Loading...
HomeMy WebLinkAboutCity Council Committees - Operations - 02/21/2012 (3) • Operations Committee Agenda KENTCouncilmembers: Les Thomas, Chair * Jamie Perry * Dennis Higgins WASH NOTON February 21, 2012 4:00 p.m. Item Description Action Speaker Time Page 1. Approval of Minutes YES 1 Dated January 17, 2012 2. Approval of Check Summary Reports Dated YES Bob Nachlinger January 1 through January 31, 2012 3. Biennial Budget YES Tom Brubaker 15 Min. 19 4. Infrastructure Funding Process NO John Hodgson 10 Min. 25 (Information Only) Unless otherwise noted, the Operations Committee meets at 4:00 p.m. on the I" and 3r' Tuesdays of each month. Council Chambers East, Kent City Hall, 220 4th Avenue South, Kent, 98032-5895. Dates and times are subject to change. For information please contact Nancy Clary at 253) 856-5705 or Pam Clark at (253) 856-5723. Any person requiring a disability accommodation should contact the City Clerk's Office at (253) 856-5725 in advance. For TDD relay service call the Washington Telecommunications Relay Service at 1-800-833-6388. This page intentionally left blank 1 KENO W/9XINOTOH OPERATIONS COMMITTEE MINUTES February 7, 2012 Committee Members Present: Les Thomas (chair), Dennis Higgins, Jamie Perry The meeting was called to order by L Thomas at 4:00 p.m. 1. APPROVAL OF MINUTES DATED JANUARY 17, 2012. J. Perry moved to approve the Operations Committee minutes dated January 17, 2012. D. Higgins seconded the motion, which passed 3-0. 2. MOVE TO RECOMMEND COUNCIL APPROVE THE REAPPOINTMENT OF BARBARA SMITH TO THE LODGING TAX ADVISORY COMMITTEE. Barbara Smith's new 3-year term will expire on December 31, 2014. She will fill the role as the representative in activities funded by the lodging tax. D. Higgins moved to recommend Council approve the reappointment of Barbara Smith to the Lodging Tax Advisory committee. J. Perry seconded the motion, which passed 3-0. 3. MOVED COUNCIL TO RECOMMEND THE OPERATIONS COMMITTEE AUTHORIZE ADMINISTRATION TO WRITE-OFF SD( UNCOLLECTIBLE ACCOUNTS TOTALING $98,141.33 AND FORWARD THIS MATTER TO THE CITY COUNCIL MEETING OF FEBRUARY 21, 2012. B. Nachlinger briefly reviewed the listed accounts. Last year's write-offs totaled $15,000.00. J. Perry moved council to recommend the Operations Committee authorize Administration to write-off six uncollectible accounts totaling $98,141.33 and forward this matter to the city council meeting of February 21, 2012. D. Higgins seconded the motion, which passed 3-0. 4. ANIMAL SERVICES CONTRACT UPDATE (INFORMATION ONLY) J. Hodgson, Chief Administrative Officer and J. Watling, Parks, Recreation and Human Services Director provided an update. King Co and the contracting cities have a new 3-yr contract. King County is investing more into the project so the cost for Kent will be $270k, which is a $100k reduction from the previous contract. The extended period of time gives the contracting cities until May 1 to determine whether they will provide individual services outside the County. A Letter of Intent will be submitted to the County at that time. Kent will still consider forming a Humane Society type of organization, which would serve to help and educate responsible pet ownership. J Watling continues to work with the County committee and the local group of vets and animal advocates. King County and Dow Constantine have changed their original position and have indicated that they do not want to be out of the animal services business. Future discussion will include the existing shelter and how long that building will last. A contract with the County would be built around an adjustable Consumer Price Index and revenue from licensing. The Operations Committee was unanimously in favor of moving forward with the three-year contract. 2 Operations Committee Minutes February 7, 2012 Page: 2 S. MOVE COUNCIL APPROVE THE RESOLUTION TO WAIVE THE COMPETITIVE BIDDING PROCEDURES FOR THE REPLACEMENT OF THE NETTING AT RIVERBEND GOLF DRIVING RANGE. As a result of the ice storm, the netting at the Riverbend Golf Driving Range became heavy with ice and collapsed, causing damage. The range is currently open with limited use although it poses as a threat to the adjoining apartment building, Colony Park, and pedestrians on the Green River Trail. Revenue is being lost due to the limited use. To control our losses, T. Brubaker, City Attorney proposed Council authorize waiving competitive bidding for the replacement of the netting at the Riverbend Driving Range and place it as an action item under Other Business at tonight's Council meeting. The City's Insurance Company will pay for the repairs and three bids have already been obtained. D. Higgins moved that Council approve the resolution to waive the competitive bidding procedure for the replacement of the netting at the Riverbend Golf Course Driving Range. J. Perry seconded the motion, which passed 3-0. 