Whatcom County Executive Satpal Sidhu formally submitted a first proposal of the biennial budget to county council Friday, Oct. 18. The budget includes increased revenue for the county in the form of “banked capacity,” unused taxing authority accumulated through years of the county taking less than its allowed maximum.
Banked capacity
State law requires property tax revenue to grow at a maximum of 1% per year plus the value of new construction. Until recently, Whatcom County for many years did not increase taxes by the allowed 1%, thanks to low inflation, significant new construction and fiscal conservatism. Banked capacity is those tax dollars the county could have taken but didn’t, and now Whatcom is looking to collect.
The county’s banked capacity in the general fund is $3.9 million and $3.7 million in the road fund. If both funds’ banked capacity is used, a homeowner with a property assessed at $700,000 would see an annual property tax increase of around $45 for the general fund and $92 for the road fund. The road levy’s impact to a homeowner is larger because it only applies to properties in the unincorporated county — owners in cities pay into the municipal road fund.
Some Whatcom County Council members have expressed resistance to taking banked capacity and increasing the burden on taxpayers.
“Every time we turn around we’re seeing evidence that people can’t afford to pay more and they’re screaming at us that they don’t want to pay more,” council member Ben Elenbaas said. “I’m having a real hard time pretending I don’t hear those people throughout the day.”
Whatcom County is unusual among peers
Whatcom County is somewhat unusual among its peer counties in Washington (with populations between 100,000 and 500,000) for having so much banked capacity in its general and road funds. Skagit County, for instance, generally uses its allowed 1% increase each year and has no banked capacity in any fund except Conservation Futures. Most of the cities within Whatcom, including Bellingham, don’t have much if any banked capacity. Snohomish County (population 840,000) does have banked capacity — and Snohomish Executive Dave Somers is expected to propose a budget that includes taking it.
Like many governments across the state, Whatcom is faced with budget challenges due to dried-up federal spending and flattened sales tax revenue paired with increased staff, salaries and expenses. New and expanded county services like homelessness programs, criminal justice, fentanyl response and climate resiliency have increased pressure on the county’s resources.
“The one-time revenues that masked some of the problems feel like they’re falling away all at the same time,” Sidhu told the council, referring to funding like the American Rescue Plan Act of 2021.
The executive’s office has worked for several months to communicate to the Whatcom County Council the gravity of the situation, and in July instituted what was supposed to be a 90-day hiring freeze that has not yet been lifted. The projected average operating deficit in the general fund alone is around $11 million per year.
The City of Bellingham is seeing similar challenges but does not have the tool of banked capacity to fall back on. Instead, according to Mayor Kim Lund’s budget message to city council, the city will deploy “targeted reductions” and “creative uses of existing resources” to address its general fund deficit. Bellingham also anticipates increasing property taxes by 1%.
The alternative
If the county chooses not to take banked capacity, the other option presented by the county executive’s office is to address the deficit by making $7 million in cuts next year. Deputy executive Aly Pennucci solicited input from every county department on how they would make the necessary cuts. The feedback was a litany of woes — the county is “an institution under stress,” according to an Oct. 8 memo from Pennucci.
The memo lays out some of the measures county departments would have to take to balance the budget without increasing taxes more than 1%. The measures included the elimination of funding that has gone to food banks, the Domestic Violence Coalition and Northwest Regional Council; furloughs, county closure days or layoffs; reductions to public safety and criminal justice; the elimination of the Climate Action Program; and major cuts to road fund expenses like chip sealing, dust control, snow plowing, large projects and maintenance.
“The things we do are pretty important,” said Jed Holmes, the executive’s spokesperson. “Public defense, flood control, law enforcement, snow plowing — it doesn’t feel like luxury work.”
Pennucci said department heads expressed concerns about staff burnout, pay cuts for those who can least afford it as a result of furloughs, longer permitting timelines, reduced public safety and other negative impacts.
Pennucci also outlined long-term strategies the county will use to keep operations sustainable in the future, such as financial planning, a fiscal transparency program, pursuing new revenue streams, advocacy at the state level and a budget prioritization exercise to inventory all county programs and services.
The county council will deliberate over the budget starting Oct. 22. The hearing to adopt the budget will likely be on Nov. 19, but the public is welcome to comment on it during regular county council meetings before then.
Julia Tellman writes about civic issues and anything else that happens to cross her desk; contact her at juliatellman@cascadiadaily.com.
