good evening and welcome to the Monday
August 13th City Council's special
meeting and we're going to meet hot this
is purpose of this meeting is told a
financial retreat we're discussing
financial performance current debt
review long term finance model financial
indicators and current revenue sources
so with that we'll get started
Thank You council president Mart's
welcome everyone tonight it's in a
nutshell everything financial and so
this is sometimes for finance
departments this is our most exciting
time is when we can have the
conversation and go through information
number by number I'm just kidding so
we're going to be talking tonight about
a number of different pieces of
financial information we've provided the
2017 year-end report we've also have a
2018 mid-year report due to some
staffing transition we would typically
have a quarterly report to the council
to give you financial performance
however tonight we're going to be
talking about that mid-year or some
often refer to it as second quarter of
the year so we're doing this in
anticipation of our budget development
cycle for 2019 this is to give a
perspective on where we've been how
we've performed and also to talk about
some planning going forward you'll note
in the information that the key section
of the book is the financial model this
is an item that the ad hoc long-range
financial committee has been working on
and as directed by the City Council
looking at ways to help with our
financial stability as the council
addresses transportation issues in the
community so with that there are
certainly projects that are identified
in the 2018 2022 capital improvement
plan
that document is not included in here it
is a separate resource that's available
for the community as well as a council
on our city website so with that we're
going to be talking about a number of
topics in my cover memo I alluded to
what those agenda items would be and so
that is financial review of the how we
have performed retrospective reports
we'll talk about where our existing debt
is just so that everyone can gain an
understanding of what it looks like talk
about the financial model and the
assumptions that were used as well as
some example scenarios that were
discussed by the ad hoc committee and
then we'll review some indicator
information this is a tool that was
created last year to help us pave the
way with understanding what warning
trends we might want to be monitoring
these indicators are not are not in it
in their entirety all the indicators
that a community might look at but we're
starting with trying to understand how
our financial condition might change
should the council make a decision and
then we'll be talking about funding
sources both existing as well as there
are some new source opportunities it's
not intended as you can see the time
allotted to funding sources or revenue
sources because this is something that
as part of our budget development we'll
continue to have discussions on
alternative revenue sources and then of
course other major projects that are not
included in the CIP so with that I
wanted to start on some financial
performance so I wanted to go into the
information and take a look at 2017 this
year-end report this does start on what
I think you have in your packet as page
1 but is the 2017 year and report budget
versus actual so overall the general
fund
pretty robust ending fund reserves tax
revenues were strong in 2017 our
development revenue we saw increases and
we had general fund expenditures come in
5% below
the budgeted amounts that were
authorized by the City Council our
utility operating our utility enterprise
funds are very strong as well in good
financial shape the one thing I did want
to note is that these are reports budget
versus actual these are different from
the formal audit of our financial
statements the finance department is
anticipating the state auditor's office
will be with us on-site for the audit
fieldwork in September and they will be
formalizing then those financial
statements and the council will be
invited to those sessions as well to to
see financial statements from a
different view but I wanted to talk
about with some highlights with regards
to revenue expenditures and our fund
balance the primary revenue sources in
the general fund are taxes and what we
call charges for goods or services so
these are other fees that that we charge
other entities residents and customers
these sources are about 82% of the
general fund and we had revenues for
2017 exceed our our 2017 target of
revenue the final revenue budget was set
at almost 47 million we received 109
percent of that or about 51 million in
revenue sources the reason that we or I
should back up a little bit about the
revenue targets in 2017 the council did
authorize some amendments and those
amendments from the starting original
budget in 2017 ended about four point 1
million dollars upwards primarily due to
the fund accounting shifts that that we
did in 2017
one of the biggest reasons for some of
the what we call the fund accounting
cleanup was because we shifted sales tax
into the general fund and then the
council through their budget decides
where that money goes so instead of
splitting it up and being confusing we
wanted to show specifically all sales
tax in one place and then you decide
what to do with it into other funds the
sales tax was very it's the largest
source of revenue for the general fund
we received about fourteen point seven
million dollars and we were around
ninety nine percent of our estimated
receipts we collected all of these
retail sales tax along with all of the
different types of sales tax the primary
or the or the large part of our sales
tax comes from retail sales we also have
a strong showing of construction sales
tax as well and that came in at 17% this
is because construction is and continues
to be strong in Issaquah we also have
another type of sales tax just wanted to
point that out in the information we
don't take a deep dive into the details
about sales tax but our accommodation
and food services tax has seen an
increase increase and this was a 7%
increase in 2017 over the same period in
2016 so that is something that that we
have data on other category of revenues
for the general fund is the property tax
this is another large source a hundred
percent of our tax estimates were
collected comes through King County very
strong source of funds very stable
utility taxes are also a large source
for the general fund about 19% of all
sources that we received and these come
from our collecting of tax on sales of
electricity natural gas solid waste
water telephone cable television all
within the city limits
so in 2007
we collected about 4.5 million dollars
and that was about a hundred and one
percent of the the budget targets so
we're very pleased to see that our
targets were that that were getting
close to what we're forecasting via no
attacks is business and occupation taxes
on the business activity in Issaquah if
the council will recall that there was
an increase in sales or the excuse me
the be no tax rates we do have another
full year of you know taxes coming into
the city this comes from about three
thousand eight hundred ninety five
businesses who filed in 2017 keep that
in mind that we we do have over 6100
licensed businesses but not all have to
pay B&O tax we had year-end receipts of
over five million dollars and this was a
hundred and eight percent of our budget
forecast again shows a full year of
those increased rates adopted back in
2015 this is a another strong stable
showing of our business climate and I
wanted to talk a little bit about
development fees these include building
permit fees engineering services plan
review inspection services we had a
sharp decline in development activity in
2016 so 2017 development related revenue
surged in 2017 a hundred and eighty five
percent of the revenue target and this
primary reason was because of the
conservative estimate at the time of
budget because we were within or
involved in the moratorium in place and
so we wanted to be conservative on that
budget target however we did have
projects that still move forward one of
those was the Gateway Apartments their
sources of revenue and these are these
fall into that category of charges for
good and goods and services is
recreation fees
very positive showing right on target
with our 2017 projections of about 2.2
million dollars then we go into our
public safety fees so these are for jail
services and we received about 1.5
million dollars received of the 1.9
million dollar target this coming in
under the revenue target was primarily
because of the number of guaranteed beds
being reserved by local jurisdictions
then we have our final revenue source of
fines and forfeitures of about 220,000
this came in way over target this is a
this is different cult one to predict is
fines in fees because you don't know
when someone's not going to comply with
law so this is just one that I wanted to
show and also comment on difficult to
predict on the expenditure side then
again the general fund expenditures in
2017 were under budget
the general fund includes levels of
service for police and fire protection
planning community development economic
development Parks and Recreation and
general government administrative and
financial services all that comes from
the general fund yes sorry before you
get too far into that can I ask a
question around revenues and I'm
actually sort of looking ahead at page
four but you know as I look at major
outliers you talked about building
permits and I'm so much I completely
understand so we were at two hundred
ninety six percent of projected and that
was with a moratorium for the whole year
so how did how did that how did we get
there you talked a little bit about a
couple of things that were ongoing
through the moratorium but I guess how
do we make sure in 2018 that we get a
more accurate number because he had a
total two and a half million bucks total
which is the largest share of the sort
of difference from what was projected
so for 28 for 2017 or I should I should
back up development fees are one of the
one of those also somewhat difficult to
predict and with a moratorium in place
because we wanted to be conservative
because it means something at the at the
end of the day or the end of the year
and and the the purpose for the low
estimate was was to do just that however
there were projects that were in the
pipeline that we were aware of and we
were monitoring that would continue to
move forward and sometimes projects move
faster than you anticipate and so
keeping up with that that budget target
it starts to smooth itself out and in
2018 we go through this the same effort
of looking at what's in the pipeline
what do we expect is is going to happen
and in what year and so 18 is set and we
all we set revenue targets higher
because you know we improved our tools
for forecasting those projects but
nonetheless we still have new that
projects were in the pipeline so as we
continued as we start to look at 2019
we're doing the same thing is
understanding again what do we
anticipate coming forward and again that
the difficulty of that is is things
happen or things get delayed or they or
they move a bit faster so it's it's one
of those things eventually we start to
smooth out and and what we do when we go
into forecasting we don't necessarily
assume project by project specific but
whenever we start to take revenues and
increase those based on the general
economic inflator so if if that answered
your question about us our ISM I was
monitoring that but things in the
pipeline are difficult to predict where
they're going to land revenue wise got
it
a related question is the other large
but the other large differences in
miscellaneous revenue was that the
changing of accounting and where we put
things versus other funds or was that a
real unexpected windfall may have been
this is that's something that we can add
into the parking lot to get to answer
some questions and provide that to the
council we did have in 2017 some land
purchases or that had been anticipated
or not and so that's something that we
can certainly you know get provided the
deep drill down into and to make sure
that we're understanding what exactly
happened but fund accounting was quite a
factor in 2017 to get things planned in
the right place
and accounted for in the right place
because here's why I ask these questions
that sort of the overall point is that I
mean how wonderful that we brought in
more money than we thought were going to
and we spent less than we thought and I
wish that my budgets from my personal
finances worked that well they don't but
what that does is it drives up our
ending fund balance right and then when
we go to correct that by spending money
and this isn't this isn't a problem per
se but we've seen recently in the
community confusion about as we go to
balance our various funds and keep our
funds at at the right levels you know
that can feel that can get confusing to
the public right so in a you know in a
perfect world you know we would bring in
what we think we're gonna bring in and
we'd spend what we think we're gonna
spend and those and that ending fund
balance I mean again it's a wonderful
problem to have oh no we have too much
money at the end of the year but you
know at the same time we I think you get
my point
so the extent to which as we get into
budget season for next year I mean I
think historically we almost always are
cautious in our budgets and so we end up
spending less than we thought we were
going to and make more than we thought
we were going to but I I want to
understand going forward how that
relates these conversations about our
ending fund balance and making sure the
community understands that when we you
know we're not running deficits if we
you know correct acrost our funds
and and bring you know bringing our
numbers in line with our long-term
financial policy so they sent to achieve
you talked about that further as we get
into budget season would be helpful
absolutely and you just alluded to the
how you tackle fund balance when your
reserves are over your target and
reserves when they're under the target
and so in your financial policy and
that's something that the council
addressed was updating financial policy
to be very clear on the the reserve
target moved last year from that 8% to a
range of 15 to 20 percent policy also
was very very clear in those sections of
it that said when the council has more
revenues and or more reserves and they
they they want to have in the in their
butt fund balance then that's where the
council has to have discussions about
how to spend that money that can be done
at the budget development time same
thing or it can be done throughout the
year knowing where you're at if there is
something that like building permit fees
that came in way over that's something
that the administration can start to
work on to say okay now we have this as
part of your your budget amendment
process is to say let's amend the budget
and then let's use it for something same
thing in the budget development where a
council would maybe be under their
revenue there reserve target is where
you would in your in your budget then
want to correct that bring it up and so
something may not get done in the year
because you are just going to leave more
in your ending fund balance to meet your
financial policies so we will continue
as we work on the 2019 budget is to
address the fund balance issue we will
be talking about that some tonight when
we talk about the financial model and
the the assumptions and a pathway
forward for tackling the transportation
issue great thanks
we can keep going I will thank you
let's see expenditures just want to give
a brief overview about spending
appropriation the requirements that the
City Council authorizes during the
budget development cycle are typically
for these major categories their salary
and benefits just like a business we
have operating supplies we have cost
allocations and that's one fun charging
another fund for some service and then
we have professional services we have
capital outlay and I just wanted to just
make a quick note the capital outlay it
can be different while it's still a
capital purchase there's a difference
between capital outlay and capital
projects and it's all because of a
threshold number that policy states and
then we have transfers from one fund to
another primarily for capital projects
or debt service obligations so in the
information I'm not going to go through
department detail which starts on page
six but I just want to generally comment
about 2017 and our expenditures we had
expenditures at about 95 percent of the
2017 budget of 52 million dollars we
came in about 49 almost fifty thousand
