April 18, 2011

Welcome Council President Ekberg, City Council members, City Administrator, City staff, and all of our visitors here this evening.

Where Are We and How Did We Get Here?

Since coming before you on April 19, 2010 with my message last year, there are some very significant changes to report. I will cover some of the items briefly.

A significant amount of time and effort was required to address the current economic climate in which we were impacted by lower development growth, flat tax revenues and declining property values. Although the process required difficult decisions that affected our residents (reductions in services); businesses (the City adopted an RGRL fee); and employees (salaries were frozen and layoffs incurred), the result was a budget that preserves most municipal service levels and complies with increasing regulatory and legal requirements.

From a budget standpoint, we began 2010 with projected general fund revenues of over $47.6 million dollars – actual revenues came in at just over $43 million, for a difference of nearly $4.6 million. This decrease represents a decline of almost 9.7% over what was budgeted.

One component of our revenue is property tax. For the year 2010, we budgeted property tax at $13.08 million, and actual receipts came in slightly above budget by $108,000.

Total General Fund Revenue
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Selected General Fund Revenues
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Total General Fund Expenditures
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Another major revenue component is sales tax. The 2010 budget was built on a sales tax projection of $20,408,000. Actual sales tax received was $14,581,000 – a difference of $5,827,000 or 28.5%. Compared to the City’s highest sales tax collection year of 2007, sales taxes were down by 24.9% (retailers down – 47.01%; specialty trade contractors down – 16.51%; and motor vehicle and parts dealers down – 13.07%). Some of this decline can be attributed to the economy as a whole, but some of it can be attributed to the change in sales tax calculation that went into effect July, 2008 (streamline sales tax). Our Finance Department is keeping close watch on the mitigation payments received from the State Department of Revenue to ensure that Tukwila receives the maximum mitigation due. We are a small city of 19,100 population-wise, yet from an employment and business standpoint we are a regional force. It is only fair that we receive the revenue due us in exchange for the expenditures we must make to support the business and employment centers that operate in Tukwila that create a daytime population of about 170,000.

While revenues were significantly lower in every area, we were able to keep expenditures “in check”. The 2010 budget called for general fund expenditures of $48,135,000; our actual expenditures were $44,804,000 for a difference of $3,331,000 or 6.9% less than what was budgeted. Compared to 2009, however, expenditures decreased in 2010 by 4.2%.

In dealing with the revenue shortfalls mentioned above, our Human Services Department faced some severe challenges. Our requests for assistance (primarily rent and utilities) has increased by 27% over last year. In the past quarter, we turned away 79 households seeking financial assistance. The impact of the economy, along with cuts in State and County services, has resulted in many more citizens being on the brink of losing their housing. Free and reduced lunch statistics have increased at all of our schools. The Tukwila Pantry served over 1,700 Tukwila residents this last quarter alone and provided 26,000 bags of food.

A significant amount of time and effort was required by City Council, administration and City staff, in order to reach the best possible solution for addressing the budget gaps for the 2011-2012 biennium budget. In spite of having to make some difficult decisions, there were also some very positive activities throughout the City and I would like to share some of those with you:

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Our permitting activity actually increased last year. The number of permits issued in 2010 was 1,695 which represents a 22.56% increase over 2009. More importantly, the dollar value of those permits was about $90 million, a 52.5% increase from 2009. In addition, there were 371 new businesses locating in Tukwila in 2010.

Last spring, Codiga Park was dedicated – a wonderful celebration of a park that had been in the development stage for a long time. The park is ideal for picnicking and escaping to a more natural surrounding. A short path leads to the river where one can observe improvements to the riverbank and the side channel that was developed to improve salmon habitat. Many volunteers helped restore the site to a natural area that will be cherished by residents and visitors for years to come.

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In the second quarter, we awarded the Southcenter Parkway Extension Project to the low bidder, Scarsella Brothers Construction. This new five lane road from South 200th Street to South 180th Street and the accompanying utilities is currently under construction and will open up a completely new area of Tukwila south for development in the coming years. The project will enable the development of 512 acres of land, five minutes from Seatac International Airport and adjacent to I-5, and is estimated to provide 25,000 new jobs and 10 million square feet of occupied space. Given the recent economic downturn experienced by our region, this development is of even more vital interest than previously imagined in generating revenues for the City, County and State. We should complete this new City road very early in 2012.

