WEIGHING THE COSTS OF GOVERNMENT AGAINST THE BENEFITS

Presented by: Chip Corder, Finance DirectorPresented to: PSFOA

February 20, 2013

City of Mercer Island

Costs vs. Benefits of GovernmentBackground

There has been a lot of negative press over the past 4 years about: The cost of government employees, in

terms of salaries, benefits, and pensions.

CALPERS, State of WI, State of WA, and King Co.

Purpose of this presentation: To boil things down so a typical Mercer

Island resident can weigh the costs of government (as measured by the taxes paid to the City) against the benefits (i.e. services) received.

Costs vs. Benefits of GovernmentHere’s What You Need to Know

The key takeaway slide General Fund 101

Resources (2013 Budget) Expenditures (2013 Budget) Annual revenue growth requirement

MI vs. other Eastside cities Number of employees per 1,000 population General Fund expenditures per capita

Costs vs. Benefits of GovernmentHere’s What You Need to Know

Putting MI taxes in perspective (3 ways) 2013 property tax levy breakdown by

jurisdiction 2013 property tax levy rate comparison to

other King County cities 2013 total estimated tax burden on typical

MI household Benefits (or services) received Noteworthy results

Jun 2012 citizen survey 2011 MI Dashboard Report

The Key Takeaway SlideCity Taxes vs. Monthly Utility Bills

2013 Typical Monthly Bill Amount

Puget Sound Energy (electricity & gas) $200Verizon (cellular telephone) $180Comcast (cable TV, high speed internet & digital voice) $180City taxes (property, utility & sales) $144City utility charges (water, sewer, storm water & EMS) $128

$711K Mercer Island Home & Family of 4

City taxes fund the following: - 24/7 police, fire & emergency medical services - Street, median, sidewalk maintenance - Park, path, trail & public building maintenance - Recreation & YFS program support - Public meetings & records management - Land use planning

City utility rates fund the following: - Water storage, distribution & maintenance - Sewer collection, treatment & maintenance - Storm & surface water management - Utility infrastructure replacement - Staffing capacity (i.e. 4 firefighters) to respond to simultaneous EMS calls

General Fund 101Resources (2013 Budget)

Property Tax43%

Utility Tax17%

Sales Tax12%

State Shared Rev-

enues2%

Other Rev-

enues5%Court Fines2%

License &

Permit Fees8%Recreation Fees6%

EMS Rev-

enues5%

Beg Fund Bal & Interfund Xfrs1%

Taxes = 72% of Total Resources

General Fund 101Key Revenue Facts (2012 Budget)

City Property Tax

SalesTax

Utility Tax

Other Taxes

Total Taxes

Bothell 23.6% 28.7% 21.5% 2.2% 76.0%Mercer Island 43.9% 11.4% 15.6% 0.0% 70.9%

Bellevue 18.5% 21.7% 15.5% 14.7% 70.4%Issaquah 21.3% 25.0% 14.0% 8.3% 68.6%Redmond 21.0% 27.8% 16.9% 0.0% 65.7%Kirkland 18.5% 17.0% 17.4% 8.5% 61.4%

Note: Mercer Island is heavily dependent on property taxes, because it doesn’t have a large commercial sector like Bellevue, Redmond, Kirkland, Issaquah, and Bothell.

Taxes as a % of Total General Fund Resources

General Fund 101Expenditures (2013 Budget)

Salaries

53%

Benefits19%

Supplies3%

Con-tractual

Ser-vices6% Other

Ser-vices & Charge

s2%Equipment

Rental5%

In-suran

ce3%

In-ter-

gov'tl Pmts3%

Utilities2%

Inter-fund

Trans-fers3%

By CategoryPersonnel Costs = 72% of Total Expenditures

General Fund 101Expenditures (2013 Budget)

Public Safety (Po-lice,

Fire & Court

)49%

General Government19%

Parks & Recre-ation17%

Com-munity Devel-opment & Plan-

ning9%

Trans-porta-tion In-

frastruc-ture4%

Youth & Family

Services1%

By Program

General Fund 101Key Expenditure Facts

Personnel costs (especially healthcare benefits) grow faster than inflation

The private sector faces similar economic challenges; however, it can minimize or completely offset their impact by: Selling more “widgets” (e.g. Microsoft

and Amazon.com) Getting more clients (e.g. K&L Gates law

firm and CH2MHill engineering services firm)

General Fund 101Annual Revenue Growth Requirement

5.0% per year on average To keep pace with annual expenditure

growth and to maintain current service levels

Excluding the “Great Recession” If property tax growth is limited

to 1.0%/yr: Then, the balance must come from new

construction, sales tax, utility tax, and fees/charges

Reminder: Property tax = 43% of total General Fund resources

General Fund 101Annual Revenue Growth Requirement

CostAverage Annual Growth

% of Total

Budget

Weighted

AverageSalaries 5.3% 53% 2.81%Benefits 7.7% 18% 1.38%Other Costs 2.8% 29% 0.81%Total Costs 100% 5.00%Note: The average annual growth of salaries and benefits combined is almost 6.0%.