spent the expenditure allocations were
amended from the original budget up
about 5.2 million and this was primarily
due to again the fund accounting cleanup
of transactions that we added because we
we put all the revenue in the general
fund for sales tax but we also added in
a transfer out for debt service so it's
clear that all of that limited general
obligation bonds that payment comes
directly from the general fund we also
had some budget amendments in 2017 that
were connected to expenditures for the
talus slide the trader Joe intersection
improvements central park pad one king
county roads property purchase the
Gilman lofts development as well as some
you know professional services for
working in our development services
department the original budget then I
have listed out the ordinances for the
the public to note that these changes to
the budget happened throughout the year
so then that leads us to fund balance
and fund balance is basically a measure
of the of our liquidity and it's
important to note that this is always a
forecast of the mount until our
financial statements are audited so when
when you're looking at it's kind of like
reconciling your checkbook because fund
balance or fund accounting is like
little checkbooks all the funds has a
beginning balance you put deposits in
you write out some checks for some
expenses and then after each line you
have an ending fund balance that's the
same thing that we deal with in fund
accounting and so that every time we
take in a deposit and every time we
spend some dollars on goods or services
that fund balance changes and so I
always like to make it be known that the
the ending fund balance is something
that we always try to have that that new
number as we go through record the
reconciliation process available for
counsel so the fund balance is it is a
source of revenue though as we just
talked about is that when there's a lot
in reserves you can spend it and when
there's not a lot reserves you've got to
put it back there so in 2017 the the
beginning fund balance was sixteen point
five million dollars our 2017 revenues
exceeded expenditures by over 1.5
million dollars and so that improved our
2017 forecasted ending fund balance of
eighteen million dollars now we're
getting ready to go to through the audit
fieldwork and so when we get to that
point at this time of the year were the
two thousand ending 17 fund balances is
pretty we're pretty close in that unless
there's something that we've seriously
missed and significantly missed but
there's always a challenge I'm if I were
to talk about prior
adjustments we could be here all night
so 2017 and the fund balance equates to
about 36% of our 2017 expenditures so
you can see that when we compare that to
our target our reserve target of 15 to
20 percent we have a significant level
of reserves at 2017 so with that I'm
going to just point out for those who
are looking to understand this financial
report some of the information with
regards to revenues are summarized and
show in the different categories on page
four of the report the 51 million
dollars taken in and then the next page
is a summary of expenditures by the
department showing a 95 percent of the
amended budget spent or utilized and
then at the bottom of every fund and
you'll see this because all funds are
included in this report so our general
fund special revenue funds capital
project funds debt service funds and our
utility funds and other agency funds are
all included and you can see the same
format it's kind of like an income
statement if you're more familiar with a
private sector you can see revenues
expenditures and you can see then the
impact to the funds balances so there
you can see the actual revenues over
expenses were 1.5 million dollars
beginning fund balance changing from
balance and an ending fund balance I
just wanted to point out to the
designation of fund balance this is a
Gatsby requirement to note the type or
the designation of fund balance because
we can't spend it all we have non
spindle non spendable items so if you're
familiar with inventory that's an amount
that's associated with inventory we
can't spend it's not cash we have
restricted dollars because in the
general fund we do have some dollars
that are associated with seizure or
forfeiture dollars and for the police
department and then everything else is
unassigned that's to be used at the
consuls discretion so with that I would
be happy to answer any questions about
the 2008 or 2017 year-end report
questions for my fellow council members
all right that's our seat well we're
moving right along then I'm gonna move
to the 2018 mid-year report this is on a
page I went too fast I was over clicking
page 49 again this is a same format I'm
going to I'll go through again some
major highlights of this but I just
wanted to let the council know on page
49 that again this is a emphasis and
it's on the general fund it is a
snapshot of the fund activity prior to
audit and for 2018 we have no budget
amendments so this is something that the
council will be addressing some proposed
budget amendments coming but this report
does not include those so for 2018 as as
we are at the mid-year point we continue
to have your best reserves our tax
revenues remain strong the general fund
revenues are at 48% of budget and
general fund expenditures are at 45
percent of budget utilized again utility
operator operating revenue is strong so
with that we have that we have the same
categories of revenue we have received
about twenty four and a half million
dollars in taxes again we have our large
taxes being sales tax B&O tax utility
tax and property tax there isn't
anything that is kind of hanging out
there that that we're seeing that would
be problematic for us to remain in that
robust and strong economic cycle here
property taxes our at the four point six
million dollars in collection that's
fifty two percent of what we have
anticipated and one thing to note about
property taxes is that we don't receive
revenues route you know consistently on
a month-to-month basis this is kind of a
big windfall in May and a windfall in
November and then property taxes then
trickle in so that's why sometimes when
you see revenues are under or over it
could be because of other agencies who
provide that and you might see that in
the case of shared revenues where
sometimes from other agencies we don't
receive that revenue until the third
quarter or even the end of the year and
so when you say why are why are we not
on target there's nothing that alarms us
with regards to why we wouldn't be
meeting or exceeding our revenue targets
any questions on 2018 revenues before I
jump into expenditures at the moment
okay well we can go back to any to any
any question that comes up there I'm
going to move around my page here oh
sorry
councilmember Rey I do have a question
so you mentioned that property taxes can
be lumpy that is we get them here and
there and a little bit in between what's
the pattern for other sources of taxes
I'm thinking about sales tax is it a
linear distribution through the year
does it skew one way or the other
you know I'm just looking at these
things and so is 49% mean we're gonna
have a 49% year or does it you know do
we get a Christmas bump for sales tax it
comes in monthly but there are because
we have yes the Christmas bump we have
you know we have the holiday bump but
there is they're pretty consistent in
the city of Issaquah so that's that's
kind of a good thing
so do we have any ability to have in
addition to what we've adopted as a
budget in addition to having our accrual
do we haven't made near the ability to
do a projection for well weeks how we
expect to end the year how that might be
different than either of those other
numbers that's what we're starting to do
is we start to develop the budget
because it's it's a component of the
budget development is where we start to
do those year in projections and so
certainly that that's something that
you'll see when we start having those
conversations but for this reports
retrospective so we would not have any
forecasted information here there is
though in a later part of this report
some of those projections you see a lot
of those are kind of they're just
they're just going up because we are in
a strong and stable economy and so
that's that's why we wanted to share
that in another part here because these
are budget versus actual and we wanted
to give you good clear reports on how we
were performing based on the targets
that you set for budget
okay because if I mean if this includes
this includes July then on revenues you
know I would if it was evenly spaced and
there wasn't a big Christmas bump then
I'd expect to be at you know 56.7% not
48 percent and this is as of June I see
okay feel better
all right so expenditure overview like I
indicated there have been no budget
amendments that have been considered by
the council those are coming for your
September 4th meeting the budget
amendments that were anticipating are a
little over almost 900,000 of some
staffing and benefits that the Council
of it has addressed and there's agenda
bills and in the budget amendment that
you'll see we reference the agenda bill
where you were already seeing the ask
of the administration and then we have
some coming up reauthorization requests
for the general fund and then we also
will be looking at a very very small
donation that came in for the Senior
Center and then there's a there's a an
exact offsetting expenditure to utilize
those monies in 2018 so that's what
that's what we're anticipating and again
will be further conversations about that
in September that leads us to again I
might sound like a broken record but we
have a 2018 identified or a target
general fund beginning balance of 18
million dollars right now revenues are
exceeding expenditures and so when you
compare a very very small revenue
revenues under expenditures from the
budget side on the planning side and
where we're at now because we we aren't
matched with the revenues at 50 percent
and expenditures at 50 percent we're
seeing that right now revenues are over
expenditures and so we have a fund
balance of about 19 million dollars as
of June 30th now again checkbook balance
changes every time we add money and we
pay bills so that that dollar amount has
already changed again we do have
significant balance though over the
council's financial reserve policy of
the 15 to 20 percent proportion on 40%
at this point right yes we are on page
I'm just gonna refer to well we're
actually from a from the calculation the
percentage of expenditures because we
have 19 million dollars and we
of only 23 million dollars of
expenditures out yes so we are at the
50% target but if you do the math on
what we've actually spent - what we you
know would have were around the 80 plus
percent but yeah yeah these are
snapshots these snapshots you wouldn't
compare the end of the year to a
half-year gives you there - but it's
still you know even if we were to take
this number and compare it to any sort
of projection to the end of here it's
gonna be something like forty percent
yeah I can't remember right so kind of
along those lines it's almost the same
question I asked on revenue but
unexpensive I mean dude did we see some
ik underruns in first few quarters that
we would not expect to see the same
under-run in the second two quarters
that is are they are they are there
things that for instance let me just use
it for instance if we had some salary
savings in the first two quarters and we
filled the positions we would not have
those salaries savings in the second two
course do we have any data that gives us
some indication about will this trend
continue or will we see ourselves
bumping back up to the budgeted level
well when I what I'm seeing is that
there may have been if there are some
delays in some projects or studies to
get underway for 2018 that had been
identified in any of the departments if
those had been delayed for any reason
then you would see you would see some
that are you know under their budget but
then if they've if they've gotten these
these these projects on your weight and
then we're gonna see that smoothing out
and and utilizing their budget now that
doesn't mean that they're there could be
you know something else that creates a
hurdle for departments to spend what
they had anticipated but we would want
to then capture that in any budget
amendment if it was going to be
significant so there isn't anything
that's that's out there that is cause
for concern with regards to you know not
getting to our expenditure targets but
we'll be knowing that
and again because we're going through
the projection process through the
budget development departments are
working with the budget analysts to
anticipate what they are they're going
to be spending throughout the remainder
of the year and so that's an ongoing
work that's happening now councilmember
winters time thank you yeah and do we
keep track of any other non accounting
balances such as headcount like budget
versus actual like we expected to have
so many we got this many your question
was on headcount yeah it's like it's a
non accounting balance sure
I mean we're we you know we had a
budgeted number of FTEs so it could it
be possible I mean if get this this
budget versus actuals you know we you
know we have a budget we have an actual
variance if that's something that can
easily be provided to supplement this
information and obviously we don't have
it tonight but I think that maybe next
time you know we we sit down for a real
budget meeting if that's easy to get and
I'd like to see that thank you I
appreciate that we and we'll put that in
the in the in our parking lot and get
that information as we have those
additional conversations for a budget
thank you all right is there any other
questions about the 2018 mid-year review
it appears not thank you all right so
let's move on to a look at our our
current debt I do want to point out that
council member rate asks some questions
thank you very much and there was a
revised page that was provided because
the charts were flipped and so when
you're looking at the second page of the
the debt review and I'll grab the page
number here 196
you'll note that the chart in the in the
packet of information that went with the
unlimited general obligation debt
obligations should have gone below with
the limited general obligations but I
think we can we can all see and I'll
talk quickly about what this information
means so the city of Issaquah has a
triple-a bond rating and this is through
Standard & Poor's this is because we
have healthy reserves as well as a
significant level of debt capacity so
you could issue a lot of debt there's
not a lot of cities in Washington to
have a triple-a rating and so we
maintain that rating as we stay current
on our mark and conditions and we
contract with a bond advisor to help us
with how the marketplace is tolerating
the potential for bond issuance I just
wanted to provide the council with a
note about the low interest rates and
what a current trend that's in place is
that we instead of going out for these
more formal bond issuance it really
depends on the bond issue size of it and
you know everything that goes into that
but the the trend is that we would go
out and solicit a bid from privately
from banks and we got we're getting very
favorable rates so for example when we
issued the last portion of the park
bonds last year that was that was great
rates under 2% so we're still looking at
favorable rates not necessarily at 2%
but that's just something that we we
find out when we go and ask for requests
for bids just clarification really quick
but you've explained that to us before I
want to make sure I understand that
instead of go really go into a market
place we just found a single private
buyer I just I just tried to Reese a
what I think I heard you say yes
that's correct we we go out and solicit
yeah you said a general bond issuance so
they're a marketplace someplace where
there may where people we don't even
know show up and maybe want part that's
correct but this is when we're just
going to one individual or institution
in this case and they're trying to make
sure it was clear we we offer it out to
any bank who wants to wants to provide a
quote mm-hmm so and so it's it's
different it's it's less expensive and
time-consuming there are still all of
the regulations and rules around around
issuing debt but what that does is that
it allows for banks to see that you know
we might be a good fit in their
portfolio and that's why we get those
favorable rates so the information
provided in this in the debt review
shows where we at we're at at the end of
the year for 2017 where we have assessed
valuation of all properties in the city
of Issaquah then what it shows there is
