Kirkland City Council Special Study Session on the 2023-2024 Preliminary Budget – October 25, 2022

The Kirkland City Council met in a hybrid special study session on October 25, 2022, from 3:00 p.m. to 8:15 p.m., to review the proposed 2023-2024 preliminary budget. Mayor Penny Sweet presided; all seven council members were present. City Manager Kurt Triplett and finance staff presented a balanced biennial budget built around the theme Sustaining Services and Building a Community Where Everyone Belongs, and the council discussed revenue and expenditure trends, major issue papers, service packages by council goal area, and roughly $547,556 in remaining unprogrammed one-time general fund resources.

Budget Overview and Financial Outlook

• City Manager Kurt Triplett thanked staff, council, and the community, noting the budget was balanced without service reductions and fully funds community safety and DEIB investments as ongoing programs while following financial policies and maintaining the city's triple-A credit rating.
• Finance Director Michael Olson said Kirkland has received the Government Finance Officers Association Distinguished Budget Presentation Award for 17 consecutive budgets.
• The preliminary budget is the first citywide budget over $1 billion; staff explained the true size of new expenditures is closer to $560 million because the total includes transfers, reserves, and internal service funds. The overall budget change is 4.82%.
• The 2023-2024 general fund is balanced. The May 2022 forecast of a $14.8 million deficit was closed through council actions, proposed service-package choices, higher revenue estimates, and removal of some one-time costs. The forecast shows small out-year deficits and a projected $8 million deficit by 2027-28.
• Property tax levy growth is 1% plus 1.54% from new construction. The 7.2% budget-to-budget change reflects biennial mechanics and higher 2022 estimated revenue. Councilmember Nixon asked clarifying questions; staff said if all property values rose equally, an existing homeowner's city property tax bill would rise about 1%.
• Sales tax is budgeted with a two-year lag, meaning zero growth is assumed for 2023 and 2024. Utility tax revenue assumes 9.5% electric/gas growth in 2023 and large public utility rate increases. The RGRL business tax increases to $130 with a $20,000 threshold, generating about $1.76 million net for the biennium.
• The street fund faces higher material costs, with some supply prices up 25-77%. Proposed fixes include increasing the business-tax transfer to $770,000/year and adding a $20 vehicle license fee starting January 1, 2024.
• General fund reserve contributions include $603,000 to contingency, $1.3 million to the rainy-day reserve, and about $1 million to revenue stabilization. The three general-purpose reserves equal about 12.4% of 2024 general fund expenditures. Councilmember Pascal requested a later calculation adding the sales-tax lag to show the full conservative-budgeting cushion.

Human Services Funding

• Human Services Manager Jen Boone presented. The base city human services grant investment has been flat at about $969,000/year since 2019, supplemented by HB 1406, MFTE, Prop One, and one-time funds. The proposed 2023-2024 budget activates $253,000/year in HB 1406 and about $350,000/year in ARPA funds, raising proposed total investment to $2.3 million/year with about $275,000/year still unallocated in commission options B and C.
• Councilmember Curtis expressed strong support for funding human services as much as possible and for the street outreach coordinator position. She also raised concern about pay inequity for behavioral health and community responder staff. City Manager Triplett said in-house community responder pay is set at $87,000-$102,000 and was intended to be competitive.
• The Human Services Commission will meet the following Tuesday to rank Option B programs. Staff will also incorporate a $160,000 human services reserve and return with a list of unfunded recommendations for council consideration.

Development Services Fund

• A new development services fund captures building, planning, development engineering, and fire prevention activities. The total fund is $53 million, including $30.7 million in revenue and about $16 million in reserves. Transfers from the general fund pay for non-development work such as long-range planning.
• Fee study changes produce roughly a 50% revenue increase. Reserves are designated for technology replacement, liability for work paid but not completed, and staffing stability to weather short-term market changes.
• Staff said the separate fund makes the general fund subsidy and full cost of development services more transparent.

Smart Parking Implementation

• Public Works Deputy Director John Starboard reviewed a multi-year plan: 2023 would install technology to show real-time occupancy without charging more for parking; 2024 would introduce market-based fees in the municipal garage and city-owned surface lots; 2025 would extend paid parking to city streets and waterfront park lots.
• The proposed budget includes $500,000 for 2023-2024 implementation, less than the $1.2 million early estimate. Revenue would be general fund revenue, with a proposal to reinvest it in maintenance of parking facilities, waterfront parks, sidewalks, and streets.
• Council asked about real-time data collection and the vendor RFP; staff confirmed the technology would support parking utilization data and public wayfinding.

Outside Agency, Tourism, and Special Events

• Staff noted the city has not formally decided to take over the July 4th parade. The budget proposes one dedicated events position, while the parks department had requested four positions to continue community events and operate a special events division. City Manager Triplett said the city would need to discuss how much to spend.
• Mayor Sweet said the city should take over the July 4th parade; she opposed returning to fireworks and suggested a drone show or other replacement, with sponsorship revenue and vendor fees possible.
• Tourism funding included $50,000/year for Kirkland Performance Center operating support, $144,000 for community programs, $60,000 in 2023 lodging-tax grants through the Tourism Development Committee, and a one-time match toward KPC theatrical rigging and electrical controls. Councilmember Nixon noted KPC's overall capital needs are about $3.5 million.

