HOW BOTTOM LINE ACCOUNTING IS CRITICAL FOR MEETING PUBLIC RESPONSIBILITIES

Introduction

When Kenmore incorporated in 1998, the community assumed the liabilities for: (1) Criminal Justice, (2) Local Road Safety Standards, (3) Parks, (4) Surface Water Management/Environmental, and (5) Land Use Regulation and Administration. The Road Safety obligations came as a major unfunded liability, amounting to approximately $200,000,000 to $300,000,000 (or $25,000 to $40,000 per household.)

The City of Kenmore has no authority or responsibility for the Library, the Fire Department, or the Water Utility District.

Before incorporating, King County provided the Kenmore Community with a clear bottom-line financial plan. It emphasized (1) that the city had a very limited tax base and revenues, and (2) the city needed to limit operating costs and preserve the annual “Operating Surplus” to fund infrastructure improvements.

The surplus came wholly from what had been the annual Road Tax paid to King County
on our real estate tax bills, and was estimated to be $1.7 million per year.

Kenmore was clearly warned that we needed to protect the operating surplus and focus our spending on infrastructure liabilities rather than on increased city services. Without the surplus, Kenmore would not be able to seriously fund its infrastructure obligations.

Bottom Line Reporting

Without bottom line reporting for both operations and infrastructure, public officials can routinely avoid being held accountable as funding for the latter suffers. While
our annual operating surplus has turned into a deficit, the City Manager and
Council refuse to acknowledge that fact.

Operating expenses exceeded revenues in 2010, and again in the 2011 – 2012 budget, yet the city publicly denies it. Last February, the City Manager issued a press release to deny what is printed straight out of his own budget. This is why we need objective
bottom-line reporting.

Kenmore’s bottom-line reporting is summarized below for 1998 through 2010, and is accounted for consistently with the original financial plan at incorporation.

It shows the critical importance of the “Operating Surplus” in prior years, and the
difficult financial position we face now that we are incurring operating deficits.

For an Executive Summary, open the table below to the “Full Screen” for:

The Operating Surplus from 1998 – 2010, and how it has turned into a deficit.
The annual savings for infrastructure improvements from 1998 – 2010, and how that savings rate has declined to an ineffective level.
A summary of how the infrastructure savings has actually been spent, dividing the costs between city operations at 66%, and actual public improvements at 34%.

To view full screen of attachment below, select the icon in top right corner of the box.