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2015 - 2016 Budget Presentation

October 6, 2014

I appreciate the opportunity today to present to you our biennial budget proposal for 2015-2016.

Before I get into the numbers, I want to thank you, our department heads, and all city employees who, for the past several years, have helped us maneuver through the most challenging financial times we’ve ever experienced. Thanks to your support and leadership, and the efforts of city staff, we have continued to provide our residents and businesses with quality city services, while encouraging new investments, jobs and housing options in our community.

I have said this before but it’s worth repeating. At a time when the nation’s economy was in dire straits, and our population nearly doubled, we successfully faced the challenge of providing services to our expanded population despite a 13% reduction in staff and a reduced budget that totaled millions of dollars over the past six years.

Earlier this year, we established four key priority areas of focus that you agreed with during your council retreat. They include:

  • Address Economic Development Priorities
  • Serve our Vulnerable and Diverse Populations
  • Enhance the Customer Service and Productivity of our Employees
  • Develop a Sustainable Fiscal Strategy

While the 2015-2016 budget focuses resources in each of these areas, we already have successes to report from the current budget period.

In the area of Economic Development, we’ve had a lot of success.

Earlier this year, the city partnered with the Aerospace Futures Alliance (AFA) and other industry members to secure $12.5 million of funding from the state to build a new training facility on the former Renton Chamber site overlooking the airport. The AFA recently hired Laura Hopkins as the facility’s executive director. Laura’s experience and expertise are well respected in both the private and educational sectors, and she has been busy securing partnerships, and clarifying the facility’s business plan.

The name of this facility will be The Washington Advanced Manufacturing Training Institute. The city, in its role as project manager to construct the facility, continues to provide support. I am excited at the potential world-class training this facility may offer.

As promised, we have been focusing a lot of our effort to Downtown Redevelopment. This year, I convened a series of meetings with downtown property and business owners, developers, and community stakeholders to seek their input on how to move downtown redevelopment forward.

We received a lot of interest from potential developers. Within the next couple weeks, the ground will be broken on a $10 million dollar downtown apartment complex at S. 2nd and Main St. that will feature 101 apartments and 3,500 square feet of retail on the main floor. And in conjunction with this exciting project, the city will be working on converting Main Street, between S. 2nd and S. 3rd, to two-way traffic with a design that will make one of the primary gateways into the downtown much more pedestrian friendly and inviting.

Later this evening, the Council will consider repurposing some of our Community Development Block Grant funds to create a program that provides financial assistance as an incentive for owners in downtown Renton to rehabilitate their buildings. Such a program will encourage private investment in downtown, provide marketable space for new and expanding businesses, achieve significant visual improvements, and improve downtown’s overall health and safety.

Last month, with the help of the chamber, staff convened a successful meeting of nearly 50 downtown business and property owners and other stakeholders to discuss the formation of a downtown business association. We see the formation of such an association as a key piece in our redevelopment efforts. The 2015-2016 budget provides staff and other resources to continue progress in these and other efforts downtown.

And we’re happy to let you know that we will be reinstating flower baskets in the downtown area next spring in collaboration with downtown businesses in cleaning-up and beautifying the area.

As you know, the redevelopment of the Highlands/Sunset area has been a priority of the city for over 20 years. In 2013, the Council adopted a revitalization plan that identifies a number of key public and private sector projects to achieve the plan’s objectives. In addition to a number of public infrastructure projects completed to date, construction of the Highlands library, and residential projects that are being built by Colpitts Development and Renton Housing Authority, will dramatically change the appearance and livability of the area.

We also plan to request funding from the state’s capital budget this next session to help fund a new, 3.7 acre neighborhood park that is part of our vision for the Sunset community.

This proposed budget provides resources that will allow us to continue progress in the downtown and Highlands areas. It also calls for continued efforts to revitalize commercial sectors in the Benson/Cascade area and the North 3rd-4th corridor, in addition to balancing future development in the South Lake Washington Boulevard and The Landing area.

The second key item of building an inclusive city has been one of my priorities for the past seven years. We are devoting a tremendous amount of effort in finding ways to better serve our diverse and vulnerable populations. And we are very pleased that our efforts earned Renton a first-place national award this year from the National Black Caucus of Elected Officials through the National League of Cities.

Earlier this year we engaged Benita Horn, a highly respected authority in this region on cultural diversity and social equity, to help us move forward. In a very short time, Benita has helped us make great progress towards our stated goals.

  • We have been providing training for our employees on race, equity and inclusion and by the end of the year most of the city employees will have received the training.
      
  • We have strengthened our relationship with our community liaisons and are in the process of formalizing their commitment to the city. And we are developing an equity lens that will help us evaluate several internal systems such as job recruitment and purchasing, with the incorporation of inclusion as one of the guidelines.

