2013 - 2014 Budget Presentation
October 15, 2012
I appreciate this opportunity to present to you our biennial budget proposal for 2013-2014.
I’ll start with some good news. The nation’s economy is showing signs of improvement.
More good news is that our city, unlike many other jurisdictions, remains healthy and we continue to take necessary steps to protect the interests of our residents.
Thanks to your support and leadership over the past several years, we have made difficult decisions to address the challenges of providing city services with reduced revenues and personnel. Our challenges are not over.
As you know, government revenues lag behind the regular marketplace. This budget proposal reflects a continued erosion of operating revenues over the next two years, much of this due to property values that have declined, which represent nearly one third of our general fund dollars.
Over the next two years, our preliminary estimates project a $5 million dollar per year shortfall of revenues against rising costs of doing business.
With the help of our employees and unions, I’m presenting you with a balanced budget proposal that meets these revenue shortfalls, with minimal employee layoffs. It does require additional staff reductions, but we’re able to manage this almost entirely by not filling open positions. We are also proposing some increased fees.
The total proposed two-year budget for 2013 and 2014 is $457 million, of which $202 million is the General Government fund that is used for police, fire and emergency services, parks, street repair, and other city services.
The last few times that I have presented the city’s budget to you, we were in the midst of one of the gravest economic recessions in history that created a fiscal crisis for the entire nation.
We have addressed the economic challenges to our city and I believe we’re on a course to recovery.
Because of our strategic investments in economic development, our commitment to reforms and the fiscal disciplines we have put into place, the city’s financial situation is stable. We’re beginning to see improvement.
Businesses in Renton are beginning to recover and grow. And we continue to provide an environment that attracts new businesses to our city.
We have worked to recruit new employers and support existing ones. We have had 200 new firms locate in Renton this past year and 6,000 new jobs have been added in our community over the past two years. King County Elections returned to Renton and the Washington State Auto Dealers Association will be constructing a new building for their offices on SW Grady Way.
Commercial vacancy rates have remained significantly low, compared with other cities in the Puget Sound region.
And The Landing continues to add new businesses every month. In addition to Cost Plus and several new restaurants and other firms, some existing businesses are expanding into additional space. Sales for The Landing businesses are up nearly 15% over last year, and 92% of the Fairfield Apartments at The Landing have now been leased.
Housing sales are improving, including new construction. Permit revenues are 9% higher than this time last year. There has been a significant increase in housing starts and since January of this year we have received permit requests for 380 new single family homes.
As you know, one of our biggest news items this year was The Boeing Company’s announcement to build the 737 MAX in Renton. With a goal to increase production of the 737 Next Generation plane to 42 airplanes per month by 2014, we have already seen nearly 1,500 new jobs added to the Renton Plant and it’s predicted that Boeing will add hundreds of additional jobs over the next couple years.
Despite some of this positive news, we continue to face budget challenges. What hit local government hard at the beginning of the recession was the plunge in sales tax revenues. Our other primary source of funding is from property tax, which constitutes nearly 30% of our General Fund. Property tax assessments lag behind the market by two years and have dropped significantly. Therefore the 2013 assessed value, based on 2011 market value of homes, is projected to decline by 4 1/2%. This will reduce the city’s property tax revenue by $1.9 million annually.
We will also no longer have the use of federal public safety grants that were available during the recession. We were able to use these grants to save 15 positions in the police and fire departments. These grants have now expired, which negatively impacts our 2013 – 2014 budget by $1.5 million.
At the same time our revenues continue to fall, we face increased costs for the state retirement system and other overhead expenses.
With these reduced revenues and increased costs, our preliminary projections indicated that maintaining current levels of services in General Government Operations would result in a deficit of $5 million per year in this budget period.
Once again this year we recruited a group of citizens and business owners to review our budget process and provide us with input, making sure that our values and priorities align with those of our community. The Community Budget Advisory Group, comprised of local residents, business owners, and community leaders, met over a period of several weeks with city department heads and our finance department. In addition to examining our preliminary budget projections, this group had an opportunity to review several of the policies and programs that we instituted during the last budget process, based on recommendations from the previous advisory group. In addition, they provided invaluable input that has helped guide us through the current budget.
This budget reflects several key priorities and suggestions for cost savings recommended by the advisory group this year. I want to thank each one of the advisors for all the effort they put into assisting us during this budget process.
In order to balance our budget, we’re proposing a three-pronged approach to bring our expenditures in line with our revenue projections through the next biennium.
First, we are once again reducing our operating costs through additional reductions in staffing.
