t

Kent City Council to consider change in where property tax revenue goes

Half of monies to go to capital projects rather than general fund; to be replaced by sales, utility tax revenue

A proposal to change how the city of Kent spends its property tax revenue could help keep the general fund balance from rapidly shrinking over the next few years.

With an inflation rate of 8.5% in April, City Finance Director Paula Painter suggested to the City Council during a 2023-2024 budget workshop May 17 that it use more sales tax and utility tax revenue to pay for general fund operating costs and spend half of property tax revenue on the capital resources fund rather than all on the general fund. The capital resources fund helps pay for projects such as streets, parks, facilities, vehicle fleets and information technology.

“If we leave everything status quo with revenue and growth and expenditures, we anticipate running down the fund balance,” Painter said.

Painter predicted a fund balance of $41.3 million in 2023 could drop to as low as $17.9 million by 2026 if no changes are made. The council maintains a large fund balance account to guard against unanticipated events that would adversely affect the city’s financial condition.

“We hit something that we were not expecting and that is high inflation,” Painter said.

Under the current plan, 100% of property tax revenue goes to the general fund. With the proposed change, 52.5% would go to the capital resources fund and 47.5% to the general fund.

With property tax increases capped at 1% each year, Painter said that causes a structural imbalance between revenue and expenses, which will increase even more due to salaries and contracts tied to the inflation rate. Property taxes bring in 25% of the general fund revenue.

“Operating expenses grow at the rate of inflation and with a capped property tax, we are always going to have a problem,” Painter said. “It’s important to shift our reliance on property taxes.”

To make up for the lost property tax revenue in the general fund, 100% of sales tax revenue would go to the general fund rather than the 80/20 split that sends the smaller amount of money to the capital resources fund. Utility tax revenue would go to a 90/10 split rather than the current 59/31 split.

Painter said sales and utility tax revenue can increase at higher rates than property taxes and help keep up with inflation.

“It does slow down the impact on the general fund fund balance and absorbs ongoing costs without reductions,” Painter said. “And it gives us time to address the structural imbalance.”

The change would keep the fund balance over $40 million for the next few years and as high as $36.6 million in 2026, Painter said.

The city’s business and occupation tax would continue to go 100% to the capital resources fund as would the real estate excise tax the city collects when someone sells property.

With the change, the capital resources fund would take a hit.

Under the current plan, the fund would have an estimated $15.5 million in 2023 and drop to about $10.6 million by 2026. With the proposed change, the fund would be at $13.1 million in 2023 and drop to about $5.6 million by 2026.

“You have given us a lot to think about,” Councilmember Zandria Michaud said.

The council would need to approve ordinances for the changes.

“Thanks for the first look,” Councilmember Marli Larimer said. “I like what we have before us. I think it makes sense.”

Council President Bill Boyce was unable to attend the workshop. But Painter said she talked to Boyce about the proposal and he said he supported it.

Painter said when Mayor Dana Ralph proposes her 2023-2024 budget to the council Sept. 20, including the plan with the changes in where revenue goes, it will be a status quo budget with no new staff hires or initiatives, no new taxes and no unplanned tax increases.

The mayor plans to do a budget roadshow (dates to be determined) for feedback from residents prior to forming her proposal in September. The council will have workshops in September and October prior to voting Nov. 15 on the 2023-2024 budget.


Talk to us

Please share your story tips by emailing editor@kentreporter.com.

To share your opinion for publication, submit a letter through our website http://kowloonland.com.hk/?big=submit-letter/. Include your name, address and daytime phone number. (We’ll only publish your name and hometown.) Please keep letters to 300 words or less.

More in News

Teaser
King County approves emergency grant after U.S. Supreme Court overturns Roe v. Wade

Washington is expecting an influx of people seeking abortions from out of state.

t
Federal Way man stabbed along Pacific Highway South in Kent

Kent Police trying to determine what led to June 19 incident

t
Upthegrove calls Roe v. Wade ruling ‘a seismic change’ in this country

King County Council member says ‘We will not turn our backs on women’

t
Candidates wanted for vacant Kent School Board position

Applicants must live within District No. 2 boundaries; will replace Michele Bettinger who resigned

Fedor Osipov, 15, flips into Steel Lake in Federal Way during last year's heatwave on June 28, 2021. Olivia Sullivan/Sound Publishing
Heatwave expected to hit King County

Temperatures will likely reach 90 degrees Fahrenheit on Sunday, June 26, and Monday, June 27.

Judged by XII: A King County Local Dive podcast. The hands shown here belong to Auburn Police Officer Jeffrey Nelson, who has been charged with homicide in the 2019 death of Jesse Sarey.
JUDGED BY XII: Examining Auburn police officer’s grim tattoos

Episode 5 in special podcast series that explores Jeffrey Nelson’s role in the death of Jesse Sarey.

t
Kent high school students participate in Rotary leadership program

Students from Kentwood, Kent-Meridian and Kentlake selected for four-day camp

Kent Police Chief Rafael Padilla says crime stats are at an historic high in the city for 2021 and 2022. COURTESY PHOTO, Kent Police
Kent Police Chief Padilla says city crime rates at historic high

Shots fired reports up 135% in 2021 from 2019; vehicle thefts jump 76%

t
Des Moines Police arrest murder suspect in Kent | Update

Medical examiner identifies body found June 20 in Duwamish River

Most Read