Saturday, May 10, 2008

City Budget Woes

Not too long ago, the City of Vancouver apparently was well-positioned financially to provide broad and a high level of services to our growing community. I say "apparently" because this was the situation before I became a councilmember (2003).

Prior to 2003, the City's revenues included a local Business & Occupation Tax (B&O), state monies from the Motor Vehicle Excise Tax (MVET -- vehicle registration), and property tax increase of up to some 6%/year. However, the availability of those revenues to support city services were either eliminated or significantly cut: the City Council eliminated the local B&O Tax; and the voters of Washington cut the MVET and capped the property tax increase to 1%/year.

The result of these changes? City staff estimate some $107 million in taxes lost to the City over the period of 2001-2008 ($67 million lost B&O; $40 million lost from WA State Initiatives).

The result of that loss of revenues? Described by city staff as a "structural deficit". The short story is that revenues (taxes/fees) aren't keeping up with the expenses. Since I've been a councilmember, every budget process (occuring every 2 years) has been led by a discussion of prioritization and cuts. In this coming biennium, the City has a $6 million deficit

Indeed, much prioritization and cuts in programs have resulted in the time I've been involved in budgeting for the City. The cuts have occurred in departments/services/programs that have been deemed less important. Over the past five years, in general the city council has prioritized funding Police, Fire and Transportation. Budgets for programs like Parks & Recreation received large cuts; other programs were eliminated and the Community Service Department was altogether shelved. All told, since 2001 the City has cut programs and positions to the tune of $14 million to balance the general budget.

During the same period, the city council did also raise taxes/fees....nibbling around the edges. Utility taxes were increased; garbage fees were increased; development and building permit fees were increased; the business license fee was increased; and a business employee head-tax was implemented. These increases don't cover the entire lost monies. As a result, the severity of cuts in services was lessened.

The city council has very few choices of its own for raising taxes/fees. Available options at this time include:

#1) $20 license registration fee -- generating some $2-3 million/year
#2) 4% Utility Tax (water/sewer/stormwater) -- generating some $2.4 million/year
#3) B&O Tax -- generating upwards of $8-10 million per year @ maximum rate

Other new revenue choices, requiring voter approval, that have been put on the table include:

#1) Additional license registration fee -- up to $100.
#2) Levy Lid Lift -- increase in property tax.
#3) Transportation Benefit District -- special levy on property for transportation projects.
#4) Maintenance & Operations (M&O) -- special levy on property for city operations (typically fire and/or police).
#5) Capital Facilities Bonds -- levy on property for new city buildings (new fire stations).

No solution will come without some pain, whether cuts in service or increases in taxes. The current economic conditions don't bode well for support of additional taxes/fees; the current growth issues don't bode well for cuts in service. Further discussion with the entire council, city staff and the public must ensue.

The Leavitt Plan

Ultimately, the City of Vancouver must balance an investment of limited resources into key services/programs that keep our community safe, stimulate job growth and maintain as best as possible our fine quality of life.

Given the current economic conditions and options available to the city, I will offer the following interim budget plan for consideration by the council:

#1) Reduce the transportation capital improvement program (TIP). PRESENTLY, the city is barely able to keep up with the maintenance of our existing roads. Limit new road construction to a priority of projects included in the Business License Fee surcharge/Head Tax, and, limit new construction to only projects that have matching private investment (e.g., new development presently in progress). No new roadway capacity projects to be funded/constructed. Re-alocate a portion of the general fund TIP monies to prioritize maintenance of our existing roadways. City to continue working on alternative and sustained funding options with the State Legislature and City Council. Ultimately, eliminate the Business License Fee surcharge and head tax and replace with a street utility tax.

Rationale: The City is presently struggling to patch together a roadway capital projects program, with some $400 million in capital projects identified as "needed". The City is presently struggling to maintain the existing roadways and medians. Maintain what we have, for the time-being, until appropriate funding is in-place for new construction and maintenance. New capital projects for increased capacity are low priority under current fiscal circumstances.

#2) Re-alocate general fund TIP money into development of after-school programs for our children and teen-agers. Working with community partners (e.g., school districts, ESD 112, non-profits and business), develop a comprehensive after-school program for junior high and high school students. Program to include educational, recreational and vocational components.

Rationale: City recreational/parks programs have absorbed large cuts in previous budget processes. There is a clear and demonstrated need through statistics from the schools, the health department and the police department to keep kids engaged after the school day ends. Lack of after school programs, from the 2 or 3-6pm timeframe is becomming a significant issue in our community.

to be continued....

2 comments:

Bob Koski said...

Tim;

The City's budget woes do not come from a lack of revenue, they ccome from a lack of control over what the City spends money on.

You want to impose more fees, but you recently joined a unanimous vote to approve spending $7 Million in design fees for the underpasses at the former Boise cascade site.

Council is talking about cutting Police and Fire protection again, but are still planning on continuing their Millions in direct support of the Vancouver Hilton, and other Downtown redevelopment projects.

How many cops could the Vancouver Police hire with the money that is still pouring down that rathole at the former Indoor Farmer's Market??

Tim, do you really think that you can get elected Mayor of Vancouver by talking about the tax increases that you are considering??

Tim Leavitt said...

Hi Bob --

The budget woes come from prioritization of services/programs (spending) AND reduction in revenues (elimination of B&O Tax, property tax cap at 1%, elimination of the Motor Vehicle Excise Tax).
As you've heard, some $15 million in spending cuts have been made since 2002, including huge cuts to Parks and Recreation, the elimination of the Community Services Department, and reductions in staff at City Hall.
With a looming $6 million deficit for the next biennium budget, please let me know where you feel we should make further cuts or prioritize services. Some of my thoughts are to be finished in the earlier blog.
Indeed, the city is spending some money for tenant improvements to the former indoor farmers market space, BUT....that space is being leased out long-term and the tenant improvement costs are being recouped in the lease rate.
I don't quite remember the $$$ amount for design fees for the rail berm underpass...but I know for certain the DESIGN FEES weren't $7 million...are you thinking of cost of construction for a project?
In any event, I'm not positioning to increase any taxes at this time...simply putting all options on the table for discussion.

thanks
tim