Cities in fairly good shape

Even though a recession is squeezing government budgets, many cities in the Seattle area will be able to maintain existing services next year, in part because of a recent utility-tax bonanza.

Many cities say they may avoid major cuts even in 2003 unless voters on Nov. 6 approve Initiative 747, a Tim Eyman proposal that limits property-tax increases to 1 percent a year unless authorized by a public vote.

Cities such as Renton, Shoreline and Everett prepared for the downturn by stashing money in "rainy day" funds. Renton has amassed $15 million in reserves, enough cash to keep the city going for three months if every tax source dried up tomorrow.

In addition, a little-known tax on cellular-telephone calls has provided an unexpected antidote to recent sales-tax declines that followed a collapse of Internet stocks, the Sept. 11 terrorist attacks and news that Boeing could cut up to 20,000 local jobs by the end of next year.

In Bellevue, for instance, the 6 percent cell-phone tax will rake in $3 million this year, 64 percent above what the city predicted earlier. The tax is levied on telecommunications firms and passed onto customers as a surcharge, based on the monthly calling fee.

Overall, utility taxes on natural gas, water, sewage, garbage, phones and electricity in Bellevue will reach $18 million — almost 11 percent more than expected. Seattle, Shoreline, Renton and Everett also report that utility-tax receipts are rising.

Utility taxes are unpopular with some residents, who consider them an unfair charge on necessities. Last year, Bellevue turned down a request by the Sammamish Community Council, an elected neighborhood group, to reduce "the burden that citizens are bearing" by cutting utility-tax rates. Renton denied a request from Boeing for a tax break when natural-gas prices spiked last winter.

Because of cautious budgeting and a diverse tax base, Bellevue probably will not need to tap the city's $13 million reserve fund to pay for routine services, said Gary Ameling, interim finance director. The reserves remain available for capital improvements such as new parks, public art or transportation projects. And the city can afford eight new firefighters to man a second ladder company next year, to protect downtown tall buildings and condos.

But job cuts have not been ruled out in Lynnwood, which depends on sales taxes from Alderwood Mall and surrounding retailers. The city might tap its $5 million reserve to balance next year's budget. Bothell was struggling this year from a slowdown in new construction, but a $500,000 utility-tax gain made up for that. Still, hiring for six new positions — including four in the city's police and fire departments — may be delayed.

Sammamish is in good shape even though its City Council decided not to exact utility taxes, forgoing $1.8 million this year. Only 2 years old, the city does not yet have a full-service government.

Kirkland, Shoreline and Redmond officials do not expect any cutbacks.

"We can wait a recession out this year and even next if we're careful," said Kirkland finance director Marilynne Beard.

Everett could lose thousands of Boeing jobs and up to 10 percent of its sales taxes next year. Yet city officials are not considering service reductions for 2002. Everett has been saving for the inevitable down cycle, budget director Bill Cushman said.

Nonetheless, the state's budget woes — Boeing layoffs are expected to drive a $900 million revenue shortfall — could trickle down to some cities.

Bedroom communities such as Newcastle, with virtually no business-tax base, depend on state revenue sharing. In July, the state distributed $70 million to cities, money seen as "backfill" to compensate for the reductions caused by Initiative 695, the $30 car-tab measure. If the program ends, Newcastle would lose $299,467 next year, or 6 percent of the budget.

Two years ago when I-695 passed, Newcastle dismantled its recreation programs and cut two administrative jobs. There are 24 city employees serving a population of 7,815.

"We're already cut to the bone," said Mayor Sonny Putter.

If the state aid goes away, he said, Newcastle might have to quit maintaining parks and streets — or impose a utility tax like its neighbors.

Seattle Times staff reporters Diane Brooks, Jim Brunner, Sherry Grindeland, Chris Solomon and Catherine Tarpley contributed to this report.

Mike Lindblom can be reached at 206-515-5631 or mlindblom@seattletimes.com.