6. BOND RATING (INFORMATION ONLY) The Mayor informed council that the City rating with Moody's Investor Services downgraded the Limited Tax General Bond from an Aa3 to an Al status (one notch lower). The Mayor is contributing this to the economic challenges we have been experiencing, including Streamline Sales Tax and Annexation funds, which other cities are not relying on as much as Kent. She presented the council with additional information for the discussion and will distribute to the other council members. J. Perry commented the budget is going to be discussed at the council retreat and this information will be a good framing. The Mayor discussed the importance of sustainable funding models and what actions the city is already taking. The Moody report notes that the "city appears to be in the early stages of turnaround, committed to rebuilding negative fund balances, paying down interfund debts and stabilizing recurring fund operations.". City staff will work through Operations Committee Chair Thomas to schedule committee discussions that specify suggestions for consideration in the 2013 budget process. J. Perry noted she discussed with L. Thomas and D. Higgins she is going to "revamp"the city financial policies and will bring them to Operations for discussion. The meeting was adjourned at 4:40 p.m. by L. Thomas. Pamela Clark Operations Committee Secretary 3 RESOLUTION NO. A RESOLUTION of the city council of the city of Kent, Washington, w6 ing competitive bidding procedures for the $0 cement of the netting at the Riverbend D$m4 g Ran THE CITY COUNCIL THE b KENT, WASHINGTON, DOES HEREBY RESOLVE AS FOLLb7WS� , RESOLUTION ar. SECTION 1. Firt .nas. The city council of the city of Kent, Washington, makes the following findings to establish an emergency waiver of competitive bidding requirements pursuant to RCW 39.04.280: A. On January 19, 2012, the city of Kent was hit with a snow, ice, wind and rain storm that caused catastrophic damage throughout the city. Power was lost, trees were damaged, streets were shut down, and the general operations of the city were disrupted. B. The netting at the Riverbend golf course driving range was completely destroyed. The net collapsed, shattering snow and ice onto the Emergency Resolution Riverbend Driving Range Netting 4 driving range facility, onto the adjoining Green River trail, and on to neighboring property. C. The driving range is open daily, year-round. With the net down, patrons are not able to use the driving range as it normally functions, and as a result, patrons are not as likely to use the city's driving range, resulting in economic loss to the city's golf course facilities. D. The heavily-used Green River pedestrian/bike trail borders the south side of the driving range, resulting in the potential for the increased risk of harm to persons using the trail, and add!.Tonal damage to the trail. E. The Colony Park apartm , bor the west side of the driving range. These apartments, its r i 'ts, vi ftors, and vehicles are subject to damage from errant g --balls he netting is not immediately r replaced, F. The aboe-ddes , ' Mtaaation constitutes an emergency that results from an ur�fpresee'N, irC; nstance that was beyond the control of the city that presents< reap immediate threat to the proper performance of the city's golf facilitiel the Green River trail, and it will result in a material loss and damage to public and private property. G. The city council finds that it is appropriate for the city to enter into an emergency public works contract for the replacement of the Riverbend golf course driving range netting. SECTION 2. Emergency Declared; Competitive Bidding Requirements Waived. Based on the preceding Findings, an emergency exists and in accordance with RCW 39.04.280, it is appropriate to waive competitive bidding requirements and to directly contract with a contractor 2 Emergency Resolution Riverbend Driving Range Netting I 5 the city determines is best able to replace and install the driving range netting. City staff is directed to employ its best efforts to obtain the most advantageous pricing for this work, given the existence of this emergency. SECTION 3. — Severabilitv. If any section, subsection, paragraph, sentence, clause or phrase of this resolution is declared unconstitutional or invalid for any reason, such decision shall not affect the validity of the remaining portions of this resolution. SECTION 4, - Effective Date. This resolution shall take effect and be in force immediately upon its passage t PASSED at a regular open public izeting bye city council of the city of Kent, Washington, this 7th day ofy Febru4 ; 2012. CONCURRED in by th, may.. L city of Kent this 7tn day of February, 2012. z* � 3 �( p d� SUZETTE COOKE, MAYOR ATTEST: BRENDA JACOBER, CITY CLERK APPROVED AS TO FORM: TOM BRUBAKER, CITY ATTORNEY 3 Emergency Resolution Riverbend Driving Range Netting 6 ! keby certify that this * a true and correct copy of Resolution No. passed R mew coca 7 the city of Gm Washington, the » day of February, 2012. BRENU yc R% CITY CLERK dy^ > � �, 01 4/ , . Emergency Resolution erbend Driving Range Netting 7 OFFICE OF THE MAYOR Suzette Cooke, Mayor ', 2204th Avenue South Kent, WA 98032 Fax: 253-856-6700 PHONE: 253-856-5700 o-vrx-,.s aueuuxcuwvxv;;yea=.,a.