We also welcomed the very first Tukwila Reporter. At long last, we have a City newspaper. This has been a goal of mine for many years and provides one more method of communicating with the residents and businesses of Tukwila and our neighbors. Granted, it is a monthly publication, but that could change based on demand and advertising.

The second half of the year brought other changes to the City;

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Where Are We Going?

Someone once said, “The best way to predict the future is to invent it”. We made many difficult decisions throughout the year – decisions that will shape and “invent” the future of our community for generations to come.

The next biennial budget cycle for 2013-14 will be a challenging one for the City. Stagnant growth in retail sales, limitations on increases in property taxes, and expenditure growth that exceeds the rate of revenue growth will present the City with many challenges during the next budget building process. The loss of over $2 million in gambling taxes due to the recently approved ordinance providing a sunset for the three casinos in Tukwila, will create very real challenges. In addition to the loss of $2 million per year in gambling tax revenue and over 400 jobs that will be lost, the casinos pay over $130,000 per year in other taxes and fees to the City. These amounts do not include the revenue and jobs that might be lost at other businesses in Tukwila and elsewhere that supply the casinos with food, beverages and other items. It remains to be seen what the total impact will be from the closure of the three casinos and the residual impact this will have on vendors supplying the casinos and nearby hotels and restaurants. I have begun the process of addressing City operations and the services we provide in order to adjust for this major shortfall in revenue already included in our budget.

In mid-2010, Tarragon, the developer selected in 2008 for the Tukwila Village development, withdrew from the project due to the economy. Since that time, the King County Library system has completed an analysis of locations on the Tukwila Village property on which to build a stand-alone library. At the same time, City staff has received interest from strong developers to build Tukwila Village using a significant component of senior housing, another one of my goals. In early March of this year, the City Council voted in support of a stand-alone library and approved a new developer selection process. We issued the Request For Qualifications on March 30, and applications are due on April 29th. The City Council is scheduled to select a developer on June 6, 2011. If we select a developer in June, we plan to have a development agreement completed by year-end.

The Tukwila Pool

In August of 2010, the City Council provided direction on several policy decision points related to the establishment of a Tukwila Pool – Metropolitan Park District, which could be created for the management, control, improvement, maintenance and acquisition of parks and recreational facilities, including the acquisition and operation of the Tukwila Pool. It is very likely this issue will move forward to voters on an upcoming ballot later this year.

Regional Fire Authority

Last winter, the City Council authorized the formation of a joint ad-hoc committee with representatives from the City of Tukwila and the Kent Regional Fire Authority to explore opportunities for joint fire service consolidation.

This ad-hoc committee will research, review and make a formal recommendation to the Tukwila City Council regarding the feasibility of the Tukwila Fire Department consolidating fire services with the Kent Regional Fire Authority. Areas to be explored further include but are not limited to: financial impacts, legal considerations, governance, levels of service and timing/implementation. The committee is scheduled to make a recommendation to each governing body this fall. In the event the City decides to pursue this consolidation, the matter would be put before the voters for a decision.

Score Jail Project

The South Correctional Entity Jail Project, (SCORE) a collaboration with our neighboring jurisdictions, will provide a place to house our misdemeanant prisoners, lower booking fees and lower daily costs for our partner cities, providing much needed capacity in the years ahead. The new jail is currently under construction and will be operational later this year.

East Marginal Way

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Even though the Museum of Flight was not awarded a retired space shuttle, the NASA training shuttle will be a popular addition to the museum. The construction of the new Space Gallery, the new Aviation High School, and Boeing’s plans to add approximately 2,300 employees in facilities along this corridor, as well as the proposed mixed use development near Boeing Access Road, will combine to make the northernmost part of Tukwila much more active and vibrant.

In closing, I want to thank the City Council and staff who have been so involved in developing and evaluating the cost saving and revenue enhancing processes that will help put the City back on a more sustainable financial path. Very difficult choices were made, and will continue to be made, and I know these choices will have a real impact not only on those we serve but also on our own Tukwila family.

“We will continue our best efforts to deal with the present, while we plan for the future”.


Jim Haggerton
Mayor, City of Tukwila