Second, we have negotiated cost-saving reforms to reduce medical premium costs in partnership with our employees and unions.
And third, we have identified a couple of revenue options that will help us close the gap for this two-year period while maintaining quality levels of service to our citizens.
As you know, the city has already made significant cuts during the past few years to balance our budgets, including the reduction of staffing levels, while our population has grown by 56% percent – from 60,000 in 2007 to nearly 94,000 this year. Today’s proposed budget reduces our workforce by an additional 25 positions, bringing an overall reduction in our workforce to nearly 15% of what we had in 2008.
We are achieving most of the staff reductions through attrition to avoid layoffs. In order to minimize the impacts these cuts will have on service levels to our citizens, we have made organizational changes, reorganized job responsibilities, focused on efficiency, and embraced technology.
Unfortunately, in addition to the attrition, we are forced to lay off a couple positions. We’ve made reductions in areas where the workload has dropped to minimize the impact to the public. Eliminating some of these positions also reflects a reduction in our administrative and overhead costs, which was one of the recommendations from our citizen budget advisory board.
Another significant cost savings we have for this budget period is a reduction of our medical costs. By increasing employees’ contributions, and reducing the amount the city is required to contribute to the medical premium, we are saving nearly $3 million in costs during this biennium.
These significant savings would not have come without the help of our employee unions. They worked hard and collaborated with us to find a way to reduce costs and save jobs.
It’s important to note that there have been impacts from the cuts that we have made these past few years. We’ve worked hard to set our priorities and cut our costs while focusing on efficiency. But some areas that have been cut, including required capital and maintenance, are not sustainable indefinitely. And we’re at a point where we need additional resources in order to preserve our assets.
Watching our spending and improving efficiency has been essential. But we have also had to explore some revenue options, especially in areas that have not been adjusted for many years. Our proposal to you will help us generate about $1.3 million per year.
Renton prides itself in having among the lowest fees in the county for most of the services we offer. We’ve kept these fees unchanged for many years despite the steep increase in the cost of doing business. This was possible due to the significant building boom the nation and our region was experiencing that helped to fund ongoing services.
This budget proposes some fee adjustments that will have minimum impact on our customers and at the same time allow us to continue to provide quality services. Our fees will remain lower than most comparable cities in the region.
One adjustment proposal is for our business license fee. This will be the first increase to this fee since 1988.
The city will dedicate 80% of the revenue generated from this fee to transportation improvement investments and major maintenance including the preservation and enhancement of parks and facilities that are in need of repair.
New growth and development in our city creates additional demand and need for public facilities. We have established an impact fee where a proportionate share of the cost of transportation, parks, and fire protection needed for these new developments is paid for by the developers. We plan to phase in these impact fees over a five-year period, and not until 2014 when the economy will be stronger.
This budget also includes a medical transport fee to transport patients to a medical facility by the Renton Fire Department. Currently, private ambulance companies provide most of these transports and charge the patient’s insurance firms. We would also charge insurance companies directly. However, having insurance coverage will not play a role in determining when a patient is to be transported by a fire aid unit or private ambulance.
This budget reflects a lot of collaboration and partnership with our community, allowing us to enhance public amenities despite budget constraints.
A great example of a recent partnership is the joint development project to build an inclusive children's playground to serve the entire community, including children with special needs. This unique playground is made possible thanks to a public/private collaboration between the city, Renton School District, Renton Housing Authority, Renton Rotary, Renton Lions Club and other service organizations. Thanks to the funds raised by our partners, this much needed public amenity will soon be a reality.
Another example of a unique partnership that greatly enhances our service delivery while saving costs and generating revenue is an innovative project between the city’s Carco Theatre and Puget Sound Access, operators of the city’s Channel 21. Puget Sound Access is a local non-profit organization specializing in cable, communications and media technology. Besides Renton, they provide multi-media services for organizations such as the ShoWare Center and various government agencies.
Beginning next year, they will lease space at Carco Theatre and assume the marketing and management functions. Under this arrangement, Carco Theatre will increase the number of customer rentals and will expand its multi-media offerings to its customers. The city will save on the costs related to theater operations, and at the same time receive additional revenue from the lease and enhance its cable operations. The public will enjoy a more modern theater with several multi-media options.
In addition to managing within our financial means and working to improve productivity and efficiency, it’s imperative that we maintain our parks and facilities, roads and utility infrastructure for our children and our grandchildren.
