‘It’s Quite a Crisis’ – The City of Normandy Park is Rapidly Going Broke
Normandy Park, one of King County’s smallest suburban cities, is rapidly going broke.
City Manager Doug Schulze terms the city’s looming financial crisis “a structural problem.”
This, he said, is “directly related to the fact that as a mostly residential community, we don’t bring in the amount of money needed to support the core services that we deliver.”
Looking for solutions, some city council members are now casting a covetous eye on Burien’s Manhattan neighborhood.
If Normandy Park could annex this area – with its commercial strip along the east side of 1st Ave. S. – the city would gain badly needed revenue from business and sales taxes.
“It’s a tricky proposal,” Mayor Clarke Brandt told The Normandy Park Blog this week, allowing that it’s questionable whether the proposal will “reach the table.”
While this is “very preliminary,” Brandt said Normandy Park separated the Manhattan area “when we annexed the west side … it’s ripe for discussion.”
He described the Manhattan area as “kind of an orphan” for Burien. “Burien’s efforts will be on Town Center and annexation” of North Highline….
“I would welcome it. The tax revenues generated would be enough to allow us to hire a new police officer,” he said.
For Normandy Park to do this, however, Burien would first have to de-annex the Manhattan area within its city limits – and Burien is unlikely to cede this tax-producing commercial strip.
But desperate times call for desperate measures, and Normandy Park is approaching the brink.
Spending Reserves, Seeking Solutions
The situation “is not dire yet,” Brandt said, “but it will become dire if we don’t make changes. We have resources. In fact we’ve been spending our resources for years.”
These “resources,” said Schulze, are the city’s dwindling reserves – which will be exhausted in an estimated three years if new revenue sources aren’t found, or additional spending cuts are made.
Additional possibilities from a list of more than 20 options the Normandy Park City Council is studying include:
- Asking local voters to approve a property tax levy lid lift.
- Establishing a Transportation Benefit District with a $20 per vehicle license tab fee.
- Imposing new local taxes including a business and occupation tax and a 6 percent utility tax on storm water fees.
- Completing redevelopment of the Manhattan Village area.
- Withdrawing from King County Fire District 2 (Burien/Normandy Park Fire Department) and contracting for firefighting services to free local property tax revenue.
- Withdrawing from the King County Library District, also to free local property tax revenue.
- Sharing a public works director 80/20 with SeaTac.
- Contracting with the City of Des Moines for animal control and code enforcement services.
“If we want to get back to where we were before the downturn in 2008, we need $1.2 million [in new revenue] to get up to the moderate level of service we had in 2008,” Brandt said.
Property Tax Levy Lid Lift
A property tax levy lid lift would generate $300,000,” he noted. “I’m confident the voters of the City of Normandy Park will go for it when they find out where we are….
“In public safety, we’re already two police officers short. We just can’t keep on operating short and shorter.”
The city council can impose a Transportation Benefit District vehicle tab fee of no more than $20 without voter approval.
And a business and occupation tax may be an attractive option for generating limited additional revenue since, Schulze noted, Normandy Park is the only city in South King County without it.
Despite its obvious benefits, advancing the Manhattan Village project presents a Catch-22, however, since the city is currently without a public works/community development director.
Another priority vacancy is a Public Works Department maintenance worker.
Remaining priorities for increasing staff “depending on the economy and city projects” are an entry level planner, a receptionist/clerk who can support the Finance Department, and an assistant police chief.
This according to the minutes of a special April 24 council study session to review the city’s financial situation and consider possible solutions, which also indicate a council goal “to maintain a comfortable staffing level” of 30 full-time equivalent city employees.
“Quite a Crisis”
“It’s quite a crisis,” agreed Normandy Park City Councilwoman Marion Yoshino. “I don’t think that people are quite aware of it.
“Two years ago we laid off our Parks and Recreation director and our Community Development director. Then we had one person in charge of public works and community development and part parks and rec, and we had to lay him off as of January.
“We also lost our city hall receptionist as of eight months ago,” Yoshino continued. “And we might have to lay off our only planner as of next Jan. 1. We’re down to less than nothing. It’s really bad.”
While contracting for police services with the King County Sheriff’s Office, as do Burien and SeaTac, she said “we get a lot of good, real quality police attention for what we pay” for the city’s own department.
“We spend about $90,000 per officer,” which Yoshino said is about half per officer compared to what contract cities pay the sheriff’s office.
Normandy Park is the smallest Highline-area city with a 2010 population of 6,335 occupying just 2.5 square miles of land. Primarily a residential community, the city is considered somewhat upscale with a per capita income that ranks 26th in the state.
Since 1999, however, local governments have seen declining tax revenues – and residential communities with small commercial districts have been hit especially hard.
Financial Needs Analysis
“The City of Normandy Park has experienced consistent and severe financial declines during the past 10 years,” notes a Financial Needs Analysis prepared for the April 24 meeting.
“Specifically, lost revenues due to voter-approved initiatives and declining revenues associated with the Great Recession have had significant adverse impacts on the City budget. Since 2009, the City has been forced to reduce spending through a variety of methods, including layoffs, spending cuts, and unfilled staff positions.
“In addition,” this analysis continues, “City reserves have been spent down to the minimum necessary. In 2012, additional cuts of $300,000 to $400,000 were required to avoid reducing reserve funds to a dangerous level.”
In the absence of new revenue, perhaps coupled with still more spending cuts, Normandy Park’s general fund would begin to run year-end deficit balances by 2015, according to the city’s six-year forecast.
State law prohibits cities from ending the year with a financial deficit.
Long-term “sustainability options” for Normandy Park’s economy, Schulze said, include “filling up Towne Center” and completing redevelopment of the Manhattan Village subarea.
Manhattan Village is “under developed, but there are ‘opportunity sites’ there that with the right incentives and redevelopment plan in place we could see some new business come in,” including commercial buildings and multi-use buildings with ground-floor retail and multi-family housing units above.
The city could encourage higher densities there that, in turn, would generate higher rents,” he added.
Schulze noted that developer Tom O’Keefe, who acquired Normandy Park Towne Center in early 2011, “is offering great incentives for new tenants,” but this is progressing slowly in the slow economic recovery.
Reduced City Revenues
Everyone interviewed agrees that Normandy Park’s financial difficulties began in 1999 when voters statewide approved Initiative 495, which limited vehicle tab fees for the Motor Vehicle Excise Tax to $30 a year.
That, said Schulze, essentially eliminated the state sales tax equalization fund that distributed revenue to cities with a limited sales tax base.
Next came I-747, also approved by voters statewide, which limits annual property tax increases by local governments and special purpose districts, such as school and fire districts, to 1 percent or the rate of inflation – whichever is less.
“Until then,” he added, “we had the authority to levy a 3 percent property tax increase annually. Normandy Park could provide services with a little sales tax base.
“But the loss of both” – sales tax equalization revenue and annual 3 percent property tax increases – “is costing us $1.5 million a year.”
Then came the recession in 2008, which not only reduced already limited local sales tax receipts but also brought down property values in this predominantly residential community.
“There’s no question we need to do as much as we can immediately,” Schulze said. “The council hasn’t decided what to do yet. It will require some out-of-the-box thinking, some radical ideas.”
“We’ve got a lot on our plate right now,” Brandt concluded.