2020/12/16 Council Agenda Packet

Findings: City's Financial Sustainability and Recent Efforts Each and every year, the City must take steps to close the gap between General Government revenues and expenditures. While it may be possible to forestall some major cuts in the next year or two through sale of public assets (generating one-time revenue), at this point there is no pain free way out of the General Government deficit. As things now stand, actions that City leaders have not wished to pursue in the past --because they are politically unpopular or have significant impact on quality of life --arguably characterize most of the options remaining on the table. • Does the City of Everett have a structural funding gap between General Government expenditures and revenues? Our answer to this question is quite simply, yes. This conclusion is amply supported by the data presented above. Revenues supporting General Government programs continue to grow more slowly than General Government revenues, and the size of the gap is increasing. The two single largest factors here are the 1-747 cap on property tax collections and the rate of growth in labor costs. It is important to understand that Everett is not unique in facing this situation Most, if not all, cities and other local governments face a similar challenge. Like Everett, most cities and other municipalities in the state (counties, school districts, fire districts, etc.) depend on property taxes for a significant portion of their revenues. Most local governments also have highly unionized workforce and are subject to the same state laws and limitations as Everett faces. The problem is more intractable in Everett because of our relatively modest household income and slower rate of growth in jobs and population. • How does the Committee define fiscal sustainability? In our view, there are three major parameters to fiscal sustainability. At the most basic level, it means the ability to balance the City's budget while sustaining maintenance and operations levels. By this definition, the City has not been fiscally sustainable for years. For us, fiscal sustainability further means having the capacity to weather some moderate level of revenue loss or unanticipated expense year to year by spending down existing reserves, rather than implementing staffing and program cuts. Again, the City does not meet this test of fiscal sustainability, and has not for some time. A third, arguably more subjective way of looking at fiscal sustainability is to combine the above concepts with the goal that the City's adopted budget be able to support programs, services and infrastructure that together make the City an attractive place to live, work and play. While different Committee members would define this condition in different ways, our consensus is that Everett is not currently meeting this definition of fiscal sustainability. • Is it important to be fiscally sustainable? Why? The Committee believes it is very important for Everett to be fiscally sustainable. City government programs, services and infrastructure to a large extent define the quality of life for citizens and 11