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City facing potential $8 million budget hole by 2018

Despite positive signs that the city is coming out of the Great Recession, there’s even larger financial troubles ahead on the horizon unless something is done now.

That was the message during a discussion on financial sustainability Monday at the City Council’s Committee of the Whole meeting in which administration officials told the City Council that they need to make a decision this year to avoid a deficit of $8 million by 2018.

“We’re going to need direction from you soon,” said City Administrator Jay Covington.

Renton administration officials are recommending the council investigate a local Business and Occupation tax on businesses, pursue a Fire Authority/Fire Benefit Charge option and put together a capital package to send to voters as soon as possible to prevent what Covington called “Major changes in how we deliver services.”

Administrative Services Administrator Iwen Wang began the discussion with the good news, telling the council that the city finally appeared to be back where it was prior to the recession hitting in late 2007.

“Renton’s economy is actually improving,” she said. “Overall, the community is doing better.”

According to Wang, taxable sales in the city are now back to where they were in 2008 after a several-year dip. In addition, residential building permits, though nowhere near their early 2000s peak, have shown growth back to 2008 levels and Renton’s unemployment rate has dropped from a high of 9.2 percent in 2009 to 4.53 percent in 2013.

Wang also detailed city efforts during the recession, including a cumulative reduction in city staffing of more than 101 positions since 2009, or 13.2 percent.

However, even with the reductions, which officials said leaves many critical positions with only a single person doing the job, Wang said the city continues to see a “structural deficit” due to annual expenditure growth of between 3.5 percent and 5 percent and a revenue growth of only 2.5 percent.

“It’s going up much faster than our income,” Council President Don Persson agreed.

According to Covington, further efficiencies will not be enough to fill the projected hole in the budget.

“The low-hanging fruit has been plucked,” he said.

As another indicator of how the city is falling behind, Wang and Covington pointed to a graph that showed residents today paying $300 less per capita in taxes than in 2000, despite an increase in population during the same time frame of nearly 45,000 people.

For city coffers, that drop in per capita taxes comes to $7.6 million.

Among the possibilities to increase revenue in the city, the administration is recommending a B&O tax. Cities in Washington have the opportunity to create a B&O tax of up to 0.2 percent and thus far, 40 cities in the state and 12 in King County, including Bellevue, Kent and Issaquah, have added the tax to their books.

In Renton, officials estimate that a tax of 0.1 percent could raise $3 million to $6 million per year and the cost would be born entirely by the business sector.

The city is also recommending the council explore the option of creating a Fire Authority and/or a Fire District Benefit Charge. Such a move would require 60 percent voter approval and is estimated to cost households an additional $20 per month.

The administration is also recommending the council put together a capital facilities bond to send to voters as well to make needed repairs to or replacement of aging city facilities. The bond would also require a 60 percent approval by voters.

No decision was made Monday, but the council agreed to place the matter on an upcoming Committee of the Whole agenda to discuss the issue and possibilities further.

However, the gravity of the situation was not lost on the council.

“Either we find a way to increase our revenue to provide the same level of service … or reduce services to the public,” Persson said.

“Bottom line,” added Councilman Greg Taylor, “we need more money.”

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