How it’s determined

General Fund 101Annual Revenue Growth Requirement

Connecting the dots: Personnel costs = 72% of budget Taxes = 72% of budget If personnel costs grow 6.0% per

year on average, then taxes need to grow 6.0% per year on average

MI vs. Other Eastside CitiesNumber of Employees (2012)

Full ServiceEastside City

# of Employees in 2012Per 1,000 Population Rank

Redmond 12.3 1Bellevue 10.1 2Bothell 8.7 3Issaquah1 8.2 4Mercer Island2 8.2 (7.3) 5 (6)Renton3 7.4 6Kirkland3 6.6 7

1 Issaquah doesn’t have a Fire Department. It contracts with Eastside Fire & Rescue for services.2 Mercer Island has a Youth & Family Services Department consisting of 18.7 FTE’s, which no other Eastside city has. Excluding YFS, Mercer Island’s # of FTE’s per 1,000 population is 7.3.3 Renton and Kirkland’s FTE ratios, which used to be higher than Mercer Island’s, reflect major annexations and employee layoffs during the Great Recession.

MI vs. Other Eastside CitiesGeneral Fund Expenditures (2011)

Full ServiceEastside City

General Fund Expenditures1

2011 Actual Per

Capita2Rank

Redmond $1,525 1Bellevue $1,290 2Bothell $1,082 3Issaquah $1,058 4Kirkland $1,041 5Renton $1,028 6Mercer Island $965 71 Includes interfund operating transfers out to other funds.

2 Audited financial statements for 2012 won’t be available until the end of 2013.

Putting MI Taxes in Perspective3 Ways

2013 property tax levy breakdown by jurisdiction ($711K median AV home)

2013 property tax levy rate comparison to other King County cities (>20K population)

2013 total estimated tax burden on typical MI household ($711K home & family of 4) Property, utility, sales, and King Co.

EMS taxes Comparison to PSE, Verizon, Comcast,

and City utility bills

2013 Property Tax LevyTypical MI Home ($711K)

Jurisdiction2013 Levy Rate Per $1,000 AV

2013 Levy

Amount% of Total

MI School District $2.66197 $1,893 28.2%State School Fund $2.56720 $1,825 27.2%King County $1.54051 $1,095 16.3%City of MI $1.43513 $1,020 15.2%Library $0.56743 $403 6.0%EMS $0.30000 $213 3.2%Port of Seattle $0.23324 $166 2.5%Flood Zone $0.13210 $94 1.4%Ferry District $0.00378 $3 0.0%Total $9.44136 $6,713 100.0%

2013 Property Tax LevyAverage MI Home ($711K)

Noteworthy facts: Islanders pay 55% to schools (MISD &

State School Fund) Islanders pay more to MISD than the

City $1,893 to MISD vs. $1,020 to COMI

Islanders pay more to King County than the City $1,095 to KC vs. $1,020 to COMI

1% increase = $10.20 per year on $711K home

2013 Property Tax Levy RateComparison to Other KC Cities

King County Cities(>20K

population)

2013 Levy Rate (City

Portion Only)

Bellevue $1.17538Federal Way $1.42234Mercer Island $1.43513Issaquah $1.48257Maple Valley $1.54845Burien $1.60000Des Moines $1.60000Kenmore $1.64499Bothell $1.66697

King County Cities(>20K

population)

2013 Levy Rate (City

Portion Only)

Kent $1.69428Redmond $1.72758Shoreline $1.85330Kirkland $1.86807Auburn $2.10000Sammamish $2.59084Renton $3.10000SeaTac $3.10000Seattle $3.28556

2013 Total Estimated Tax Burden$711K MI Home & Family of 4

Taxes Paid to City of Mercer Island Amount

Property tax (based on 2013 median AV of $711K) $1,020Utility tax (electricity, gas, phone, garbage, cable, water, sewer & storm water) 466

Sales tax (excludes construction) 209King County EMS levy (based on amount remitted to City only) 37

Total estimated taxes paid to City in 2013 $1,732Total estimated taxes paid to City per month in 2013 $144

Total estimated taxes paid to City per day in 2013 $4.75

2013 Total Estimated Tax Burden$711K MI Home & Family of 4

2013 Calculation Amount

Property tax ($711K median AV/$1K x $1.43513 levy rate) $1,020Electric & gas utility tax (PSE: $200/mo x 12 mo x 6%) 144Telephone utility tax (Qwest: $45/mo x 12 mo x 6%) 32Cellular telephone utility tax (Verizon: $180/mo x 12 mo x 6%) 130

Garbage utility tax (Republic: $24/mo x 12 mo x 7%) 20Cable TV utility tax (Comcast: $97/mo x 12 mo x 7%) 81Water, sewer & storm water utility tax (City: $124/mo x 12 mo x 3.9%) 58

Sales tax ($3,353,000 including CJ sales tax x 61.5% non-construction sales x 90% MI resident sales / 8,862 equivalent dwelling units)

209

KC EMS levy (convert $418,019 into levy rate x $711K median AV/$1K) 37

Total taxes paid to City in 2013 $1,732

2013 Total Estimated Tax BurdenComparison to Monthly Utility Bills

2013 Typical Monthly Bill Amount

Puget Sound Energy (electricity & gas)* $200Verizon (cellular telephone)* $180Comcast (cable TV, high speed internet & digital voice)* $180

City taxes (property, utility & sales taxes) $144City utility charges (water, sewer, storm water & EMS)* $128* Excludes state and local taxes and cable franchise fees.

