Mayor Mary Lou Pauly presented her proposed 2020 budget to the Issaquah City Council during a special meeting on Sept. 24.
Pauly explained that there is a predicted gap of about $5 million, and that the city is in a structural deficit, meaning expenses outweigh revenues.
“This is the biggest gap I have ever seen,” Pauly said. It is Pauly’s second budget as mayor.
“This is a really big deal for a city of our size,” she said. “It’s going to be a really tough year for council.”
The mayor said this will be an interesting year as the city will be considering new revenue options and also having to cut spending in an attempt to reduce the shortfall.
The adopted 2019 budget had $53 million in general fund expenditures, but revenues failed to hit anticipated amounts, so the general fund is now down about $3 million relative to 2019, Pauly said.
“Assuming this same expenditure level in 2020, this creates a $5.2 million gap for 2020(the gap between expenditures and revenues). In other words, projected revenues are not sufficient to sustain existing services,” she said.
In the budget document Pauly writes that the proposed 2020 budget totals $148.2 million in expenditures, including $50.3 million for the general fund.
Pauly said a priority plan for 2020 is to fund an assessment of city services — a $250,000 expense — which aims to increase efficiency and make overall improvements. More than $1 million also will go to improving financial management infrastructure.
Another priority within the proposal is investing about $15.6 million in transportation capital investments, aiming to improve mobility. The budget allocates about $3.2 million to be invested in parks. Additionally, the proposal includes about $39 million of projects as detailed in the city’s 2020-2025 Capital Improvement Plan.
The proposal maintains current public safety functions and the city will continue to locate a temporary fire station in North Issaquah. The city also will continue with various Strategic Plan items.
Pauly later described the meeting as somewhat somber, as she had to deliver news of some big upcoming challenges for the city council.
She said the main challenge in creating the proposed budget was the city’s weakening revenue picture, the single biggest reason for which is an ongoing decline in city sales tax revenue, one of the city’s primary revenue sources.
“In 2017 and 2018 general fund expenditures were supported by a relatively steady $50 million in revenues, which was fueled by strength in sales tax revenue. The 2019 adopted budget assumed that sales tax and other revenues would propel overall revenues higher than in 2017 and 2018, allowing for an expansion of city services,” she said in her presentation. “Those assumptions, however, are not materializing, and revenues are projected to end 2019, and continue into 2020, at levels lower than what the city experienced in previous years.”
The proposed 2020 budget from the mayor seeks to increase revenue in other ways, like increasing certain taxes and implementing new fees for services.
“Along with expenditure reductions, this budget also recommends leveraging revenue tools. Simply put, city revenues are not growing at a rate sufficient to sustain existing services, resulting in structural shortfalls,” she said.
The proposal suggests collecting the banked tax capacity, which is the amount of property tax accumulated over time while the city has been charging below the maximum permissible rate. That would generate about $138,000 in property tax revenue and cost about $10 each year for the average taxpayer in Issaquah.
Pauly also recommends increasing utility tax rates, which she said are more stable than sales taxes. Right now the city does not charge the same rate for taxes on all utilities, having a lower rate for some. Non-city operated utilities are already at the maximum allowable rate of 6 percent. The suggestion is to raise all utilities tax rates to all be at 6 percent.
“This change is expected to generate $1.9 million in revenues for the general fund, and result in an estimated $14.10 increase in the monthly utility tax charges to the average city of Issaquah rate payer,” Pauly said.
The budget proposal also recommends several increases of parks fees, as well as the rates charged for Senior Gold Pass. Residents also can expect new community center fees.
To cut some of its costs, the proposed budget suggests not filling seven open city positions. Additionally, all city departments reviewed their budgets to identify spending that could be reduced. Pauly also proposes slowing the rate of growth on salary and benefits.
The proposal also reduces the amount the city would award for community fund grants to community organizations. Plus, some parks services and hours will be reduced to previous levels.
When asked what she was most hopeful or excited about within the proposed budget, Pauly mentioned the projects outlined in the CIP. She said some of the items are technology related, which she is extra excited for.
“We’re continuing to get great work done. We’re still building new things,” she said.
Balancing the proposed budget was challenging, she said, and the mayor worked closely with team members.
“Special thank you to my finance team and for all the work that the directors put into feeding in the great information that’s in this year’s budget. You guys are fantastic — you did a really great job,” she said at the meeting.
The council will have several study sessions to deliberate over the proposed budget and make any changes to it throughout October and into November. Deliberations will include hearing overview presentations from city departments.
A public hearing for the final budget is scheduled for the Nov. 18 regular city council meeting.
“The 2020 proposed budget will allow the city to continue providing high quality services to Issaquah residents, with a focus on preserving and protecting public safety, enhancing investments in our parks and open space and improving transportation mobility, our community’s number one priority,” Pauly said in her presentation.
The proposed 2020 budget document and information can be viewed on the city’s website at issaquahwa.gov/2020budget.