Budget Summary. City Organization

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2 This section has been prepared as a general summary of the biennial budget for the City of Mercer Island. It is designed to provide City residents and other interested readers with a quick overview of the financial plan of the City for the next two years. The summary is divided into seven sub-sections: City Organization how the city is organized to do business Staffing who provides the services Total Resources what the funding sources are for the city Total Expenditures how the revenues are spent Fund Summary revenue and expenditure totals by fund Utility Rates overview of proposed rate increases City Debt purpose and status of debt issued by the City and debt capacity If a more in-depth understanding of the budget is desired, detailed information can be found within the graphs, charts, narrative text, and funding level summaries located in the full budget document. City Organization The City of Mercer Island has a Council/Manager form of government. In this form, the City Council, comprised of seven elected members, hires a City Manager to act as the Chief Executive Officer of the City. The City Manager reports directly to the Council and carries out their policies. Council members listen to their constituents, the Island residents, and also receive advice and help from the Council appointed Boards and Commissions, which numbered ten in The Council is vitally interested in hearing the voices of all residents and in increasing citizen involvement. The day-to-day activities of the City are carried out by the eleven departments shown on the chart on the following page. For an in-depth description of the functions carried out by these departments, see Section F (Operating Budget by Department) of the budget document. City of Mercer Island Budget C-1

3 C-2 City of Mercer Island Budget

4 Staffing Budget Summary The two charts that follow show the number of regular and contract positions in The regular full-time equivalents (FTEs) represent the City s permanent staff. Regular Full-Time Equivalents (FTEs) Department City Attorney City Manager Human Resources Court Development Services Finance Fire Park & Recreation Police Youth & Family Services Public Works Support Services Right of Way Utilities Capital Project Engineers Information & Geographical Svcs Total The changes to the City s regular and contract FTEs in and proposed changes for are noted below: Staffing Changes: Restored Assistant City Attorney to full-time (0.25 FTE increase); funded by reducing contracted legal services Increased Paralegal position to full-time to provide public records support (0.50 FTE increase); funded by reducing annual funding for soil remediation work near the Maintenance Center Added Planning Manager (1.0 FTE); funded by permit fees Added fourth elementary school counselor (0.83 FTE); funded by YFS Fund balance Added Water Quality Technician (1.0 FTE); funded by water utility rates Restored Transportation Engineer (1.0 FTE); funded by fuel tax and real estate excise tax Added two Park Maintenance Team Members (2.0 FTEs); funded by eliminating four nine-month seasonal labor positions Eliminated Eastside Narcotics Task Force (ENTF) Detective (1.0 FTE decrease) Added Helpdesk Technician (1.0 FTE); funded by elimination of ENTF Detective Added Project Manager (0.58 contract FTE); funded by Sound Transit settlement agreement Increased Code Compliance Officer to full-time (0.50 FTE increase); funded by permit fees Increased Development Services Arborist to full-time (0.50 FTE increase); funded by permit fees Increased Donor Development Officer hours (0.13 FTE increase); funded by MIYFS Foundation Increased YFS Administrative Assistant (0.20 contract FTE increase); funded by MIYFS Foundation Added Thrift Shop contract staff (2.0 contract FTEs); funded by Thrift Shop sales City of Mercer Island Budget C-3

