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.
|Financial Challenges 2017 - click to view the 2-pager factsheet|
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. [Click here for a 2-page factsheet]
The structural imbalance in our City budget will grow over time, and needs to be fixed now. The City is considering a levy lid lift to raise property taxes above the 1% annual cap, plus a capital levy to raise funds for deferred capital projects. But before any decision is made, the City wants to hear from you. We want to answer your questions and together make the choice that is right for our community.
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. In late June 2017, City staff invited a small group of important community partners to meet informally to provide feedback on this 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.
This work all ties in to the City 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. See meeting schedule below.
A key component of the engagement process is the Community Advisory Group (CAG) appointed by the City Manager to review the data, discuss the challenges and solutions, and provide a recommendation. View CAG membership here.
Presentations to Groups and Clubs
The City recruited widely (e.g. this video invitation) for volunteers to serve on the CAG; all applicants were interviewed by an independent consultant, then nominees were selected by the City's Leadership Team to ensure a wide-ranging composition. As a whole, the CAG represents:
1) diversity of perspective,
2) community connections,
3) broad and varied work and life experience.
Public Meeting Schedule (New Dates!)
- Chamber of Commerce Luncheon, Wednesday, Oct 11, 2017 | 12:00pm (MICEC)
View the Presentation
Additional meetings with community groups and clubs will be scheduled in 2018.
Telephone Town Hall Meeting
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, 2017 | 7:00-8:00pm
- Wednesday, March 7, 2018 | 7:00-8:00pm
Community Advisory Group (CAG) Meetings (click here to view meeting materials)
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.
- (Kickoff Mtg) Wednesday, November 15, 2017 | 6:30-8:30pm
- (Mtg #1) Saturday, January 6, 2018 | 9:00am–12:30pm
- (Mtg #2) Monday, February 5, 2018 | 6:30-8:30pm
- (Mtg #3) Saturday, March 3, 2018 | 9:00am–12:30pm
- (Mtg #4) Monday, April 2, 2018 | 6:30-8:30pm
Community-Wide Public Meetings
- Monday, January 29, 2018 | 6:30-8:30pm, City Hall (This meeting will be recorded)
- Saturday, February 10, 2018 | 10:00am-Noon, Community Center, Room 104
- Wednesday, March 14, 2018 | 1:00-3:00pm, MI Library
Frequently Asked Questions
Visit our frequently updated FAQ page for answers
If you don't find the answer you need in the FAQ, please send questions to: Financial@mercergov.org
- Read and download a factsheet on the City’s financial challenges