2020/12/16 Council Agenda Packet

taxes, utility taxes, and license fees, and implementing fees for commercial fire inspections and police false alarms. As of late November 2020, it appears that the budget variance from 2020 is going to be relatively large due to under -expenditures by the City this year, as well as slightly better revenues than initially projected. As a result, the City may be able to close much —but not all --of the projected 2022 General Government deficit with the 2020 budget variance, should the City so choose. This would also provide the City valuable time to implement strategies to avoid deeper service cuts in 2023 and beyond. As noted above, although the budget variance has been a major help in balancing the budget in the past decade, it is volatile, and is unlikely to generate nearly the savings needed to cover projected deficits after 2022. In terms of other savings, labor cost reductions have been secured through attrition, layoffs, furloughs, and revisions to salary and benefit costs. Over the past two years, 73.5 General Government positions were eliminated or reallocated to functions outside General Government operations. In 2020, 58 positions were temporarily furloughed in response to the pandemic. The City is in the process of negotiating increased healthcare premium sharing with employees, and has also introduced a high deductible healthcare plan this year designed to lower the City's premium costs by incentivizing a more consumer -based approach to the use of healthcare. The City has also opened its own healthcare clinic and introduced a new telemedicine option to provide care at a lower cost. On the other end of the spectrum, the City still provides healthcare coverage to all employee family members at a significantly reduced cost which continues to have adverse impacts to the budget. The City has deferred costs of facilities maintenance for many years in order to help balance the General Government budget. A study recently completed for the City recommends it set aside approximately $5.7 million per year to fund facility needs identified as critical deficiencies. In contrast, the City was able to set aside only $2.2 million for these purposes in 2020. Any homeowner knows that at some point, deferring maintenance leads to bigger and more expensive problems, we seem to be approaching that point with City buildings. The two largest General Government operations are the police and fire departments. Together, spending on these departments comprises about 45% of General Fund spending in the proposed 2021 budget. Interestingly, City Finance Department analysis shows that the per capita expenditure on police and fire services, adjusted for inflation, is essentially the same today as it was a decade ago.4 This has been accomplished through a variety of cuts over time, primarily to maintenance and operations and administration: front line staffing levels have not been reduced. While most of the cuts and efficiencies the City has implemented in the last ten years have not been experienced by residents and businesses as direct service cuts, the ability to insulate the public from cuts has ended. In mid-2020, as the impact of COVID-19 on city revenues (and operations) became clear, the City closed the City pool and Senior Center; eliminated all recreation programs and public events; curtailed library hours and services; eliminated the sidewalk program; and reduced staffing across most departments. 4 This calculation excludes the cost of funding LEOFF 1 for former police and fire employees. 9