To address the needs of our senior population, we propose to eliminate the pet license fee for low income seniors. Each eligible senior can have up to three permanent pet licenses.

We are also amending our requirement for reduced utility rates. Currently the rate is available only for “dual occupancy households” where both members in the household meet disability or low income senior requirements. Our proposal changes the requirement to only one member of the household that needs to meet the requirement. The current standard has been a very high bar for many low income senior households to qualify for a utility rate discount.

It is important to recognize that it takes an entire community to best serve our most vulnerable populations. We’ve made great progress over the past two years thanks to community partnerships.

  • One example is the arrangement we worked out with the Renton Youth Advocacy Center for utilization of the Tiffany Park Neighborhood Center. This organization offers afterschool and summer programs for local youth and teens between the ages of 12 to 17. They have great programs including tutoring, community services, sports, reading, interviewing skills and basic life skills. Our staff has worked very hard with director John Houston to help grow and sustain this program.
      
  • We’re most excited over the success taking place in the Center of Hope at city hall, located downstairs in refurbished space that used to be the jail. Our partnership with REACH (Renton Ecumenical Association of Churches) has resulted in many positive outcomes for homeless women with children, which we heard at their first annual fundraiser that was held Thursday night. This city can be very proud for finding a creative way to partner with our local churches in providing a program that has proven to be so successful in just a short period of time.

Benita will be giving you an update in November on our efforts to address cultural diversity and inclusiveness in our community once she completes her assessment and recommendations.

In the area of enhancing productivity and customer service, we have literally changed the workforce culture here at City Hall. We have created an environment that accepts change, embraces creativity and performance improvement, with a management team that provides vision, leadership, training and motivation.

We continue to focus on our goal of being “the best city in King County,” with great customer service, strong partnerships, and measurable progress in everything we do. We have created a culture that works to solve issues for our citizens instead of passing the buck.

Our employees, from police officers to our storm water workers, continue to find ways to meet the needs of our citizens while often going that extra mile to provide special service. I continually receive comments from our citizens and business owners praising individual employees for their professionalism and for the services they have provided.

This commitment to service has also equated into improved productivity as employees find new and better ways of doing business. Our ability to meet service demands these past years with fewer employees and reduced budgets is due to the tremendous efforts of department administrators, managers and our entire workforce.

Another indicator that our employees are internalizing the challenge to improve our productivity and customer service is the increasing number of training sessions conducted by fellow employees. And the results can be seen by the number of thank you notes that are posted on “Honor Walls” throughout City Hall.

This proposed budget continues the staff training efforts by utilizing outside expertise when needed, while still leveraging training by our own staff when possible.

The fourth priority is building a sustainable fiscal strategy. Every year, the cost of maintaining basic city services increases but our revenues do not grow at the same rate. Renton is no different than most other cities and many businesses in our state that are struggling to keep pace with inflation and the cost of employee wages and benefits.

In 2000, the motor vehicle excise tax was repealed; in 2001, the state limited the growth of property tax to 1% per year; and last year the state reduced the share of revenue we used to receive from the liquor excise tax and profits.

As you know, cities receive a very small portion of the property and sales taxes collected. For each dollar collected for property taxes, Renton receives 22 cents. For sales taxes, we receive less than 10 cents for every dollar collected. Still we depend on these two categories that represent more than 50% of our total revenues to pay for police and fire protection, city parks, road repairs and many other city services.

And in addition to all this, the years of recession exposed the volatility of our revenue structure and the vulnerability of relying on sales tax. While overall sales taxes have increased in recent years due to the improved economy, they are just now back to the level we received in 2008.

Every year, the cost of maintaining basic city services increases at a rate higher than our revenues grow. Nearly every jurisdiction is facing the same financial challenges of meeting rising costs with the limited available revenue sources. 

Take Seattle for instance. Despite a multi-billion dollar base budget and a strong local economy, with hundreds of millions being spent in new construction, Seattle residents recently had to vote to create a new Metropolitan Park District to generate enough taxes to pay for deteriorating parks and facilities. And they are planning to ask voters next month to also tax themselves to meet police and fire needs.

The same scenario is playing out in many local cities and the county. With your support, we have proposed instituting a Business and Occupation Tax to address the budget shortfall, which I’ll explain in more detail in a couple minutes.

The choices we have to keep the city financially healthy are very limited. The City Council must balance the budget and is faced with hard choices: either reduce services or raise revenue to close the gap between expenses and revenue.

As in past years, the budget I present here today mixes aspiration with reality, hope with hard truth, and inspiration despite fiscal challenges. And it includes input from you and members of the community.