that we have some certain kind of debt
capacity and that's at that
two-and-a-half percent of assessed value
so we have debt capacity for certain
types of levying and certain certain
purposes from a capacity standpoint so
you can see we have total capacity of
that 800 million part of that then comes
into play when the council issues konso
manic or non voted on debt that means
not having to go to the to the voters to
ask if you can issue debt so that comes
into play where we have to be under a
different assessed evaluation limit so
you can see that showing there that we
have statutory than debt limits are set
then we remove the outstanding debt that
we have we have 8.1 million in council
Manek bonds out there as well as other
debt for the that excess levy and parks
and open spaces are both voted on levies
and so we we total outstanding debt as
of the end of 2007
is about 25 million dollars we have
about eight hundred and seventy eight
thousand dollars as of the end of 2017
in our debt service funds you would say
we don't have enough to cover that
that's the amount to pay the annual
payment because we receive tax dollars
into these funds and then we pay the
debt service out for those folded pieces
so you can see our debt capacity is
quite large in the bottom blue line what
I wanted to also provide for the council
just so that you could see a perspective
of our annual debt service this is this
is our current obligations of the
council Manek debt at over two million
dollars every year and we have then the
excess levy the voters approved and our
current year debt obligation is a little
over 1.7 million dollars I just wanted
to put in a perspective that the council
Matic bonds or our debt service is about
four percent of our general fund current
year expenditures so oftentimes that's
something that we get asked to say well
what's what's the percentage of debt as
as compared to our total expenditures so
we're at about four percent so I think
it'd be useful to understand not today
but in future meetings how that compares
with comparable cities
how does Redmond look how does Kirkland
look as we consider options that would
take on additional debt for in for
infrastructure and transportation it'd
be really good to understand like we
know we're in a great place with ending
fund balance right that 4% Seifer
present' I don't have anything to
compare that to okay we will do that
thank you
all right the next page then if you take
the amended report you can see visually
that our our our unlimited geo bonds or
those are the the bonds that had voter
approval that those those amortization
schedules run out about one
one-and-a-half our that's at one point
seven out to about two thousand twenty
six and then we start to drop down so
that's the that's the bond payment
starts to go down principal and interest
as we then run out in those bonds mature
in 2033 then we if we compare then and
what kind of we'll be talking about this
when we talk about the financial model
the the the graph that depicts our
limited geo obligations this is the
council Manek bonds you can see that
we're we have a debt service payment of
about two million dollars well very
quickly we're gonna start to drop and so
in 2019 2020 we're starting to see our
obligation annually drop half a million
dollars and so eventually we would have
we have no debt and so this is something
that I wanted to show and depict this
way that we would we would start here
then and when the council starts to make
a decision about debt issuing debt to
see how that would change and and there
is a picture of that when we are getting
into some of our assumptions and in the
model the questions on our current debt
and again the revised page was sent out
to counsel prior to just just right
before the meeting so it looked like a
quizzical look but no hands if a council
member hunt
so the debt obligation for the non
booted on his flat for a longer than or
the voted debt and so I'm just so my
question is why why is that difference
in the rates so much later for the non
voted debt if I'm under said that is
it's the annual payment and so our
annual payment based on the bond
amortization schedule it was just
designed in that way so our our payments
go down about a half a million dollars
over the course of the next three or
four years and so we we essentially
would not have a debt payment and so
that flat line is it's just a depiction
of the the payment each year year over
year right okay but all that's the
question maybe slightly differently have
we have we exercised non voted more
recently than voted like these are the
schedules you know it's just there
appears to be more I mean if we look at
our debt service is comparable between
voted and non voted at the moment but
the total outstanding there's much more
voted in than there is non voted in
and yet the voted in drops faster well
the voted in drops faster in I'm just
trying to because the we just issued it
just issued the last piece of the park
bonds and so that is that is also
included in our annual payment for the
voted in bonds and that's that is the
structure of the repayment of the bonds
so I'm not sure if I have an answer to
say why one is more than the other
the council has has not issued any
councilmen
debt for quite a long time
and so that's why you see basically no
no debt obligation but the council
didn't or the or the community voted to
or the excess levy and so therefore that
that was a bigger amount of money so
it's just the chart that's backwards it
wasn't corrected here okay
it was I thought it was corrected in
this version okay not corrected in the
book version okay I totally get it okay
I thought this was the correct oh my
apologies okay now that was played why I
was utterly can was that why you were
confused several people that was why
they're confused so the correction it
that was in the original printed fiscal
forecasting book if you take the the two
charts they were flipped so it was a
copy-paste this is good so the the
charts are they're correct they were
just under the wrong categories so this
is the corrected one no this is not the
corrected one there was an amendment
after what added so thank you there in
the ninety cents yeah
can you could you go back there to make
it larger
not larger make it smaller to do show
the comparison there we go yes this is
the correct one that's remember winters
time don't leave Tina second to be a
master the document you go back to page
103 of the today's packet
and it's it's it was just a thing
there's just a page before where we were
and it's the debt review current-gen
it's the the outstanding line less debt
outstanding geo bonds there is no longer
okay this is not which page number its
page 95 of the original packet you going
up right there
so the yeah so midway through that table
less debt outstanding you see about 8.1
and counsel Matic 7 7 and XS parks and
open space 9 what those are as of when
those are as of 12:30 1 2017 okay okay
all right okay I see that date there
okay that was oh I see that date jumps
out at me because I was looking I was
comparing those two hour those are the
exact same amounts they were at the end
of September 2017 as well I was just
because I was looking I know I had that
in front was looking at to see what we
actually had counsel Matic bonds and for
I'm not sure where I can't recall if top
my head what we're using the council
Matic bond for so I looked at the old
budget that I noticed these numbers are
exactly the same because we we know
because we have the we have the
amortization and so we know what the
outstanding debt is at the end of every
year so it's something that we could see
that we would have the same amount for
you if the report said June 2017 we know
what our ending debt would be at the end
of the year and so I think we can do it
better we can clarify that better that
that this is this is based on the
amortization schedule so it wouldn't
change it just so happens that those
amounts exactly match as of September
30th to 7 2017 as well we knew what
those we knew what those balances were
so we should we should have noted that
they that they were the balances
identified for 2000 at the end of 2017
the report was just dated September and
it wasn't the outstanding bonds as of
September it was as of the end of the
year 2017 ok maybe actually said yeah it
says September 30th okay thank you
any more questions on the depth review
actually I did sorry it was what do we
what's that's inside that on council
have we issued a council Matic bond so
the current bonds for council annek
bonds are paying for what well the cons
of matic bonds off the top my head they
were for there's a variety of reasons
for there was some police and we're
pulling that up now what will that we
might want to get that back to the
council so we can get you that accurate
information there's a number of debt
issuance you know what during the 2018
budget I found it here Highlands Park I
can answer my own question here there is
2006 2007 2009 and 2014
oh there's some 2014 Highland Park
facilities all right so it was under our
watch hmm hey thank you some of us over
you are off the hook
shall we proceed any other questions
nope nope all right all right okay so
let's talk up a little bit about
long-term financial model this is on
page 97 of the original packet so as we
as we talk about incorporating long term
council long term goals and financial
strategies we wanted to provide a way to
look at not only where we've been
historically and and if some of you
remember because the financial models
and a little bit different format
because it was it was it was big sheets
big spreadsheets and a lot of
information and so we wanted to
synthesize this down into a way that we
could quickly have a conversation about
where's our baseline where's our
starting point and if we do a B C or D
how does it look
and so we've integrated some potential
general fund debt service obligations
for projects that are
and in the CIP this is something that
the ad-hoc committee has been working on
to help the administration present this
information in a way that would be
useful for decision-making and so this
is a financial model is a living
document so when a decision is made
we're gonna update the model and we're
going to then you know continue to
provide this as a decision-making tool
because it identifies the revenues that
we anticipate expenditures that that we
expect and then that impact on an ending
fund balance and so we we look to do a
conservatively objective measure of our
our forecasts because we just didn't
want to be too optimistic so the model
provides a baseline scenario and I'll
walk through those assumptions here in a
little bit it was based on an analysis
of our historical and current financial
environment revenues operating and
capital expenditure forecast our current
debt and potential debt and then we look
to do some affordability analysis and
that's and I'll talk about that in the
financial indicator section but again
this model is updated routinely and the
ad hoc committee had some dis of great
work and had some good discussions about
putting together scenarios for how we
start to tackle primarily our
transportation issues so the next page I
want to just briefly cover the
assumptions that were used in our
financial model what you'll see this is
on page 97 I want to make sure I'm given
the right page number 98 excuse me
so our assumptions are where we start
with at the baseline we used an
assumption for general economic growth
for revenue unless otherwise noted and
so we use 3% for most of the scenarios
with the exception of scenario D we also
then going down the rows use specific
revenue assumptions for economic growth
and you might see that some might be the
same and you might say why be a no tax
we see as increasing 3% it's based on
the three-year average we wanted to
segregate that out because it's a major
source of revenue
just like we segregated out sales tax
and property tax and so you might say
that's just kind of irrelevant but we if
we wanted to look at a scenario where it
just had a deep decline it was available
to do that in a scenario sales tax
increasing again on a three-year average
is at a four percent so that's obviously
more and then you see property tax
because they're subject to the state law
and limitations of one percent plus any
new construction growth and you'll see
ncg that is what that means new
construction growth so that's added on
top of the one percent
and then we wanted to add in a
possibility of a new revenue source and
we put in new revenue because we don't
know what that is that that is something
for these future discussions of the
council on the expenditure side then we
used a general economic growth for
expenditures unless otherwise noted we
talked we we talked about do we just
have one for both general for revenues
and expenditures and so we wanted to
separate it out in case we wanted to
have a scenario that said revenues we
don't see any good outlook and
expenditures are just going to keep
rising so then we have a specific
expenditure assumptions and what we did
in the baseline is what we wanted to
make an assumption that we had annual
new staffing for enhanced levels of
service so we didn't define what that
level of service was but an enhanced
level of service so new staffing we
wanted to show about three and a half
percent
each year so that we that we were always
assuming that there would be some growth
in FTE they also wanted to put into play
and this is primarily where that some of
the biggest changes come because for
tackling some of the transportation
issues it means issuing debt and paying
a debt service payment and paying a
principal and interest payment and
that's what we were just talking about
what we have in the our current debt we
also included the obligation for the
transit-oriented development and that is
included in the baseline it's also
included in any scenario change that you
see in the line above but we did include
that because that has also been an
obligation that has been already
obligated in some cases in the the 2000
in the baseline the 2018 budget adopted
this does include the those budget
amendments that I talked about earlier
and that is those staffing changes and
the reauthorizations for a couple of
projects one comment I think of probably
many in the annual debt service
obligation as a percentage of the
expenditures in the baseline 4% I think
that should just be clear that this is
we're just talking about council Matic
bonds and this has nothing to do with
any voted in debt this is us just using
existing cash flows and here that's what
has its own restricted funds thank you
for bringing that up because if one
looks at those if you look at the any of
the reports a year on report or the 2018
mid-year report because it has all of
those funds if you were to look at the
the fund for voted in debt those tax
dollars go directly into that fund and
the debt service is paid out it so it
does not touch the general fund
it's the council Manek bonds where the
where the general fund has to transfer
some dollars to that fund so you see a
transfer in and then you see the debt
service going out so thank you for
bringing that up
deputy council president Matisse so
thank Thank You Jen I just had a couple
questions so I can better understand the
assumptions so with the annual new
staffing resources in scenario B which
which would be the economic downturn you
you were still having 3.5% for new
staffing okay and then likewise on
scenario B where there's an additional
source you still have that at 3.5% so
across the board really seeing that in
the assumptions anyway yes we left that
flat because then that would kind of
align with a a more conservative of
objective approach is that we may have
added staff and continued have to add
staff for delivering levels of service
and certainly that that's something in
an economic downturn is that it is it a
short chill is it a long a long term
recession and so there still may be a
plan going forward to continue to add
staff maybe not at that level but it was
it was just a way to show that we
routinely
are continuing to add staff to ensure
that we provide quality levels of
service okay and then the general
economic growth for expenditures is also
at 3% for the economic downturn so just
again flat across with your assumptions
okay I was trying to better understand
that Thanks tell us member winter Stein
I want to pick up on something where I
just said so I'm missing the point about
an economic downturn scenario B as an
economic downturn
adhi well I thought you said B so my
mistake that's how I'm looking at this
and
up above it says scenario B you're right
scenario D we've got to be in a D sorry
okay that it was D that I was talking
