Tacoma's bullish budgeting backfires

The root causes of Tacoma’s budget shortfall are as far-flung as the worldwide economic downturn and as local as drivers slowing down on the Bay Street curve.

The City Council will hear an overview today of what it could do to bridge the $25.7 million gap. Council members also hope for more clarity on the reasons budget estimates didn’t hold up.

No single problem dominates. In several categories of spending and revenue, city officials were overly optimistic last year when they wrote a two-year, $399 million spending plan.

“We predicted that the economy would start to recover,” city Finance Director Bob Biles said, “and we’re just not seeing that.”

Reality has splashed cold water on projections in several major areas, from fewer drivers running afoul of traffic cameras to fewer building projects in need of permits.

TAXES

Tacoma’s biggest source of revenue, property taxes, are keeping up with expectations. So are business taxes. But collections of sales taxes are sluggish for Tacoma just as they are for state and other local governments.

They would be even worse if not for a windfall of about $800,000 the city received from a one-time amnesty state government offered this year to businesses owing back taxes. That program, though, may have masked otherwise falling revenues, city spokesman Rob McNair-Huff said.

Utility taxes have run lower as well, especially revenue from Tacoma Water customers.

Customers used far less water than was projected this summer because of the cool, wet weather, Tacoma Public Utilities spokeswoman Chris Gleason said.

McNair-Huff said it didn’t help that one of the city’s largest water users, Nalley’s chili and beans cannery, closed this summer.

CAMERAS

The city’s experiment with catching speeders on Bay Street between River Road and Interstate 5 with a radar-equipped camera may be paying off in the form of less speeding.

But that means less revenue. Through September of the second year of the state-approved pilot project, tickets are running so far at less than half of last year’s numbers.

They’re also below projections. City staff estimated the speed camera would raise $4.2 million in 2011 and 2012, but have now revised that to just $1.7 million.

Revenue from the city’s red light cameras is also coming in lower than expected. The city could change their number and locations when it renegotiates next year with contractor Redflex, Tacoma Police Lt. Corey Darlington said.

“After a period of time, drivers’ behavior is modified,” Darlington said.

That’s the point, in fact. “The whole idea was to increase safety, not to generate revenue. Of course, that’s a secondary outcome,” Darlington said.

Secondary or not, camera revenue makes up most of the revenue dedicated to the city’s traffic enforcement fund. It’s by far the biggest reason the city expects to transfer an extra $3.5 million from its main budget to the traffic fund.

City Councilman Jake Fey said the decline in tickets would have been hard to predict – but he said the budget shouldn’t count on them anyway. The cameras should be expected to pay for themselves and no more, Fey said. “It’s not supposed to be a revenue fund,” he said.

PERMITS

The city’s permitting fund is also in need of an extra transfusion – in this case, $1.4 million – from the main budget, or general fund.

Staff expect revenue from permits issued by the city to miss original projections by nearly 25 percent as the economy continues to take a toll on building projects.

Fey, who cast the lone vote against the budget over concerns that then-City Manager Eric Anderson’s projections were too optimistic, singled out building permits as built on faulty assumptions. He said it was clear there were more employees working in building and land use than their workload required.

That could be one area where the council targets cuts. If so, Tacoma wouldn’t be the first city. Planning and land use departments have been among the areas hardest hit by employee layoffs because of falling revenue, according to the Association of Washington Cities.

Other special funds for parking and for the Tacoma Dome are faring better, and the city expects to be able to reduce their dependence on the general fund, partly by grabbing savings from vacancies in those areas.

The city was able to keep open even more vacancies among the employees responsible for street maintenance, engineering and construction. But that didn’t help the city’s general-fund problem, because the money was needed to resolve an imbalance in the streets fund.

PAY

City officials counted on freezing employee pay when they wrote the budget. Contract negotiations with employee unions followed, and it quickly became clear that freeze wouldn’t materialize.

The city expects to pay employees $1.3 million in step increases through 2012. Biles said city officials were concerned that the freeze would hit newer employees while not touching those at the top step of the salary range.

A bigger spending increase, a projected $1.6 million, comes from unexpected overtime pay.

Police are working some of the extra hours, but most are in the Fire Department. Biles said firefighters had to compensate for vacancies. A new early retirement incentive for firefighters may help tamp down pay costs by encouraging top-paid employees who accrue the most vacation to retire, he said.

Before the scope of the budget problem was known, a committee of the City Council endorsed 5 percent raises for the police and fire chiefs – but those now may be scrapped. An item on the council’s Nov. 15 agenda includes a proposed raise for a top official in the retirement system but doesn’t mention the chiefs, and Fey said he doesn’t expect the chiefs’ raises to come before the council.

Jordan Schrader: 360-786-1826
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