From the Director - A Softening Economy: City Revenue Impacts!

The downturn in home building; reductions in consumer confidence; and declining home values are adversely impacting many cities’ real estate excise tax, sales tax, and property tax revenues.

While the Washington economy remains stronger than that of many other states, nonetheless Washington is feeling the impact of the national economic downturn. State revenue forecasts have projected a potential $2 billion-plus shortfall for the 2009-11 biennium. Additionally, the increasing rate of inflation, especially in health care, motor fuel costs, and construction materials is significantly impacting the cost of governmental services.

For many city officials, developing their 2009 operating budget will prove to be a significant challenge. With the 1% property tax limit now established, declining sales tax revenue growth; and a reduction in REET translating to less funds for the City-County Fiscal Assistance Account, making ends meet will be difficult. It is my belief that we may be again entering a period of fiscal uncertainty and the inability of cities to sustain services.

Unfortunately, aside from changing economic conditions, much of cities’ fiscal problems are the result of recent initiative activity. The repeal of the motor vehicle excise tax and the imposition of the 1% property tax growth limits have significantly eroded cities’ fiscal wellbeing. For many cities, the consequences are now being felt, and it is time to communicate those outcomes to the media and to constituencies.

Is There a "Silver Bullet?"

In the days of the Lone Ranger, the "silver bullet" represented the mechanism that guaranteed safe passage for the Lone ranger and his faithful companion Tonto. In contemporary times we refer to the "silver bullet" as the panacea to address major problems. At this point there is no easy solution to the fiscal problems that have befallen many of our cities. There are however strategies that may help.

First, I think that elected officials have to be out front and communicate why they’re unable to sustain previous service levels and as well respond to new service needs.

Secondly, and equally important, city officials should meet with their legislators and discuss their problems. It is the Legislature that can provide some degree of fiscal relief, but they must be apprised of their cities’ needs.

Third, I think that where possible local officials should seriously reexamine their revenue options and determine whether tax increases are warranted or whether their constituents should be asked to vote on certain available tax increases.

Fourth, now more than ever, city officials are being asked to more prudently then before, to manage their city’s resources. This will require a more comprehensive reexamination of both operating and capital needs, as well as resources and reserves available to provide services. Concurrently, local officials should try to determine their future conditions and whether they’ll be able to sustain existing services beyond 2008 and 2009.

In Closing

In coming months, AWC Officers, Board members, and lobbyists will be meeting with the Governor, and legislators to communicate the fiscal problems of the state’s 281 cities and towns. The Governor has already expressed her concerns regarding the ability of cities and counties to sustain public safety and other services, and has indicated a desire to initiate a dialogue. The membership of the Association has adopted a resolution in support of addressing the fiscal needs of cities.

The fiscal problems of our cities need to be addressed. All city officials are encouraged to become active players in this process. AWC will again document cities’ needs in the forthcoming 2009 "State of the Cities" report. At this point I am guardedly optimistic that by working together we can find an ongoing solution to our cities’ fiscal problems.

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