The Lacey City Council on Thursday took a short- and long-term look at its general fund budget, with the aim of developing a plan to address next year’s deficit and possible future deficits.
Officials project an $843,000 shortfall in the 2015 general fund budget. That stems from
higher expenses, such as labor costs, health insurance premiums and inflation, combined with the drag of a still slow economy.
Sales tax revenue, a significant contributor to the general fund, was projected to grow to 0.9 percent for 2014, and it hasn’t hit that mark, said Troy Woo, the city’s finance director.
Based on the lack of sales-tax revenue growth this year, the city is expecting little to no growth next year. Woo’s forecast, which was presented as part of a pre-budget workshop to the entire council, calls for sales tax revenue growth of 0.2 percent in 2015.
Woo outlined some solutions to balance next year’s general fund budget, and a six-year financial plan for the city’s general fund budget.
For 2015, the council likely will agree to raise property taxes 1 percent, and to continue with some scheduled water and stormwater rate increases. The city also could raise building and inspection fees, and tap some city reserves.
Cost savingsare part of the picture. For example, Lacey no longer needs to spend $100,000 to hire a consultant for input on form-based building codes for the city’s Woodland District.
Woo also warned the council about depending on the city’s $27 million in general fund reserves to solve annual budget deficits. That outlook was grim and showed the city broke by 2021.
“We’re going to bring you a proposal to use some reserves, but it comes with some caution,” he told the council.
For the future, Woo presented a six-year forecast for the general fund budget with annual deficits in the $700,000 to $800,000 range. Based on that projection, general fund deficits widen to around $3 million by 2020.
Woo also suggested possible solutions.
Among them were across-the-board budget cuts; strategic annexations to generate revenue; a new transportation benefit district, funded either by a sales taxes or license tab fees; or a voter-approved increase to the utility tax.
Council members groaned when the idea of across-the-board budget cuts was raised, and several said such a measure is too harsh.
Mayor Andy Ryder asked whether Lacey Gateway was figured into the six-year forecast. Woo said it was not because there’s still no measurable data on the proposed mixed-use development. However, once the development gets underway, it could be a game changer for the local economy and the city’s general fund budget, he said.
Lacey Gateway is the name of a mixed-use development, anchored by Cabela’s, that was planned by Tri Vo, who lost the property during the recession.The Lacey Gateway property has since been acquired by the Nisqually Tribe and Bellevue-based Wig Properties LLC. One of their first tasks was to clean up a portion of the property that was once home to a trap-shooting business.
Woo added that redevelopment of the Woodland District, including Woodland Square Loop, also was not included in the six-year projection. That plan, too, is in its early stages.
The council is expected to adopt the city’s 2015 budget Dec. 18. But before then, a series of meetings will be held, beginning with City Manager Scott Spence’s budget presentation to the council Oct. 23.