5 Proposed Staff Changes: Eliminate Deputy Fire Chief (1.0 FTE decrease) in 2020 Eliminate Parks Special Events Coordinator (1.0 FTE decrease) in 2019 Add half-time Police Public Records Clerk (0.50 FTE) in 2019 Freeze hiring of Patrol Officer (1.0 FTE decrease) in 2019 Reduce Geriatric Specialist to half-time (0.50 FTE decrease) in 2019 Eliminate Elementary School Counselor (0.83 FTE decrease) in school year Eliminate additional School Counselor (0.83 FTE decrease) in school year Reduce YFS Administrative Assistant to half-time (0.50 contract FTE decrease) in 2019 In addition to regular employees, the City utilizes contract employees, casual labor, consultants and contractors to address workload needs that exceed the capacity or expertise of the City s regular staff and that are time limited or seasonal. Contract employees are hired or retained when there is a significant increase in workload that cannot be absorbed by the City s regular staff and when the ongoing need for a new position is in question. They are just like regular employees, except their positions are time limited usually one or two years. The departments that utilize contract employees the most are Youth & Family Services, Parks & Recreation, and Development Services. If the workload is deemed to be ongoing (typically after three biennial budget cycles), a department can request that a contract position be converted to a regular position. Casual labor is used primarily to address seasonal workload needs and short-term workload issues created by special projects or position vacancies. Compared to a contract position, a casual labor position has limited or no benefits and is filled for a shorter period of time (1-3 months, 6 months, or 9 months). The departments that utilize casual labor the most are Parks & Recreation, Public Works, and Youth & Family Services. Consultants and contractors are hired when the City s regular staff lacks the capacity or expertise to perform specialized work that is usually short term in nature (i.e. less than a year). Consultants are considered experts in their white collar fields, providing specialized legal, engineering, technology, financial, and other professional services. Contractors, on the other hand, are highly skilled in the blue collar trades, providing specialized repair and maintenance services (e.g. electrical, plumbing, and heating/cooling system repairs) and bidding on public works projects (e.g. re-surfacing a road). Consultants and contractors are more expensive on an hourly basis than regular or contract employees; however, they are generally more cost effective than trying to perform the specialized work in-house. Contract Full-Time Equivalents (FTEs) CONTRACT City Manager Development Services Fire Information & Geographical Svcs Public Works Park & Recreation Youth & Family Services Total C-4 City of Mercer Island Budget

6 Full Time Equivalents (FTEs) and Contract FTEs Budget Summary Contract FTE Regular FTE City of Mercer Island Budget C-5

7 Total Resources For 2019 and 2020, the City s total budgeted resources amount to $71.7 million and $79.3 million respectively. These totals include the use of beginning fund balances to cover planned expenditures in (typically for capital projects and vehicle/equipment replacements). The remaining fund balances are not budgeted to be spent in but are reserved for various purposes (e.g., operating reserves, capital projects after 2020, and vehicle/equipment replacements after 2020). The City receives its revenues from a variety of sources, as noted in the table below and the graphs on the following page. Charges for Services, which account for 3 of total budgeted resources in , are the largest resource, with $24.7 million budgeted in 2019 and $25.6 million budgeted in They mostly consist of water, sewer, and storm water utility charges; recreation fees; and Thrift Shop sales. Property Tax, which accounts for 18% of total budgeted resources in , is the second largest resource, with $13.7 million budgeted in 2019 and $13.9 million budgeted in Collectively, Sales Tax, Business & Utility Taxes, and Real Estate Excise Tax account for 18% of total budgeted resources in , with $13.8 million budgeted in 2019 and $14.0 million budgeted in The chart below details resources for the period The graphs on the next page provide a percentage breakdown of total resources for 2019 and RESOURCES Budgeted Resources, All Funds Description Actual Forecast Budget Budget Use of Fund Balance $ 3,723,636 $ 12,197,080 $ 5,677,554 $ 2,370, % -58.2% Property Tax 13,055,294 13,408,196 13,680,769 13,846, % 1.2% Sales Tax 4,806,169 5,053,083 5,129,942 5,098, % -0.6% Business & Utility Taxes 5,259,430 5,268,456 4,832,990 4,899, % Real Estate Excise Tax 5,690,681 3,768,000 3,906,000 4,052, % 3.7% Shared Revenues 3,233,925 3,377,549 3,192,971 2,628, % -17.7% Utility Overhead 455, , , , % 2.8% Charge for Service 24,924,673 24,336,035 24,712,727 25,620, % 3.7% Licenses & Permits 4,422,287 3,638,482 3,879,447 3,870, % -0.2% District Court Fines 405, , , , % 0.0% Other Resources 3,914,213 3,864,825 2,881,624 14,296, % 396. Interest 383, , , , % -7.4% Interfund Transfers In 5,398,394 8,164,227 2,325,754 1,104, % -52.5% Total Budgeted Resources 75,674,394 84,588,786 71,736,243 79,264, % 10.5% Not Budgeted Percent Change Beginning Fund Balance 36,579,403 34,133,780 32,065,753 30,853, % TOTAL RESOURCES $ 112,253,797 $ 118,722,567 $ 103,801,996 $ 110,117, % 6. C-6 City of Mercer Island Budget

