Clyde Hill News: Residents, the deficit, and the city’s budget priorities
Also: Light rail stations open on the Eastside
Clyde Hill’s budget process will start in May when the council is expected to “adopt Budget Priorities for the 2025 Budget Cycle.” (link).
This week’s newsletter looks at the budget deficit problem structurally. Every budget planning cycle has challenges and opportunities. How might realistic budget priorities help the city’s financial sustainability plan, and how can feedback from residents help?
More on this topic below, but first: after years in the making, Sound Transit celebrated the opening of eight new Eastside light rail stations this weekend. Clyde Hill is now more connected! More details are available here: https://www.soundtransit.org/discover2line.
Disclaimer: while I am a councilmember on the Clyde Hill City Council, I write this newsletter in my capacity as an individual resident. Any opinions expressed are my own and not necessarily the position of the city. City information and references here are from public sources. I welcome email responses — and if the topic is about city business I will respond from my city email account.
Budget and priorities: the short version
Looking at the big picture here:
The city’s financial projections show an increasing gap between what the city spends and what it takes in (unless something changes).
The city’s current approach results in a focus on increasing taxes and fees rather than finding optimizations.
Discussing the budget through the lens of realistic priorities is a practical way to find healthy trade-offs and solutions, especially when money and people are scarce.
If you’re pressed for time, you can stop reading here. The rest of this newsletter provides more detail and context.
My hope (as a resident) is that you’ll think about what the city’s priorities should be and how willing you are to pay more in property taxes to Clyde Hill. Maybe even talk with a neighbor or friend — and then reach out to city council members (link) or the mayor (mayor@clydehill.org) with your thoughts.
As a starting point for a conversation about budget priorities below, I pick one of many possible budget prioritization schemes to explore how it can help with trade-offs. It’s written in terms of benefits and value to residents, not in terms of the city’s financial accounting infrastructure, because residents are supplying the funds and the government is accountable to residents.
Note that, as usual, all of the information and material here is publicly available. I use links liberally to document sources. Now, onto the detail and context.
The city’s financial projections show an increasing gap between what the city spends and what it takes in (unless something changes).
People costs (salaries and benefits) represent ~60% of the city’s operational expenditure (link). Those costs rise with cost of living adjustments, increasing faster than the revenue sources available to Clyde Hill. This is a structural budget problem that is not unique to Clyde Hill.
The following deficit projection appears in the very last line of the 2024 City Budget Book’s section on “Long Term Financial Projections” (link):
“Balancing our budget using reserves and one-time money is ultimately unsustainable,” according to the 2024 Budget Message. (link)
For each of the last four years, Clyde Hill’s operating (“General Fund”) spend exceeded its revenues:
2023: $5.26m v $5.20m (link)
2022: $4.72m v $4.63m (link)
2021: $4.33m v $4.23m (link)
2020: $4.13m v $4.10m (link)
The city’s budget deficit streak is expected to continue in 2024, with a planned operating spend of $5.93m against revenues of $5.56m (link).
As residents have become aware of these deficits, they have expressed concern.1
The city’s current approach results in a focus on increasing taxes and fees rather than finding optimizations.
In a public meeting last year, the city’s previous mayor called a property tax hike the city’s “easiest option” (link). During public budget discussions, city staffers last year asserted that “the City has little discretion to reduce general fund costs” (link, slide 14).
According to the city’s 2024 Budget Message,
The best way for Clyde Hill to ensure financial sustainability into the future without compromising essential services is to secure additional revenue, either by identifying new sources or further raising existing taxes and fees. (link)
Note that in the 2024 Budget Message’s 102 pages (in PDF format), there is no discussion of which services are essential. It’s not clear which services and service levels should be re-evaluated with cost-effectiveness or cost-savings in mind.
More broadly, the public record of budget discussions in Clyde Hill over the last few years has very little about relative prioritization of city services and service levels.
Here’s why
According to the city’s Budget Book, the current “philosophy” or approach to the budget is to “maintain current service levels and hold the line on costs when possible.” In today’s environment, that creates challenges.
One challenge is that people (city staff and contractors) deliver most city services. People costs are a factor and there aren’t really “economies of scale” that many of us are used to.
The costs of people go up, a lot, every year. That’s the structural cost issue described in the previous section. For example, residents can expect that the new labor contract with the union representing police officers will increase the city’s costs, and that many factors will drive up the cost to the city to provide public defenders to people accused of crimes. Asserting that the city will “hold the line on costs when possible” sounds great, but what can residents expect when the costs are not under the city’s control?