We have started a $42 million dollar redevelopment project on Rainier Avenue South, funded largely by state and federal grants. Rainier Avenue South serves as the major north-south thoroughfare through Renton. When completed, the Rainier Avenue Improvement Project will result in a safer and more attractive gateway to our city and business community. The project will improve transit mobility, upgrade traffic safety, and enhance pedestrian safety with new 8-foot wide sidewalks, attractive landscaping, and improved street lighting.
We also broke ground on phase 1 of the SW 27th Street/Strander Boulevard Connection. This project includes a new railway bridge and a two-lane roadway that will provide access for Renton residents to the future Sound Transit Commuter Rail Station in Tukwila.
No update on our investments would be complete without mentioning our Sunset Area Community Investment. The public and private capital investments in that area have totaled over $41 million to date.
Recently we celebrated the opening of the Glenwood Townhomes, a new eight-unit housing development, which is the beginning of creating a more attractive and vibrant community for local residents and businesses. We believe this project will provide a stimulus for other public and private development in the Sunset Area.
We continue to invest in our streets and infrastructure. But investing in the safety of our city has continued to be my priority.
Crime rate as measured by crimes per thousand has decreased by double digits over the last three years. Currently our crime rate is one of the lowest in South King County. But crime rates alone don’t measure things that are under our control. As a city, we are committed to finding creative ways to reduce criminal activity and to make people feel safe throughout our community.
Our efforts have been effective at reducing negative impacts in several areas of the city. Despite reductions in staffing, our police officers have successfully targeted repeat offenders and focused resources on neighborhoods experiencing high levels of criminal and dangerous activity.
We were successful at helping to close down a local restaurant and bar that was the site of many serious offenses that created fear for families living nearby. And the council provided new tools through ordinances, giving the city and our police a means to target property owners who continually allow criminal activity to take place, impacting the neighborhoods.
Our fire department has made sure that our response time to residents needing help has not been impacted, despite reduced resources, and we continue to help our citizens to be prepared in the event of a major disaster.
I’d like to turn your attention now to West Hill. As you know, on November 6, residents in West Hill will be able to vote and choose whether they would like to annex to the City of Renton or remain part of unincorporated King County.
This annexation poses a challenge and an opportunity. The challenge is to provide the services needed with the resources available; the opportunity is to transform West Hill into a safe urban center where residents and businesses thrive.
If the residents vote to annex, we will work closely with King County and our state representatives to find solutions to the current financial gap. This budget does not include revenues and expenditure projections for West Hill.
Renton is defined by the excellent quality of life that we enjoy in our city. We proudly state in our business plan that we are the center of opportunity in the Puget Sound area where families and businesses thrive.
A huge part of this success is due to the great programs and services that we continue to provide despite significant personnel and budget cuts, which is a testament to the committed efforts by our dedicated employees. These programs and services contribute to a safe, healthy, and vibrant community for our citizens.
Providing recreational opportunities is important for a healthy community. Our parks, facilities, trails and golf course continue to receive praise from the public. Our world class recreational programs still offer something for everyone, regardless of age or ability.
Serving unique populations in our city is important. Our summer lunch program serves hundreds of children in need, and our Housing Repair Assistance Program has helped elderly and low-income residents stay in their homes and retain their independence. This budget maintains these vital programs.
Community-building programs strengthen our neighborhoods and promote awareness. Our award-winning Neighborhood Program now has 72 recognized neighborhoods representing thousands of Renton residents. Over 5,300 people attended neighborhood events and picnics this summer. This budget includes $73,000 in grant funds that give neighborhoods the opportunity to invest in their communities.
Events that promote our city help our local economy. Our Farmers Market enjoyed a record attendance this past summer with over 4,000 people a week. The Seahawks Training Camp brought over 21,000 people to Renton during the summer. And festivals and events, from the Seattle International Film Festival to the Fourth of July celebration, IKEA Renton River Days, Return-to-Renton Car Show and Clam Lights at Gene Coulon Memorial Beach Park, all experienced record crowds.
These programs and events bring tremendous value to our citizens. They also bring tourists and visitors to our restaurants and stores. They fill hotel rooms and provide entertainment for our families, while boosting the local economy.
We have been through some stressful times during the last several years, and I want to thank each of our administrators and all the employees for their hard work and efforts to find solutions to these budget challenges. I especially want to thank our finance director, Iwen Wang, and her staff for the quality work they have done throughout the budget process.
I also want to thank the Council for your guidance and input as we have worked on this budget together with a goal to maintain a quality city for our residents and businesses.
We will be presenting you with more specific details on this budget proposal during the next couple weeks and welcome your feedback, concerns, and recommendations.