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Maple Valley ponders future and potential fiscal cliff

Whether or not Maple Valley will go over a “fiscal cliff” depends on who you talk to.

The Maple Valley City Council and city staff are pondering the city’s own version of a fiscal cliff as talks about the Comprehensive Plan and the city’s future ramp up this month.

The term, City Manager David Johnston said, caught on after it was used in a report prepared by the International Economic Development Council on the city’s future related to economic development.

“We’ve been talking about this for about two or three years,” Johnston said of the broader idea behind the term. “What has to be appreciated by everybody is that the city has funded its growth with the revenue from aggressive residential development.”

With the city approaching build out, residentially speaking, revenue streams associated with new home construction — things like real estate excise taxes and sales tax on construction materials — are decreasing. And that means the city has to find new revenue streams or face decreasing services the city provides.

The fiscal cliff term is being applied to the general fund balance as a percentage of expenditures.

“The fiscal cliff is just revenue streams versus expenditures,” Councilman Noel Gerken said.

That number, 16.7 percent, covers two months of the city’s expenses, Johnston said. And, he explained, that threshold is recommended by financial institutions. Previously, the city’s threshold had been 10 percent, but the council increased it to 16.7 percent last year to meet the recommended minimum.

“So how we look at it is that 16.7 percent equals zero in the check book balance,” Johnston said.

The current forecast by the city has the percentage dipping down to 16.1 in 2017.

“We’re around 19 percent now,” Johnston said. “We feel with our residential development we have on the books now we are good for two or three years. That’s why economic development is urgent.”

The conversation of how to grow other revenue streams or face service reductions has been a long time coming, according to Johnston.

“It something that the (former mayor Laurie) Iddings administration recognized and this administration now has to deal with it,” Johnston said.

The approach going forward is to market the city to investors and to prioritize city programs.

“I think we have to talk about prioritizing services rather then say, ‘hey, everybody has to take a 5 percent cut,’” Johnston said.

Going below the recommended threshold could affect the city’s bond rating, which would in turn affect the interest rates at which the city could take on debt.

“I don’t see it as a fiscal cliff, I see it as we know what’s happening and I think last year we did pretty good,” Gerken said. “I don’t see disaster looming, but we might have to make some cuts.”

If economic development doesn’t occur in the next several years, Johnston said everything covered by the general fund could be in the discussion of having funding cut. That list could include deferring maintenance on infrastructure such as parks and roads, cutting from the city’s grant funding program for community organizations and looking at city staff positions.

“Right now we think we are providing Cadillac level services; that’s what our residents expect and that’s what a competitive community in economic development expects, but if you don’t have the resources you have to make compromises,” Johnston said. “Probably the budget process at the end of 2016 is talk turkey time.”

 

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