Updated financial forecast shows improving finances

October 4, 2012

By Christina Corrales-Toy

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City staff members presented the Newcastle City Council with an updated six-year financial forecast at the Sept. 18 council meeting.

At the council’s June budget retreat, Finance Director Christine Olson presented a forecast that showed increasing deficits in the city’s general fund, but the new forecast shows a more positive outlook. The difference, she said, is because of more data and information accumulated over the past few months.

“At the budget retreat, I did the same thing I did now, I forecasted, but I only had four months of data,” she said.

The new forecast projects the city will end with a surplus in its general fund at the end of this year after higher-than-expected collections from development revenue.

The city’s general fund for 2013 also seems to be in good shape, according to the forecast, with a projected shortfall of just $60,000, a number that can be easily remedied once the council decides its priorities for the 2013 budget. For comparison, at the retreat the shortfall for 2013 was projected at more than $200,000.

The reason for the improved 2013 outlook is a projected increase in revenue, Olson said. Though, the forecast assumed that the City Council would decide to take an allowable 1 percent increase in property taxes, but that has not been determined yet.

While most of the council members seemed encouraged by the new outlook, Councilmen Bill Erxleben and Gordon Bisset were less satisfied.

Erxleben said he was dissatisfied with the numbers projected in the real estate excise tax fund, which funds capital projects for the city. He wanted to see more money budgeted for pavement overlay for the streets, an important part of city infrastructure, he said.

In the years of 2014-2018, the new forecast projects an initial budget of $400,000 for pavement overlay each year, while the forecast from the budget retreat had it at $683,000. The city does project to spend $683,000 on overlay in 2013, though.

“I think this council believes that we have to maintain infrastructure if we are going to call ourselves a city,” Erxleben said. “As far as I’m concerned, there is no euphoria. There is no clapping of hands. We need to redo this budget and come back with a reasonable budget that funds properly the city’s infrastructure.”

City Manager Rob Wyman said it will be up to the council to prioritize how to spend the money as budgets are formulated.

“You guys set the priorities through the budget and if you think we the staff, or the city as a whole, should put more money into overlay than other projects, we’re happy to respond to that and address it that way, but it’s your decision at the end of the day,” Wyman said to the council.

Both Bisset and Erxleben suggested that the staff manipulated the numbers to make finances appear better because of the council’s recent discussions about Bellevue annexation.

“Why, in June, did we get a forecast that said we were in deep, deep trouble?” Bisset asked. “Now, after we’ve discussed going to Bellevue and we’ve all of the sudden got a happy budget. I guess what I’m saying is a bit inflammatory, but you know that’s my feeling on what’s been proposed here.”

Wyman said the Bellevue discussions had absolutely no influence on the numbers. He added that both he and Ols0n documented every single change from what was presented at the budget retreat.

“There is no connection, no correlation whatsoever between any outside, nonbudget event and what numbers we came up with,” he said.

Councilman John Dulcich came to the defense of the staff and the new forecast.

“They’re our staff and preparing this, if they were playing any games they wouldn’t be here and I think we proved that with the last change,” he said.

One other major change in the forecast was the inclusion of revenue from four major projects that have a high probability of taking place in the city in coming years.

The projects include the construction of a retirement home, development of the Mutual Materials site, construction of a Renton School District middle school, and the sale and development of a property owned by the Renton School District.

At the time of the retreat, Olson decided against adding the projects to the forecast.

“As a finance person, I tend to not want to include projects unless I’m really sure they are going to happen,” she said at the meeting. “But, these projects, these four, of all the projects I’ve heard, are the four I think will be viable and probably happen.”

Even with the inclusion in the new forecast, the numbers for the revenue expected to come from the projects are very conservative, she said. Furthermore, the major bulk of any projected revenue from the projects would only begin to start taking place in 2014 and later, she estimated.

Olson said the purpose of a six-year forecast is to assist the city as it prepares the foundation of its upcoming budget. It also allows the city to plan for long-range challenges and helps build stability in city finances, she said.

Wyman said he was happy with where the numbers are, though he added that the numbers are estimates and as time goes by, things will change and the numbers will become more accurate.

“I feel really good about it,” he said. “I feel better than I’ve felt in the last couple of years, or since I’ve been here in this position, about where we are financially, at least for the short term. So, that’s a good thing.”

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