2020/12/16 Council Agenda Packet

determine whether the City will be an attractive location for existing and new businesses to operate. The City's role is to facilitate the planning, services and infrastructure that will ensure this. We have a long way to go before Everett is a vibrant regional center. Progress towards that will take time. How the City responds to the current financial crisis will determine the pace of that progress. If Everett can become a very attractive place for new businesses to locate, for all types of residential development, with retail and other services that makes us a destination for visitors —this in turn will generate more robust revenues for the General Government. in the immediate future, however, the General Government situation is critical: will the City's actions in the next two years involve dramatic service level cuts, or can we buy time to implement the larger options that can right the ship? This is the challenge before City leaders. • Is the City fiscally sustainable? By any manner in which the Committee defines this term, the answer is a resounding "no." The City has for at least a decade now sought to balance its General Government budget through what some have called "death by a thousand cuts.' COVID has amplified this, leading to many programmatic reductions and outright closures of programs and facilities. Even before the news that Boeing will be closing the local 787 assembly line, there was no cushion in the City's finances. The structural gap between revenues and costs is real, and worsening. The current General Government budget forecast for 2022-2027 indicates that the City will need to close increasingly larger gaps. As discussed above, City General Government revenues are projected to grow at 2% per year over the next six years, while growth in the cost of current General Government programs is projected to grow at an annual average of 4.5% per year.' By no stretch of the imagination is this sustainable. To put the current situation in somewhat daunting perspective, the City could close the entire parks department and barely begin to plug the multiple year funding gap: parks spending proposed for 2021 is $6 6 million, the General Government budget deficit forecast grows from an estimated $14M in 2022 to just over $30M in 2027. To its credit the City has implemented a number of important efficiencies over the last decade — including actions to control the cost of employee benefits at the margins. The City has implemented both cuts and new revenues. However, despite these actions the City's budget has reached a crisis point. Without dramatic change in the revenue and expenditure picture, it will be years before recently cut programs and services can be restored. In our view it simply is not possible nor prudent to kick the can down the road and hope economic recovery addresses the situation. It will require bold action and shared pain to overcome this challenge. • Has the City done a thorough/good job in the last several years to address its financial challenges' On this question, we give the City a mixed review. The City has done a tremendous amount in the last decade to address the General Government structural deficit: as noted above, over $104 million cuts or Deferral of contribution to Law Enforcement and Fire Fighter (LEOFF) pensions and reserve funds in order to help balance the 2021 budget shift this expenditure growth rate up from 3 5 % per year to 4.5%. 12