Mayor: City budget is on track despite flat revenues

August 5, 2011

By Tom Corrigan

Newcastle city officials got together for their annual budget retreat July 19 and while the news was not exactly great, Mayor John Dulcich said it wasn’t all gloom and doom either.

“We’re not in trouble,” Dulcich said, adding that the city’s budgets seem to get a little bit better every year. He compared steering Newcastle’s current finances to guiding a large boat through a small channel.

“We need to be at the helm and we need to manage through it,” Dulcich said.

He also said there have been no service or employee cuts to date and he sees none coming at this point.

For the most part, in her 2012 projections, Chief Financial Officer Christine Olson sees Newcastle’s municipal revenues remaining largely flat.

“We’re not predicting any major projects or growth in the sales tax,” Olson said.

Olson partly was referring to a dearth of new commercial projects in the city and no related increases in tax dollars.

At the same time, Olson’s predictions show increases of 19 percent and 32 percent in police and fire costs, respectively. Olson did note that Newcastle is renegotiating its fire service contract with Bellevue.

Back on the revenue side, Olson said the city’s biggest hit has arrived in the form of stalled development. Even in the city’s downtown area, no major projects are foreseen. Overall, Olson’s figures show development plummeting. At one time development supplied 13 percent of the city’s general fund budget, down to a mere 3 percent in 2012.

As in most cities, the general fund pays for the day-to-day operations of the city, including police and fire. Development dollars feeding that fund have dropped so noticeably that Olson stated Newcastle no longer can consider new development a major source of revenue.

Instead of development dollars, property taxes now are, by far, the largest source of Newcastle’s general fund income. While the money collected is remaining largely static, Olson projects property revenues will make up 70 percent of the city’s general fund dollars next year. That same figure was 56 percent in 2007.

What are some the potential long-term effects of flat revenues? For 2013, Olson puts the city’s general fund income at about $5.9 million. In 2017, she predicts it will only increase to $6.5 million.

On the other hand, over the same five-year time frame, expenses are expected to jump from just over $6 million to $6.8 million. As predicted, Newcastle could end 2017 with $99,000 in its bank account. By contrast, the city hopes to begin 2012 with a general fund balance of $1.6 million.

Dulcich said Newcastle can continue to supply the municipal basics such as police and fire services. Any capital projects or major investments probably will be on hold, he said, with the city moving into maintenance mode regarding buildings, property and equipment it has now.

What can the city do to stem off some of the projected money woes? Olson gave council and City Manager Rob Wyman a number of options, running from a utility tax to creation of a transportation benefit district to pay for road projects. The latter would add to the cost of local car tab fees.

While he noted he only can speak for himself, Dulcich doesn’t see any increased fees on the horizon, saying that given the current economic climate no one has the appetite for new taxes. Still, Dulcich didn’t rule out Newcastle taking the 1 percent property tax increase Washington cities are allowed to impose annually without a vote of the public. He said local leaders will be able to better evaluate whether or not the 1 percent is needed when they have firmer 2012 budget numbers later this year.

For the current year, Newcastle took the 1 percent hike but thanks to a cut in storm water fees, Dulcich said most residents actually paid the city less.

On the expenditure side, Olson’s budgetary suggestions include again studying city employee medical benefits and looking at eliminating city maintenance of small parks.

“We’re not unlike any other city,” Dulcich said. “They all have their issues.”

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