8 2019 Resources, All Funds Total: $71,736,243 Other Resources 4% District Court Fines Licenses & Permits 5% Interest Interfund Transfers In Use of Fund Balance 8% Property Tax 19% Charge for Service 34% Sales Tax 7% Utility Overhead Real Estate Excise Tax 5% Shared Revenues 5% Business & Utility Taxes 7% 2020 Resources, All Funds Total: $79,264,166 Other Resources 18% Interest Interfund Transfers In Use of Fund Balance Property Tax 18% District Court Fines Licenses & Permits 5% Sales Tax 6% Business & Utility Taxes 6% Charge for Service 32% Utility Overhead Real Estate Excise Tax 5% Shared Revenues City of Mercer Island Budget C-7

9 Total Expenditures For 2019 and 2020, the City s total budgeted expenditures amount to $70.6 million and $72.6 million respectively, which are accounted for in 22 different funds. Section E (Recap by Fund) provides summary level information on the revenues, expenditures, and fund balances for each fund. The General Fund is the City s largest fund, with $32.6 million budgeted in 2019 and $33.0 million budgeted in Most of the City s general government services, including police and fire protection, emergency medical response, street and park maintenance, recreation programs, land use planning, and community development, are accounted for in the General Fund. Taken together, the Water, Sewer, and Storm Water Funds, are the second largest group of funds, with $22.5 million budgeted in 2019 and $26.5 million budgeted in These funds account for all operating, maintenance, and capital costs related to water distribution, sewage treatment and disposal, and storm water management. Another way to look at the City budget is by expenditure category. The Budget is comprised of 14 separate categories, which are noted in the table below. The largest expenditure categories are Salaries & Wages and Benefits, which collectively comprise 45% of total budgeted expenditures in The graphs on the next page provide a percentage breakdown of all expenditures for 2019 and USES Budgeted Expenditures, All Funds Description Actual Forecast Budget Budget Salaries & Wages $ 20,355,847 $ 21,138,940 $ 21,742,419 $ 22,178, % 2.0% Benefits 7,684,213 8,184,918 8,207,838 8,468, % Supplies 1,458,222 1,470,515 1,477,289 1,487, % 0.7% Contractual Services 4,949,023 4,045,814 4,273,201 3,877, % -9. Communications 238, , , , % 0.4% Equipment Rental 1,984,261 2,005,183 2,236,492 2,262, % 1.2% Insurance 823, ,736 1,037,410 1,082, % 4. Utilities 1,003, ,644 1,076,871 1,116, % 3.7% Other Services & Charges 1,720,878 1,785,276 2,016,581 2,036, % 1.0% Intergovernmental 1,276,684 1,396,584 1,328,250 1,374, % 3.5% Water/Sewer Treatment 6,711,972 6,641,982 6,847,462 6,938, Capital 9,836,988 21,829,457 15,500,661 17,271, % 11.4% Bond Redemption 2,801,237 2,129,346 2,208,194 3,118, % 41.2% Interfund Transfers 5,077,727 8,265,978 2,325,754 1,104, % -52.5% Total Budgeted Expenditures 65,922,938 80,979,258 70,578,102 72,619, % 2.9% Not Budgeted Percent Change Ending Fund Balance 46,330,859 37,743,307 33,223,893 37,498, % 12.9% TOTAL USES $ 112,253,797 $ 118,722,567 $ 103,801,996 $ 110,117, % 6. C-8 City of Mercer Island Budget

10 2019 Expenditures, All Funds Total: $70,578,102 Capital 22% Bond Redemption Interfund Transfers Salaries & Wages 3 Water/Sewer Treatment 10% Intergovernmental 2% Other Services & Charges Utilities 2% Insurance Equipment Rental Communications 0% Supplies 2% Contractual Services 6% Benefits 12% 2020 Expenditures, All Funds Total: $72,619,087 Bond Redemption 4% Interfund Transfers Capital 24% Salaries & Wages 3 Water/Sewer Treatment 10% Intergovernmental 2% Benefits 12% Other Services & Charges Utilities 2% Insurance Equipment Rental Communications 0% Supplies 2% Contractual Services 5% City of Mercer Island Budget C-9

