Federal Way budget crisis: Why it's here and what you need to know

It's easy to comprehend that Federal Way is facing a budget crisis. However, attempting to understand why there's a nearly $9 million shortfall for 2011-2012 is a more difficult task.

Federal Way operates on a nearly $40 million general budget fund. In 2011, the City of Federal Way is expecting about $39 million in revenues and $44 million in expenditures.

City manager Brian Wilson is not suggesting raising taxes to close the budget gap. Instead, he's suggesting balancing the budget by laying off 39 full-time employees. The city council will decide in December whether to adopt Wilson's budget as is or make changes.

Meanwhile, Wilson and staff just wrapped up a two-month effort Thursday to educate the public on Federal Way's revenues, expenditures and upcoming budget. They hosted 10 public meetings. More than 200 residents attended. Louise Wessel was among them. Wessel is upset that people will lose their jobs at City Hall and police officers could be cut.

"These issues, for me, are all issues that are heart wrenching," she said.

The meetings helped her better understand the city's predictament. For those who were unable to attend the meetings, here's what was missed.


To Federal Way residents, it likely seems a good portion of the paycheck goes toward taxes, but Federal Way residents pay less taxes than residents in neighboring communities. Here, residents pay an annual average of $328 per person in taxes and fees. This is less than the per capita taxes and fees paid by residents in other King County cities, some of which collect taxes that Federal Way does not. In Seattle, residents pay an average of $696 annually to keep the city operating. Renton residents pay $588. Auburn folks pay $578 per person.

This sets Federal Way apart, Wilson said. Despite a low tax base, the city has accomplished a lot in its 20-year history. It has little debt, well-kept roads, a good bond rating and quality parks and services, he said.

"We're not 100 years old. We're 20 years old and we have a great deal to be proud of," Wilson said. "We're much more efficient."


Revenue is what allows Federal Way to be successful. The brunt of the expected revenue in the next two years will come from sales tax (27 percent of all revenues collected), property tax (25 percent of all revenues collected) and utility tax (19 percent of all revenues collected). Other revenues will come from the red light photo program; fines and forfeitures; state shared revenue; other taxes; licenses; and permit and service fees, according to information provided by Wilson.

Even though sales and property taxes keep Federal Way afloat, the city only gets a slice of the total amount paid by residents. The current sales tax is 9.50 percent (another 0.50 percent, known as the stadium tax, is applied to prepared food and beverages). Of this, 6.50 percent of the money goes to the state, 0.90 percent goes to King County Metro Transit and 0.85 percent is kept by the City of Federal Way to put toward its general fund. The remaining 1.50 percent goes to the Regional Transit Authority, Sound Transit, King County, King County Mental Health and Criminal Justice services.

When it comes to Federal Way property taxes, the state and school district are recipients of the majority of the monies paid out by residents. For each dollar paid in property taxes, the school district receives 41.34 cents and the state gets 17.99 cents. The fire district gets 14.57 cents, the county 10.4 cents, the City of Federal Way keeps 9.15 cents, and 6.55 cents goes toward the Port of Seattle/libraries/ferries and flooding.

Utility tax is a different story. Federal Way residents pay a 7.75 percent utility tax, all of which is kept by the city. Two percent (a projected $3.223 million in 2011 and $3.243 million in 2012) typically goes toward the general fund's baseline operations. The remaining money is used to pay for projects and programs such as the annual Red, White, and Blues celebration; debt service, operations and reserves for the Federal Way Community Center; the Arterial Streets Overlay program; the Transportation Capital Improvement Plan; and Proposition 1 — which brought more police to Federal Way. Unlike money collected from less lucrative taxes, such as the real estate excise tax, utility tax can, by law, be used for a wide range of purposes.

Federal Way has historically relied on revenue from utility taxes to balance its budget or fund new programs. The amount stemming from the tax steadily grew from 2003 to 2008. With utility tax money, the city launched the Safe City program, which uses 27 closed circuit cameras to monitor crime downtown. But recently, the utility tax slowed drastically. 2008's revenue of $13,469,000 inched up only to $13,549,000 in 2009. This year, utility tax revenue decreased nearly $1 million to $12,597,000. Staff expects the trend to continue through 2011 and begin to reverse in 2012.


While the city struggles to bring in revenue, it simultaneously expects to see $44 million in expenditures in 2011. The police department alone accounts for 58 percent of total expenditures.

"It becomes very difficult to balance your budget and not touch police," Wilson said at Thursday's budget meeting.

Public works department accounts for 10 percent, the parks and recreation department 8 percent and the community development department another 8 percent. Other expenditures are incurred through the municipal court, public defenders, mayor's office, support services, criminal prosecution and the law department. These include staff salaries and public services.

Rising medical insurance premiums also come as a hard hit. The city is preparing for a 10 percent (or $380,000) per year increase in medical insurance premiums. A task force has been created to address this rising cost.

Check it out

• To learn more about the 2011-2012 budget and view budget documents visit

• The city council will hear Wilson's proposed budget at 7 p.m. Oct. 19 at its meeting at City Hall, 33325 8th Ave. S.

• The council will adopt the 2011-2012 budget Dec. 7.

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