As the City’s new Finance Director, I was asked by the Mayor to share a brief update regarding the upcoming 2014 budget.
The good news is, for the most part, there will not need to be budgetary cuts in the 2014 budget. Consumer confidence, low interest rates, an improving real estate market, and new car sales have stabilized the economy and caused growth.
The City General Fund is on track and revenues appear to be slightly stronger than budgeted. Real Estate Excise Tax (REET) revenues, which must be used for roads, parks and other infrastructure, have recovered reflecting the improvement in the economy and the recovery of home values and sales.
The stronger economy, however, is not the main reason the City is on more stable footing. City leadership made difficult decisions throughout the Great Recession. It reduced its budget and was able to build fund balance by initiating deep cuts in staffing.
In the past six years, the City has cut positions in every department. Overall reduction in city-funded staff over this period was 11.2 percent. For example, our police force has almost 17 percent fewer staff than it had in 2006. In addition, they no longer have a volunteer group of about 20 individuals.
The City has also not added expenditures in areas where expanded needs exist, such as pavement preservation projects, which have only been accomplished over the past five or six years when grants were obtained for those specific purposes.
Due to these significant reductions, and to the fact that each year the City has been able to under-expend their budget, General Fund balance has been restored. Fund Balance provides liquidity during the annual revenue cycles that impact the City and resources that allow the City to quickly respond to large or small emergencies.
When the next recession comes, if the City has sufficient fund balance, it will not need to immediately cut services at a time when people need these services most.
I have recommended to the Mayor and City Council that we stabilize our fund balance at its current level (as measured by percent of current year revenue).
So, by making difficult cuts and not adding costs, the cost of government in Edmonds has been cut, and barring any economic or budgetary surprises, the improved economy will allow some limited increases in specific program expenditures.
We will not, however, have sufficient resources to replace most of the positions that have been eliminated. Based upon what we know today, the amount that revenues will exceed the level required to fund the city at 2013 resource levels will be equal to an amount of between 3 and 4 percent of projected fund expenditures.
That isn’t a lot. Funding a road overlay program at the level needed could easily take half of these available additional resources in addition to resources available from REET.
With the available resources, the Mayor intends to recommend funding one-time projects. One-time projects are generally an investment to improve the effectiveness of City services. A dollar invested in 2014 can help the city for years to come. One example of a one-time project is critical improvements to our data systems to assure stability and safety of data.
Bottom line, the City will not be able to reinstate the vast majority of cuts to departments that have taken place since 2007. In order to build this budget, the City will prioritize its diverse needs and, in so doing, identify what to add or add back in, being responsive to its citizens’ priorities.
Budgets will be submitted by departments in the near future, and the Mayor will begin to prioritize the requests included in those submissions, and then the budget will move to the Council phase of review, amendments and decisions.