Federal Way depletes rainy day fund

“Set it aside for a rainy day” is sage advice that Federal Way has apparently followed. For the city, the $3.1 million “rainy day” fund set aside during the 2009-10 budget has been depleted.

But depletion is exactly what was supposed to happen to the money, said Tho Kraus, city finance director.

In response to a citizen inquiry, Kraus spoke in regards to the city’s rainy day fund at the May 3 council meeting. Kraus described the need for the fund.

“The rainy day fund was established during the 2009-10 budgeting process,” she said. “It was set aside at $3.1 million to fund the projected 2011-12 budget gap. That gap was $1.3 million in 2011, and is 1.8 million in 2012.”

The money has been used to fund the anticipated budget gaps, Kraus said. Now, the city’s rainy day fund balance is zero. In an email correspondence, Kraus said this was the purpose of the rainy day fund, adding that the fund was a “one time deal, not intended to be replenished.”

The original $3.1 million set aside for the rainy day fund came from the city’s ending general fund balance surplus for 2009-10.

Although the rainy day fund is depleted, Kraus noted that Federal Way has a number of other reserve funds available for various needs. She said there is currently $1.1 million in the contingency reserves, also known as the mayor’s reserve fund. Along with that fund, Federal Way also has $2.2 million set aside in strategic reserves. From the city’s standpoint, the strategic reserves are called upon mostly in case of natural disasters and other similarly unforeseen events.

Kraus noted in her May 3 presentation that both the contingency and strategic reserves require action by the mayor and council before they can be used. She said both of those funds need to be replenished if they are used.

Outside of those funds, the city has four other reserve funds in the budget, Kraus said. These funds are:

• $100,000 in snow and ice removal reserves

• $420,000 in pension reserves

• $2.9 million in self-insurance reserves

• $10.2 million in vehicle, equipment and building reserves for future replacement

Kraus wrote in an email that the city was “currently working on revised estimates” for any upcoming budget shortfall, and that the information would be available at a later date.

Federal Way is not alone in having spent its rainy day fund. Seattle has come close to exhausting its rainy day fund in recent years, and faces even more financial trouble moving forward. For Seattle, the budgetary problems caused by the stagnation of both the state and national economy means serious cuts are on the horizon. Seattle Mayor Mike McGinn has been quoted as saying that budget cuts of 3-6 percent are on the way for Seattle’s police, fire and human services departments, and is also asking for budget cuts of between 4-8 percent for all other city departments.

With the money crunch becoming more and more evident throughout all aspects of life in Federal Way, citizens are invited to attend the May 24 public meeting of the Finance Economic Development Regional Affairs Committee (FEDRAC). The meeting begins at 5:30 p.m. at City Hall, 33325 8th Ave. S., in the Hylebos Conference Room.


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