about okay thank you so I'm kind of
curious and and maybe this is something
for to bring back but I I think deputy
president batiste is brings up a really
good point which is if we're having an
economic downturn we're probably not
adding 3.5% in staffing and I'm curious
to see what would happen to that that
chart if we flattened out both the
revenues and the expenses Oh City
Administrator thank you
we can certainly run that scenario the
purpose of putting together these
scenarios was to just create some
bookends so that you can see under one
changing condition what sort of effect
does that have on the whole so that is
why you see staffing assumption
remaining constant across the scenarios
we just want to adjust one variable so
in this case we were adjusting the
revenue side of the equation and
scenario D so that you can just see that
impact but council members are are
correct under real-life conditions we
would make other adjustments to make
sure that we balanced out this is just
for painting a picture of what happens
if you have less revenue but you keep
other things constant
deputy council president patís Thank You
Emily so that was really the purpose of
my questions so with assumption modeling
that way you're as you're trying to look
across you're able to compare apples to
apples Thanks it comes from Winchester
thank you I think before we move off
this page those that didn't have the
opportunity that the rest of us did in
committee to review this this is really
the time to challenge some of the
assumptions that we have or at least
understand them I'd say maybe not at
this point let's really make sure we
understand each one of these before we
move on and I know that some of the
things that we wrestled with in
committee where you can like the head
count for example I think the original
proposal was just a fixed number and we
said no let's do it as a percent we
thought that that would would be a
better model and then and then this idea
scenario a was was everything in the
transportation TI p but we funded
ourselves we don't go ask for any
dollars all the unfunded portion of the
transportation TI p we just we its
existing revenues we find our savings
somewhere else we know we're going to
get some back because our debt
obligation is going to go down but this
was a scenario we just pay for it no no
ask of the people of for anything and
then B was no I'll just take half of it
thinking was what let's let's use our
existing revenue to fund half of the
unfunded transportation projects because
some of the transportation has funding
associated or we and we're forecasting
getting grant money and other sources of
money but there is an unfunded component
and I would just recommend I always keep
an electronic copy of the the CIP budget
at hand so I can always look at those
real quickly so I think that's very
handy to do so be said let's just do
half let's just fund half of that
outstanding balance and maybe just maybe
we'll get some projects under our
and and demonstrate to ourselves that we
can do this and we can do it well and
then maybe maybe that would be a time
where we go back out and ask the voters
to fund the balance of the unfunded half
and that's what C represents so funny is
fun at all don't ask for any new B is
without any new revenue fun half of the
unfunded balance and and C goes out and
asks the people for the revenue for the
other half of the unfunded balance does
that make sense those are the scenarios
thanks Paul that's helpful
cops remember Ramos just for me the
scenario D and I know what you're trying
to say
I mean trend only change one thing but
as you said the realistic part of it is
hard to look at it because if you just
assume everything may the expense side
just keeps growing but you just cut your
revenue you know that just wouldn't be
realistic so I find a hard time now you
say it's comparing apples that was to me
it changed at Apple to an orange so then
looking at that with the other without
making adjustments there which you we
would have to do it it doesn't give me a
good comparison that way so I guess the
challenge on the two columns there of
growth of expenditures 3% and the three
and a half percent growth of staffing it
makes it look like a lot worse than it
probably would councilmember hunt
thank you so I have a question about the
new construction growth and assessed
valuation that is held constant across
the model right
and then how how is that factored in
with the model so it's 1% plus new
construction growth in assessed
in the financial model what we identify
is a 1% growth in the property of
property tax that is not the same actual
growth in assessed valuation and so the
the 1% is what we calculate as being our
our limit based on those forecasts for
assessed valuations based on our growth
our growth projections and so then the
new construction value is is not a
static number that's also going up based
on our historical growth in new
construction I think some of the the
numbers are around 280 some thousand in
new construction growth and so that
we've we've taken and we just we
increase that based on our our new
construction growth of about three to
four percent every year but it's there's
there's a lot of detail in into that
line item because it because one it's
not static and the 1% is just based off
of the calculation of our assessed
valuations and you can see and that was
in one of the reports and we've got some
information in our our growth in our
assessed valuations later on in the
report and then I can show you how we
calculate that because we are assuming
that our property valuation this us
about that's just a depiction of that 1%
of that that dollar amounts so I can
answer that question maybe a little bit
later have some of your race so I have a
question and a concern my question is
what we're really trying to do here is
to establish what our realistic new debt
capacity is for capital improvements
using council Matic bonds is that the
intent of what we're driving at here yes
so my concern is we keep talking about
transportation and I don't think we've
ever had a discussion
as counsel about that so I I think that
it's fine as an ie
you know such as investing in the you
know more transportation initiatives but
I don't ever recall us having a
discussion about we're gonna look to
invest much more in transportation than
we are right now so this could be other
capital investments as well as
transportation less your mark fair okay
so noted I'm something of a wintry Stein
I'm gonna go back to what Vicki asked a
second ago I'm gonna stick bet with the
new construction growth I want to make
sure I have this correct so there's new
construction in 2018 and we're going to
there's going to be some assessment of
that value they're gonna be charged a
property tax and we're gonna we're gonna
get that in 2018 now that property in
its assessed value in 2019 will go into
the pool that has a limited growth of 1%
so so this so where it says and say if
so one percent plus ncg that ncg at one
year is into the 1% pool maximum growth
the next year so every subsequent year
the new construction growth goes goes
into the pool where it's limited there's
no limit to the new construction growth
because we don't we they've never been
taxed before there's no this is the
first assessment on some improvement on
the property the first year's assessment
it's got a value okay now that becomes
part of the assessment pool that we have
limited growth in in subsequent years so
it's you're nodding your head I think
that's that's important thank I mean
thank you for acknowledging my statement
of understanding deputy council
president impetus I just in in regard to
feedback on the assumptions one thing
that I was pleased to see is that when
we're we're talking about
the staffing resources that were also
listing enhanced levels of service that
to give us an opportunity that if we're
talking about that that we're talking
about what level of service we want to
have and something that we I I think you
know that we talked about during the
last budgeting session in terms of what
are the levels of service that we're
focusing on
any other questions or comments at the
moment alright let's proceed okay thank
you next page is really a key age in
most of this report because it's a chart
and it has the what for this discussion
purposes was to show all of the baseline
ending fund balance and this is general
fund how the ending fund balance is for
is forecasted so the baseline scenario a
scenario B scenario D so what happens
then to the ending fund balance forecast
when we lay it all over into one chart
and so what I wanted to point out is is
just some of the colors to show that
with the baseline you can see that the
purple ending fund balance starts at
they're all starting at the same point
starts at the just below 20 million
dollars and pretty much skyrockets
because one of the main reasons is there
would be no more debt that would be
issued because you can see in the
assumptions we're assuming additional
staffing we're assuming expenditure
growth at 3 percent we're assuming
revenue growth at 3 percent some a
little bit higher sales tax and so you
can see that this is a the purple line
is a very positive picture doing only
those things that are in the baseline
now that doesn't mean that we've
identified specifically but we've we've
identified a level of assumptions that
we would move forward with I want to
jump over and then talk about the
scenario a which is the orange line and
this is the exact opposite because this
is what I think was referred to and we
were talking about in our ad-hoc
committee as the apocalypse and so you
can see that ending fund balance
starting at just under twenty million
dollars goes severely downward into the
negative realm and so I just wanted to
give you both ends where we've got
baseline and we've got scenario a I just
wanted to then point out the green lines
in between are the council's reserve
policy so you see the dark green is
where the ceiling for your reserves are
identified in policy and then the light
green is the floor so that's the 15% of
those expenditures so you can see that's
that's kind of our target so we've got
the as a scenario that identified if we
tackled every piece of the unfunded
transportation projects in the CIP that
we would not have enough not enough
money in our ending fund balance in
order to accommodate so that that is
just not a sustainable scenario then we
go into scenario B and that is the blue
line and you can see that the blue line
does dip down in a few years primarily
because we have existing council Matic
debt we still have a payment but as you
can see in that in the amended graphed
for the debt that that was provided you
can see that that debt those debt
obligations were going down and so what
the blue line depicts is that we
continue to pay that debt if the council
chooses to issue debt for tackling some
projects we would dip down into our
reserves to do that all things being the
same in the assumptions but then we
would start to come back up because
again existing debt obligations drop off
but what this shows is that this it's
about a two point one two point five
million
our annual debt service and so basically
what this scenario shows is that we're
going to continually have about that
level of debt service about that four
percent five percent of expenditures
towards debt obligations console Matic
bonds so that's the blue line that
scenario see then was a scenario that
added in a source of revenue to help
either offset and remove some of the
obligation of the general fund but you
can see the yellow line is pretty close
to the baseline because the assumptions
showed about 1 million in the first year
and then kind of ramping up to about a
two million dollar revenue source that
would help to offset the general fund
paying the debt obligation so that again
is a is an upward movement and does not
impact or or dip into our reserve
targets and then we have the scenario D
which was to show that revenues would be
declining but our expenditures would
remain the same also shows that we would
go into an unsustainable mode and that
certainly as administrator moon
indicated is that yes the reality would
be that the council would be reacting to
offset and reduce expenditures should
the revenues decline but this was a way
to depict the scenarios to give try to
give a good clear understanding about if
if there was one scenario versus another
and so I would like to hear feedback and
certainly questions of the council
councilmember we're just not thank you
two questions
do you recall why did we start scenario
C when we did it looks from this it's
almost like next year but I mean that
wouldn't be we wouldn't do that right it
would be a couple years down the road
rather than so immediate
assumptions showed in the assumption
that serves 1 million two million so it
showed an example of and to look at the
start of the year that we wouldn't have
we wouldn't just you know it wouldn't be
a start at the beginning of the year
calendar year and all of a sudden we we
knew we were gonna have two million
dollars that's why I have the million
two to show that we would not have a you
know that full source of revenue well
I'm just saying from this these numbers
right here see tracks with the baseline
immediately and it seems to me the new
revenues would more likely kick in see
should track with B for a number of
years before the new revenue kicks in so
so I basically it looks like we're
taking some new revenue almost
immediately with C I'm just thinking it
was should kick in a little bit later
does that make sense yes
so that was my first question but you
have a response I mean do we provide the
year as to when it actually was when the
scenario C revenues were we're kicking
in it started around if you look about
2022 okay so I would expect that C curve
to take off we should track with the B
curve all the way to 2022 and then start
sloping up rather than starting right in
2018 so that's that I think it would
look a little bit different okay but
think about that I know I fully
understand okay all right all right then
the other question is about that
scenario D it doesn't mcgann it it says
in the assumptions I guess this is this
is supposed to be like a 1-year in 2021
or is this like we go zero looks like we
go zero in 2018 and just stay zero
forever in terms of the general economic
growth and and I wonder see that we
so this this downturn in 2021 doesn't
look like it looks like it's a downturn
starting in 2018 per these numbers that
are in this chart in front of us now so
I'm actually looking at the previous
page and seeing the numbers but looking
at this chart up here so that down and
so and so that is a scenario where we
just have this zero growth forevermore
okay so that's pretty extreme and I'm
not sure this model run even reflects
that oh it does okay it's tracking with
the until 2021 okay and then then it's
just assuming from 2021 onwards we're at
zero okay that one makes it okay now I
get that one because that one's tracking
would be as it should until there's a
turn a downturn okay don't remember hunt
green lines which are the 15% reserves
are in the 20% reserve target those are
the same for all scenarios but in
reality when they also change because
the reserve would change with the
different scenarios well well the reason
that they're that they're going up it is
because it's it's based on the
calculation of the expenditure in that
year and so the data behind this is is
calculating 15% of those expenditures
and those expenditures generally are
going up three percent so the reserve
requirement is going up just as it is
based on on the baseline because they're
all at three percent right so there's no
variability and that one and they're all
at they're all at 15 percent and 20
percent so so one things that's
interesting about this is you know I
feel like this is you know we Jam the
knobs one way and the JEM knobs the
other way and see what it sweeps through
and it's you know it's also thinking
like okay if I add lots of salt no salt
lots of pepper no pepper and in the end
there's give me some combination of salt
and pepper
to make a zesty meal and it seems like
something that sort of qualitatively
looks something like the scenario B
outcome right where you get down towards
some number that is somewhere close to
where our reserve goals are and that's
through some combination of what we take
on council Matic and what we fund with
alternative revenue sources but you know
I'm just sort of doing a spoiler alert
from where I hope we get to down the
road which is something that looks
vaguely like this maybe not
you know quite so beautifully right just
skimming the 15% line but something that
looks kind of like this that brings us
