There's good news and bad news about the city's budget for next year. The good news, according to city officials, is that the projected deficit has shrunk substantially from a $2.8 million shortfall this year to an estimated $1 million to $1.2 million for 2004.
"The bad news is there's just no room to move," Finance Director Marilynne Beard said of budgeting options.
The 2003 deficit was covered with a "40/60" approach, she said, meaning 40 percent of the shortfall was covered by reducing expenses, while 60 percent was covered by increasing the revenue stream and tapping into the city's rainy day reserve fund.
"The approach is very different this year," Beard said. Only around $90,000 of the 2004 budget gap will be covered by increasing revenue. That revenue increase would come in the form of a 1-percent jump in property taxes for Kirkland residences next year, although the Kirkland City Council has not signed off on that idea yet, said Mayor Larry Springer.
This year also saw a 1-percent increase in property taxes, although City Manager David Ramsay had recommended a 3-percent jump, according to a postscript in the 2003 budget document.
Half of the remaining budget deficit for 2004 will be covered by reserve funds, while the other half will involve cuts in city spending, Beard said.
The cuts could be painful, according to Springer. "The single largest expense we have is people," he said of city staff. That's why tapping reserves is important for next year's budget.
"We're simply not prepared to balance the budget on the backs of employees," the mayor said. Still, one approach along those lines is to try to place a cap on an increase in employee benefits and wages, Beard said.
The Kirkland City Council would like to see a cap on benefits such as health insurance limited to a 10-percent increase, Springer said. "The problem with that is those benefits go up 10 to 15 percent each year."
That means city employees will be expected to increase the amount they pay for benefits, he said. Wage increases will be limited to 4 percent or less, Springer added.
Increases in wages and benefits are subject to negotiations with city workers, most of whom are in unions, said Beard. However, current contracts with the Kirkland Fire Department and staff in the Teamsters Union will still be in effect next year, she said.
"Reductions in staffing levels are entirely possible," according to Ramsay, who said more than $1 million was saved that way in this year's budget. How that might play out remains to be seen, however.
"There could be a couple of things: attrition or a reduction in hours," he said. "The ultimate would be to lay someone off."
Springer insisted that layoffs would be a last resort, although he conceded the potential always exists for that cost-saving measure. Making such a move wouldn't be easy, though. "Kirkland is the lowest-staffed city in the region, as far as employees per 1,000 residents," he said.
The biggest revenue source for the city is sales tax, Beard said, but sales-tax collection has remained relatively flat as the economy continues to sputter along in the Puget Sound region.
Kirkland is trying to change that on a local level with an economic-development program that seeks to lure new businesses to the city, Springer said.
"We've got a team working on that right now," he said, adding that the results look encouraging so far. However, Springer described attempts to spur economic development as a long-term effort that will take time to show results.
In the meantime, Ramsay noted, the Juanita Village area has shown growth, and efforts are under way to revive the Northeast 85th Street corridor. Rumors are also circulating in town that the bedraggled Totem Lake Mall is for sale, he said.
If that property is sold and developed, it would provide a real boost to the city's revitalization efforts, Ramsay added. "Building-permit activity continues to be very strong, so people want to invest in this community," he also said.
Springer also takes an upbeat tone about Kirkland's economic health. "We've been very, very conservative in our budget in this city for years," he said. "I think we're certainly doing as well and better than many (Eastside cities)."
