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City finances:The search for more revenue
If there was a disconnect about how and when the city’s financial crisis should have been recognized, there is even more debate over what to do about revenue streams currently coming into the municipality.
New ways to create revenue could include increases in fees for permits and building and development charges. But one of the most persistent options for council and city administration is the potential to raise revenue through voter-approved bonds.
At the heart of this question is what citizens currently get for their tax dollars and whether they would be willing to tax themselves for specific capital projects.
“It’s clear to me, and it should be to anyone else who pays taxes in the community, that they have a personal interest in how those taxes are spent,” said Chris Snow, who chairs the council’s Finance Committee. “Not only the process but the end product.”
The rationale behind leaning on taxpayer-approved hikes is that the city needs such a revenue stream to provide beyond basic services.
“There has been talk that if people want this (capital project) let’s do voter approved bonds,” Snow said. “But the community says we already pay too much.”
Mayor Darlene Kordonowy expressed exasperation with the growing list of capital projects and island demands compared to a city revenue flow that is limited. “They are telling us what they want (but) they aren’t telling us how to pay for it,” said Kordonowy.
Responding to a question regarding the use of voter-approved bonds in the near future, she said, “I think there will be, absolutely; we have had only one voter-approved bond since 2001.”
Kordonowy mentioned three projects that could go to voters for funding in the coming years: a new court and police facility; expansion of the senior center; and non-motorized infrastructure throughout the island. A six-year financial capacity analysis, produced last month by city Finance Director Elray Konkel, made the assumption that $6.2 million in voter-approved bonds would be needed between 2010 and 2012.
Kordonowy also said that taxpayers should expect less city-provided services due to the current budget crunch.
“I can’t imagine any time in the next three to four years that we are going to be able to entertain a list of services that we have been looking at over the last few years, and the growing pent-up demand,” she said.
For some members of the city council, however, it’s more about saving money through efficiency and realistic spending priorities than raising funds through voter-approved bonds.
“It’s about what we do with (taxpayers’) money, what the average citizen is getting for their tax dollars,” said Council Member Debbie Vancil. “Have they gotten better roads, better non-motorized...what have they gotten? What they have gotten is a much larger city organization, much larger overhead and a much larger staff.”
One point of ire for Vancil is the inflated Capital Facilities Plan – a planning document brought forward by the mayor and approved by the council – that is supposed to outline city spending over a six-year period. The approved 2008 CFP has roughly $70 million budgeted between 2009-2013 for anything from the replacement of city vehicles to major road overhauls and public works projects. Vancil has voted against the last two CFPs, calling them unreasonable.
“We have a five-year track record,” Vancil said. “As long as I have been (on the council), we have never completed more than $6 to $7 million in capital projects a year.”
According to Vancil, the city and council should be realistic with a $40 million or less CFP.
Annual output of capital projects – for both utility and government assets between 2003 and 2007 – have seen a low of $6.1 million and a high of $7.9 million in 2007, according to analysis of completed capital projects.
“The (CFP) is unrealistic and there is a cost to pretending it can be completed,” Vancil said. “When the CFP is unrealistic, it is mistaking the costs of the projects that get pushed into the future.”
Vancil also believes the city has enough on its plate in terms of basic services that need to be addressed before voters are asked to raise more tax revenue for the growing list of capital projects.
“The community would like basic services,” Vancil said “I would say the most crucial is road maintenance. We have funded road maintenance to the tune of almost $1 million a year but it doesn’t get done. There is an inability to complete projects on time, on budget or at all.”
According to Council Member Barry Peters, there should be a priority for working within the city’s financial means before the city goes out for voter-approved bonds.
“The goal should be to do more with less, but realistically, if our city cannot support as many projects or employees as we have been fortunate to have as last year, then we have to make hard choices about priorities and get back to basics.”
Peters has suggested the city look at optimizing current services, such as making an expedited permitting process for building plans already approved by state-certified architects and engineers. This is one measure that could reduce the number of full-time planners in the city, the highest source of city costs, according to a 2006 benchmark study.
But the crux of the situation, for Peters, is that the community will be looking for these types of conservative spending practices before citizens will entertain the notion of a voter-aproved bond measure.
“I think what the community wants right now is to take a conservative, prudent action to control and reduce expenses before coming to the voters and asking for additional revenue,” Peters said. “That is going to be our job for the rest of this year.”
Currently, the amount of Kitsap County property tax that goes to the city is finite. Property tax is limited to what is currently collected, plus 1 percent a year. The increase in tax revenue from 2006 to 2007, amounted to roughly $192,000 – hardly enough to keep up with the rate of inflation for building costs pertaining to capital projects.
There is also the 1 percent the city collects on the 8.6 percent state sales tax and the small percentage that the city gets each time property exchanges hands on the island (real estate excise tax).
With funding revenue down and the limited ways the city can obtain money, the likelihood is that island residents will be petitioned for more tax revenue in the form of voter-approved bonds and levy lid lifts.
Levy lid lifts raise the amount of money – over 1 percent – a jurisdiction can obtain through property taxes. A levy lid lift for Kitsap Regional Libraries was defeated last year. Voter-approved bonds also increased the tax levy, but that money is earmarked for dedicated projects. The last voter-approved bond occurred in 2001 when the city passed a roughly $8 million measure, which was used primarily to the purchase open space around the island.
“The voters aren’t going to say “yes” all the time,” Kordonowy said. “When they say “no” we will have to be more conservative when we go out for voter bonds.”