City finances are 43 percent under 2008 projections

June 5, 2008

By Chantelle Lusebrink

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Council members question whether staff layoffs are in the future

New forecasts for the city’s budget show that its first-quarter profits for the general fund are down.The city’s overall projected revenues for 2008 are supposed to be about $6.9 million. The amount collected the first quarter was only about $748,000. 

City Budget Manager Christine Olson made a presentation to the City Council at its May 6 meeting. 

Three areas of the budget that dipped significantly the first quarter were building permit revenues, plan check fee revenues and interest earnings.

Yearly projections for building permits estimate the city will collect $368,000. However, the city only captured 8 percent of that, or $30,600 in the first quarter.

In comparison, the city collected nearly $71,400 and $137,109 during the first quarters of 2007 and 2006 respectively. 

Similarly, the plan check fees charged by the city to review building plans are down nearly 69 percent from the same time last year, according to Olson. 

The total estimated plan check fees are $260,000 for the year. 

The last area to take a hit is the city’s interest earnings budget, which has been affected by lower prime rates.

The interest earnings are projected to bring in about $375,000 in 2008 or 13 percent of the revenue budget. 

In the first quarter, they only brought in $50,383, when it should have been closer to about $93,000. 

In addition, the cost of gasoline, construction materials and electricity is putting added pressure on the city’s general fund, Olson said.

Another large concern was the large dip in the Real Estate Excise Tax, or REET fund, which has been a big money maker for Newcastle for years.

That money goes into the city’s capital fund for projects, Olson said.

In the first quarter of 2007, the city made about $450,000 in REET money, whereas this year, it has only collected about $150,000 in the first quarter.

“It started going down mid-last year, but we still have enough in our reserve fund to finish the capital projects we’ve budgeted this year with the REET fund.” Olson said. “But we’ll just have to wait to see what happens the rest of this year, and how we come out and see whether that effects the ’09 budget.”

As for this year, the city is doing well on saving funds from the Coal Creek Parkway project.

City officials recently announced that they had saved $15,000 on the project and that grant funding for the project from the federal government was greatly aiding them.

Total spending for the project consisted of about $2.9 million in the first quarter. However, city officials collected about $3.3 million in the first quarter from other governmental sources.

They also have several requests for reimbursement through the state and federal governments, which officials submitted in April, for roughly $4.2 million.

There were other bright spots in the budget update.

Two major revenue sources that remain on target in the budget are the property tax revenue and sales tax revenue.

The property tax accounts for roughly 54 percent of the city’s overall general fund at about $3.8 million. In the first quarter, the city collected $132,941 in property taxes.

There was another $800,000 in property tax due, but officials had not received that by the quarter’s end, Olson said. Typically, April, May, October and November are the months the city receives the largest sums of property taxes.

Despite rising prices hitting many consumers across the nation, the city’s sales tax is still keeping up with projected forecasts for the first quarter, Olson said.

The expected revenue total from the city’s sales tax for the year is $944,000.

The city collected $234,892 of that during the first quarter, slightly above what it collected in sales tax revenue during the first quarters of 2006 and 2007.

To combat the effects of lower revenue streams, department officials are already tightening their belts, Olson said.

And the city has yet to fill the assistant deputy city manager position it has open.

City Manager John Starbard said the position would most likely go unfilled, but that some other position with a different job description may be posted in the future.

Several City Council members asked whether staff layoffs could be necessary in the near future. Olson said she was not concerned with staff layoffs since the city has such a small staff.

Council members also asked whether other cities and King County were experiencing the same thing.

“The region has been going through a mild recession, and the city of Newcastle is experiencing it as well, and it really depends how well we can bounce back,” Olson said. “I’m hoping we can. And actually, the next month, April, has been much better. But it will be a very low revenue year.”



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