Is the city of Kenmore facing a looming budget deficit?

The question has been raised again and again in recent weeks as the Nov. 3 election gets closer and closer. As you might expect, the answer to the question depends entirely on who you ask. There seem to be two chief proponents for either side of the issue.

According to Mayor David Baker, the answer is a somewhat qualified, but strong, “No.”

According to Councilman John Hendrickson, the answer is a resounding, “Yes.”

Making his comments late last week, Baker said he mildly was hedging his bets as City Council, on Oct. 19, was to review any proposed course corrections for the current two-year budget.

Council adopted its first two-year budget late last year. Covering 2009-2010, as first proposed, the spending plan included overall expenditures of about $70 million.

At the time the budget was adopted, City Manager Frederick Stouder said Kenmore was looking at spending roughly $12.9 million from the general fund this year, about a 2-percent increase over 2008. He projected — and several councilmembers have indicated they expect — the city to have about $2.9 million in reserves at the end of 2009.

Even though Baker said some budget adjustments may be needed, he wasn’t expecting any major coming surprises in terms of the overall spending plan, noting legislators receive monthly updates on the status of city spending.

“The city staff has been very responsible,” he said. “The gloom and doom just isn’t there.”

In support of his assertions, among other comments, Baker pointed to the fact the city, in 2009, did not take the 1-percent increase in property taxes the state allows all cities to impose annually if they so choose. Baker noted Kenmore hasn’t taken that 1 percent since 2004. He said if the city was bleeding red ink, officials likely would have moved to take those dollars.

Arguing the flipside, according to Hendrickson, there definitely are some problems coming Kenmore’s way. As he has in the past, Hendrickson argued the city needs to continue following the economic plan laid out by King County when the city was incorporated approximately 11 years ago.

At that point, county officials said Kenmore should be operating on a “lean level” of services, putting plenty of money away to attack capital improvement problems such as roads, parks and surface water issues.

Hendrickson added that for many years Kenmore followed King County’s advice, building up a sizable bank account. While he added there have been various drains on the capital funds, particularly for the renovation of State Route 522, the biggest check on that account has yet to be written.

That large-sized check will go toward paying for the new City Hall rising up on 68th Avenue Northeast. The city plans to essentially pay cash for the project out of its capital funds, though it also has a $4 million contingency loan available to it.

When that roughly $12 million project comes due, the city will have about $8 million in savings left to it, according to Hendrickson. In documents, he said that is the money Kenmore will have available to spend on itself.

Besides greatly reducing the amount of capital improvement money available, Hendrickson argued the loss of the city’s saving also means the loss of a revenue stream, namely the interest collected on that money over the years. He also claimed the city has or will lose other revenue streams, such as lease money from businesses in the city-owned Kenmore Village shopping center.

For the most part, Baker agreed with Hendrickson that the city has been stashing away money for 10 years. But he also said the goal was always improving SR 522 and building the new City Hall.

In the future, in dealing with capital improvements, he added Kenmore will need to make better use of state and federal grants. Baker also noted many grants require matching local funds and said the city will have that money.

In terms of operating dollars, over the next six years, Hendrickson projects Kenmore will have a total income of about $55 million. He compares that with $66 million in projected expenses. With some other factors taken into account, he predicts a total deficit of $11 million. Hendrickson has the biggest, single-year deficit arriving in 2014, when he claims the city will be short some $2.5 million.

As one example of what might be called the city’s unrealistic approach to budgeting, Hendrickson pointed to a budget projection that showed Kenmore’s spending on safety forces holding steady over the next few years. In response, Baker asserted, as have other councilmembers, that Kenmore’s police services may be in flux.

“It’s kind of hard to make assumptions at this point,” Baker said.

Kenmore contracts with the King County Sheriff for its police services. Kirkland is hoping to annex some unincorporated areas surrounding that city, meaning Kenmore could lose the services of the county officers who now patrol those neighborhoods.

In the end, the county could be looking to increase service costs to Kenmore, Baker said.

But he also quickly added the city is not locked into using the sheriff’s office.

“There are options,” he said, insisting City Council will look at every possibility, including, for example, entering into talks with surrounding municipalities for police services.

Hendrickson offered plenty of paperwork and the opinion of a local accountant and one-time Kenmore councilmember to back up his reading of the state of Kenmore’s coffers.

“I’m looking to be able to work together and see how we can handle this,” Hendrickson said regarding the rest of council.

Baker said at a recent town-hall-style meeting some residents asked council to keep an eye on city finances.

“The public has asked us to pay attention to the budget and we will be conscientious,” Baker stated.