customers; approximately $1.2 million annually from two different types of real estate excise taxes that are limited by state statute to capital infrastructure construction and maintenance, and Parks and Recreation related projects by Council policy; a transfer of approximately $600,000 from the General Fund into the LEOFF retirement fund as required payment of medical benefits for retired firefighters, police officers or their surviving spouses; and an estimated $70,000 in lodging taxes that state statute requires be used exclusively for tourism promotion.
As mentioned previously, fund balances in the other funds, besides the General Fund, have declined significantly the last several years. Because the use of revenue in these other funds is very limited, that means there has been and will continue to be pressure on the General Fund to keep other funds financially viable.
Shawn Hunstock is doing a great job in helping citizens understand the complexity of our budget issues. Edmonds is lucky to have him as our finance director.
Thank you Shawn for taking the time to communicate with citizens regarding budget and financial issues in the City of Edmonds. Your commitment to open government is encouraging.
I want to make a few simplistic points for Edmonds’ citizens to consider regarding the challenging budget issues at hand.
The General Fund Expenditure Budget (GFEB) prepared for 2004 totaled approximately $26.5 million. The General Fund is the source of dollars for City programs such as public safety, parks, and development services. Approximately twenty-three percent (23%) of the 2004 GFEB related to the Fire Department, which is no longer a City Department. Deducting the Fire Department from the GFEB prepared for 2004 would have resulted in an adjusted 2004 GFEB of approximately $20.5 million.
The proposed GFEB prepared for 2012 totals approximately $33.0 million, roughly a 61% increase in budgeted expense over the GFEB prepared for 2004 after the Fire Department is backed out.
The Snohomish County Assessor reports that the average assessed taxable value per residence in Edmonds is $337,300 for 2012, roughly a 21% increase over the average assessed taxable value per residence in Edmonds of $278,000 in 2004. Budgeted General Fund Property Tax Revenue is approximately $13.4 million in 2012, roughly a 30% increase over Budgeted General Fund Property Tax Revenue of approximately $10.3 million in 2004.
Budgeted General Fund Retail Sales Tax Revenue is approximately $4.7 million in 2012, roughly a 5% DECREASE from Budgeted General Fund Retail Sales Tax Revenue of approximately $4.95 million in 2004.
This is a simplified version of our City’s Financial Condition, but it supports Mayor Earling’s comments made during the Edmonds Chamber of Commerce Luncheon on February 23, 2012 that these factors are helping to cause an ever-widening gap between revenue and expenses that cannot be addressed with one-time use of reserves or with the addition of new revenue sources alone.
I am of the opinion that we need to review all expense categories and reduce expenses wherever possible, as soon as possible. The approximate 61% increase in 2012 budgeted expenses over the GFEB prepared for 2004 is alarming when one considers a smaller percentage increase in Property Tax Revenue and a decline in Sales Tax Revenue since 2004.