Business

Local economy showing signs of improvement

By ERICA HALL

Staff writer

The city of Federal Way received a record 60 land-use applications in May — breaking the standing record of 45 — which might mean the long, dry economic spell could be about over.

“Land-use applications are a leading indicator of what’s to come,” city finance director Iwen Wang said. “It’s a good sign.”

That’s good news for city officials, who are in the midst of preparing a 2005-06 budget with a $2 million budget shortfall.

Still, Wang tempered her optimism with a word of caution: Construction activity can come years after the land-use applications have been been submitted, so actual economic activity associated with a new business could be a few years away.

May’s 60-application record beat out May 2003, during which the city received 36 land-use applications, said Greg Fewins, deputy director of community development.

Last month, the city received 25 land-use applications, down from 31 in June 2003. The total number so far this year has been 195, compared to 187 last year.

The majority of the applications are for new developments in Federal Way, but some are for renovations of existing businesses or developments. Applications range from simple inquiries into what owners are allowed to do with their properties, to commercial or environmental review applications.

Fewins said the increase in applications reflects developers’ confidence in the economy.

“Financially, money is at good rates for borrowing. And there’s a market for what they’re building,” he said. “(The increase) is telling a couple stories. It’s nothing but good news.”

If land-use applications were a ray of light in an otherwise gloomy economy, a sales tax intake that actually rose last month was almost a break in the clouds.

“We saw a little higher sales tax collection in June, primarily from construction,” Wang said. “That was really good news. We hope it’s the start of a trend, but we don’t know if it’s going to happen.”

May’s sales tax collection was at the same level as May 2003. Sales tax collection in April was below April 2003.

Utility tax is doing well, too, Wang said.

“Last year, we overestimated our revenue, but this year we’ll definitely meet or exceed our projection,” she said.

Despite what appears to be the first blush of economic recovery, Wang said city officials still have to deal with the $2 million shortage in the city’s operating budget. While sales tax income appears to have stabilized, the city would have to experience an extraordinary increase in sales tax revenue to make a dent in the deficit. Wang said officials don’t see that happening soon.

City officials came up with a zero-based budget planning system this year that categorizes city services as:

• Mandatory (required by state law).

• Not mandatory but very important.

• And optional.

The city’s baseline budget is about $32.6 million. According to officials, mandated services make up 80 percent of the budget, followed by important services (18 percent) and optional services (2 percent).

As city officials deliberate where and how to make cuts, they’ll also consider ways to fill the budget gap. Ideas so far include redirecting 1 percent of the utility tax from the capital budget to the operating budget. There will be a full 1 percent, or $1.25 million, available next year.

In addition, officials are planning to ask for a property tax stabilization measure, possibly as soon as the November election, that could provide another $240,000 if voters approve a lift of the 1 percent lid on local tax rate increases.

City officials will spend the summer reviewing and deliberating various departments’ budget proposals and hearing public comment prior to adopting the 2005-06 budget in December.

Staff writer Erica Hall: 925-5565, ehall@fedwaymirror.com

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