By Shawn Hunstock, CPA
City of Edmonds Finance Director
The City of Edmonds has been successful in ending the last three years (2009-2011) with a surplus in the General Fund despite declining revenue in each of those years. The city accomplished this by implementing both short-term and permanent cost-cutting measures.
Also, the addition of a few select new revenue options eased the burden on the General Fund. For instance, the $20 annual vehicle license fee implemented in 2009 when the city formed a Transportation Benefit District (TBD) has provided a dedicated funding source of over $600,000 per year. This new revenue source replaces what was a General Fund contribution to transportation maintenance and operational expenses, thereby freeing up General Fund resources for unanticipated expenses or to offset other declining revenue.
The city’s ability to adapt to cost increases for mandated services, or to declining or flat revenue, will be significantly limited by the fact that nearly all the tools the city could use, like the TBD, have been enacted.
Duress Indicators
The table below is adapted from a publication of the Association of Washington Cities titled Red Flags Checklist. The intent of the checklist is to provide information to the community about the internal and external fifteen factors affecting a city’s finances. The factors are not intended to provide solutions to the issues facing cities, but to start the discussion about areas that might or do need attention.
The following describes the meaning behind individual rankings, and the potential implications of the overall scoring based on all 15 factors.
Ranking by Factor
0 Does not apply to our city.
1 Does not currently apply, but could be a consideration given current trends and/or the potential for continued economic downturn.
2 This is something the city is currently considering, or something that might impact the City very soon.
3 This has already occurred in the city, or something the city has already implemented.
Overall Ranking Score
0-15 Opportunity
1. Review specific problems.
2. Seek targeted resources to address them.
16-30 Growing Distress
(City of Edmonds has a total ranking of 22 and falls within this category)
1. Need long-range financial planning that includes an analysis of potential impacts to service levels if improvement does not occur.
2. Identify new resources and potential partners.
3. Communicate with citizens about potential impacts on services.
31-45 Significant Distress
1. Research alternatives to city service provision.
2. Provide strong community leadership.
3. Communicate likely impacts on city services and seek effective citizen involvement to resolve.
The financial distress indicators of most concern for the City of Edmonds relate to cost increases for mandated services the city provides, the city’s reliance on property taxes as our largest source of revenue, and cost increases outpacing revenue growth. Salary and benefit cost increases for mandatory services like police and public works means the city might have to reduce services in other areas or look for opportunities to provide funding for these additional costs.
As mentioned in previous articles on City of Edmonds finances, the 1-percent limitation on property tax increases provides approximately $95,000 in additional revenue to the city for year 2012. Despite the fact that property taxes are the city’s largest revenue source, the 1-percent increase for $95,000 of additional revenue amounts to less than 0.3 percent of the total General Fund budget.
Current projections show costs increasing approximately 3.2 percent per year for the General Fund, and revenue increasing by 1.4 percent. This causes a growing annual deficit each year, meaning the city may need to use reserves to make up the difference in expenses and revenue. According to the latest projections, this could result in city reserves being depleted by 2016.
The Edmonds Mayor and City Council will be addressing these and other issues facing the city during development of the 2013 budget. That process will begin this summer and residents will have the opportunity to provide feedback about the City’s budget during public hearings prior to a new budget being adopted.
allow for recreational marijuana use with a hefty tax on use – transport of -advertisement…… expected fed involvment met with stand your ground type citizens protection.
Revenue sharing with Fed gov would allow for other cities to follow suite against regan era laws
that are”quaint and outdated”
Reciepts should show in excess of $8.8 million per quarter. conservativly.
Interesting numbers, are you suggesting fed tax, then revenue sharing with cities? Is $8.8m the fed number to then be shared or is it the final payment to Edmonds per quarter? If that is a Fed total then the return to Edmonds would be about $4800 per year. While this would help the budget, the gap is still pretty large. A tax on every household in Edmonds of 25 cents per year would raise the same amount.
If the $8.8m is the Edmonds share of the fed tax then the total fed tax would be about $900 per person per year. Not sure the tax rate you have in mind but that seems a little HIGH. A 50% tax rate would mean the average consumption per person would have to be $1800 per year. That would mean every man, woman, and child in Edmonds would have to consume $5 per day. Sounds kind of HIGH.
The City has done a great job with all these articles about our finances. With the gaps that are looming in the near term it is time we roll up our seleves and find some answers. And when an answer is proposed it is also helpful if the math is included so we can clearling understand what the writer has in mind and how it will impact the budget. This is our city and we all have a responsiblility to now sort out our future.
Before cutting services or staff, how about giving some real scrutiny to the amounts of money spent on “consultants” and their fees. The $100K being spent on the Strategic Plan consultant alone could have gone toward a police position. ( crime prevention for example). A top to bottom review of how much is spent on consultants and if the consultants were truly necessary would probably yeild some real savings to the City.
Along those lines, has the new flat rate billing system with the City Attorney actually reduced the legal expenses to the City?