As the city enters the halfway mark for its biennial budget, staff are making adjustments to address the unexpected gains and losses of dollars in 2019, as well as staffing changes and setting a property tax levy amount for 2020.
Administrative Services Administrator Jan Hawn presented the budget adjustments to council at the Oct. 4 Committee of the Whole meeting. Then the city will hold public hearings on Oct. 21 and Nov. 4 for the changes. Council will then set the property tax levy for 2020 and approve the budget adjustments and proposed department changes.
The end of several large construction projects and no new major projects underway has caused a dip in the city’s projected development fee revenues. Staff recommends reducing the budget estimate for these fees by about $800,000 in 2019 and $800,000 in 2020, 15 percent of the original projected revenues.
Data tax exemptions for cell phones, under the internet tax freedom act, and a unique winter took a blow to the city’s utility tax revenue, which has historically been a stable funding source for Renton. Staff recommended reducing the budget estimate for utility tax revenues by $650,000 for each year, 2019 and 2020, after seeing the underperformance in 2019. That’s about 4 percent of the total utility tax revenue.
The Business and Occupation tax, based off laws implemented in 2016, has seen an increase in city revenue in the millions. And both taxes and business licenses brought in more revenue than expected in 2019, causing staff to recommend increasing the budget estimate by $1.5 million in 2019 and $1.5 million in 2020, about a 20 percent increase from the original expectation.
Other revenues running higher, and therefore being recommended for a budget estimate increase, including gambling tax, fines and forfeits, public safety revenue, and interest earnings. Revenues that are being recommended for a budget estimate decrease include admissions tax and parks and recreation fees. Hawn said the parks and recreation fees are due to changing over to a new system, and this is a delay in revenues, not a decrease.
Council President Don Persson said at the meeting that he wanted to clarify to the public that budget estimate changes are not increases in taxes, but taking into account a more realistic total, in the budget, of the money that gets brought in.
Hawn said the city will increase the base property tax levy by 1 percent, as allowed in state law and an increase for new construction. The increase totals to $380,924 from 1 percent and $132,425 in new construction. In 2019 there was a $1.1 million increase in property tax from the council-approved park maintenance bond. The city levy is estimated at $111 per $100,000 of assessed property value, lower than 2019’s $114 per $100,000 of assessed property value.
The city is well below its allowed tax rate as a result of Renton Regional Fire Authority becoming a separate entity. Preliminary data from King County shows the city could tax about $267 per $100,000 of assessed property value.
The big picture
In the original biennial budget presentation, staff projected the city would end 2024 with a fund balance of $5 million, but the city now estimates that balance to be $1.5 million. Hawn said given property tax limitations, the city’s expenditures grow faster than the 1 percent allowed in levy increases.
“With this proposed adjustment we end 2020 with a projected $30.8 million in reserves. That’s a pretty healthy ending fund balance,” Hawn said.
“Hopefully with the conservatism written into the budget and continued strong economic conditions, and our continued efforts to be lean and identify efficiency’s, we will see the forecast improve over time.”
More information on the budget adjustment is available here.