Tukwila’s Budget and the Impact of the Coronavirus Pandemic

Our current reality

Like many other local governments, the City of Tukwila faces an immediate budget shortfall due to the coronavirus pandemic. The City is losing revenues from sales, gambling and utility taxes as a result of the Stay Home, Stay Healthy order.

Additionally, property tax deadlines have been pushed out, and State sanctioned timelines for remitting sales tax have been extended. This means a delay for the City to receive its property and sales tax revenues. From what we now understand, this economic crisis will extend into 2021 at a minimum. The City of Tukwila projects the loss of $12 million in revenues this year and a loss of $6 million in revenues in 2021. Such revenue losses require expenditure reductions, resulting in an impact to City services.

 

What this means

State law outlines a few specific City services that all code cities must provide, such as a chief law enforcement officer, and city planners to enforce the Growth Management Act.

Most City services are established by City Council policy based on community priorities. Standards for these specific service decisions – like law enforcement response times or human services funding – are often subject to legal requirements. For example, when a jurisdiction decides to provide fire services, training and other activities are legally mandated with that service.

Tukwila’s adopted Strategic Plan provides much of the policy guidance for services. Our biennial budgets are developed to be in alignment with the five goals outlined in the Strategic Plan.

 

Services the City must provide

The Federal Government has provided some funding for cities with 500,000 or more residents. The State is also distributing additional federal funds to cities based on population. With Tukwila’s population of 20,000 residents, our share is proportionately small. However, it is important to know that this funding is being made available to cities to cover costs associated with the pandemic, not for lost revenues.

The reality is that the City’s current budget shortfall has very little to do with pandemic-associated spending, and everything to do with lost tax revenues.

 

Supplementing the General Fund with other City funds

Some of the City’s enterprise funds are seeing lost revenue – such as the water fund, which has fewer customers during the shutdown. Funds covering the Public Safety Plan have already been committed to those projects and cannot be held back at this time. Any interfund loan made from one fund – such as the sewer fund – would need to be paid back in a reasonable period of time and with market-rate interest.

 

Utilizing contingency or reserve funds

The City has both contingency and reserve funds (unassigned fund balance). It is expected that more than half of the contingency fund will be used in 2020 to deal with the budget shortfall. If the economy does not improve, any remaining contingency funds will be used up in 2021.

By their nature, these funds must keep sufficient monies on hand for cash flow purposes or dealing with future emergencies. It is neither prudent nor possible for the City to spend all of its contingency and reserve funds to address this shortfall.

 

Actions for reducing expenditures

Consistent with other cities in the region, nearly 70% of the City’s general fund is spent on personnel. While all departments have slashed their budgets for items like supplies and professional services, it’s not enough savings to preclude staff cuts of some nature.

The City has also enacted a hiring freeze, taken steps to control overtime costs, reduced all travel, furloughed part-time staff, and reduced capital projects. Combined, these actions reduced City expenses by $4 million. Staff has identified an additional $2 million in other savings, such as delaying purchases for the City’s fleet.

From the $12 million shortfall, this leaves the City needing to find an additional $6 million in savings for 2020, and ongoing into 2021.

 

For those staff who are impacted

Staff who are furloughed for any significant time periods or laid off would have access to unemployment through the state’s Employment Security Division. As a part of the CARES act, affected staff will also receive an additional $600 per week through the end of July. This federal subsidy could potentially be extended as well.

Any staff member laid off due to this economic crisis will have return rights for 12 months. This allows them first access to their former position, should the City have the ability to refill the position within this time period.

 

What comes next

The City Administration and City Council are working through a process to identify an appropriate ratio of contingency funds and service reductions, the latter which includes personnel reductions in some form. Contingency Funds will be used to fund a portion of the $6 million gap.

Tukwila’s labor contracts require layoffs unless union members agree to an alternative. It is also expected that layoffs, in accordance with the City’s labor contracts, will be needed. However, should the affected labor groups agree to furloughs, there is the potential to avoid layoffs at this time by accepting a 10% reduction in pay and time worked. The staff leadership has already agreed to a 10% pay reduction, saving more than $145,000 this year alone.

It is important to ensure that the City will maintain its required and necessary services, and prioritize other services in accordance with the City’s adopted Strategic Plan and community priorities.