11 Fund Summary Total revenues and total expenditures by fund for the period are summarized in the tables below. Summary of Revenues by Fund for Fund No. Description Actual Forecast Budget Budget 001 General Fund $ 34,078,078 $ 33,057,995 $ 32,613,590 $ 32,964, Self Insurance Fund - 10,000 10,000 10, Youth Service Endowment Fund 2,860 3,500 3,500 3,500 Subtotal General Purpose Funds $ 34,080,939 $ 33,071,495 $ 32,627,090 $ 32,977, Street Fund $ 4,196,169 $ 6,406,276 $ 3,567,588 $ 3,235, Transportation Benefit District 374, , Criminal Justice Fund 1,100, Beautification Fund 1,151,675 2,510, Contingency Fund 1,510,455 1,530,942 1,356, , For the Arts Fund 35,435 79,251 19,000 17, Youth and Family Services Fund 2,715,433 2,974,623 2,916,274 2,962,835 Subtotal Special Revenue Funds $ 11,084,518 $ 13,933,795 $ 7,859,140 $ 6,535, Bond Redemptiion (Voted) $ - $ - $ - $ Bond Redemption (Non-Voted) 1,013, , , ,700 Subtotal Debt Service Funds $ 1,013,782 $ 847,159 $ 841,800 $ 839, Town Center Parking Facilities $ - $ 2,365,680 $ 139,930 $ Capital Improvement Fund 4,590,310 7,812,752 3,560,150 2,940, Technology and Equipment Fund 733, , , , Capital Reserve Fund Subtotal Capital Funds $ 5,324,184 $ 10,960,383 $ 4,510,080 $ 3,277, Water Fund $ 8,764,006 $ 7,904,292 $ 9,557,767 $ 15,663, Sewer Fund 9,341,022 10,179,939 10,310,350 13,741, Storm Water Fund 2,670,869 2,734,452 2,680,563 2,601,762 Subtotal Enterprise Funds $ 20,775,897 $ 20,818,683 $ 22,548,680 $ 32,006, Equipment Rental Fund $ 2,173,175 $ 3,583,446 $ 1,892,601 $ 2,020, Computer Equipment Fund 1,138,713 1,270,826 1,367,852 1,512,766 Subtotal Internal Service Funds $ 3,311,888 $ 4,854,272 $ 3,260,453 $ 3,533, Firemen's Pension Fund $ 83,187 $ 103,000 $ 89,000 $ 94,000 Subtotal Trust Funds $ 83,187 $ 103,000 $ 89,000 $ 94,000 TOTAL REVENUES $ 75,674,394 $ 84,588,786 $ 71,736,243 $ 79,264,166 C-10 City of Mercer Island Budget

12 Summary of Expenditures by Fund for Budget Summary Fund No. Description Actual Forecast Budget Budget 001 General Fund $ 32,463,667 $ 32,036,063 $ 32,564,082 $ 32,964, Self Insurance Fund - 10,000 10,000 10, Youth Service Endowment Fund 500 3,500 3,500 3,500 Subtotal General Purpose Funds $ 32,464,167 $ 32,049,563 $ 32,577,582 $ 32,977, Street Fund $ 2,785,090 $ 6,406,276 $ 3,567,588 $ 3,210, Transportation Benefit District 350, , Criminal Justice Fund 1,100, Beautification Fund 919,685 2,510, Contingency Fund 700,000-1,035, For the Arts Fund 7,162 79,251 15,000 15, Youth and Family Services Fund 2,651,439 2,974,623 2,916,274 2,935,145 Subtotal Special Revenue Funds $ 8,513,991 $ 12,402,853 $ 7,534,566 $ 6,160, Bond Redemption (Voted) $ - $ - $ - $ Bond Redemption (Non-Voted) 1,013, , , ,700 Subtotal Debt Service Funds $ 1,013,782 $ 847,159 $ 841,800 $ 839, Town Center Parking Facilities $ - $ 2,225,750 $ 139,930 $ Capital Improvement Fund 3,531,953 7,812,752 3,302,556 2,738, Technology and Equipment Fund 733, , , , Capital Reserve Fund Subtotal Capital Project Funds $ 4,265,827 $ 10,820,453 $ 4,252,486 $ 3,075, Water Fund $ 6,116,353 $ 7,861,407 $ 9,557,767 $ 11,797, Sewer Fund 8,857,450 10,179,939 10,310,350 12,081, Storm Water Fund 2,263,677 2,734,452 2,680,563 2,601,762 Subtotal Enterprise Funds $ 17,237,480 $ 20,775,797 $ 22,548,680 $ 26,481, Equipment Rental Fund $ 1,385,024 $ 2,877,239 $ 1,537,942 $ 1,649, Computer Equipment Fund 959,481 1,103,193 1,196,047 1,339,994 Subtotal Internal Service Funds $ 2,344,504 $ 3,980,432 $ 2,733,989 $ 2,989, Firemen's Pension Fund $ 83,187 $ 103,000 $ 89,000 $ 94,000 Subtotal Trust Funds $ 83,187 $ 103,000 $ 89,000 $ 94,000 TOTALS $ 65,922,938 $ 80,979,258 $ 70,578,102 $ 72,619,087 City of Mercer Island Budget C-11