down towards our where we want to get to
with our ending fund balance and that in
terms of it
hockey sticking back up to use a good
Minnesota term later you know we can
figure out how to how to deal with that
as we when when we get to that good one
of the one of those are the good
problems to have thank you that I mean
the the purpose of of the different
scenarios was to do just that is that
was there a pathway forward that was
planned
and then according to financial policy
that the council would be adhering to
that is that you have a planned use of
your resources your reserves and that
you have a plan because when we look at
some of the indicators you would say
well operating deficits are not a good
thing however if there is a plan to go
into the green in this case with the
colors chosen on the graph is that
you're you're doing something and you're
working on issues and this is a
financial depiction of what happens if
you issue new debt and that was
primarily the purpose for coming up with
these the financial model is to try to
tackle
those issues regarding transportation
sure because because I'll just add at
some point having a really high ending
fund balance there's there's a level
beyond which it's it's it's just bad you
know bad public policy right because a
citizen in the city or a business owner
in the city could come to us and say you
know if we were at 60% right or some
some super high number and they're like
why are you raising so much money and
not spending it right like you haven't
all you have options you can take you
know you've got all this extra money you
can spend it or you can just not tax us
and you know collect a little less money
or slow down your rate of growth of
taxing and and do that as well so you
know I do think I have been happy that
I'm happy that we're above the Green
Line but you know I I would love us to
come up with a solution that gets us
back towards our stated goal I feel like
every year we talked about this we
talked about how lucky we are they were
above the line but you know at some
point it would be good to do that like I
said just because residents might feel
like hey you know what one solution is
just not taxes so much and of course
because we have such narrow taxation
mechanisms in this state and it's so
draconian to get money back once you
stop you know once you reduce a revenue
stream we're always careful not to not
to do that but it's but having having
policies that result in a net closer to
our goal I think is is is the is the
responsible thing to do with voters
money other questions oh come of
interest I well just in general I would
say that see you see is the scenario
again if you detach it from 2018 basis
there and reattach it to be around 2022
2023 then that starts to make the most
sense to me and it in it but it banks
upon us us kind of basically earning
some capital in terms of public trust
and what we can do with transportation
we're saying without any additional ask
we're you know we're gonna we're gonna
take the assets we've already collected
and
gonna do some important projects and and
and it's a little bit of a bat that says
and and if we do a good job and we think
we will do a good job then you know
there will be a better climate for us to
go ask for some new funding for the
balance of the unfunded transportation
projects in our CIP that's what that's
what scenario C says and I'm interested
in that scenario at the same time I do
want to take up the conversation that
Chris brought up about other portions we
have other asset classes in our CIP way
of facilities parks trails and
transportation and and I don't know if
we're prepared to have a conversation
about that tonight but there might be
good some get someone out onto the table
to discuss and I'm looking I'm looking
at the the CIP document right now of the
and it goes out for you know into the
future years there's a total of 238
million of unfunded capital
transportation is 161 of that 238 and
parks and trails are a total of 28 out
of that 238 perhaps we've been making an
assumption in this that because we've
been the public has a time and again
shown a willingness to tax themselves
for parks and open space acquisition and
trail related stuff that that as a
policy would be something that we would
expect to do in future years as well
perhaps to cover that on funded portion
of the capital plan which which I don't
know so I'm just putting I don't - I'm
just saying something I want to put any
words anybody's mouth and then and then
the facilities part is all in the future
years which means is out beyond 2022 and
it is it's unfunded Kippur Shin is 48
million so that's significantly that's
twice what the parks and trails is
almost and I'm not as familiar with that
because that's actually roll and roll up
of quite a few of the categories that's
only for asset classes but we have many
more categories than that in our CIP
and I'm not sure we're prepared at all
to have a more in-depth conversation
about that tonight but I think it would
be good to hear if from the
administration on what the thinking
might be about that part of the CIP
because it was it was when we got
together as the Finance Committee ad-hoc
committee it was definitely very strong
direction like let's focus on
transportation it's the biggest part and
it's the one that we don't have a track
record in terms of you know going to ask
for money for being successful we went
for the bond and still got 54% but that
still wasn't successful so and in
feeling also it reflected what we
thought was the most urgent need within
the community and we have a list of
projects that we think would make a
difference so let's put the focus of our
capital and in this whole model on
transportation but I've said what I
think maybe about parks and trails and
what the strategy might be for him
handling the unfunded portion there I'd
like to know what others think about
that and I and I like to hear we'd want
to get some more back on the facilities
part and I think we need to get that
from the administration because I don't
think we've ever talked about that so so
I want to be clear on one thing the a be
that impaneled the ad hoc Finance
Committee acts actually asked us to look
specifically at transportation and
that's why we focused on transportation
having said that here we are today
talking about citywide the bigger issues
and so you know that that's why I had
Hawk focuses with you thank you yeah you
know it's this whole conversation is
gonna be really interesting Paul because
I understand this idea of maybe starting
with council Matic and and you know
building some inertia I also think
there's a there's an alternate and
certainly not gonna solve it here
tonight but there's an alternate thing
that says if you know what you need to
do to start transport to get to address
transportation get cracking right and
use all the tools that are arsenal to
address it right I'm not sure that's the
right way to do it but you know I could
see somebody saying that somebody's
saying look you know we've said
transportations the thing just get going
do everything you can find every nickel
in every cushion in every couch
everywhere and and go do it so it'll be
interesting to figure out how how we
want to how we want to pursue that
Christian did you have something resin
no sorry okay other questions comments
and we're looking for other thoughts all
right
alright I'm just gonna quickly go
through because like I said that this
this page was was probably a page that
we could have just had maybe a smaller
packet and we could have talked
specifically about the model but the
again the this information is intended
to provide you with with a lot of detail
as we go into the the budget discussion
so thank you
council president marks for talking
about will continue the discussions on
revenue sources and capital expenditures
that might be made I want to then jump
to financial indicators because this is
this is where we are getting into kind
of testing how we're doing and so one of
the things that I wanted to point out is
that financial can our financial
condition is obviously something that we
want to make sure that we have the
ability to maintain existing levels of
service and that there are there are
things that impact there are local and
regional economic disruptions that often
get in the way of what we need to do to
meet demands and so what we wanted to
put together and this is the same as
last year but if you remember that these
were the large pages again which we
shrunk these down and pointed out some
retrospective and historical information
about where we've been and I'm going to
talk about each of the the indicators
that we have developed information for I
also just wanted to point out that there
are a number more indicators that are in
that would impact our environmental and
organizational factors that contribute
to our financial condition so that would
answer perhaps comes whenever
winter stands comment about
non-financial and so I just wanted to
make that point that those are in the
overall kind of matrix and I'll walk
through that we're in the process of
compiling this information and just kind
of wanted to let you know that how you
would read the the first page is that
we've done some work on the indicators
one two three six and partial of seven
we continue to add data to our our
master data and will continue to then go
out and look for comparative information
from other communities as well so
nonetheless I wanted to just briefly go
over that our indicators are based on
our baseline right now and certainly as
the council makes decisions then what we
do is we go back and we put that that
forecast or that those those assumptions
of the council or those decisions of the
council in and it serves as a test on
whether or not we're going to be
performing better or worse and helps us
take a a longer look at our financial
condition so what I wanted to point out
on page let's say I'm just trying to get
page numbers here on page 107 of the
packet that just kind of shows that flow
of some of those environmental factors
that impact our financial condition
there's organizational factors and then
there's certainly the financial factors
and we we the easy ones are the
financial factors because we we do
collect data and and we do want to
present it in a way that is helpful for
the council and then you see way up
above you can see those early warning
trends and you can see some of those
early warning trends are and I'll go
through those in the indicators that we
have prepared and and what you would
look for but it's intended to help the
council with decision making
and I have a description of each of the
indicators so if there isn't any
questions about the the overall plan for
putting a tool in place and continuing
to use it I'll go on with the indicators
the first one is revenue per capita and
so examining our revenue per capita and
this is the this is in comparison so per
capita is relative to the change in
population and the rate of inflation and
you can see historically that we have
had increasing net operating revenues
per capita and so you can see at the top
the warning trend would be is that if
they were decreasing because that would
mean is if our revenues were going down
per capita that means that we're not
able to maintain those existing levels
of service we would need to find new
sources of revenue or or certainly ways
to save money on the expenditure side
but it assumes that that the cost of
service is directly related to
population size and so we've put
together the data in the historical
information you can see how the numbers
play out these are actual numbers from
our audited financial statements the the
CPI and then we just we just do the math
and the population then creates that per
capita revenue and you so you can see
that is increasing historically Hausner
would just I'm Thank You Jen what type
of revenue are we talking about this is
just general fund so this is just
general this is just okay we can do we
could do any indicators on the different
types of revenues so if we were going to
look at this from a utility perspective
then you know those would be those rates
and the capital contributions I just
didn't see I thought that maybe it was
but I didn't see any where I know that's
primarily been our context tonight has
been general fund but I didn't I didn't
see that on there say specifically
general fund so thank you for that
tell me about transfers but when we're
talking about the general fund and
transfers what do you what would we be
referring to
what we referred to there is because in
fund accounting one fund transfers money
to another so we also include those
transfer dollars now some you might
think maybe a special revenue fund was
entrace fer some dollars into the
general fund because of some some
condition but we we want to be made
known that we are including transfers in
the the net operating revenues could you
give me an example of this example a
transfer into the general fund yeah
transfer into the general fund could be
from let's just and this is hard because
when we when we did our fund accounting
cleanup we shifted and we created
special revenue funds specifically for
like REIT so for example if you would
have the project that the general fund
was the project was left out of the
general fund so all the transactions
were being you know tracked in the
general fund but there was a source of
revenue that that was going to come from
readers were going to come from another
special revenue fund that we would
transfer in that revenue to tackle that
that one-time capital project so there's
not a lot of transfers that come into
the general fund right we're often
feeding other funds with general funds
so transfers as a percent I mean how
what percent is this above the total
revenue I'm gonna have to get you that
just get apart I don't want to guess
less than five I'm not a guess there one
could we provide that back okay sorry
they just said something which I was
wondering if this was true you said this
it's not common to transfer from other
funds in the general and yet you have a
title to your net operating revenues and
transfers like transfers had some
significance I just wasn't aware of what
that was so there was significance in in
2007
tene because there was a million dollar
transfer from the because of the Malheur
bait property and so there there was a
transfer into the general fund so yeah
transaction that confuses us constantly
it never stops confusing us okay
it is a very complicated project the
purchase okay so so I'm can I'm confused
by this first that first off are these
in real dollars are actual dollars
revenue no I know they're actual dollars
are they in real dollars in other words
have you corrected are these in 2017
dollars all back NPV to current they are
they are real so in what year are they
then are they they're in 2017 dollars
they're in 2013 dollars what are they in
they are the actual for that year these
are the audited financial statement
that's not what I mean by real dollars I
mean for is it corrected for a certain
year's currency because they were
because they were in the past on the big
spreadsheet they were corrected for
inflation basically because otherwise
what I have to do here is I have to take
these numbers then I have to compare it
to the CPI and eyeball it myself right
what you want to do is you want to
divide these numbers out by the CPI to
get real dollars right I think so take
that as an for an offline I believe on
the bricks down the big spreadsheet we
corrected for two things we corrected
for population and then we corrected for
inflation right which should have given
us per capita in real dollars right not
just per capita because the thing that
the thing that I'm confused about and
I'm not ready to be I'm not ready to say
I'm alarmed yet but I thought that at
least before last year the big chart
showed is essentially flat in revenues
more or less in revenues per capita in
real dollars over time and this the the
first three years of this chart is
anything but right the the actual
operating revenue goes up 19.4% the
operating revenues transfer per capita
goes up by 17 percent meanwhile the CPI
only goes up by three point eight
percent I don't think that's what
previous years what we call the big
chart showed I think it showed over a
reasonable length timeline that those
numbers were flat because if those
numbers aren't flat then it means that
the cost of governance in the city is
going up even even taking into account
the fact that we get economies of scale
and some of our operations right some of
the things we do we can do with a larger
population that's harder to do with a
smaller population so you should at
least be staying flat in that kind of a
measure and it was in the big in the big