Another challenge is that this approach lumps together the many city services offered across different levels of importance, value, impact, and cost. The next paragraph in the Budget Book is true but not useful:
Yes, these are categories, and while the costs can be viewed this way, it’s not clear how having the cost of the public defender and the cost of janitorial supplies in the same category helps the city determine the right levels of spending for the impact and value involved.
An alternative approach might help identify if the way in which different services are being delivered is optimal. For example, is there work being done by a contractor that the city is better off having a salaried employee do? Is there work being done by a salaried employee that the city is better off having a contractor do?
Approaching the budget as “maintain current service levels and hold the line on costs when possible” makes adjustments drastic and scary. Remarks like
“Without cutting staff or finding a new Fire service provider, the City has little discretion to reduce general fund costs.” (link, slide 14)
are a consequence of this approach. It’s hard to see any option other than increasing revenue (by raising taxes and fees).
Discussing the budget through the lens of realistic priorities is a practical way to find healthy trade-offs and solutions, especially when money and people are scarce.
There’s a different approach.
Earlier this month, Mayor Friedman presented a “Financial Sustainability Plan” (link). The city council adopted it by a 5-0 vote.
The plan’s principles include considering which city services are “of the highest value to Clyde Hill residents” as well as the importance of prioritization. To date, residents have not seen a budget review that assesses the costs of different city services and service levels in terms of their “value to Clyde Hill residents.”
Here’s why that’s important. Residents have demonstrated that they are willing to spend on services important to them. For example, residents have contributed money directly to help police purchase equipment not covered by their budget (link, link). Residents already pay for permit applications, or their appeals in front of the hearing examiner.
Unrealistic priorities
The 2024 Budget Message identifies three priorities:
Maintain or increase levels of service
Prioritize public safety
Improve long-term financial sustainability (link)
Theoretically, it’s possible to get more (“increase levels of service”) while spending less (“improving long-term financial sustainability”), at least as a consumer. To use a local, personal example: I buy some things at Costco rather than Nordstrom or Pasta & Co. Not everything — but many things, reflecting my priorities and budget.
It’s much harder for a government entity for sure.
The priorities in the Budget Message don’t seem to provide helpful guidance around which services and service levels have relatively higher or lower priority, and which should be reconsidered with cost-effectiveness or cost-savings in mind.
Right now, it’s not clear what options (outside increasing taxes and fees) the administration remains open to. I respect how hard this problem is.
Last year’s Budget Advisory Committee meeting in July (link) explored many options that were suggested by residents and staff. Many of them turned out to be non-options: reducing the number of police officers, or renegotiating the agreement with Bellevue Fire/EMS (“There is not a benefit to renegotiating with Bellevue Fire. Additional legal fees would offset any possible benefits,” according to staff).
In hindsight, the larger goal of the 2024 Budget process “to deliver a balanced budget to Clyde Hill residents that maintains or strategically enhances the current quality and level of service for essential functions” (link) seems unrealistic given the revenue sources available to the city and the costs it faces.
One possible prioritization scheme
Here is just one of many possible ways to articulate budget priorities:
Public safety (e.g. Police, Fire/Emergency Medical Services, roadways and drainage).
Land use code and enforcement (e.g. permitting, view and sunlight enforcement, link).
Everything else administrative (resident communication, finance, legal, events that develop community) to support those goals as well as compliance with mandates and long-term financial sustainability.
Again, the intent is to provide something specific (rather than theoretical) as a starting point to build from.
The priorities are written in terms of benefits, value, and outcomes to residents (not in terms of the city’s financial accounting infrastructure or organizational structure) to make discussions about trade-offs and adjusting service levels easier.
When the discussion is about which requirements and priorities a budget can and can’t deliver, the focus shifts to expected outcomes instead of effort (and categories like “People, Fire/EMS, Everything else”).
Right now, it’s hard for one side to see how to get more done without more resources and it’s hard for the other side to believe that higher taxes will solve anything.
When the focus shifts to outcomes, conversations about trade-offs between budget areas get easier. The conversation about whether the budget needs to increase gets easier too.
Resident feedback helps
As a resident, how do you think about the city’s priorities?
Thank you for reading! Please forward and share with your friends and neighbors, and if you are not already getting this newsletter, subscribing is both easy and free.
Dean Hachamovitch
One question I’ve heard several times: why hasn’t community engagement had an impact here, despite so much effort on the part of the city and residents, particularly over the last four years?
Briefly: most of the time and energy of residents who volunteer to participate on the city’s annual “Budget Advisory Committee” is spent listening to explanations of the complexity and details of the budget, like the city’s different funds, and the restrictions on different revenue sources (link).
The process is helpful in informing residents. Unfortunately, given the time constraints at the meetings, the time available for resident feedback has often been limited. This is a challenge. I’m curious if people have suggestions about how to do this better.