13 Utility Rates The Water, Sewer, and Storm Water Funds are completely self-supporting utilities that are operated like a not-for-profit enterprise. They are primarily funded by customer charges, not taxes. The City purchases its water from the City of Seattle as do many of our neighboring communities. The Wastewater Treatment Division of King County provides treatment for all of the sewage in the King County area, including Mercer Island. The 2018 actual, and proposed bi-monthly utility charges for water, sewer, storm water, and Emergency Medical Services (EMS) are broken down in the table below (excluding utility taxes, which are a General Fund revenue source) for a typical single family residential customer. Utility Rate $ Change % Change Component Adopted Proposed Proposed Water $ $ $ $7.17 $ % 6.5% Sewer Maintenance (City) $84.71 $91.23 $98.26 $6.52 $ % 7.7% Sewer Treatment (King County) $88.44 $90.66 $90.66 $2.22 $ % 0.0% Storm Water $33.59 $34.66 $35.77 $1.07 $ % 3.2% EMS (estimate) $9.14 $9.29 $9.62 $0.15 $ % 3.5% Total $ $ $ $17.13 $ % City Debt The City has prudently issued a modest amount of debt over the years, maintaining a sizable debt capacity and consistently following a conservative fiscal management policy, which is reflected in the highest possible bond rating from Moody's: Aaa ( triple A ) rating on the City s unlimited tax general obligation (UTGO), or voted, bonds and limited tax general obligation (LTGO), or non-voted (i.e., Councilmanic), bonds. Only two other cities have a Aaa bond rating from Moody s: Seattle and Bellevue. A high bond rating enables a city to secure lower interest rates, thereby reducing debt service costs. The City can issue five types of debt which have legal limits set by the State. The five types of debt include: voted and non-voted general obligation bonds, revenue bonds, lease debt, and loans. For the purposes of the legal limit debt calculations, leases and loans are included with the non-voted general obligation debt limits. A schedule of all the City debt classified by type is included later in this section. Voted Debt Voted debt is approved by registered voters via a ballot measure and is supported by special (excess) property tax revenues. Voted debt has typically been used to fund large public buildings and to buy land or open space. The City currently has no voted debt outstanding. Non-Voted Debt Non-voted debt must be paid for out of the general revenues of the city. Non-voted debt includes not only bonds but also any loans and lease obligations of the City. The active issues are described below: 2004 MICEC Construction In 2004, the City issued $2.0 million in councilmanic bonds to partially pay for the construction of a new community center. The new center was completed in December To save on interest costs, this bond issue was refunded in The total principal owed on the refunded debt at the end of 2018 is $655,000. C-12 City of Mercer Island Budget

