The City of Chehalis is “cautiously optimistic” about its finances going into 2022.
A budget passed this week includes funding for new positions with the understanding that if revenues next year drop below the current estimates, the city will need to reconsider.
The budget was approved by the Chehalis City Council on Tuesday.
In addition to funding a planning position created in June 2021 and a new financial analyst position, the budget returns funding to five vacant positions — two firefighters, one police officer, a part-time parking enforcement officer and a part-time recreation administrative assistant. The positions were purposely not funded in the city’s 2021 budget because, at the time, the city didn’t know how the ongoing COVID-19 pandemic would impact the city’s revenue sources.
“Fortunately, they (revenues) continued to increase,” said City Manager Jill Anderson, who told the city council that state and federal pandemic-related financial interventions likely helped keep the city’s revenue sources stable.
But with those financial interventions intended to end soon and other unknown factors anticipated to affect 2022 revenue, Anderson said the city may need to amend the budget at some point before the end of 2022.
“If the economy does not continue to grow as it has in the last five years and if the removal of the COVID stimulus money has a negative impact, we’re going to have to go back and review the budget, there’s just no doubt about that,” Anderson said.
Current projections factor in the end of those financial interventions and predict sales tax revenue for 2022 will be at 97% of its 2021 level. Sales tax is expected to account for 48% of the city’s total revenue in 2022, with other major revenue sources including property taxes at 19% and utility taxes at 14%.
The city council approved a 1.11% increase in the city’s property tax levy rate that, with new construction expected to be taxed in 2022, is anticipated to bring in just over $32,000 more in levy revenue than the city collected in 2021.
The six-year EMS levy renewed by voters in August at a rate of 50 cents per $1,000 was also voted into law and is expected to bring in just under $464,000 in revenue.
In total, tax revenue makes up 81.7% of the general fund, which funds basic municipal services including administration, police and fire services, building and planning, public works, parks and street maintenance, municipal court and recreation services.
Anderson called the projected revenue for next year “relatively stable” with the potential to see revenue growth in 2023 or 2024 from airport development, “Which, while we can’t bank on just yet, does look to be moving in all the right directions,” she said.
The total city expenditure budget for 2022 is $41.6 million — a 44.47% increase from the 2021 budget — but the majority of that increase is due to one-time internal transfers within each of the city’s utility funds, said Finance Director Chun Saul, who presented the proposed budget to the city council at its Nov. 8 meeting.
Without those one-time transfers, the budget is actually 0.84% smaller than the 2021 budget.
Just over half of the city’s $11.9 million general fund budget, a 4.1% increase from last year, goes to police and fire services, with the remaining half broken up between the rest of the municipal services. The budget includes a $200,000 transfer from the public facilities reserve fund for expenses related to a future permanent fire station.
While the general fund budget is balanced with $462,210 of the general fund’s reserve, Mayor Dennis Dawes pointed out those funds are a revenue surplus from the previous year.
“I think it's important to know that just about every budget session I’ve been through, our prior year’s budget has taken in more money than we have anticipated, therefore, I guess you could classify it as a surplus, but it goes into the reserves for the following year,” Dawes said. “When we set a conservative budget and we have a year where our revenues exceed that conservative budget that we’ve prepared because it’s easier to add money or add a program than it is to delete it … I just want it to be known because of years that we’ve exceeded our expected budget, we’re not going on a wild spending spree.”
While the city did not put money into the reserve fund this year, Anderson said the city has compensated by funding preventative maintenance projects, like refreshing restrooms at some of its facilities.
“There are little things that we’re planning to do to make sure we’re doing as much preventative maintenance as possible,” she said.
While the budget shows the city’s cautious optimism about the future of the local economy, the budget may need to be reviewed if the economy takes a turn for the worse.
Data from the last three years shows revenue growth isn’t keeping up with cost increases and unless the city sees a substantial increase in taxes or other revenue soon, Chun said the city might need to cut expenditures.
“The thing is, while we’ve got this budget, if revenues drop we know we’re going to have to readjust and make adjustments, but again, it’s a balance, it’s a tightrope. We’re trying to manage meeting the current needs and watching revenues,” Anderson said.
The proposed budget is available as part of the city council’s Nov. 8 and Nov. 22 meeting packets, accessible at www.ci.chehalis.wa.us/meetings, and Anderson encouraged anyone who has questions after reviewing the document to contact her at 360-345-1042 or firstname.lastname@example.org, or Saul at 360-748-0271 or email@example.com.