I convened the Mayor’s Budget Advisory Group again this year to meet with each department to review the services we provide, our successes and challenges, and to provide guidance on priorities for the city as we move forward.

This group was comprised of local residents, business owners, and community leaders. They met over a period of several weeks with every department head and our finance department. In addition to examining our preliminary budget projections, they had an opportunity to review several of the policies and programs that we instituted during the last budget process, including the recommendations they had made to us.

They reviewed our recommendation to address the ongoing deficit in revenues with a Business and Occupation tax. In the end, they concurred with the need to raise revenues in order to maintain service levels. They also made suggestions on how to spread this tax more broadly throughout the business community while still protecting small businesses.

As always, 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.

The budget that I’m submitting to you today is not filled with many new programs or initiatives. It was prepared with a continued commitment of improving productivity and efficiency and operating within our means, while striving to achieve our stated goal of becoming the best city in King County.

So this evening, I’m presenting a balanced budget for 2015 and 2016. The total budget for the two year period is $486 million, of which nearly $230 million is for the General Government fund that covers the bulk of our city services that are critical to residents and local businesses.

Iwen will follow me in a couple minutes to provide more detail on this proposed budget. And in the coming weeks, each department administrator will provide you with the specifics of their department budgets. We are not rolling out any new programs but have identified a few key areas where we had made significant cuts in the past and now need to make adjustments to keep up with the increasing demand.

I’m recommending adding back a few key positions that were lost during the height of the recession. Overall, this budget proposes adding nine positions, one that is limited term, two that will be funded by the utilities divisions, and six in the general fund to allow us to keep up with the increased demand in services.

A number of these positions, especially in Community and Economic Development, are funded through the dramatic increase in permit activity and fees.

We are also adding back two positions within the police department to staff the School Resource Officers in our high schools that were eliminated early in the recession. This is possible thanks to the partnership we have with the Renton School District in sharing the costs of three officers dedicated to the high schools.

You will also see a request to increase our Human Services funding by $48,000 over the two year period. This is in response to a request by our Human Services Advisory Committee that recently presented you with its recommendations of funding local human service programs. As you’ll recall, we’re only able to fund about half of the requests we received due to limited available budget. This added budget request will allow us to meet the financial needs of a number of smaller requests and help these agencies continue to meet some of the critical needs in the community.

This budget also addresses some of our badly needed maintenance and capital projects that we’ve had to defer for a number of years. Some of these projects include:

  • Repairing the pilings and float structures, and control erosion and stabilize the bank between Ivars and the north picnic shelter at Coulon Park
  • Stabilizing the river bank on the shoreline of the Cedar River
  • Updating some of our irrigation system to reduce water use

As I mentioned earlier, in order to meet our increased costs without reducing services to our citizens and business community, this budget includes the implementation of a Business and Occupation Tax beginning in 2016.
This tax is already being collected by many cities in Washington, and Renton is the only city our size in King County not to have a B&O tax. This is a tax that we have always resisted due to the increased challenges it places on the business community, especially small businesses.

To address these concerns and to protect small businesses, you approved our recommendation that exempts businesses doing less than $1.5 million in annual sales, and places a maximum cap on taxable sales to protect large companies like Boeing. While this tax will help us cover our anticipated revenue shortfall, and allow us to conduct some long overdue maintenance, the rate remains much lower than any other jurisdiction collects in this region.

Before deciding on implementing the B&O Tax, we worked closely with our business community to get their input. We held two forums in collaboration with the Renton Chamber of Commerce, worked closely with the auto dealers, had several meetings with the Boeing Company and other local businesses.

It was encouraging to hear from our business leaders that they believe the city has used its resources responsibly and they understand our need for additional revenue. Even though nobody embraced the implementation of a new tax, the businesses we met with and members of the Budget Advisory Group felt it was important that the city not reduce the level of service we currently provide.

Renton has a rich history of embracing the future and making its mark. We are a city that is proud of its past, but even more excited about what the future holds—a future where all our residents have access to all of the opportunities, jobs and culture that Renton has to offer.

There are exciting times ahead. Last week we participated in the groundbreaking of a new, four-star hotel that will be built at Southport on Lake Washington. This beautiful $180 million dollar facility will feature 350 quality rooms, fine restaurants and a 40,000 square foot conference center.

In addition, IKEA will be building a new $75 to $100 million dollar store in our community, in addition to another $40 million dollars of new projects already in the permitting process for our city.

If we are to remain a city where businesses want to invest and parents want to raise their families, we must build on our successes rather than falling back into status quo.

In closing, what you have in front of you is a fiscally responsible budget—a budget that takes care of basic city needs efficiently and sensibly.

I welcome your thorough evaluation of this proposed budget and am hopeful of your support.

Thank You
Mayor Denis Law