14 2009 LTGO South Mercer Playfields In 2009, the City issued $1.0 million in LTGO bonds to fund capital improvements at the South Mercer Playfields. To save on interest costs, this bond issue was refunded in The total principal outstanding on the refunded bonds at the end of 2018 is $330, LTGO Sewer Lake Line In 2009, the City issued $9,405,000 in LTGO bonds to fund a portion of the sewer lake line replacement project. To save on interest costs, this bond issue was refunded in Sewer utility rates are being used to repay the long-term debt. The total principal outstanding, for the refunded bonds at the end of 2018 is $5,825, LTGO First Hill Water Improvements In March 2011, LTGO bonds were issued to fund a portion of a water system improvements project in the First Hill neighborhood. Water utility rates are being used to repay the long-term debt. The original issue amount was $1,500,000, and the total principal outstanding at the end of 2018 is $1,025, Fire Apparatus Lease (Velocity Pumper) In 2012, the Mercer Island City Council authorized a contract with Pierce Manufacturing to purchase a Velocity Pumper Truck through a lease purchase financing agreement with Municipal Asset Management Inc. in the amount of $619,547. The total principal owed at the end of 2018 is $266, LTGO Fire Station Construction and Equipment In February 2013, the City issued $4.94 million in LTGO bonds to fund the replacement of Fire Station 92 and a Fire Rescue Truck. The debt service is being funded by a 9 year levy lid lift approved by Mercer Island voters on November 6, The total principal owed at the end of 2018 is $1,775, Fire Apparatus Lease (Mini Pumper) In 2015, the Mercer Island City Council authorized a contract with Pierce Manufacturing to purchase one Mini Pumper Fire Truck through a lease purchase financing agreement with Municipal Asset Management Inc. in the amount of $341,295. The total principal owed at the end of 2018 is $235, Fire Apparatus Lease (Enforcer Pumper) In 2018, the Mercer Island City Council authorized a contract with Pierce Manufacturing to purchase a Enforcer Pumper Truck through a lease purchase financing agreement with Municipal Asset Management Inc. in the amount of $732,778. The total principal owed at the end of 2018 is $732,778 Public Work Trust Fund Loans In addition to the above debt, the City has one long-term loan outstanding as of the end of 2017, with $3,624,815 in principal due. Public Works Trust Fund loans are low-interest loans ( interest) administered through the State of Washington Department of Community Development. In 1985, the legislature made provisions for this program using the Public Works Assistance Account, which is funded by the Motor Vehicle Excise Tax (MVET) collected by the state. To qualify, jurisdictions are required to do the following: 1. Impose the ¼ of one percent real estate excise tax; 2. Have developed a long-term plan for financing public works needs; 3. Be using all local revenue sources which are reasonably available for funding public works; and 4. Have an adopted comprehensive plan. City of Mercer Island Budget C-13

15 Schedule of Outstanding Debt City of Mercer Island Schedule of Long Term Debt Original Amount Outstanding Description Date Issued Amount 12/31/2018 Non-Voted Debt: 2011 LTGO First Hill Water Improve 03/23/11 1,500,000 1,025, Refunding (MICEC Bldg) 02/06/13 1,140, , LTGO Fire Construction & Equip 02/06/13 4,940,000 1,775, Refunding South Mercer Playfields 08/17/17 335, , Refunding Sewer Lake Line 08/17/17 5,870,000 5,825,000 Total Non-Voter Approved $13,785,000 $9,610,000 Voted Debt: Total Voter Approved $0 $0 Lease Obligations 2012 Fire Velocity Pumper 06/01/12 619, , Fire Mini Pumper 06/01/15 341, , Pierce Enforcer Pumper 04/01/18 732, ,778 Total Lease Obligations $1,693,620 $1,234,429 Total General Obligation Debt $15,478,620 $10,844,429 Public Works Trust Fund Loans Sewer Lake Line 01/31/05 6,650,000 3,222,058 Total Public Works Trust Fund $6,650,000 $3,222,058 Debt Capacity The debt capacity of the City is limited by law. Below is a chart showing the computation of the debt capacity as of December 31, Limited Tax Unlimited Tax General Purpose Debt 1 General Purpose Debt 1 Open Space and Parks Utility Purposes (1.5% of AV) (2.5% of AV) (2.5% of AV) (2.5% of AV) Legal Limit $199,495,411 $332,492,352 $332,492,352 $332,492,352 Add: Cash on hand for debt redemption 5,038 5, Less: Limited Tax Debt outstanding (9,610,000) (9,610,000) 0 0 Less: Unlimited Tax Debt outstanding Remaining Debt Capacity, Limited Tax $189,890,449 $321,652,961 Remaining Debt Capacity, Unlimited Taxes $332,492,352 $332,492,352 1 General Purpose debt may not exceed 2.5% of total assessed valuation, which equals $13,299,694,072 as of 1/1/18. Any non-voted debt reduces the margin available for voted general purpose debt. C-14 City of Mercer Island Budget