chart that we did in previous years but
it's not here so again I don't want to
say I'm alarmed yet but I want to say I
absolutely need to understand better
corrected for real dollars corrected for
inflation so so again divided by
population divided by inflation so that
we see what the real cost of governance
is over time so these are these are
revenues just revenues mm-hmm so I think
we can take a deeper dive than in on
your your view of last year as compared
to this year well the big chart that we
did did it for like 10 years right we
looked you have to be careful just
looking for three or four years right
you have to you have to take sort of
when we did it before we looked at a
longer timeline so you smoothed out sort
of local variations because you can get
little local blips that'll make things
look weird but both revenues and
expenditures in per capita real dollars
were essentially flat and that's what
made me comfortable with a lot of the
things we were doing this was two years
ago the conversation because it made me
say I could go to a resident in the city
and say the cost of government for you
isn't any worse you know the cost of
government for your yeah we're in any
worse for you than it was 10 years ago
right if I can't say that then I have to
ask myself a whole bunch of questions
that I want to have to ask myself about
the way that we're choosing to generate
and spend money and that was the whole
purpose of that of that big spreadsheet
and and so that's what that's why I need
to know a lot better about this per
capita in real dollars over a longer
time lines and
make sure that we don't have a problem
because this if I just looked at this
the fact that I mean he got allocate
expenditures also but in you want all
that stuff to track you want to say
we're asking of the people comparable
that we asked to the people ten years
ago we're spending comparable for people
that we were spending ten years ago and
you correct that for a population and
inflation will bring back the big all of
the data and so you can look at it in
that framework because we're looking at
the historical here and then we're
looking at the next page we're looking
at the forecast so we will certainly
include that when we have budget
discussions great okay that would help
me and and and I believe it'll show
things better than I'm envisioning them
in my head just looking at this one page
okay thanks oh then I'm just gonna move
on through then the revenues per capita
this is the projected this is this is
coming then from that moving forward
with the same information and and then
based on the baseline assumptions
the indicator to which is expenditures
per capita I do want to point out that
the warning trend would be this was a
correction and it is in the page 111
replacement that was supplemental
materials this was a typing error and it
should say increasing that operating
revenue expenditures per capita
obviously with changing expenditures if
expenditures are going up relative to
population changes that that would mean
that the cost of providing services is
outstripping the ability the community's
ability to pay it also indicates - if
there is an increase in spending that
can be greater than accounted for then
the inflation or the addition of new
services and here's the replacement page
to show the warning trend would be
increasing net operating expenditures
per capita again we showed the same
information from a historical
perspective from 2013 as council
president Mart's indicated last year's
sheets had information that had a
significantly more historical data in
there and so our shift to move some
things around we will again do that
deeper dive but you can see in the
expenditures again when we try to depict
that in charts we show per household and
per capita pretty much the same in in
changing from expended one year to the
next there was a question by a
councilmember ray with regards to what
happened in 2021 I provided an
explanation on that this was some of the
impact of our debt obligation our annual
debt obligation dropping off and
the then the the general economic change
in expenditures is 3% so we don't have a
full three percent year-over-year so in
a couple of years we have about two
percent and so we have population
changes increasing at the two percent
level and so all of a sudden we have
this blip in that third year because our
debt service has dropped down in the and
the change year over over a year is not
apples to apples again like I indicated
in my response and if this had been
extended out into 2023 we would see
another funky change in expenditures for
per capita expenditures and per
household expenditures to go upward
similar to 2021 so so we are seeing so
the sign that says warning trend would
be increasing that operating expenses
per capita and that's exactly what we're
seeing so we've got the warnings that we
have warning sign mm-hmm okay yes and
and so per capita expenditures over four
years have gone up 26% but CPI is only
gone up ten point three percent so we're
outpacing inflation so that's
hypothetically a problem again it looks
different than when we talked about this
either a year two ago but this concerns
me it's noted and we'll go back and make
sure that the information provided and
what changed in these in this depiction
other questions all right indicator 3 is
operating deficits the warning trend is
increasing general fund operating
deficits I talked a little bit about
this when we were looking at the
financial model when we were looking at
scenario B that it would look like it
was an operating deficit again this
occurs when expenditures are exceeding
revenues it doesn't mean that the budget
is out of balance because reserves are
used because reserves are a source to be
used to fund services and so it does
mean that in a current year it doesn't
mean that the government is spending
more than its receiving there could be
things like an emergency in one year and
then not the next but for the most part
is that an operating deficit in one year
is not a cause for concern it's when it
happens over multiple years and there's
not a plan in place and the council does
again as I stated have financial policy
that identifies how you handle operating
deficits over time how you handle
spending reserves or bringing reserves
back up into your into your policy
targets and so this is something that I
wanted to point out too with regards to
credit raging firms when they look at
operating deficit it's certainly a minor
warning signal but then they would at be
asking for a plan and so certainly any
large deficit more than more than 10%
would also be something that the credit
raiders would ask for more information
about so I'm sorry what assumptions are
we using why why are we seeing a change
out at 20 20 20
20:22 because if you if you if you
append the projected on to the
historical for most of this you get sort
of a little back and forth oscillation
of some kind but then you get this you
get this step out around 2020 and all of
a sudden you're above zero and you stay
above zero what's that about
well one of the one of the things that
we talked about was the where our debt
service starts starts to be reduced and
so this does not include the any new
debt right now this is just a look at
where we pelvis right that should make
it better and that's why you see the
operating deficits on the projected side
going out going above the negative sorry
an operating deficit is a good thing
the well I'm not saying the operating
deficit is a good thing this is just how
we're looking at this indicator based on
the operating deficit revenues over
expenditures and every year so as we go
into the outer years in the baseline
that that the the color I'm going to go
back to the color of the line there was
no operating deficit in some of those
years in the outer ears now I'm super
confused deficit so a positive number
means a deficit or does it positive
number mean a surplus the positive
number means a surplus thank you okay
now I get it
so rising surpluses would be a warning
sign no it would not be a warning sign
it would be the the warning would be
that if we continued to be in the
negative then that would be problematic
but in this case our current our current
revenues over expenditures forecast
shows that we would not have we would
not have operating deficits so therefore
there would be no warning right okay
nothing to warn us I would heartily
encourage either calling this operating
surpluses or inverting the graph right
because the title on the thing is the
positive value of the thing right and
this is not a measure of operating
deficits as a measure of operating
surpluses right
this is a measure of operating deficits
because that is that is the warning but
in this case in this in these scenarios
in these forecasts we do not have one so
certainly I think this is the how the
indicator Jennifer let me tell you as a
math person the warning says increasing
increasing in this chart is not a bad
thing decreasing is a bad thing
so something some combination of the
warning sign and the title of the chart
and what whether you choose to invert
the chart or not but anybody that is not
a map person or not a finance person is
going to be very confused by this okay
I'm quite confident that that's the case
because you see the increasing write on
the warning as this number is increasing
and that's actually a good thing right
but it took some time for me to work
through what that was so I just ask that
you consider whether there's some
combination of how we word this and how
we show this that makes it more clear
for anybody who's going to take a look
at this because I'm sure if I'm confused
there will be other people working we
will work on depicting it in a better
manner and a better framework for the so
that the community can understand it
Thanks before we move on
Toula could you explain it to me so I
can understand yeah I really understand
I'm not tracking you sure so above the
nice and calm
above the line is a surplus at which
chart page which are you looking at I'm
gonna make sure I'm in the right age 114
right operating deficits historical is
the top charge so above the line is the
surplus which chart are you on the top
one the top one either they're both the
same for both of them above zero is a
surplus below zero is a deficit so when
you go back one page to increasing
general fund deficits as a percentage of
net operating revenues that would be a
warning trend right what that means okay
wait hold on okay moving on warning
trend would be increasing general fund
operating deficits so the deficit is
increasing if the deficit is increasing
that's a warning sign so I so okay it's
a-okay it's right that's right
what's that that's a deficit that's
growing right value is getting large yes
so so it means a chart that is it has an
increasingly negative value that's what
means going further into deficit that's
right right okay all right okay so and
so what is your concern my concern is
that first of all if I see something
that's titled deficits I'm used to the
the title of a chart being a the
positive value of something and secondly
is it if I see increasing I think well
it's increasing so so we've got a
problem
you lost me right there where are you
seeing the word increasing what are you
talking about under the warning trend
would be says increasing general fund
operating deficits yep you're free to
disagree with my date with my understand
what it was so what's the problem with
that phrase increasing deficits because
I look at that chart and that charts
increasing so we've got a problem no no
it doesn't it's not increasing it did
from 13 to 14 the deficit increased and
it took a little dip in 15 to 16 but
it's but the value of the chart is
increasing over time moving up into the
right yeah growing I know that okay okay
again you're free disagree with my
concern well I hear what you're saying
now yeah I don't this you don't yeah I
see that this I know that a growing
negative number would be a bad thing
we're not seeing a growing negative
number gotcha
so that's good right council member ray
Jen thank you very much for your earlier
responses to my questions that we're
real helpful the one that I do want to
kind of dive a little bit into is is
here because in our projections for 18
we're showing a deficit of nine hundred
twenty three thousand dollars and right
now where we have a surplus of 1.2
million dollars and so I understand that
there's some guidance that's driving
that number I just like to understand
the guidance of why we why we're going
to have why we have the discrepancy
between what we're seeing you know what
we're
um the we could have we could have
multiple charts than to show the the
operating deficits or surpluses or or
how it's depicted up into the right yes
based on the budget based on the
council's expectation that there would
be an operating deficit in 2018 we could
also show then and I think it's
something that will be an important
piece as we get better depiction of this
is that when we start to forecast the
year on 2018 we can show the same chart
inverted to show how what were what
we're forecasting for the operating
deficits so I think will will properly
identify what is what is the budget
versus forecast then as we bring back
more information other questions
okay thank you indicator six this is
capital outlay this is one that commonly
and and again this is this is general
fund capital outlay but this is just
another indicator that in the warning
trend would be that three or more year
decline in capital outlay might mean
that there are some challenges with
keeping up with vehicle and equipment
and the maintenance of that referred to
as maybe capital outlay so we've
replacing items in the general fund or
capital outlay items that do not make
the CIP that is something that we wanted
to show historically on the the second
chart is where we wanted to depict CIP
and so this is one that is to show that
we're we're working towards putting
together these tools and to let the
council see the see the portion that has
been identified for total capital outlay
it is rather all over the place but
nonetheless it's something that can help
to test how we're doing in our financial
condition because our smaller assets are
important as well as the bigger objects
that are in CIP and then the final
indicator so you can ask a question so
this is another one that if you tie
together the historical would be
projected like if I just look at the
historical I go oh I think we may have
that warning trend right but if you tie
it together with the projected what you
get is sort of a back and forth squiggle
a little bit right and so it's not
necessarily I guess it's still is it
still generally coming down there's high
there's highs and lows but we go from
orig
that's generally in the 1 and a half to
three percent range to a regime that is
generally sub 1% right so would you say
that that warning trend is is is
activated on this on this indicator
administrator moon not yeah not yet I
think this is a great tool for us to
just watch over time and make sure we
are thinking about our replacement of
smaller capital assets if we go back in
time beyond 2013 we may see a different
pattern from year to year you have
different pieces of equipment that come
due some might be really big and create
a little spike on the next year you may
not have that so there's a good deal of
variability from year to year I would
also say in the projection we have some
work to do
to make sure that we're forecasting
accurately into the future for those
smaller capital needs so as we think
about our fleet replacement you know how
we certainly have a schedule but we can
analyze you know how to spread things
out in a better way and so I would I
would expect that we don't fall as lows
as shown in the projection and that we
stay somewhere around whatever that
trend line has been historically but I
think the purpose of the chart is just
to be mindful that we we should assume
that we have an annual obligation to
keep up with those replacements and then
if we underfund we're putting service
delivery at risk
do we have an idea of what that number
should be that's an excellent question I
don't off the top of my head I think we
do on our on our fleet side and that
tends to capture
larger more expensive pieces of
equipment I don't have that off the top
of my head and then there's other pieces
that are part of capital outlay that
we're developing asset management plans
for yep other questions
that's member hunt what are the
asterisks indicate what are they
indicate on the years for that one I
don't see them on the other one excuse
me this may have been a change in the in
the formatting and so I'll need to get
what that note is because that didn't
