2020/02/26 Council Agenda Packet

Financial Analysis Results Summary The following discussion represents summary information regarding options for changing the City's service or funding models. Please see the Detail section of this report for additional information regarding each of the options provided. Library Merger with Sno-Isle Regional Library System Merging with Sno-Isle would require simple majority voter approval. Impact on Everett's Maximum Regular Levy Rate—If Everett were to merge with Sno-Isle, its maximum levy rate would initially increase from $3.60 to $3.825 before being reduced by the amount of Sno-Isle's levy rate. If Sno-Isle was at its maximum levy rate, the City's maximum regular levy rate would be $3.325. Sno-Isle 2020 Estimate Levy Rate -Sno-Isle's estimated 2020 levy rate is$0.44. If the City merged with Sno- Isle, due to the size of the City's assessed value,the amount of property tax that would be generated by Sno- Isle would exceed the Library's 2020 budget by nearly$2.7 million. Conceivably,this could allow Sno-Isle to increase library services and undertake capital repairs and renovations in Everett. However,there would be no mandate to spend Everett tax dollars locally, so Everett property tax could be absorbed in the system and spent regionally. Regular Levy Concessions-Another consideration is whether the City would need to make any concessions in its regular property tax levy in order to achieve voter approval. If the City were to make no concessions on its regular levy, adding Sno-Isle's$0.44 to Everett's tax role would cost the owner of a median value home an additional $171 per year, based on Everett's 2020 assessed value. If the City were to reduce its levy rate by Sno-Isle's full$0.44 levy rate, it would increase the General Government deficit by just under$2.7 million. In order to break even financially, the City would only be able to reduce its levy rate by$0.31, and there would be no immediate deficit reduction resulting from the transition. The difference in levy rates of$0.13 ($0.44- $0.31) would be absorbed by Everett's taxpayers. Under the breakeven option,the median value homeowner would see an increase in cost of approximately$51 per year, instead of$171 per year as noted above. Banked Capacity-Any reduction in the City's regular levy would create banked capacity that could be recaptured over time by increasing the regular levy by more than 1%through the annual Property Tax Ordinance process. Indirect Cost Reduction— Indirect costs are associated with services provided by Facilities, Finance, HR, IT, and Legal. With the exception of Facilities, eliminating responsibility for the Library from support departments would not reduce the workload sufficiently to consider a reduction in staffing. It would, however, reduce the demand for Facilities' custodial/caretaker services by approximately three FTEs,which could result in approximately$240,000 in annual savings for the General Government. Recommendation -Because there is little or no potential for near-term improvement in City finances, pursuing a merger with Sno-Isle is not recommended. NNE LI Alternative Service Delivery/Funding Models 2 I P a g e