Review by Council Goal Area

• Inclusive and Equitable Community: funding for outreach and engagement, public safety recruitment, DEIB training and roadmap implementation, speed limit policy review, transportation master plan update, mobile integrated health, and GIS. Councilmember Falcone asked about diverse art and events funding, noting only unspent carryover remained; she advocated continued or increased investment. Mayor Sweet suggested partnering with Kirkland Performance Center to market existing culturally diverse performances to a broader audience.
• Vibrant Neighborhoods: funds for the 2024 community survey, neighborhood matching grants, neighborhood safety CIP, planner and development engineer positions, ongoing community court, and a web and multimedia specialist. Councilmember Falcone requested replacing the word citizens with community members in the budget and challenged returning to pre-pandemic participation as the success benchmark. Staff explained full hybrid meeting support for boards and commissions was not funded, but IT will support initial meetings during training.
• Community Safety: funding for the regional crisis response agency, NORCOM mental health professional, court security, body-worn cameras, five final Prop One firefighter EMTs, a $2.7 million training prop at Fire Station 24, snow and ice equipment storage, and other public safety investments. Staff noted conversion of two school resource officers to ProAct and Neighborhood Resource Officer roles. Deputy Mayor Arnold asked about future reuse of the old Fire Station 27; City Manager said it may be considered in a mid-biennium proposal.
• Support of Human Services: continuing discussed grant increases, a homeless outreach coordinator, expansion of the low-income senior and disabled utility discount program to all low-income customers, and development of a low-income car-tab reimbursement program.
• Balanced Transportation: funding for TBD project managers, the regional transportation model, parking technology replacement, and CIP projects. Councilmember Pascal called for revamping the neighborhood traffic calming program and using the speed-limit study to target safety improvements. City Manager said the former dedicated 0.5 FTE position was eliminated, and public works staff will return in early 2023 with an updated approach. Deputy Mayor Arnold requested adding a $38,551 Kirkland share for East Trail Regional Advisory Committee outreach, metrics, and a 2024 event.
• Abundant Parks, Open Spaces, and Recreation: $10 million for Houghton Park and Ride, parks ballot measure exploration, pop-up off-leash dog areas, summer action plan wages, tree maintenance equipment, Colocla preliminary design, and more than $8 million in park CIP. Councilmember Curtis advocated for teen programming and mobile education and for more lifeguard funding; City Manager said these were not funded but could be discussed with a potential parks ballot measure. Councilmember Falcone asked staff to explore purchase and environmental remediation costs for the lot near Fire Station 24 and Goodwill.
• Attainable Housing: housing trust fund parity, an additional $500,000 to ARCH for a total of $1.3 million, $800,000 for the La Quinta site, CDBG funding, an online permit fee estimator, and reclassification of temporary construction inspectors to ongoing senior inspectors.
• Financial Stability: reserve replenishment, employee health and safety investments, telecom franchise analyst, CIP consultant, finance staffing conversions, business analyst, administrative services manager, and Springbrook utility billing upgrade support. Councilmember Black asked how FTE costs are calculated; staff explained one-time costs are for equipment and ongoing totals include salaries, benefits, and IT.
• Sustainable Environment: $500,000 in ARPA funds for the electric leaf blower program, median and tree maintenance, ORCA passes, facilities condition assessment, Clean Buildings Act compliance, and sewer and surface water CIPs. Councilmember Curtis raised reclaimed-water purple pipe; staff and Mayor Sweet cited county pricing and PFOS complications. Councilmember Falcone asked for sustainability master plan implementation funding.
• Thriving Economy: KPC operating support, community event grants, Port of Seattle and 4Culture grants, permit-processing staffing, tourism grants, surface water development fund, and KPC rigging match. Building and planning staff acknowledged turnover and permit workload pressures; Councilmember Black cautioned against relying on overtime and noted public-to-private retention risks.
• Public Works and Fleet: street, water, IT, and facility CIPs; capital project management software; street sweepers; utility equipment; electric vehicle planning; snow and ice equipment; and facility safety upgrades. Fleet staff said an EV master plan is being developed, with two Ford F-150 Lightnings on order as pilots. Councilmember Falcone requested a resident snow-shoveling incentive program; City Manager said funding could be considered.

Unprogrammed Resources and Next Steps

• After known uses and before reserve replenishment, about $8 million in general fund resources remained; about $3 million is needed for reserves, leaving about $5 million. Staff recommended holding $2 million as a possible higher Houghton Park and Ride appraisal and setting aside 1% of revenues as a recession hedge, leaving $547,556 in unprogrammed one-time resources.
• Council discussed using the remaining funds for unfunded human services grants, diverse arts, a sustainability master plan, snow removal incentives, short-term rental enforcement software, the East Trail share, and community how-to videos in multiple languages. Staff will send council a costed list of requests and possible non-general-fund sources before the next meeting.
• No formal votes were taken; the meeting was a study session.

Key Outcomes

• Staff to return on November 1 with a list of council-requested items, options for the $547,556, and possible funding sources outside the general fund.
• Staff to provide Councilmember Pascal's requested combined reserve and conservative-budgeting calculation, plus Human Services Commission ranking and prioritization after its next meeting.
• Next scheduled steps: November 1, 2022 study session and public hearings on the budget and CIP; November 15, 2022 study session and public hearings on the budget and preliminary property tax; December 13, 2022 final deliberations and adoption of the 2023-2024 budget, 2023-2028 CIP, and property tax levy ordinance.
• The meeting was adjourned at 8:15 p.m.