Last week, the city councils in Bothell and Kenmore took a preliminary look at their 2019-20 budgets and heard their city managers explain the challenges that property tax-reliant cities face in their operations: costs are rising faster than revenues.
“It has become increasingly challenging to produce a balanced budget,” Kenmore city manager Rob Karlinsey said at the council’s Oct. 8 meeting. “Eventually, we will need to have a broader discussion with the community about the structural revenue problem that many bedroom communities like Kenmore face.”
Both Kenmore and Bothell are considering “status quo” budgets that don’t add a lot of new services or staff, and don’t fully fund many projects.
“The bottom line is we have a structural deficit,” Bothell city manager Jennifer Phillips said at the council’s Oct. 9 meeting. “We need to look at opportunities to reduce our expenses or increase our revenues.”
For Kenmore, pavement preservation was identified as a priority, though a more robust program would cost an extra $2 million per year. In Bothell, Phillips noted that the city can’t fully fund its asset replacement program, meaning that when it needs to replace turf fields, firefighting equipment or other major assets, it has to dip into its general fund or reserves.
Both Bothell and Kenmore are known as bedroom communities, with smaller retail sales tax bases than surrounding cities like Woodinville and Lynnwood, and both decided not to increase property taxes the allowed 1 percent during the Great Recession.
“Those are the things that are impacting our budget and the ability to deliver the level of service this community would like to have, but we have limited revenue to be able to do that as our costs of services continue to increase,” Phillips said.
Bothell is going out to voters with two public safety measures this November, but the budget was prepared assuming no new revenue sources, Phillips said. She will come back with a budget adjustment in January if voters approve the levy and or bond.
Kenmore may consider a voter-approved levy lid lift to solve its financial challenges, but will also look at other revenue sources, including banked capacity, utility taxes, or raising the fee above $20 with its transportation benefit district, according to its budget document.
Bothell will look at aggressive grant strategies for parks and public works, state funding, technology upgrades and efficiencies. The city has been looking to sell the properties it owns in downtown to pay the lease on City Hall, but has to do some contamination cleanup before putting them on the market.
Bothell also had to use money for future capital projects to balance its 2017-18 budget. At its last review, the council was told that the city overspent and was looking at a $3.2 million deficit to $1.5 surplus after Phillips moved some money around and put a hiring freeze on the city.
One of Phillips’ other priorities was to establish a strong reserve fund for Bothell, which would be used to enhance the city’s credit rating and in case of emergency.
Karlinsey said he’s also looking to the future, wanting to set aside money for future maintenance of Kenmore’s Walkways and Waterways projects. They are expected to be complete in the early- to mid-2020s.
Kenmore will also look for help from the state on the sales tax “leakage” problem, and for things the state told them to do without funding it, like elections.
“While I would prefer that the State save the day by more fairly distributing sales tax and easing up on unfunded mandates, the solution will most likely be a combination of cutting services and raising taxes and fees,” Karlinsey wrote in his budget message.
In their preliminary budgets, both cities have funding for human services, A Regional Coalition for Housing (ARCH) and an enhanced focus on special events.
Bothell and Kenmore will continue to discuss their budgets in October and November, and must adopt them in December.