Mercer Island is in the process of adopting its 2015-15 biennial budget. The $120 million preliminary budget was presented to the City Council on Oct. 6, and the review of the operating budget and first public hearing was on Oct. 20.

In terms of the operating budget, there are major changes in the General Fund, Youth & Family Services (YFS) Fund, and Utility Funds (Water, Sewer, and Storm Water), said Finance Director Chip Corder.

The city’s structural problem of overall costs increasing more quickly than revenue growth will be an increasing challenge in coming years, according to the budget summary. Difficult choices about eliminating or decreasing existing services or identifying a new General Fund revenue source will be needed beginning in 2017.

Overall, the 2015 budget is 1 percent higher than the 2014 adopted budget, and the 2016 budget is 2.6 percent less than the 2015 budget.

“Those percentage changes are deceiving, because they include capital project expenditures, which vary significantly from year to year,” Corder said.

For the General Fund, there will be a 5 percent budget increase in 2015 and 3.7 percent increase in 2016. This will eliminate a right-of-way maintenance position, reinstate the Fire Marshal and Facilities Maintenance positions that were cut in 2011, increase General Fund support of YFS Department from $200,000 to $300,000 per year and move street sweeping costs, which are $125,000, to the Storm Water Fund.

For the YFS Fund, a $196,000 deficit is projected in 2016. The City Council and Mercer Island School Board of Directors discussed this issue at their joint meeting on Oct. 16.

The YFS Fund encompasses Thrift Shop operations, school counseling, family counseling, Communities That Care, senior outreach, VOICE, Jobline and emergency assistance, Corder said. The projected deficit is primarily due to a leveling off of Thrift Shop annual sales growth.

In addition, General Fund support of the YFS Fund was reduced significantly from 2010 to 2014 due to the recession’s impact, and School District financial support for school-based counselors dropped from covering 50 percent of the cost for six of the seven counselors to a fixed sum of $60,000 per year beginning in 2010.

“YFS staff will undergo a 2015 planning process internally and with its community stakeholders to prioritize services and to explore funding options, including service level reductions,” Corder said.

Utility funds will increase for a typical single family residential customer. Per the Preliminary Budget, there will be a 6.5 percent total utility rate increase in 2015 and 5 percent increase in 2016. This will cover the addition of two sewer maintenance crew positions in 2016, to perform preventative maintenance tasks that the existing four person sewer crew can’t fully address.

Corder noted that the ‘boil water’ advisory events occurred after the Preliminary Budget document had gone to print. The long term action plan to minimize the risk of a similar event will have an impact on the proposed 2015 water utility rates, which were reviewed by the Council on Oct. 20. More specific staff recommendations will be provided at the Nov. 17 meeting.

As for the capital budget, the major change is the proposed creation of a transportation benefit district (TBD), which would result in a $20 fee per vehicle for $350,000 in annual revenue to fund transportation improvements.

On Sept. 15, the Council approved the spending of $25,000 from the beautification fund to hire a consultant to begin a Town Center visioning process.

The city’s major revenues are: water, sewer, and storm water utility charges for service (26 percent), property tax (20 percent), utility and business taxes (8 percent), sales tax (7 percent), real estate excise tax (5 percent) and licenses and permits (5 percent), Corder said.

The next public hearings will be on Nov. 3 and Nov. 17, with adoption of the final budget taking place on Dec. 1.

For more information and how to comment,  go to www.mercergov.org.

Update: At the City Council meeting on Oct. 20, Corder said that the projected YFS deficit is actually $260,000. Council considered increasing General Fund support of YFS from $300,000 to $350,000, and discussed the importance of having a counselor at Elementary School #4. Corder also presented the updated proposed utility rates, which increase 7 percent in 2015 and 5.5 percent in 2016. The rates were discussed, but not approved.