2013–2014 BIENNIAL BUDGET - the City of Tukwila

2013-2014 Biennial Budget City of Tukwila, WashingtonRevenues and expenditures are projected on the basis of assumed economic relationships. Revenues areforecast on the basis of future economic and demographic factors. Expenditures are forecast based onpast trends modified by present and future conditions. Future conditions are based upon a series ofassumptions. This model has been used to test a large range of assumptions and policy options in thecourse of developing budget recommendations.The Tukwila economy is cyclical and is still recovering from the recession that began in 2008.Unemployment is slowly declining and change in personal income is forecasted to slightly outpacechange in Seattle area CPI. Housing and construction sectors are also showing signs of recovery.However, volatility in the stock market, European and Asian economic issues, and the war on terrorismand unfunded mandates by state and federal government for criminal justice and human services haveall had an impact on the General Fund budget. Modest economic growth is reflected in the revenueforecasts through 2014 with gradual and steady improvement shown in the 2015-2018 projections. Thisforecast is relying on a 1% increase for property taxes plus an average factor for new construction.Expenditures involving public safety and public services are expected to increase at a greater rate.Commercial development, residential developments, and new annexations are a few of the areasexpected to increase the demand for public services. The Finance Department will continue to studyrevenue options and enhancements to offset any decline in future revenues and also look for costcontainment opportunities.Forecasting models have been used to assist in fiscal planning for quite some time. Models haveallowed analysis of alternative actions in funding programs during the development of the budget. Themodel accents the continuing need to control the per capita rate of expenditures reflected in thepreceding pages. Continued caution will be required to anticipate and manage the effects of currentand future legislative actions to avoid service reductions for budgetary reasons. Should growth occurslower than anticipated the adverse effect on fund balance may be greater than predicted.As mentioned, the City has taken into account the statewide initiative in forecasting property taxes.The issue that develops when property tax increases are held to 1% is that costs are not. Costs such asemployee benefits, negotiated labor contracts, services and supplies continue to increase at a greaterrate. Fuel, professional services, and healthcare costs are good examples. The shortfall then has to bemade up by increases in sales tax collection and population growth. The City has been able to maintainthe existing level of service, in light of legislative action, because the economy is growing at ratessufficient to offset the limits placed on property taxes. Sales tax revenue needs to grow at a rate that willmake up the revenues lost from property tax declines. If not, the City will then have to make somedifferent choices in the delivery of basic levels of services.Page 45