$711K Mercer Island Home & Family of 4

Benefits (or Services) ReceivedRelative to Taxes Paid to City

24/7 police, fire suppression & emergency medical aid services

Street, roadside, median, sidewalk & path maintenance

Park, ballfield & trail maintenance

Benefits (or Services) ReceivedRelative to Taxes Paid to City

Public building maintenance City Hall, Maintenance Building,

Community & Event Center, Luther Burbank Administration Building, and 2 Fire Stations

Recreation & YFS program support

Public meetings & records management

Land use planning

Noteworthy ResultsHow is the City Doing?

Jun 2012 citizen survey 2011 MI Dashboard Report

Jun 2012 Citizen SurveyRight Direction vs. Wrong Track

Do you feel things on Mercer Island are generally going in the right direction, or do you feel things have gotten pretty seriously off on the wrong track?

2008 2010 2012

65%70% 71%

19% 15% 15%16% 15% 14%

Right Direction Don't Know Wrong Track

Jun 2012 Citizen SurveyCity Service Ratings

Using a scale of excellent, good, only fair, or poor, please rate the job the City of Mercer Island is doing:

Maintaining parks, trails, and open space

Providing amenities at parks

Preventing crime and protecting the community

Providing recreation programs for youth, adults & seniors

Ensuring prompt fire & EMS response times

Protecting environment & water quality on/around MI

Operating MI Community & Events Center

Maintaining streets

Maintaining sidewalks & pedestrian/bike paths

Promoting traffic safety

Preparing for a natural disaster

86%85%82%81%80%

75%74%

67%64%

56%51%

3%5%

4%9%15%

11%14%

1%3%

4%25%

11%10%

14%10%

4%14%11%

32%33%

40%24%

+75%+75%+68%+71%+76%+61%+63%+35%+31%+16%+27%

Positive Don't Know Negative Net Pos

Jun 2012 Citizen Survey“Goldilocks” Measure of City Services

In terms of services provided by the City of Mercer Island, do you think that overall the city provides too many services, too few services, or about the right amount of services?

Too Many About Right Too Few Don't Know

10%

80%

3%7%

2011 MI Dashboard ReportNoteworthy Results Funded by Taxes

Dashboard Indicator

Rating Note

Personal security

Very good

Jun 2012 survey: Residents who feel “very safe” or “completely safe” walking alone:• In their neighborhood (85%)• In the Town Center (82%)

Crime prevention effectiveness

Very good

2nd lowest crime rate among 6 Eastside cities in 2011 (Sammamish has lowest rate)

Traffic safety effectiveness

Very good

2nd lowest traffic accident rate among 6 Eastside cities in 2011; excluding I-90 accidents, MI is very close to No.1 Sammamish

Fire suppression effectiveness

Very good

2nd lowest fire $ loss per 1,000 population among 6 Eastside cities/districts in 2011

EMS effectiveness

Very good

2011 cardiac arrest survival rate:• MI (50%) vs. King Co. average

(50%), which is highest county in U.S.

2011 MI Dashboard ReportNoteworthy Results Funded by Taxes

Dashboard Indicator

Rating Note

Community issues

Good Jun 2012 survey: Most important problem facing Mercer Island is:• Education, school funding (29%)• Traffic, transportation, parking

(14%)• Nothing (11%)• Road conditions, infrastructure

(8%)• Overcrowding, overdevelopment

(5%)Creditworthiness

Very good

LTGO (non-voted) bond rating: Aa1• Highest Moody’s rating in state

along with Seattle, Bellevue, and Redmond

UTGO (voted) bond rating: Aa1• 2nd highest Moody’s rating in state;

only Seattle and Bellevue have higher ratings

Financial management

Very good

“Clean” audit opinion received annually for past 17 years; “perfect” audit in 2011

2011 MI Dashboard ReportNoteworthy Results Funded by Taxes

Dashboard Indicator

Rating Note

Street pavement condition

Very good

2011 engineer’s assessment of City streets that are in “good” or “excellent” condition:• Arterial streets (71%)• Residential streets (83%)

Park amenities Very good

Jun 2012 survey: 85% are “satisfied” or “very satisfied” with available amenities at City’s parks

Informed citizenry

Good Jun 2012 survey: 83% are “satisfied” or “very satisfied” with City’s public communication efforts

To quote a pig celebrity:“That’s all folks”