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The equitable distribution of the benefits and costs of growth is not guaranteed.

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Following is economic data from the City of Mukilteo 2019 Adopted Budget

and with projections from GENERAL FUND FORECAST MODEL JULY 2019:

  • Business tax revenue has made up the same average of 9.5% of total taxes paid to the city since 2005

  • Growth of 9% in business taxes had minimal positive impact on overall budget due to being 1/10th of the total city tax revenue while non-business taxes grew 3% driven by an 11.6% increase in property taxes

  • The majority of Mukilteo businesses are manufacturing operations that don’t generate sales tax, with aerospace manufacturing expected to increasingly capitalize on the benefits of automation.

    • Sales Tax is projecting no growth through 2024, while business licenses and permits revenue is expected to grow by 6% over the same time

  • The 2019 Budget shows Total Expenditures growing faster than Total Revenues, with this disparity starker in the General Fund

    • To generate revenue, The City of Mukilteo has implemented banked property taxes per the Mayor’s Budget Message 2019

    • To generate future revenue, the city is considering raising non-business taxes including property and sales tax

    • Expenses are projected to continue growing faster than revenues through 2024 (latest projection) with the exception of 2019

    • Expenses are projected to be greater than revenues through 2028 (latest projection) starting 2019

    • With no change, the Reserve Fund is expected to go negative in less than ten years.

  • To save costs, Mukilteo residents decided not to approve an emergency services levy that would have funded Fire Department equipment replacement in 2018

    • The City of Shoreline found that business owners most valued police, emergency, and street services when it considered, and eventually implemented, a new business tax in January 2019

    • Police, Emergency, and Street services make up the three largest portions of Mukilteo’s annual budget, for 69% of the total

  • The data is clear: Mukilteo has failed to update its tax code to reap the benefits of economic growth and must do so in order to maximize the opportunities- and mitigate the threats- of our time.

Mukilteo residents and homeowners are overly tax burdened, and cannot continue to fund the increased costs of the City’s public goods and services as evidenced by property tax that is at capacity and flat sales tax that are unable to meet revenue requirements. Increased traffic capacity, and development and population growth in and around Mukilteo will continue to benefit local businesses, but this growth can only drive 1/10th of the City’s budget at the current rate. If our current tax structure does not change, Mukilteo residents will increasingly pay the cost of doing business in Mukilteo- either by funding public goods and services, or going without. With no changes the current tax structure, Mukilteo’s Reserve Balance is expected to go below the balance threshold per city policy in less than five years, and to be negative in less than ten.

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Mukilteo businesses also shoulder the burden of compensating for low business taxes with high fixed costs that can accompany business licenses and permits. Instead of a low and ongoing cost that is based on level of activity, Mukilteo business owners face fixed costs that can be high for new and small businesses. Business and Occupation taxes are very flexible, with thresholds in Everett of $20,000 annually and in Shoreline of $500,000. A city like Mukilteo should explore small business tax exemptions that would exempt per-employee revenue up to a threshold. Small business exemptions allow the benefits of job creation and local commerce to be realized while maximizing the potential benefits of occupation tax paid by larger companies.

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Cities comparable to Mukilteo that are maximizing the potential of economic growth via occupation tax are Lake Forest Park, Kenmore, and Bellevue. Examples of cities that have utilized occupation tax during times of recent enhancement and development are Bellingham and Tacoma- with Bellingham offering condominiums over $600K and "New Tacoma" offering high-quality suburban living at a time of increased population density. The State of Washington has recently doubled occupation tax on services. Now is the time to proactively and responsibly respond to the evolution and growth of our economy by ensuring our tax structure is fair, appropriate, and sustainable.

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As technology and innovation bring automation to sectors like retail and aerospace, Mukilteo will see a shift in the balance of jobs created per local business. The City of Mukilteo’s budget illustrates this point with rising business taxes coupled with flat sales tax- a trend that indicates the City of Mukilteo is getting paid less and less for its natural, public, industrial, distribution, and labor resources. If this trend continues, Mukilteo will have to decide whether to sacrifice public safety and the quality of Mukilteo, or if residents and homeowners will pay the increased cost. As your representative I will push for a Business & Occupation tax that alleviates the tax burden on Mukilteo’s small businesses, homeowners, residents, and visitors. Doing so maximizes the benefits of economic growth while realistically recognizing the challenges of our time, including population growth, automation, and the future of energy.

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With Mukilteo expenses growing faster than revenues, now is the time to ask-

Who will pay the cost of doing business in Mukilteo?

Mukilteo Library

The Mukilteo Sno-Isle Library relies on property tax levies when funding increases are required

Sources:

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City of Mukilteo 2019 Final Adopted Budget:

mukilteowa.gov/wp-content/uploads/2019-Final-Adopted-Budget.pdf

Mayor’s Budget Message: Page ii

Revenues and Expenses: Pages 4-9

Emergency Medical Services: Page 97

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GENERAL FUND FORECAST MODEL JULY 2019

Available by public request of City Council

"Semi-annually, staff will provide revenue and expenditure projections for the next five years (General Fund Projection Model.) Projections will include estimated operating costs for future capital improvements that are included in the capital budget. This data will be presented to the City Council in a form to facilitate annual budget decisions, based on a multi-year strategic planning perspective."

-2019 Final Adopted Budget Budget Policy

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