get transferred
their questions right I'm just gonna
move quickly through the the indicator
number seven this is property values
both historical and projected again it's
based on the assessed valuation these
are the King County assessed valuations
from a historical perspective and then
these are the growth so I'm going to
shift to page 118 and just point out in
the the assessed valuation numbers are
based on what we we are seeing
historically and what we have that are
coming from the projects in the pipeline
and so this is the number where we get
that that 1% the limitations for in
order for us to forecast property taxes
and you can see that the assessed
valuation in this particular projected
information is going up and so I just
wanted to circle back and let you know
this is the dollar amount where we get
our property tax estimates going forward
so I struggle a little bit with this one
because you could by just putting more
stuff by having more development swamp
what's actually going on like I it with
a measure like this you could have the
average home sale price be dropping
right but as long as as long as you are
growing faster than housing prices are
dropping you would see a positive number
so my question is is there any way the
same way we talked about revenues and
expenses as per capita in real dollars
is there some divisor that we can put
the this is the numerators the divisor
we can put this over such that we can
measure how this is for a business that
has a certain number of square feet or a
homeowner for a certain risk square feet
I mean what you what what I'd one in a
perfect world if I could wave a magic
wand would be like the value of
commercial real estate over the
commercial square feet the value of
residential
over the residential square feet right
and then you would get commercial per
square foot you'd get residential per
square foot and then you would really
experience what I mean we could sort of
talk about what the average homeowner or
business owner is experiencing and I
have no idea if any of that information
is available or how easy it would be to
get I don't know just that that that
would be super we're taking down this
and again these are indicators that
we're starting to pull together so that
we can start having these conversations
so appreciate that and let's remember
winter stuff yes so historical that's
easy to get you just go look it up
pretty daring to project rising property
values in the future well this this is
something that the the crystal ball it's
it's a hard one to I mean it's it's hard
to predict these things and so we we
have to put something out there as a
starting point as a talking point and
then we're not afraid to have holes
punched in our our assumptions over our
information so yeah it is a risky so why
why even why look forward at this one I
mean we know we just we know what's
happening mm-hmm right because we don't
there's there's there's so many factors
in the environment that that drive
assessed valuations most and I don't
know how we would manage to a forecast
of property valuation changes so I think
tracking it I get tracking it that's
absolutely fine as a look this is what
it's okay we've got next year's numbers
in this is what it is I just don't know
the value of projecting anything into
the future in this way because it's a
major source of revenue and we do want
to
something in the financial model that it
identifies property tax as add is a
source and the only way that we get
there is is the you know the formula to
identify what our annual levy is gonna
be okay so then I would want to track
how it's happening care compared to our
our baseline or our basis that's what I
want to track hey so you're providing
the actual but what I want to know is
what it is to our base sofiane are so
okay so that makes sense so so so we
actually if I we this is and this is
this is not total this is total
valuation or just like average increase
this is this is total valuation this is
okay which it would be averages okay
yeah so I would think is a key indicator
I just want to know what is it doing
compared to what we are in using in our
forecast if we're using an 8% I already
ate no 2018 so for we don't know 2019
yet that's correct right
okay so let's track how it does compared
to what's what we forecasted okay other
questions comes from array um this is
this is great I just want to start by
saying this is great stuff since we're
gonna get back and the routine of doing
quarterly updates it would be I think
really useful to see these numbers on a
quarterly basis instead the anyone
particularly relates to property because
it can be an early warning indicator of
an impending doom if we start to see
property values tank and we've seen that
happen before so if we can have a little
higher level of granularity than just
the annual numbers I think that would
provide us all kind of some some good
early warnings to take some corrective
action with so but I love this stuff
other questions
all right so then let's let's move on
this is intended of the next session the
lat the last section is about revenue
sources and this talks about current
revenue sources but I also wanted to
just briefly touch base on some
information for information purposes
only was alternative revenue so what I
wanted to provide for the council here
is just a look at our current revenue
sources this is information all city
funds so this is not only the general
fund but it also includes all of those
revenue sources and you can see that
there's a large portion for charges for
goods and services because it includes
the utility funds and that's those
utility rates that we charge just to go
back we're on page 119 of the packet of
information the information in here is
intended to give you historical actual
levies that we have received in and then
we have then the forecasts for the
different types of revenues that that we
have put out you can see a number of
different ways that we've provided this
information so on the next page 120 you
can see the authorized levy amounts also
wanted to provide the council with that
property tax distribution so when a
property owner receives their their tax
bill not all of those monies go to the
city of Issaquah there is about 10% of
the property tax that would go to the
city of Vista that's the blue pie piece
that's coming out and so we wanted to
make sure that this information was
available next page this is the levy
rates one of the things that I think we
talked about here but I wanted to kind
of circle back to was about that when we
when we predict assessed value and we
predict what the property tax levy would
be as the assessed value goes up the the
the property because we're limited with
that 1% the actual rate goes down and in
the chart at the top of the page it
identifies the the total the dollar for
in 2018 per thousand and assessed
valuation I also wanted to shift out
that there is the general levy or the
regular tax rate of about 87 cents and
then you have that access tax rate and
that's the the voter approved levy that
does not hit the general fund but it but
it show you that that when our
valuations go up and our ability to set
the property tax rate it is just an
automatic going downward then I just
wanted to show you those assessed
evaluations this is a lot of small
numbers in a space to show you what
those actual assessed valuations were as
well as there's that new construction
value of about the two hundred and I I
knew I remembered a number about two
hundred eighty but that was 2017 in 2018
we actually had information from King
County that it did go down some so it is
one that's hard to predict other
information then for the council
historical residential home values and
at the bottom of the page you can see
some average valued home and the changes
year-over-year that's a question about
that so you've got that that value was
obtained from Zillow mmm-hmm do we have
a more rigorous way to get that number
other than Zillow because I seem to
recall not necessarily in City Council
but some question about how Zillow's
mechanism and whether it's accurate and
all that kind of stuff and we're working
on making sure that we have that we have
the right source so certainly
something as we continue to build on our
tools for understanding where we are
we've been and where we want to go we'll
continue to have better sources and the
Multiple Listing Service doesn't make
that kind of information available well
they do that make that kind of available
at the time of this report this is my
understanding it was what had been used
in the past and again and we're working
to strengthen our tools and the
information that we produce okay I don't
have anything against Zillow just if
there's a if there's a more accurate
mechanism I've just seen Zillow stuff in
the past that I was sort of a
head-scratcher it was like I would
didn't have a lot of confidence and
there are numbers and then when we go to
page 122 this is information and does
some comparisons to other cities what we
wanted to do is show the the only the
city portion by community and the change
in the the rates just a quick snapshot
of you you can see the city portion and
the total rate and then the percentage
of the total and so from 2016 to this
current year that's at ten percent of
the total tax bill the city of Issaquah
collects or that just over a dollar for
per thousand of assessed valuation you
can see how we compare two cities from
Bellevue to Kirkland Redmond Sammamish
and in smaller communities counts
remember ray why is our number so low
because we have our assessed evaluation
is it is what it is and the property tax
limitation of 1% and that is I mean that
that's the math okay I mean I just
always you know a little bit of
competition with Sammamish right and and
they're killing us here and a dollar
seven now
it's all in perspective we are not
aligned no this is so so I was gonna
come out of this my comments are not
reflected they're not aimed at what you
just said but I think this is super
super important and I'm just gonna get
on a on a high hog here just for 60
seconds this is the flipside of all the
traffic and concerns that our community
has had around growth over the last
thirty years this is when you talk about
old Issaquah and where did old Issaquah
go we made a decision thirty years ago
and have continued to execute public
policy around having a well rounded city
that has commercial and retail and
residential and so when you see we are
able to function with a relatively lower
cost to our residents to our homeowners
than many of our comparable cities on
the east side this is the upside part of
the upside and there's there's a number
of having of being a real city and not
just being a bedroom community and so I
think this is SuperDuper important and I
I struggle because I don't want to throw
any of our neighboring cities under the
bus but this is really the repercussions
of being well rounded and so I'm very
proud of these numbers and I will tell
you that these numbers are lower than
unincorporated King County I looked at
unincorporated King County last summer
and so when people think that by not
incorporating they're gonna get
themselves a better tax bill
unfortunately that's not how it works
so and our residents and this numbers
prove that thanks sounds remember
winters time property taxes are roughly
13% of revenue and the general fund that
true roughly in were you looking at a
specific year just India recently it's I
mean
I mean how you you don't have to do I
thought maybe you'd know if top your
head this isn't I just just to put this
in another I think in an important
perspective as well as what this rate
you know that this rate is what it is
but it's also only about 13 percent of
our revenue mm-hmm and in in I was just
looking back into them in the mid-year
report yeah you have it in the narrative
well we've we've collected what I've got
in the narrative here is not the
percentage of our total our overall
revenue so that's something that we can
add the the chart and you know it's more
just yeah the you have this in here you
compares with the other cities and
that's interesting and and we have a
significant amount of retail sales tax
for example not everybody has the same
mix so that that's that's it's
interesting to compare but we're not
really but II you know we have to do it
I think it only makes sense if you know
the entire makeup what's the president
yes I wanted to add to this too because
the one we're looking at this
information is that the city portion
includes the excess debt levy and so one
thing to note is that another community
may have have had voter approved excess
levies go forward they may have opted to
do a lid levy lift they may have opted
to do utilize all of their bank capacity
so so this this tells a story of
everything that that a community has has
determined to do and when we compare
those communities and so I just wanted
to point that out is that this is the
the total city portion of all the
different levies that and the the
impacts to their levy that those
communities have chosen do it thank you
for that clarification
so then we move on to page 123 I just
wanted to give a council the council a
breakdown of our sales tax it goes to a
variety of different places you can see
that the city of Issaquah does not
collect the the the total 10% general
sales tax so we collect a small portion
just like the property tax it goes to
other entities then we put in some
information - about our our total sales
tax as well as a history of sales tax by
some of those major categories there's a
quite a number of different categories
of sales tax that we monitor and receive
and it's all over the board but the
major portion is the retail sales tax
portion then we move on to information
background information about our
business and occupation tax you can see
there all of the different tax rates
again the tax rate was was changed in
2015 so you can see how we look at and
how we audit those bno tax returns and
those thresholds for whether or not
someone has to file a tax return
quarterly filing is at 25000 an annual
filing is at a hundred thousand and then
providing some historical information
and forecast
keep going moving on to page 125 at the
bottom is information utility taxes and
those are the taxes that we charge on
electricity natural gas so again that
forecast of all of the different
categories of utility tax and then on
the next page 126 shows a historical
comparison by the type of utility tax
that the city collects we also have
included information about building
permits engineering and plan check fees
at the bottom of page 126 and just want
to know this was a question last year
but we're certainly keeping it in
because there was a question about plan
check fees dipping and an engineering
fees increasing and this was primarily
due to some in 2014 and 16 some of large
multifamily projects in Highlands and
well in the valley floor to show you
that again like I stated this is a hard
one to predict and we do our best to
monitor what's in the pipeline and put
that into our forecast and budgets
shared revenues then is on page 127
shared revenues include our liquor
license our liquor profits and and
marijuana profits and just to show you
where where we have been and how we the
dollar amounts that we have been
collecting tell us remember hunt I
actually have a question about the
previous page the figure four with the
building permits engineering and plan
check you mentioned that it's hard to
predict these I also is it safe to say
that they're not tracking with each
other you you don't see the same trends
with you can't really predict what's
gonna happen with the plan check or with
building permits and they're just sort
of independently changing it looks like
yeah listen I just want a question is
there there they don't they're not
really they're not following a trend
with each other they just follow
different trends for each of those these
that's not I guess it's not really
question it's just I I would have
thought that they would have a
relationship with each other where
they're correlated or something but they
seem to not be they do it's a little
funky on this page I think you're seeing
the impact of the moratorium here so
they do sort of track until we hit that
that moment in time to some degree
there's also lag
so you'll typically you get the plan
check and then the building permit so
they do they they typically follow kind
of similar pattern but I think we've had
some weirdness with our moratorium
impact and and that's why 2017 was so
difficult for us we tried to be very
conservative in our estimate and
actually had more in the pipeline that
proceeded faster than we had expected so
that's really the strangeness I think
