City’s Operating and Capital Financial Challenges - 2017/18
The shortcut to this page is: www.mercergov.org/FinancialChallenges
For the 2017-2018 Budget cycle, significant deficits have been projected in the General Fund and Youth & Family Services (YFS) Fund, which account for most of the City’s services (excluding utilities). The General Fund pays for a wide range of City services such as park maintenance, police and fire services, and special events; the Youth and Family Services Fund pays for school counselors, emergency family assistance, and employment assistance.
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The imbalance was temporarily solved using 2016 surplus revenues in the General Fund, which were generated by the high level of development activity on the Island, and one-time resources in the Criminal Justice Fund, which was folded into the General Fund in 2017. However, this budget balancing solution is only temporary, meaning the projected deficits will occur in 2019.
A (revised) public engagement process is underway to share information about the City’s financial challenges with the community and seek public input on how best to balance the budget while sustaining City service levels.
The Council’s adopted Goal #4 for 2017-2018 is: Maintain Quality of Life Services by Addressing the City’s Financial Challenges. Click here to read past City Council deliberations around this budget imbalance.
Sources of Funding
The City’s revenues from property taxes, which represent 40% of total City revenues, are capped by state law at 1% annual growth. Over time, the 1% property tax limitation prevents the City from keeping pace with inflation of goods and services, which the City purchases to deliver services. Examples of goods and services include: asphalt road paving, plants and topsoil for park projects, salaries of City employees, medical benefits (for employees), and contract services. These costs have increased well beyond the 1% limitation, and the City is struggling to maintain current service levels and to address increasing demands.
In other communities by comparison, such as Bellevue, Issaquah, Kirkland, and Redmond, property tax comprises only 19-23% of total revenues, but those cities all have significant retail sales tax bases to help make up the difference. Mercer Island does not enjoy this same situation.
Why are Deficits Projected?
Simply put, annual revenue growth is not keeping pace with annual expenditure growth. The high level of development activity on the Island in 2014-2016, which is responsible for the record-setting spikes in construction-related sales tax and development fees, is projected to decline in 2017-2019. These spikes have masked the underlying structural imbalance in the City’s future budgets.
The projected deficits were originally identified back in 2014 (when the 2015-2016 budget was developed). Since that time, staff has repeatedly updated forecasts with the best information available and presented various budget balancing options to Council at its January and June Planning Sessions in both 2015 and 2016.
What’s Happening Now?
The City has launched a (revised) public engagement process to help residents understand the financial challenges it faces in balancing its budget, and in maintaining the levels of staffing and quality of services that the community expects.
In late June 2017, City staff invited a small group of important community partners to meet informally and begin discussing the issue along with the draft outline of a proposed public engagement process. These "Quality of Life" partners represent a wide range of groups that make a positive difference in our community, provide services, and are central to our quality of life; this is not an exhaustive list of all groups serving Mercer Island.
A key component of the engagement process is to convene a Community Advisory Group (CAG) appointed by the City Manager to review the data, discuss the challenges and solutions, and provide a recommendation. Community Advisory Group meetings will be widely advertised and open to all. See schedule below.
The City is now recruiting volunteers to serve on the CAG: anyone interested should review the meeting dates and application, available here. [The form can be printed and filled out by hand, or filled out online and then printed]. The City Manager strives to appoint a broad-based, diverse group of residents-- view her video invitation here. The application deadline is October 27, 2017.
Our community enjoys an exceptional quality of life, such as: outstanding schools, safe neighborhoods, and easy access to parks, trails and services, just to name a few. Please consider volunteering to help your City find solutions that will sustain our exceptional quality of life.
Public Meeting Schedule (New Dates!)
Presentations to Community Groups and Clubs
Chamber of Commerce Luncheon, Thursday, Oct 5, 12:00pm (MICEC) -- Note: Open to the public
Additional meetings with community groups and clubs will be scheduled in 2018.
Telephone Town Hall Meeting
NEW! The City is piloting a new technology that allows interested residents to join a moderated, community meeting by telephone or computer, providing a new option for those who are unable to attend in-person. Participants may ask questions in real-time, and a recording of the event is available afterwards. This interactive meeting is known as a Telephone Town Hall
- Wednesday, October 11, 7:00-8:00pm Register to Participate Here (coming soon)
Community Advisory Group (CAG) Meetings
Note: This nominated panel will be taking an in-depth look at the City's finances and budget details in order make a recommendation to the City Manager on a solution to the City's budget problems. All meetings will be held at Mercer Island Community and Event Center (MICEC), and open to the public, but will not be offering a public comment period.
- Wednesday, November 15, 2017 | 6:30-8:30 pm
- Saturday, January 6, 2018 | 9:00 am–12:30 pm
- Monday, February 5, 2018 | 6:30-8:30 pm
- Saturday, March 3, 2018 | 9:00 am–12:30 pm
- Monday, April 2, 2018 | 6:30-8:30 pm
Community-Wide Public Meetings - TBD
Frequently Asked Questions
Coming soon as we begin to hear from residents
Read and download a factsheet on the City’s financial challenges (coming soon!)
Read a history of recent City Council budget deliberations
Read the 2017-2018 Budget Message for more detailed information on the City’s financial outlook
View all recent budgets.