The City of Lakewood is on track financially halfway through its two-year budget period, but the potential for state cuts brings uncertainty to its spending plan in 2012.
Pierce County’s second-largest city will decrease its projected $38 million general fund, which pays for day-to-day operations such as police and street work, by $14,000, according to a staff report.
“It’s miniscule,” Finance Director Choi Halladay said of the midpoint adjustment.
Lakewood expects $144,900 less in sales-tax revenue this year and $106,000 less in gambling taxes because of the closure of a minicasino.
But it’s receiving $189,000 more than budgeted from utility taxes because of rate increases and higher-than expected receipts from property taxes and court fines. Labor costs also are slightly below projections, saving $31,000.
To the north, Tacoma is grappling with a projected $26 million budget shortfall in its general fund. So what makes Lakewood so different? For one thing, Tacoma’s original two-year budget is more than five times the size of Lakewood’s.
Lakewood City Manager Andrew Neiditz said his city anticipated difficult times ahead several years ago and planned for it by reining in budget increases and by cutting expenses. The city also benefits by being fairly young — it incorporated 15 years ago — with a tax base that is still developing, as well as being conservative with revenue projections.
“We didn’t have that far to fall,” he said. “We were able to weather the storm without having to make such drastic cuts.”
For next year, Lakewood staff will ask the City Council to approve two changes: hiring a part-time employee to handle billing for a new sewer fee in the Tillicum and Woodbrook neighborhoods, and increasing employee hours at municipal court.
In January, Lakewood began providing court, prosecutor and public defender services to neighboring University Place. The changes will cost $62,000 and will be paid from court fines and sewer fees.
The Lakewood City Council will vote on the requests and establish the city’s property tax levy on Nov. 21. A public hearing precedes the votes. State law caps the annual increase in property tax revenue at 1 percent; Lakewood is projected to receive $6.23 million in property taxes next year, a $61,177 increase from this year.
The city’s total budget, including utility and other dedicated funds, is projected to swell by nearly $10 million, to $65.4 million. The lion’s share of the increase is because of the city reflecting on its books $7.8 million in grants it secured for street construction projects. The city also is spending $1.8 million on water and stormwater projects.
The state’s budget woes might yet have implications on Lakewood and other cities. Gov. Chris Gregoire has called legislators to a special session starting Nov. 28 to cut the state budget by $2 billion. Gregoire intends to close a $1.4 billion shortfall in the state’s two-year budget that ends June 30, 2013, and leave a $600 million reserve.
Halladay said Lakewood staff members will closely follow the session, but it’s too early to adjust the budget to account for potential cuts.
“At this point, it’s just pure speculation on where that’s going.” Halladay said.
Among the ideas Gregoire has pitched to cut spending is ending or reducing revenue sharing with cities. Halladay said the biggest concerns for Lakewood are liquor profits and taxes. Another concern is money the city receives to make up for sales-tax revenue lost when the state changed how it distributes that revenue in 2008.
Last week, 115 mayors, including Lakewood Mayor Doug Richardson, sent a letter to Gregoire opposing cuts to shared revenues.
Eliminating the three revenues in February, one of the governor’s alternatives, would cost Lakewood $719,500 next year. Cutting 10 percent of the liquor revenues and 25 percent of the sales-tax revenue starting in July, another of her alternatives, would cost the city $348,750.
Christian Hill: 253-274-7390 christian.hill@thenewstribune.com Twitter: @TNTchill
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