Strapped city's council likely to increase fees

Looking to end five years of deficit spending, Sultan officials tonight are expected to approve an administrative overhaul to move city finances into the black by the end of 2007.

The overhaul includes a utility tax and stormwater-management fee that could increase a homeowner's cost of living by more than $100 annually.

The city needs to make up a $260,000 shortfall and return to the days when it had as much as $500,000 in reserves, Mayor Ben Tolson said. Sultan also wants to once again receive a clean financial audit from the state, an issue that has dogged the city for years.

Under a plan created by a private consultant, city leaders likely will expand the administrative staff first by dividing Sultan's planner-administrator post into two positions and splitting its clerk-treasurer job into two.

Other administrative positions are to be reorganized, creating a staff that is more efficient and better able to handle an expected doubling of the population in five years, city officials said.

But such measures also would cost Sultan an additional $260,000 annually. To cover that difference and the pre-existing $260,000 shortfall, city officials said they must implement fee increases, including a 6 percent utility tax and a $5 monthly stormwater-management fee.

City officials also plan to increase real-estate excise taxes collected on home purchases. To do so under state law, Sultan must give up a portion of its sales-tax revenue to the county, unless city officials can persuade the county to give it right back.

Assessment report

www.cityofsultan.com/files/
documents/Profit_report_2006.pdf

"Which we plan to do," Tolson said.

Tolson is expected to meet with County Executive Aaron Reardon early next month. County officials said they're willing to consider the plan that Sultan officials are expected to bring.

Added together, the city could end next year with as much as $160,000 in reserves. The city, with about 4,000 residents, has an annual budget of about $1.6 million.

"No one wants to be the one for raising taxes," said Jim Flower, considered one of the most conservative members of the Sultan City Council. "But if we were a business, things are so bad we'd be looking at bankruptcy by now."

It has taken a number of years and decisions for Sultan's finances to reach such a poor state.

State Initiative 695 in 1999 led to a cap on vehicle license taxes and the end of Washington's "equalization" funds to compensate cities with small sales-tax bases. In 2001, Initiative 747 limited annual property-tax increases to 1 percent. Together, the changes have slashed the city's revenue.

Previous Sultan councils had failed to adjust utility rates and other fees to make up funding losses, instead squeezing existing money to pay differences, Tolson said.

The increase in population without commercial growth has been another factor. The population has increased, but not enough to bring retailers to the city. Without higher commercial tax revenue to balance spending, $1 in services is costing Sultan nearly $1.25, city officials said.

Retailers have shown interest in vacant commercial property east of the city off Highway 2, Flower said, but most have said they need at least a 5,000 population to make business viable. That's still more than a year away and not soon enough to pull the city out of financial straits.

"There could be a backlash with all of this," Flower said of the proposed overhaul. "But you add it all up, and it's a way of turning it around so that our reserve fund starts to get back up."

Tolson said he expects a unanimous vote in support of the overhaul.

"We have to make a change, or this city will die," he said.

Christopher Schwarzen: 425-783-0577 or cschwarzen@seattletimes.com