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.]]>