you begin to see play out in 2016 and
2017 I just like that there was a year
that we run in $50 in engineering of
inspections it just makes you wonder
what was that $50 any other questions
the homestretch
I think your mic is your mic not about
that on page 128 there's a this is the
some similar information the council
might have seen for information purposes
only
these are alternative revenue options
that may be considered we talked about
that earlier about a new source of
revenue was in one of the scenarios in
the financial model but it is hoped to
give the council a very brief background
about some of these alternative revenue
options there is certainly more
information certainly about any of these
revenue options and as we go forward
through the budget discussions certainly
would would bring forth more
comprehensive review of a source should
the council direct the administration to
do so all right questions all right
does administration have any closing
comments for us this evening does anyone
in council have any comments I'm
something of a winter's day
thank you toilet I think I'm gonna ask a
question of the administration that I'm
gonna ask a question of you the the
fiscal model summary the baseline sarios
a b c and d you've indicated tonight
that you will be using this information
some i mean and maybe going forward did
you just explain what what you were
talking about there I'd like to hear
that and then actually so I'm gonna let
Tola know what I'm gonna ask him as well
so Tola
it seems to me that that model and what
we've assumed in there are all big is is
there's a pretty big deal it's hold
documents a big deal Jen but that part's
a really big deal and and if some of us
I know you know Ryan
bill Vikki haven't seen it before at all
but it would be good not to go away
tonight without getting at least some
type of reaction to what was proposed
here or or or what it's not really a
proposal but what's in this model and
what it might be from everybody I'd like
to get because we spent a lot of time on
this and the ad hoc committee I just
seeing it for the first time I'm just
kind of wondering if they have any
reaction or care the concerns or
comments and and and I thought before we
left tonight to get that would be good
but I'd also like to hear a little bit
more how the administration was it wants
to use this information so there you go
okay so one of the things that so what I
what I would like to do to honor that is
I would like to offer council members an
opportunity to summarize how this
information they think will what
questions it may address that we want to
bring up in the budget process but I
also want to make a mechanism where
people can alternately if they have
feedback that they want to provide in
writing this week to the administration
they could do that and the
administration could come back to us
because I know some of us are more
comfortable speaking extemporaneously
and some people are not so I want to I
want to provide both of those mechanisms
and make sure people don't feel like
they would have to do it tonight they
could also do it in if they wanted to
after after sleeping on it and thinking
about it a little further I like the
idea of us having an opportunity to
provide that feedback and I've sort of
already done that myself personally
so I think from administration's
standpoint we were just eager to share
this information so you have a better
sense of the overall financial health of
the organization and you asked you know
how might we use this information going
forward and I think we have a we have a
couple places at least coming up soon
we're having this background will help
us in facing some decisions so one is
with the budget amendment that is coming
up majority of the budget amendments are
items that have already been approved by
council and you've directed us to
incorporate those but when we bring it
back to you as a package it looks like a
big number so this will help you put it
into context to some degree and we are
in the midst of developing the 19 budget
I think having this background
information will allow you to maybe get
a visual on how what we will propose for
2019 compares to what's in the forecast
let's take an example of that might be
the debt service level we might propose
having greater debt expenditure or we
might propose adding more staffing
resources than what was depicted here
and you might be able to kind of scale
up and understand what the longer-term
impact of that is I think on the
scenarios that we gave you we are hoping
to get some reaction whether it's
tonight or some point in the near future
so that we can bring forward a tangible
proposal a direct proposal for you on
how to meet some of the community needs
that you've expressed whether that's
transportation or something else as
council president Mart's stated there is
an
standing directive to the ad hoc Finance
Committee to come back to the whole
council with the recommendation on how
to fund the unfunded transportation
projects and so we're trying to be
responsive to that as well deputy
council president impetus first of all
Jan and everyone who worked on this
thank you for for all the hard work and
everything that has gone into this I
would say I just wanted to give a little
bit of initial feedback and then if I
have some other thoughts all follow up
via email but having the the modeling
and the ending fund balance baseline
with the different scenarios especially
as we're talking about transportation is
really helpful to me being able to look
at that and think about the different
scenarios and and try to I think it just
helps my brain anyway to think about
those different scenarios especially
before something comes forward I did
have the question about that that we
went straight to recall it traffic
instead of transportation here but that
we went straight to that so better
understanding that was good we asked a
few questions around those assumptions I
always feel like when you're working
with models and assumptions it's really
good to get a lot of pushback on the
assumptions I think it gives you a
better product in the end so I was glad
that we had a conversation around that
so I just wanted to say overall having
having it modeled this way and and being
able to look at that is helpful for me
other comments
council member hunt thank you also for
all of the work that went went into this
so this is the first time that I've been
looking at the budget and we're looking
at the finances in such detail and I
think for me the the thing that I want
to look at in parallel with the model is
what's in our CIP because I think that
that is the other piece to this and look
at here it is trying to tackle traffic
or transportation but as has been
mentioned by my fellow councilmembers
there are other things in the CIP too
and I think that that really affects how
I would think of the scenarios and then
I think that having the having the
scenarios where you just change one
variable it makes a lot of sense for
looking at how in the big picture how
changing one variable does change the
trend over time it might be as we have
more conversations it might be helpful
to have some more realistic detailed
versions of scenarios where if we if we
come sort of start narrowing down our
options and then think well if we did
this then we would probably start tuning
down this other lever at this point that
would also be helpful so I will be
looking at looking in more detail to try
to match up my understanding of this
model with the CIP councilmember Ramos
yeah this is great to start looking at
the budget in this way because one of
the concerns I've had as we've done
things in the past is we look at the big
budget and then we keep making these
amendments through the year which keep
adding a piece of the time of pieces
time as you just mentioned all of a
sudden we're gonna get an amendment
that's gonna come here and look like how
the heck we did we just approve all that
because it totals up quickly and it's
not and when we do that we're never
looking at the big piece we just keep
looking at these individual pieces which
which puts our perspective nothing in a
good way so this is a start
trying to look at that hole that big
picture and say compare back to the CIP
that's all great too but we have not
prioritized that list in in the totally
you know so as we look at that it's like
what would we do in in what order and
that would also make a difference to to
how we fund things in the long run as
well so the priorities do make a
difference to to that list as well and
and another thing that I guess because
I've heard it previously as we need you
know a transportation benefit district
to fund these things and this is shown
that there are some ways without adding
more money because I think one of our
most important duties is to take the
money we have now and spend it very
wisely and in places where we prioritize
it I think it's most important and
before we ask for additional funding so
that's that's showing that that gives us
more option than what I've heard
previously from s administrations so
that's a real good way to start looking
at those those things so to me
prioritizing what can you get done with
the resources you have protecting them
out over time before you start looking
at more and really the way we just do
our budgeting in a way that when we keep
adding pieces we have to somehow keep
keep the whole picture in mind versus a
little piece of the time a little piece
of the time and all of a sudden you
spent a few extra million dollars that
you weren't expecting this bin and that
that lets our budget way out of whack
when we when we're looking at the big
picture we're arguing sometimes down to
ten thousand dollars or something like
that and Ellison's something much bigger
comes buying it slides right in so those
are things I hope that we continue to
improve how we look at this budget
overall and then fiscal practices will
just keep getting better thank you
so so I'll circle back this is this is
incredibly valuable information and
thank you very much it's super important
that that people understand this
information and that's why you know I
apologize if I if I pick some
engineering nits and some individual
slides I just want to make sure the
public understand it's because because I
think generally it tells a really good
story about our fiscal stewardship it
does this issue of
we track compared to inflation is a
thing I'm gonna really want to
understand going forward I have some
concerns I'm again I'm hoping that when
we look at it on a long timeline and
gonna put it in present dollars and all
that kind of stuff
that my concerns will will not you know
will go away you know I want to
reiterate I think the challenge coming
out of tonight is to talk about this
you know there's transportation and then
there's the other right and the a you
know I wrote down some stuff open space
we've had conversations recently about
spending money on open space we've got
you know recreational facilities every
so often we get letters from people that
want us to build a new pool and we're
not gonna do that any time soon but
that's in the mix out there city
facilities and where the city what the
city looks like 20 years from now for
infrastructure human services things
that we want to do services to provide
for the community workforce housing is
something that at times cost money
you know Senior Center do we want to
invest money and in running a Senior
Center ourselves that's a that's a
smaller one but a one that's coming up
in the near term and we have to factor
all these things in when we look at that
coming up with a curve that's that's
beautiful and just touches a limit that
we set for ourselves we want to make
sure that those other factors although
no one of them probably you know raises
people's blood pressure as much in the
community as traffic put together
they're also additional important
factors for making our city run well so
I'm not sure exactly how we broaden the
conversation to include those topics but
we'll figure it out and we'll do it
any other comments and I do want it I
don't know if we have anybody from the
public here tonight but if we do we
could do we have anybody yeah all right
we don't have to worry about public
comment all did you yeah thank you
regarding the the scenarios I'm gonna
repeat myself somewhat but it is so I've
had the opportunity to sleep on it for
many moons I'm not just hearing it for
the first time we heard it in the
ad hoc committee and seeing it again
tonight there I think Vicki touched upon
something I think I saw some non income
heads we see we think we think we think
this strategy we pick a strategy to go
forward with we will perhaps refine some
of the estimates that makes sense to me
but at at this level I think I think
what we're looking for some type of
policy direction with this granularity
in this type and level of data that we
have right now so so that I think that's
that will happen well we'll get more
rule refined things once we focus in on
a scenario that we want to try to
execute on I'm still in favor of I do
like the idea of using that capacity
that we have and saying we're going to
fund this out of our existing revenues
and we're gonna we're going to figure
out how to make this work and so that
and that so that so that cenario see
that we've already discussed I just want
to reiterate I think that that is I'd
like to see us go on a path and try to
do that and and I think what I heard
that does say there's got to be some
revenue we have to somehow fund a
greater debt obligation and the TBD
still maybe one of the tools for doing
that but not anytime soon
if we follow scenario C any other
comments o deputy council president
batiste
so that this comment may be a little bit
down in the weeds but I'll just go ahead
and talk about it the as we talk about
whether this is for transportation or or
it's going to include other things as
has been talked a little bit about when
we when we look at scenario B and within
the modeling we bring it all the way
down to the 15% reserve line that what
what sticks out to me is
if we're if we're wrapping everything
around transportation and we go all the
way down to that reserve line and then
what about other things that might come
up so just within the modeling it might
there might be the ability to play with
the numbers a little bit so it's not to
being all the way down and scenario B to
the 15 percent reserve line so just a
thought so all for myself a third
comment I think that I want to come back
to this idea that if we know what we
need to do I think that one of the
things we should consider as a council
is whether we go to the public sooner
rather than later I think that on the
last bond I don't think the public
necessarily saw the direct coupling of
what we wanted to do to improve to
improving transportation in and through
the city and I think that if we came up
with a killer package of things that
everybody looked at and said oh yeah
that's gonna make traffic better
tomorrow right
like the roundabout in front of in front
of target makes better banks traffic
better right now right it's better safer
through that area now than it was before
that roundabout was there there's
there's projects like that so I I just
want to I don't want to leave it unsaid
that there's an option going forward
that would be putting together like I
said this killer package of
transportation benefits and putting in
front of the public that I think we you
know we did well on a package that I as
I said had some confusion had an active
no campaign if we had something that the
public thought Janet that's perfect
that's what we need
I think we'd find the other 5% so I
think it needs to stay in the mix in
consideration I also think that before
we did the parks bond and this was what
five years ago something like that we
did some polling to find out priorities
around bonding specifically right and so
when we did the bond and we said five
million of it was going to be for
renovating the pool and five million of
it was going to be for confluence we had
some confidence that there was support
for that in the community and it's one
of the reasons why we just went to the
city we didn't try to create a benefit
district that would include the larger
area because those voters told us to go
pound sand and so I wonder if there's an
opportunity as we move forward to get a
better feel as to the community's
appetite for what they would want to see
potentially bonded out to the public
before deciding what would go into that
quote-unquote killer package so again
other additional comments thoughts going
once
I think twice I guess we don't have to
do it like public comment we don't have
to ask three times with that we are
adjourned thank you very much everyone
you