In the course of the debate over a utility tax, opponents of the tax have made several allegations about city operations and finances that are not supported by the facts. Following are some of the allegations along with the truth.

• Utility Tax need

• Budget forecasts

• Tax-and-spend city council

• Bellevue vs. Newcastle taxes

• FFN’s financial backers

• Small government

• City Hall purchase

• City Hall price

• Use of consultants

• The Downtown Plan

• The city’s debt load

• Wasteful spending

• City manager’s salary

Facts: Newcastle has been working for several years to address a revenue gap in its six-year budget forecast. The gap has grown larger and more alarming each year. Financial projections have been carefully audited and determined to be fair representations of future conditions. Without new revenue, the City is headed toward fiscal insolvency... commonly called “bankruptcy”.

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Facts: By design, the city has taken a conservative approach to forecasting income and expenses. For example, it assumes only a moderate increase in sales tax revenue, but it estimates payroll expenses as if there will be no vacant positions during the year. City management needs to have a high level of confidence that forecast revenue will actually arrive “in the bank”.

As a result, the City expects to usually operate with a small year-end budget surplus. That has consistently occurred over recent years, averaging about $400k per year. That is a good thing. Any year-end surplus may be held as a cash reserve or it may be applied to reduce outstanding debt or other approved uses.

By the way, good management that generates year-end surpluses does not resolve the underlying revenue gap issue. Not even close!

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Facts: No new taxes have been approved by Council over the past eight years. Zero. Property taxes have been adjusted to the 1% legal limit for increases most of those years. City fees for services have been adjusted for inflation over time, and a few new fees have been implemented for specific uses (like Surface Water Management). Regarding SWM fees, State mandates linked to the Clean Water Act require significant new capital investments for compliance.

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Facts: Unless you want Newcastle to disincorporate and become part of Bellevue or Renton, it is pointless to compare Newcastle’s property taxes to these cities, which collect utility tax, Business and Occupation tax, Admissions tax, and Hotel tax among others. Both of our neighboring cities are much larger and have huge retail areas that generate sales tax. When Newcastle is compared to its peers, eighteen small King County cities, Newcastle ranks 5th lowest for property tax levy rates. All of the other small cities also collect utility taxes.

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Facts: Friends For Newcastle draws support from people across the city who have one thing in common: They love the city and want to maintain our quality of life. Many have experience as unpaid volunteers on city commissions, which has given them the opportunity to learn about city operations and persuaded them that the city is well managed and that the need for new revenue is justified. Other residents who believe the city is on the right track, and simply want to see current services maintained, also donated. FFN got involved in the utility tax debate because it felt citizens deserved more information than a 200-word statement in the voters’ pamphlet. FFN followed the intent and letter of the law by registering and reporting financial transactions with the State Public Disclosure Commission. In contrast, the anti-tax activist group has made campaign spending transactions behind a curtain of obscurity. 

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Facts: Newcastle became a city in 1994. The population back then was 5,400. Today Newcastle is 2 1⁄2 times larger, with a population of 13,500 residents. By any measure, City government is very small and quite efficient. Staff headcount is the same now as it was back in 2009, even though legislated mandates have added significant workload.

Taxes collected by Newcastle are among the lowest for King County cities. The proposed 3% utility tax is not planned to pay for any new programs or new staff. It is simply necessary to maintain services that residents currently receive.

The allegation neglects the fact that when Newcastle was incorporated, the State Board that reviewed the request concluded that “the proposed new city would not be financially feasible without the addition of new taxes; specifically, the addition of utility taxes and Business and Occupation taxes.” Fast-forward to today, Newcastle still needs to diversify its sources of revenue.

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Fact: Newcastle is paying $50,000 a year less than it would if it were paying rent. This more than offsets the interest Newcastle was earning on the funds it was holding in reserves—funds that were intended for capital projects such as the city hall purchase. And Newcastle is building equity in the building.

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Fact: The lender conducted its own appraisal and concluded the city was paying fair market value. Just like your home mortgage, it is the lender who commissions the appraisal to ensure that the loan amount is covered by the value of the property. The lender for city hall was Piper Jaffray, which issued bonds. To determine the fair market value of the building, Piper Jaffray calculated the cost to operate the building, the debt service and rental income. These calculations were considered by Standard and Poors in setting the bond rating. Standard and Poors gave the bonds its highest rating—AAA.

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Fact: The city maintains a lean full-time staff, so it relies on consultants to conduct special projects and handle temporary surges in work load. This costs less than hiring full time employees to do the work. The special projects that have been funded have been in response to real and pressing needs. For example, the 2017 Downtown Plan was triggered by concerns that the previous downtown plan permitted too much growth and density. The previous plan was developed in 2000, when Newcastle had barely half as many people and none of the traffic problems. So much had changed since 2000, and so many new residents had moved to Newcastle, that a new study was essential to understand what the community wanted for its downtown.

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Fact: The 2017 Downtown Plan will help keep the downtown area a vibrant place to shop and live. With the rise of online commerce, retailers across the country are pulling back. Neighborhood shopping centers such as the one in Newport Hills are declining. Newcastle’s downtown plan gives the owners of our shopping centers an incentive to continue investing and expanding in Newcastle by requiring them to maintain retail space while allowing residential units in the floors above. At the same time, the downtown plan lowered height limits and reduced the density permitted by the previous downtown plan. Funneling growth into the downtown keeps it out of Newcastle’s neighborhoods and provides more consumers to support new shops and restaurants.

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Fact: The city is in an excellent debt position. Its only debt is for the widening of Coal Creek Parkway and the purchase of city hall. The city uses only a small fraction of its allowable non-voted debt allowance.

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Fact: The Watchdogs consider any project they don’t like to be a waste of money. Here are a few examples they cite. Do you agree these are a waste?

·       $300,000 to repaint the peeling May Creek Bridge. Really? We should build a bridge but not maintain it properly?

·       $750,000 for a new traffic signal and crosswalk at Coal Creek Parkway and the Hansen Brothers private road by Tapatio Restaurant. First of all, the city hasn’t funded this project, as you probably realize if you ever attempted to turn left from the QFC parking lot during rush hour or tried to find a safe place to cross Coal Creek Parkway as a pedestrian between Newcastle Way and the entrance to Newcastle Commons. The recent city survey showed 89% of Newcastle residents support improving infrastructure in the downtown.

·       $23,960 to survey Newcastle residents to assess their level of satisfaction with the city and with city services.  Really? Is it a waste of money to ask your customers how you’re doing and how you can improve?

·       $124,000 for new park signs. Why? To replace a mishmash of designs that had been installed over the years, some by developers, many of which didn’t carry legally mandated information or had metal edges that posed a safety hazard. The new signs avoid injuries to people who might accidentally walk or ride their bikes into a sign—and sue the city for damages.

The merits of any project are debatable, and reasonable people may disagree on whether a project is worthwhile. But that doesn’t make a project a waste of money. Moreover, project expenses aren’t the cause of the city’s budget problem. Projects aren’t funded from the general operating fund, which is where the shortfall is.

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Fact: The city manager’s salary is comparable to what other cities in King County pay for a person of similar experience. To keep good people, Newcastle must pay salaries that are competitive, especially for the position that is most accountable for delivering results.

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