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Health & Fitness

Councilmember Mike's 2011 Annual Budget Analysis

In my first blog on Patch, I present my view on the "chasm" separating government and the people when it comes to how their money is spent.

There is a big difference in how Cities present economic data and analysis and how I prefer to present economic data and analysis. Until this chasm is breached, citizens will continue to shake their head as Council and Staff identify paper savings and efficiencies rather than real savings and efficiencies. For example, I can’t accept a “cut” as being a decrease to an increase. To me and to everyone I talk to, a “cut” is a decrease in spending from the prior time frame. 

During our last Council meeting, the Council was briefed that the City requires a “5.0% annual revenue growth to maintain current service levels.” Revenue is derived from taxes. To point out the obvious, a “5.0% annual revenue growth” is only possible with a 5.0% tax increase. This rate is disturbing and I feel unsustainable as not being in Islanders best interest. That rate certainly will not make Mercer Island more affordable to young families or seniors on fixed incomes.

In my last newsletter, I explained my vote against the 2011-2012 Biennial budget, “because I felt too much reliance was put on raising utility rates, increasing permit taxes, and creating a completely new taxes.” Instead of bringing expenditures in line with the Country’s economic slump, we failed to sufficiently reign in discretionary spending and instead raised taxes. We actually expanded our headcount and expenses. Not at all what I think you expected during the deepest recession since the depression. 

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The responsible budget policy is to adjust spending to the revenue produced from our present tax rate and tax base. Spending is adjusted up or down depending on: 

  1. The economy (ie sales tax)
  2. The corresponding wealth of our citizens (ie property values)
  3. Development (ie home remodeling and residential and business construction)

 

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About this time last year, we professed to have shrunk the “City’s general government operations 5.4% ...by cutting $1.4 million in expenses...and reduced the number of discretionary services...including eliminating 8.9 positions in 2011.”  But, in spite of these pronouncements, the City’s Full Time Employee ratio increased to 8.0 / 1,000 citizens in 2011 from 7.8 / 1,000 citizens in 2010. The actual results of our “5.4% cuts” was a 1% increase in 3rd qtr expenditures. The actual results of “eliminating 8.9 positions” was a 3% increase in our 3rd qtr salary + benefits + contractual service expenditures.

As was mentioned, the Council voted to raise 2012 property taxes 1.5%. The newly implemented ambulance transport tax will cost approximately $700 / ride or the annual revenue equivalent of about 3% in property taxes. Additionally, the total water, sewer, stormwater and EMS tax increases for 2012 for the average single family homeowner will increase 5.9% or $80 a year. To improve construction revenue during this period of lower construction activity, we raised construction valuations 23%. 

So often I hear the justification to raise taxes is the actual dollar amount is “miniscule.” Even though 2011 was the year to adjust spending to the realities of the economy, the average Mercer Island Assessed Value Home Owner experienced their Property Tax Bill go from $8,253 to $8,894 — a 7.8% increase while the value of their home decreased 2%. So after every one of the many tax entities justifies a “tiny” increase,  the hit to the individual taxpayer is significant. The City portion of the Tax bill is 15% while we were 3% of the tax increase. 

The point of bringing this up is to highlight the need to budget and analyze the City’s spending using the same budgeting assumptions that are used in your home or around corporate boards. Government isn’t a Corporation, but there are logical budgetary understandings that are universal.  Part of the commonsense to which I refer is proper prioritizing.  We need to spend money on essential services first, ie public safety, infrastructure, human services, snow removal, debt/obligations etc (and not every need in an “essential service” is essential).  Discretionary spending comes last and new taxes are justified by nonessential services instead of holding taxpayers hostage to essential services.   

My sense is the Staff and the Council have not embraced the “new normal” or have had enough of the “new normal” and are positioning for seemingly inevitable tax increases.  I cite our recent brief for a 5% revenue (tax) growth and the Council approving a 1.5% property tax increase just a couple meetings ago.  (Councilmember Grady and I dissented).  

I want to be clear that this analysis is not critical of the professionalism and expertise of our committed city employees.  The analysis is a criticism and at times frustration of the idiosyncrasies that make government accounting perplexing. 

This is one of several articles from this upcoming semi-annual newsletter.  If you have never received one of these newsletters, send your email to mscero@comcast.net.  Make note if you don't want future mailings.  Other issues in the newsletter include my last word on the litigation, a summary of issues for the Council's upcoming Planning Session and charts showing what issues your neighbors are writing to the Council.  Because of the power outage, I'm having a few issues with the computer but I should be able to get the newsletter out by Wednesday.  Finally, please help our crews by clearing roadside drains or catch basins.

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