Des Moines in danger of being insolvent; city says lost state money causing pain


by Jack Mayne

The nexus of the recent recession and the Washington State Legislature’s redirection of financial supports that cities used to use to balance their budgets has resulted in the City of Des Moines grinding down its financial reserves to the point the state auditor say the city “is it at risk for not being able to meet its financial obligations and maintain current service levels.”

The latest audit, released on Dec. 1, said the city’s general fund “has been diminishing due to the downturn in the economy and declining tax revenues” and that the city “has not effectively controlled costs in relation to reduced revenues … and ending fund balance has declined for three of the past four years.”

The general fund ending balance was actually at a loss of $55 in 2012 and only at $251 in 2013, the auditor wrote. Revenues have decreased and expenditures have increased.

“Therefore, the city is at risk of not being able to meet financial obligations at current service levels,” and should “monitor and evaluate its to ensure it meets the needed funding requirements.”

The auditor’s recommended that Des Moines adopt and follow “a formal comprehensive plan” and that it needs to “closely monitor and evaluate its financial activities” to be certain “the desired results are achieved.”

City ‘respectfully disagrees’
In its response to the auditor’s report, the city said “the steps the city has taken to address its financial situation, particularly the level of expenditure reductions and deferrals that have been implemented in the past three to four years” do not justify the proposed state recommendations.”

The Legislature has taken away from cities many of the streams that permitted cash-strapped municipalities to balance their budget, said Des Moines in its response to the auditor.

“When the Legislature eliminated the Sales Tax Equalization Program, the city lost a significant revenue source. In 1999, Sales Tax Equalization revenue totaled $1,667,000, representing 14.3 percent of the City’s General and Street Fund revenue.

“If this program had not been eliminated, this revenue, for 2014, is estimated to have been in the range of $2,800,000,” Des Moines told the auditor.

The city said it has done much to keep expenses in check and to reduce what it can.

It has changed and relaxed “dozens of development regulations and authorizing an economic development position to work directly with the development community to attract business.”

The City Council has also “maximized the use of just about every councilmanic revenue that is allowed under state law—including B&O taxes, Transportation Benefits District vehicle assessments, gambling taxes, utility taxes etc.—to balance its budget.”

But, the city wrote, “the Legislature has continued to deal with its budget problems by, in part, diverting revenues that have historically gone to cities.”

Liquor tax revenues the city received in the past three fiscal years “were $272,065 less than what would have occurred had the Legislature not taken those funds. In 2015, we expect liquor funds to be at least $65,767 less than what they should be.

In addition, the city says the Legislature took away from cities Public Works Trust Fund revenues and used the money to balance the state general fund.

This forced cities to use “other revenues to construct vital public works projects or to simply forgo them entirely.”

Living off savings
The Waterland Blog sent e-mails last week to the six state legislators representing the South King County area. We sought thoughts on legislator’ “views on actions the Legislature can, will or will not do to alleviate/change these financial problems.”

None responded.

We also copied the request to area City Council members and city managers, but only one person responded despite several days delay in completing the story.

The one respondent was Des Moines City Councilmember Jeanette Burrage.

“Great issue and I am glad you are covering it,” Burrage wrote.

“The City of Des Moines has the lowest sales tax per person of any city in King County,” just $80 compared with $125 per Burien resident or $387 for each SeaTac resident, according to figures put together by Des Moines City Finance Director Paula A. Henderson.

“For the last 12 years, Des Moines has been living off savings, one time money from building permits, and taking money from the Marina account, which is now also operating in the negative,” she wrote. “We have not put any money into replacement funds for computers or equipment for many years and no street overlays.”

‘Draconian’ cuts drew crowds
The officials city response to the auditor noted that “when draconian budget cuts to the Park and Recreation programs were proposed in 2008, residents filled the Council chambers and made it quite clear that these services were vital to the well being of our community and that budget reductions must cut across all City departments, not just one or two.

“The City Council has worked very hard to make sure that we maintain the highest possible level of services given the realities of our revenue situation.”

Des Moines officials did not dispute the auditor’s finding that it was relying on “one-time revenues to balance its budget” not “there are revenues from one-time projects in the 2014 budget that have not fully come in yet” but “we are seeing an uptick in onetime sales and B&O tax revenue from two of these projects (the Des Moines Creek Business Park project, and the Sheraton Hotel).”

The Des Moines Creek Business Park also started two months later than expected because of a delay in the Port of Seattle finalizing the land lease with the Panattoni Development Company.

