The City of Kirkland is preparing for changes in the next few years with the loss of the yearly Annexation Sales Tax Credit in 2021, the addition of new sales tax revenues and the normal increases in costs. All of this comes while trying to stay focused on what residents have said they want through city surveys.

Kirkland City Manager Kurt Triplett and city staff developed the budget with a “Stay Steady, Get Ready” mentality, trying to keep costs low while making sure the city has enough services and resources for the forseeable future. Triplett is proposing a budget of more than $694 million for the 2017-18 biennium, an increase of 7.5 percent from the 2015-16 budget.

The budget was developed on three strategic anchors: a quad chart that establishes the services that matter the most to the community from data compiled through the surveys and outreach; ensuring Kirkland’s services remain affordable to residents; and looking ahead at the financial forecast through 2022.

Looking ahead

One of the biggest issues coming up for the city’s finances is the expiration of the Annexation Sales Tax Credit (ASTC), which ends in 2021. The credit gives the city approximately $4 million a year, and city staff is working to find the funds to make up for that lost revenue. The city received the funds for 10 years starting in 2011 when it annexed into the city the neighborhoods of Finn Hill, North Juanita and Evergreen Hill (Kingsgate).

The city has been replenishing its reserves during the last few years after wiping them out during the recession, dropping one percent of the operating budget there each year. Triplett said the reserves should be replenished by 2019, in time for that $900,000 to be directed to helping make up for the loss of the ASTC. Another $900,000 will be available through a planned reduction in debt service payments related to the Kirkland Justice Center.

The city is contributing $15 million to the public infrastructure surrounding the Totem Lake development, and by paying $5 million of that debt off up front, the city will also free up approximately $350,000 per year to go toward the ASTC loss. Additionally, Triplett is proposing setting aside an additional $500,000 for an Annexation Sales Tax Transition Reserve. This all adds up to $2.65 million, and Triplett is hoping sales tax and other revenues generated by the area’s growth, including the Kirkland Urban and Village at Totem Lake developments, will cover the remaining $1.35 million.

The city also is trying to manage expenditures. Triplett said one of the major successes in doing that is the Healthy Kirkland Initiative, which helps city employees get healthier while saving hundreds of thousands of dollars by slowing the growth of health care costs.

Affordability

When preparing the budget, city staff keeps affordability for residents in mind, Triplett said.

Based on the aggregate personal income of Kirkland residents (which is estimated to be $4.6 billion in 2017 and $4.8 billion in 2018, based on data from the June 2016 Washington State Economic and Revenue Forecast), the average price of government will be 3.5 percent for 2017 and 3.3 percent in 2018. A price between five and six percent is typical for local governments, Triplett said.

That percentage of income includes taxes and fees such as Real Estate Excise Tax (REET); city-levied property tax; sales and use tax; public and private utility taxes; water, sewer, solid waste and recycling service fees; development services and permitting; business licensing; and funds received from the federal, state or county government.

Public survey

The city budget not only takes into consideration residents’ finances but what services they want from the city as well, according to Triplett. Kirkland conducts a citizen survey every two years and prioritizes areas of the budget based on the feedback from the survey, which was most recently conducted in May. The city creates a quad chart depicting the city services, ranking them both in terms of performance and importance, as determined through the survey results.

Services with high importance and high performance are labeled as “stars” and will receive a total of $144.5 million in funding for the 2017-18 biennium. The services include police ($50.8 million), fire and EMS ($42 million), recycling and garbage ($34.7 million) and parks ($15.9 million).

To ensure adequate staffing, the 2017-18 budget includes the authority to over-hire two police officer positions and three firefighter positions. This will address any staffing shortages and anticipated retirements, Triplett said.

Services determined to have high importance and low performance are labeled as “imperatives” and will receive $22.5 million. They include streets ($17.3 million), people in need ($3.2 million), traffic ($1.3 million) and sidewalks ($169,000).

Areas with low importance and low performance are labeled “lesser priorities” and will receive $9.2 million. They include land use ($4.4 million), permitting and inspection ($3 million) and bike safety ($812,000).

Areas with high performance and low importance are labeled as “successes” and will receive $5.2 million. They include recreation programs and classes ($4.8 million), arts ($46,000) and events $355,000).

Operating costs

The general fund budget is nearly $216 million for 2017-18, an increase of 6.8 percent from 2015-16. The biggest increase in the budget is for non-operating funds, which is up 19.9 percent to $186.2 million, compared to more than $155 million in 2015-16.

Operating costs outside of the general fund and internal service funds are both planned to be budgeted less during 2017-18. The other operating costs are budgeted at nearly $32 million, a decrease of 2.9 percent from 2015-16, and the internal service funds are budgeted at just over $79 million, a 2.4 percent decrease.

For the city’s utility budgeting, water/sewer will increase 5.1 percent to more than $100 million and solid waste will increase 6.2 percent to more than $36 million, while surface water will decrease 0.5 percent to more than $44 million.

The general fund budget is nearly $216 million for 2017-18, an increase of 6.8 percent from 2015-16. The biggest increase in the budget is for non-operating funds, which is up 19.9 percent to more than $186 million compared to 2015-16.

“The primary driver in the increase (in non-operating funds) is that the city is budgeting a higher level of capital investment in transportation ($12.8 million) and other categories including parks, fire stations and other facilities ($8.4 million),” Deputy City Manager Tracey Dunlap said. “In addition, the amount of Real Estate Excise Tax (REET) and impact fees available to fund the projects has increased by $9.4 million, reflecting the strong development activity that Kirkland is experiencing.”

Public input on proposed budget

Public hearings on the budget will be held during the Nov. 1 and 15 Kirkland City Council meetings, scheduled for 7:30 p.m. at city hall. Although the budget was based on a community survey, Triplett sees any input given by the community during the public hearings as a welcome part of the budget process.

The budget is scheduled to be approved by the city council at its Dec. 13 meeting. Kirkland’s 2017-18 budget documents can be found on the city’s website, kirklandwa.gov.