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other adjustments have been made to balance the General Government budget in the last 10 years. But <br />the structural deficit remains and is projected to get worse: much more needs to be done. <br />We do not believe the deficit can be addressed simply through finding efficiencies in current operations <br />or relying on tax increases alone. Action will be needed in many areas. <br />Regardless of how one rates the City's actions to date, it serves no purpose to look backward and point <br />fingers. City Hall, and City residents and business owners need to own the current reality and look <br />forward. <br />• What are the Challenges for the City in its effort to become more fiscally sustainable? <br />We chose to slightly reframe this question to consider both barriers and opportunities for the City to <br />become more fiscally sustainable. <br />Barriers to fiscal sustainability: <br />We identify four significant barriers: <br />• Initiative 747 limitation on growth in property tax revenues. Having a major revenue source — <br />property taxes --growing at less than inflation every year poses obvious challenges. Getting <br />around this will take an act of the legislature, which has for decades now declined to repeal the <br />initiative. <br />• The ability to control growth in public employee salary and benefit costs. Although there are <br />actions the City has taken here and can continue to push on, the current trajectory in the cost <br />of public employee salaries and benefits is not sustainable. The rate of increase in cost of the <br />City's labor force annually exceeds the growth rate of the City's revenues. We are at the point <br />where cutting General Government costs largely means cutting public employees. We cannot <br />make progress towards being a vibrant City center if we are constantly closing or cutting back <br />programs because the staff to operate them are no longer on the payroll. This leads us to the <br />n ext barrier. <br />• Perceived reluctance to address labor costs. The importance of having high quality public <br />e mployees serving the City with dedication and integrity cannot be understated. We are <br />fortunate to have a skilled and dedicated workforce in City Hall —working ever harder as their <br />n umbers have been reduced in recent budget years Most of the constraints the City faces are a <br />result of state statutes —many of them probably well intentioned, but which frankly need to be <br />re-examined in our current economic climate. That said, the growth in City labor costs — <br />salaries, benefits and pensions --is not sustainable. While the City has limited flexibility as an <br />e mployer as compared to the private sector, this cannot be an excuse for the City to walk away <br />from this challenge. The City must push hard to control growth in salaries and benefits. With <br />labor being the largest single component of General Government expenditures, and those costs <br />growing at nearly twice the rate of growth in revenues each year, there is simply no choice but <br />to re-examine labor contract terms and related state statutes to find a way to reduce the <br />escalation in these costs. <br />• Relatively low median household income in Everett. With household median income at <br />$57 205 (compared to over $100,000 in Seattle or Kirkland) it may be very difficult to build voter <br />support for significant tax increases. Everett s vision of its future must address this reality. <br />13 <br />