“Building permit issuance will occur later in 2014 than we anticipated because of the delay in finalizing the land lease and a change to the city’s development agreement with the Port but the permits will be issued this year.


Comments

11 Responses to “Des Moines in danger of being insolvent; city says lost state money causing pain”
  1. BirchCreek says:

    So why not increase the sales tax to be equivalent with our surrounding neighboring cities?
    As for our elected state and local officials who are not responding to your communications, can we have their names and contact information so the rest of us can flood them with emails in regards to their apparent unconcern for our financial situation?
    And we must remember, we elected these representatives who seem to lack concern for our city. So why do we keep voting for them?

    Well-liked. Like or Dislike: Thumb up 16 Thumb down 4

  2. Wanker says:

    Is this an opinion piece? Or is it factual? I am thinking someone may be abusing their access to broadcast their opinion and would love to hear the cities position on the situation.

    Hot debate. What do you think? Thumb up 8 Thumb down 9

    • Jack Mayne says:

      Not an opinion piece. Taken directly from the Audutor’s report. You can read it yourself by contacting the state auditor in Olympia. It contains both the state’s finding and the city’s responses. I will send you the full findings if you send me your e-mail address by simply clicking my byline on the story which will give my my e-mail address so I can return a message including the pdf.

      Rate: Thumb up 11 Thumb down 3

  3. Susan White says:

    I think there are many issues for the City that need to be addressed and I remember years and years ago Mayor Kaplan’s complaints about using one time monies to keep funding things and that’s what keeps happening! That is clear in the audit and cannot be denied. I have to ask myself and so should many others . . where is the leadership Mayor Kaplan? You cannot keep doing the same things over and over again and expect a different result! And now we have our entire boardwalk destroyed here in Redondo . . and not blaming the city for that happening HOWEVER . . not going to want to see some resolution to this as it’s a major asset to the City and our community in Redondo. I do think there should be some clear communication to the community about where we really are and make it transparent to the public. As much as I love our City of Des Moines I must admit there are serious concerns here.

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  4. Emily says:

    I ask, who will pay for that rebuilding of the boardwalk? The DM residents want want and want, but yet they pay so little in taxes for all the things they want. silly.

    Hot debate. What do you think? Thumb up 12 Thumb down 5

  5. Sandra Higgins says:

    Thank you very much for this article. As is clear, the city has been in a tough situation for a long time. Certainly the recent Redondo destruction makes it even worse!
    One clarification: As councilperson Burrage intimates, the marina has been functioning as our ‘golden goose’ during these tough times. The fact is that the marina always operates in the black. It is the city’s continuing withdrawals from that operation that make the marina’s numbers appear negative.
    We must find a way to help both the city and the marina. The marina’s our city’s heart and our jewel. If we kill the goose we’ll all suffer.

    Is it possible the collective will of our city’s residents, those talented ‘human resources’ who live here, can be harnessed to help our council? We’re all in this together! I’d sure like to be part of the solution.

    Well-liked. Like or Dislike: Thumb up 24 Thumb down 0

  6. Dumb Moines says:

    I would like to see the city dissolve once and for all. Split it up, give Redondo to Federal Way, the Marina to Normandy Park and the rest of it to Kent. Every city around Des Moines is trying to grow and encourage development. They also have better police resources and more responsible council members steering the ship. Why does Des Moines continue to throw away resources and spend money on adding more restrictions like a tree ordinance or restoring an old shack that no one cares about? Even as bad as Federal Way looks in some places, the city is buying up bad property and working with investors to rebuild the city. This will never happen in Des Moines. The city is doomed..

    Hot debate. What do you think? Thumb up 9 Thumb down 14

    • View from on high.... says:

      The problem has been apparent for years…..Des Moines does nothing to encourage business, which is the life blood of any city. Years ago, maybe 8 or more,….there was discussion about what a jewel Des Moines is and how much potential it had. Bob Scheckler was Mayor, me thinks and despite all of the talk, nothing was ever done. Des Moines has one of the most business unfriendly policies in the Highlne area. The potential is enormous but with a ‘no growth and no support’ attitude, there is little hope. It is sad.
      If you have a Mayor and a Board that refuses to budge, what can a city do?

      Rate: Thumb up 2 Thumb down 1

  7. Don Wasson says:

    It dose not take a genious to look at Des Moines last five years budgets to understand exactly why they are on the verge of insolvency!
    If Des Moines were operating in the real world, they would have been bankrupt many years ago.. There’s a term for trying to solve a problem over and over again the same way and expecting a different result !

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