City Challenges

1
City Challenges

• Association of Washington Cities
• June 2004
• Stan Finkelstein
• AWC Executive Director
• [phone]
• Stanf_at_awcnet.org
• David Moseley
• City Manager, Federal Way

2
Washingtons Cities TownsAn Overview

• 281 cities towns 39 counties
• Total population living in cities is 3.74 million
  (total state population is 6.1 million)
• There have been 13 newly incorporated cities
  since 1993 (including Spokane Valley)
• The percentage of the states population living
  in cities is now 61 - up from 52 in 1990
• The largest city is Seattle with a population of
  571,900 peopleand the smallest city is Krupp
  with 65 people.
• Impacts of growth More people demand more
  services and impact every element of government.
• Many areas annexed or incorporated do not have
  urban level of services such as sidewalks, street
  lighting or adequate transportation capacity.
• City streets have increased by 4,567 centerline
  miles (41) since 1990.

Cities Grew 48
Source OFM 2003 Population Estimates
3
OVERVIEW
2002 City Operating Expenditures (General
Special Funds, Excludes One-Time Capital
Utilities)
4
OVERVIEW
2002 City Operating Revenues (General Special
Funds Includes Restricted Unrestricted
Revenues)
Includes certain revenues used for capital
expenditures
5
OVERVIEW
How much of 1 of property tax goes to
Cities?Statewide Distribution for Tax
Jurisdictions for 2002 (including
voter-approved levies)
2.5 Ports, Hospital Other
12.9 City
2.9 Other Voter Approved Local
31.7 Local School (Voter Approved)
6.2 Fire EMS
2.5 Library
17.1 County
24.2 State
Statewide averages
6
How much of the sales tax goes to cities?
OVERVIEW
Cities 0.85 of 1 local sales tax (plus share
criminal justice with county)
15 of city 1 sales tax is shared with
counties Refers to sales tax levied in cities.
Counties have similar authority in
unincorporated areas.
7
City Infrastructure
INFRASTRUCTURE

• Sewer and water infrastructure is generally
  self-financed through utility fees.
• Stormwater requirements are being defined and
  will require substantial investments.
• City streets are our biggest infrastructure
  investment-we are not keeping up.
• Approximately 69 of transportation funding is
  from city general fund dollars while only 31 is
  from state/federal gas tax sources.
• Cities counties have not had a state gas tax
  revenue increase in 14 years.
• Adjusted for inflation, cities have experienced a
  per capita decrease in gas tax distributions
  (result of incorporations and annexations).
• 24.54 in 1991
• 14.87 in 2002

8
City Infrastructure
INFRASTRUCTURE

• City streets (cont)
• I-776 permanently repealed local license fees
  that cities used for matching fundsa 19.5 M
  loss in 2004 alone.
• The Transportation Improvement Board (TIB) is
  consistently oversubscribed for grant funding
• In the FY 2005 funding cycle, over 90 of
  applications were from cities.
• A total of 593.4 M were requested (482 projects)
  and only 74.4 M were awarded (66 projects). An
  81 ratio
• Many city requests are to fund state highways
  that serve as main streets.
• The 2004 Legislature reinstated 1M for the
  School Safety Program and provided some Freight
  Mobility project funding, but did not include
  funding for the Small City Pavement Program.

9
Major Fiscal Trends/Impacts 1973-2004

• Growth in the Service Economy
• Rising Dependence on Sales/Excise Taxes
• State Funding of K-12 Education
• Impact of Unfunded Mandates
• Winnowing of State Local Governments Tax Bases
• Growth in Remote Commerce
• Impact of Direct Legislation ( Initiatives)
• Rising Anti-Government Sentiment
• Voter Approval Required for Revenue Enhancements
• Reduced Council Discretion
• Rising Expectations/Demand for Services
• Peak and Valley Cycles of Fiscal Instability

10
Future Fiscal Challenges to Cities
ECONOMIC TRENDS

• Economic Downturn has Affected Cities and the
  State
• slower recovery than predicted
• inflation
• Initiative Impacts Grow Every Year

Initiative Losses to Cities (includes
I-864)2002-2007
Assumes 8 M backfill to cities in 2003, 3 M in
2004, 2 M in 2005, and no backfill to cities
beginning in 2006 I-776 was declared
constitutional by the Washington State Supreme
Court in October 2003 and sent back to King
County Superior Court for final proceedings.
11
Future Fiscal Challenges to Cities
ECONOMIC TRENDS
Cost of Government Services vs. Inflation

• Growing Costs of Providing Services
• Public Safety Costs
• Growth higher than inflation
• Impacts of interest arbitration
• Health Care Costs ? 67 last three years
• Liability Costs/Tort Reform
• Pre-emptions/Mandates (e.g. Homeland Security,
  Stormwater)

• Waning State/Local Fiscal Partnership
• Competition between the states and local
  governments for limited tax sources

12
Future Fiscal Challenges to Cities (cont)
ECONOMIC TRENDS

• Fiscal Well-being
• Continual erosion of local fiscal capacity
  (conflict between economic development and
  maintaining services)
• Impact of Remote Commerce
• Growing lost sales tax revenues from remote
  Internet catalog sales
• Streamlined Sales Tax/Sourcing
• Court Decisions Impacting Funding, e.g. ambulance
  utility
• Pressures on General Fund
• Traditional Services (Police, Fire)
• Augment Transportation Budgets
• I-864 -- 25 Property Tax Reduction?

13
Group Discussion

• Strategic Engagement
• Priorities of City Government
• Citizen Expectations

14
State of the Cities
 
State of Cities survey results as of 6/8/04 147
cities (53) responding to I) Govt in General
145 cities (52) responding to II) Your City