Thanks to disciplined budgeting by City of Mountlake Terrace staff and increased revenue from last summer’s voter-approved property tax increase, the city has been able to re-establish targeted reserves and has seen its overall financial position improve.
City Finance Director Crystil Wooldridge provided that good news during her fourth quarter 2016 financial report to the city council during its April 13 work/study session.
“The majority of the city’s funds ended the year with better financial results than were forecast and budgeted,” Wooldridge told the council. “This was accomplished through implementation of a controlled budget and staff’s continued efforts to reduce costs whenever possible.”
Reinforcing the message that the city is committed to “living within our financial means,” the finance director noted that total general fund expenditures were $13,711,739, which was $1,405,746 under the $15,117,485 budgeted.
The city stressed that it was committed to financial belt tightening when it asked voters in August 2016 to pass a property tax increase to cover ongoing expenses related to renting an interim city hall facility.
Proposition 1, which received 53 percent approval, allowed the city to raise property taxes by 44 cents per $1,000 of assessed property value per year, or $154 per year if the property is worth $350,000.
During her report, Wooldridge reviewed the status of the city’s various funds for 2016 and how they have compared with previous years.
Among the highlights:
– Sales tax collections for 2016 were $2,324,833, exceeding budget by $38,960. Sales tax from retail trade accounted for 31 percent, and sales tax from construction was 15 percent. “This has switched from years past,” she said. “Typically in the past construction has been the largest sales tax payer and for 2016 it was retail sales.” She attributed the increase to the sale of goods — presumably software — from a large technology company to a local business.
– Gambling tax revenues from the city’s casinos were under budget, totaling $870,164 for the year, or 93 percent of the city’s revised annual budget. The city’s gambling revenues have been declining since 2014, and but that slide appears to have “leveled
off,” she said.
– Development services fees totaled $1,340,549 or 102 percent of the city’s $1,320,000 budget.
– Fines and forfeitures were down 49 percent — coming in at $219,998 instead of the budgeted $450,883. Wooldridge noted that civil violations were also down — with 35 in 2016, down from 131 in 2015 — as were traffic violations, with 1,270 in 2016 compared to 2,594 in 2015. “I think this probably has to do with the staffing levels in the police department,” she said.
– The city saw increasing revenue in 2016, with the majority of that coming from development services. Operating revenues came in at $700,000 over the 2015 actuals. “The majority of this increase is directly tied to development services fees,” she said, including a $287,000 increase each from building permit fees and plan check and zoning fees, and a $83,000 bump for engineering fees.
– Expenses for 2016 were $15 million. Over the four-year period, from 2012-2016, city expenses increased $1 million, or 7 percent. “That’s an annual average of 1.8 percent cost increase per year, which is…a low percentage as far as cost inflation, and something to be proud of,” Wooldridge said. “That shows that the staff and the council and the city manager all have kind of done their part to get their expenditures within their revenue sources.”
– The ending fund balance for 2016 totaled $1.2 million. The city has $251,709 in outstanding encumbrances and of those obligations, $234,000 is for city’s anticipated share of two years of retroactive costs to cover the city’s contract with Snohomish County Fire District 1. (The amount has not yet been assessed because the Fire District is still negotiating its labor contract with firefighters.)
– The city also has a $267,761 contingency fund, representing 2 percent of operating expenses, and $669,403 in reserve (5 percent of operating expenses). That news indicates the city is back on track with a healthy reserve balance after a few lean years in which it had to dip into reserve funds to meet operating expenses.
“In 2016, the city had $216,000 in unreserved and we are fully funded for reserves,” Wooldridge said. “This is the first year over a three-year period that we actually have met our goal of being fully funded as far as reserve balances go.”
In making a case for the Proposition 1 property tax increase, city officials said that without it, the city would run out of reserve funds by the end of 2016.
The property tax revenues allow the city to pay rent at Interim City Hall for the next four years while making plans for a new permanent city hall, as well as funding parks and recreation needs, which are not fully covered by user fees. After four years, the 19-cent portion of the levy paying for rent will disappear, while the 25-cent funding for parks and recreation would remain.
A City Hall Advisory Committee has been reviewing options for a new city hall design that could be put before voters for funding approval this summer. The next meeting of that committee is April 20.
(You can see the finance director’s full fourth quarter 2016 presentation here.)
— By Teresa Wippel