There is some good news about Puyallup’s budget, City Manager Gary McLean said, but to keep it that way the city council is going to have to make some tough decisions.
“We’re going to be just fine,” he told the council at the April 14 council study session.
Year-end preliminary data from the 2007 budget cycle shows a shortfall of about $2 million, but the city had about $6 million in its reserve fund and was able to cover the shortage.
The shortfall came from lower than projected sales tax revenues. Sales tax makes up about 30 percent of general fund revenues, which is about $15-20 million. From 2004 to 2006 there were increases in sales tax revenues of about $1 million per year or about 7 percent.
Based on those numbers the 2007 budget was projected to have about 6 percent in increased sales tax revenue, but preliminary data shows there was actually a 2.4 percent decrease due to an economic downturn.
With the trend expected to continue, the budget needs to be adjusted.
For 2008, the budget expenditures need to be adjusted to keep the city’s $4 million of additional reserve funds in place.
Re-prioritizing capital projects could be where the city could adjust the budget, he said.
“We believe that is probably the first place we look,” McLean said.
The city council will have to decide how to adjust capital projects expenditures by about $2 million less. Some places funding could be found is a $500,000 set aside fund the council directed staff to create at the beginning of the year, the use of $900,000 in salary savings, $75,000 for an Economic Development Study, $2.8 million of unused REET fund balance, $500,000 possible reduction in General Fund capital items, $700,000 from re-prioritizing some portion and adjust Fleet replacement rates or using about $500,000 of expected revenue from the new photo enforcement program.
There could also be additional funds by creating a local economic development stimulus project to encourage construction projects planned to start beyond 2008 to begin sooner. Encouraging construction could lead to additional permit revenues, as well as sales tax revenues.
A combination of some of the options should put expenditures on target with expected revenue.
Changes in expenditures won’t affect services and city staff levels, he said.
To address future budget needs McLean proposed that the city council look at changing from an annual budget to a biennial budget. Making two-year budget projections could allow for more flexibility in finding funding sources and the council could review needed changes as they come up, rather than reexamining an entire budget.
The city council voted to have staff look into going to a biennial budget.
“I think it’s a great tool to work with,” said Councilmember Rick Hansen.
But it needs to be clear that cost relationships are continuously looked at to try to prevent shortfalls in funding, he said
Deputy Mayor George Dill said he likes the idea of a two-year budget and wants to see the council updated quarterly about budget benchmarks.
Councilmember Kathy Turner said going to a two-year budget could also free up staff time to work on other city business.
Staff will return the exploration of going to a biennial budget by June as an ordinance for council approval.
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