It’s called the “crossover point.”
That’s when the city of Sammamish’s general operating expenses outpace general operating revenues. And it happens in 2020.
That means that the city will to have to do something, like raise property tax or start collecting a utility tax, to continue paying for what the 2017-18 Budget-in-Brief calls “basic city services such as police, fire, street and landscape maintenance, parks and recreation, and community development.” It could also cut back on some of these basic city services to make up the difference.
That’s where you come in.
You, the residents, have the opportunity to help shape the city’s financial future by giving the city your opinion.
And it’s input the city of Sammamish wants to hear at its next virtual town hall in mid-May.
“We are actually in good financial condition,” City Manager Lyman Howard said at the interactive financial roundtable on April 27. “It’s one of the things that sets us apart.”
The city has no bonded debt. When it did have debt it had an AAA bond rating. The city has “strong” reserves, Howard said. Compared to the other Eastside cities, it has the lowest general fund revenues and expenditures per capita. It doesn’t have a utility tax or a business and occupation tax.
“It’s unique,” Finance Director Aaron Antin said. “It really is a success story.”
So the city is not in dire financial straits. It’s looking ahead to where projections show it will need to either cut expenditures or increase revenues. Maybe even a bit of both, depending on the input received.
There are several ways in which the city could approach this situation.
The city could increase revenues through property tax, by adding a utility tax or by adding a business and occupation tax, as proposed at the April 27 roundtable.
Only about 18 percent of what residents pay in property tax goes to the city, but that amount is the primary source of funding for general city services. The city anticipates collecting $27.7 million in property tax in 2017 alone.
The city hasn’t increased property tax for the last eight years, so it has $1.6 million in banked capacity. (Per state law, cities can increase property tax by 1 percent annually. If they choose not to increase the tax, they have the right to reserve that increase for the future.) In other words, the city could increase taxes by up to roughly 9 percent (8 percent in banked capacity and an additional 1 percent allowed by state law).
But it doesn’t have to take the entire amount. It could increase property tax by say 2 percent and diversify its other revenue sources to make up the difference.
Introducing a utility tax would produce $6.6 million annually, assuming a 6 percent tax rate. This equates to about $66.50 per household per year.
Again, the city doesn’t have to take a 6 percent rate. It could take less or more depending on what residents think is best.
Adding a business and occupation tax would only bring in another $105,000 annually, since there aren’t that many businesses in Sammamish. Additionally, the city would need to spend some of that income on the costs of collecting that tax.
Plus, residents at the April 27 roundtable said they’d rather not impose a tax on businesses, as it might deter them from moving onto the plateau.
Residents at the meeting also said they’d rather not cut any city services, saying the city is already fairly lean.
Its top-two general expenditures in the 2017-2018 budget are for fire and emergency medical services at $15.3 million and for police services at $14.5 million. These are both contracted services through Eastside Fire and Rescue and King County Sheriff’s Office.
The city of Sammamish has historically been a contract city, which Antin says saves the city money.
Public works and street maintenance, the third highest expense, comes in at $11.1 million, with parks and recreation following closely at $10 million in the 2017-18 budget.
The virtual town hall will feature an audio recording from the interactive roundtable, as well as ask five key questions posed at the roundtable:
Should the city diversify its revenue sources by adding a new tax?
Are there any services the city should stop offering?
Given how Sammamish compares to its neighboring cities, what services would you want enhanced or eliminated?
What unmet service expectations do you have now or anticipate having in the near future, and how would you want to pay for them?
What should be done when future contracted public safety costs increase at a greater rate than revenues? What should the city do to offset those cost increases?
The City Council will review the input gathered from the roundtable and the virtual town hall for a discussion at the council financial retreat on June 29 from 5-7 p.m. in city hall.
