A dramatic decline in revenue collected by the City of Tacoma through Real Estate Excise Taxes (REET) could delay $2.4 million in facilities and maintenance improvements slated for 20 fire stations throughout Tacoma, according to a presentation made Tuesday by the City’s finance and budget director.
Upgrading fire stations is just one of several projects City Council has considered delaying or not completing as it tries to balance the city’s capital budget by year’s end.
According to finance and budget director Amy Palmer, the city received record REET revenue between 2005 and 2007 as a result of a booming real estate economy. In 2005, REET revenue totaled $4.9 million — a jump from $3.3 million in 2004. That upward trend continued in 2006 ($5.1 million) and 2007 ($5.8 million). However, the city is expected to collect $3.9 million by the end of this year (so far, it has reported $2.6 million in REET collections).
That drop in revenue, coupled with commitments already budgeted through 2008 and beyond, is expected to leave the city with a $7.2 million capital budget shortfall by year’s end.
That said, Palmer and City Manager Eric Anderson have recommended using miscellaneous revenue within the capital fund and eliminating or deferring funding for projects slated to be completed this year.
They suggested the following capital budget adjustments:
D Street Overpass / $1.8 million — The city is expected to receive grant funding that will cover expenses related to the $24.5 million project that separates train and motor vehicle traffic by raising the roadway over the railroad tracks. The project was completed in June.
City Hall Deferred Maintenance / $1 million — Roof and elevator improvement projects are currently under way. But the finance department has recommended eliminating $1 million in additional improvements planned this year.
LeMay Museum / $1 million — Eliminate a grant match repayment reserve from the 2007-2008 biennium budget and reprogram it for 2010 or 2011, when the repayment would be due.
City Buildings Major Repair / $400,000 — Eliminate planned but unspent funds for improvements to buildings citywide.
Miscellaneous Revenue / $1.134 million — Use interest and other miscellaneous revenue currently coming in over projections.
These adjustments, which total approximately $5.334 million, would reduce the $7.2 million REET shortfall to approximately $1.9 million. Currently, the city has set aside $2.4 million for maintenance and upgrades to Tacoma’s fire stations.
That money is unspent. According to city manager Anderson, it is also a viable option for bridging the shortfall because the fire department is in the middle of assessing the locations of its existing fire stations to determine if they best serve the city’s residents.
According to Tacoma Fire Chief Ron Stephens, the assessment will be completed by the end of next year.
During Tuesday’s meeting, Anderson suggested using the $2.4 million set aside for fire station improvements this year to cover the shortfall while the department continues its assessment. Once the assessment is complete, the city could consider a levy lid lift or bond measure to pay for the improvements.
Still, the idea of deferring maintenance on several capital projects in order to balance the budget did not sit well with some councilmembers.
“Further deferring maintenance on what we already own is a false economy,” said Tacoma City Councilmember Mike Lonergan.
“I don’t think deferred maintenance is permanent,” said Anderson. “It’s not desirable, but it is necessary.”
City Council will spend the rest of this year finalizing the 2009-2010 biennium budget before approving it Dec. 9. It will review the budget again during two study sessions Sept. 9 and Oct. 28, and budget workshops in November.