-M.s�anean '.. City of Kent's Bond Rating Moody's Downgrades LTGO Bonds to Al from Aa3 Response from Kent Mayor, Suzette Cooke Introduction For nearly four years, city government has been in persistent contraction. Rising costs and deteriorating revenues have forced reductions in every area our budget. We have significantly cut internal supports - like training and supplies, reduced staff, cut programs, and delayed projects until economic conditions stabilized, trying to maintain a level of service that least damages our residents and job base. As Moody's notes, "Specifically, there is uncertainty with regard to the city's ability to implement additional expenditure cuts as it has already enacted significant cuts over the last three fiscal years." (bold added) Last year the Council established a strategic goal to develop and implement a sustainable funding model for city services. To this end, along with program and staff cuts, I included several new revenue sources and rate increases in the proposed 2012 budget. Council adopted a portion of the proposals. Uncertainty created by the economic recession has placed a financial burden on all levels of government. Locally we know South King County sales tax revenue is down 32%, the sluggish construction industry has gutted our development fees income, and the dearth of property sales has reduced REET revenue (Real Estate Excise Tax) by 75%. As the State and King County re-align their budgets, they have either reduced committed revenues to us (such as Stream-lined Sales Tax) or transferred the responsibility of providing services down to us with no attached revenue (such as animal control). The trickle-down effect has left Kent financially "_. vulnerable to acts and decisions outside our control. As Moody's states, y "There is also uncertainty with regard to the city's ability to preserve current Y levels of state shared revenues...." U 3 Page 1 of 3 0 MAYOR SUZETTE COOKE e -R.�: x .��ss. •t+Asa: c v � »c=_.rr.a".r�.s..<r.::aza v aw seq..us;ss� -nn.ww. :..... .::.....€ x:vze.: ,m•-.2...,::.r; ,. „<:€, >;s Kent Bond Rating 8 O 1. Why was the city's credit rating downgraded? Taken directly from Moody's report, "The downgrade reflects the city significantly deteriorated financial position, resulting from recurring operating deficits and depletion of cash and reserve levels across all governmental funds." The downgrade also incorporates the debt burden and risk associated with backing the Public Facilities District for ShoWare Center. 2. What is the effect of this rating change? What is the cost to the city? There is no immediate cost to the City. This downgrade does not affect current indebtedness or bond payments, nor would it affect voter-approved or revenue bonds. Where it would have a negative impact is if the Council was to approve councilmanic bonds, the interest rate we pay would increase approximately one-tenth of a percent (0.1001o). Any impact to a Kent municipal bond holder would only occur if the bonds were sold before maturity, in which case the sales price would be slightly less. The bond amount at maturity remains unchanged. 3. Is the city planning to issue any debt in the near term? The only type of debt that was downgraded is LTGO - Limited Tax General Obligation. We have no plans to issue LTGO bonds. 4. What can the City do to improve its credit rating? • Continue to improve our general government fund levels so we can eliminate our reliance on water and sewer reserves to finance short-term cash flow needs. • You approved an amended contract with ShoWare Center's operator that reduced annual management fees by over 50% (.$120,000 savings). • Continue working with ShoWare management and the Seattle Thunderbirds to increase self-sufficiency for ShoWare operations to help the Public Facilities District (PFD) pay off its capital debt. 2 I Kent Bond Rating g • Liquidate land and facilities that are not critical to the City's long-term goals in order to reduce our debt burden. • Implement a two-year budget that establishes a longer-term financial commitment to strategic goals. • Restore the general fund balance to 10%. • Establish a capital reserve fund and an emergency reserve fund (as recommended in the 2011 preliminary budget). • Increase the variety and amount of revenue from taxes and fees (such as business licenses, internet cable tax, business & operations tax). S. Are the city's finances on solid footing now? No. While the economy shows signs of a weak turn-around, we are at the mercy of the State Legislature. Our 2012 budget assumes nearly $14.5 million (15% of our general operating budget) in state-shared revenues. Where do we go from here? On a good note, Moody's report lists our strengths as having a large, relatively resilient property tax base; a stable local economy; and a 'still manageable debt burden" with regards to the PFD (ShoWare Center). "The city appears to be in the early stages of a turnaround, committed to rebuilding negative fund balances, paying down interfund debts and stabilizing recurring fund operations." Moody's downgrade illustrates our need to play to our strengths and mitigate the challenges we face that are within our control. Those challenges include increase our financial flexibility, reduce our fixed debt ratio, re-visit our balance between revenue and expenditures, and convince the State to keep its financial commitments to us. We will work through Operations Committee Chair Thomas to schedule committee discussions that specify suggestions for consideration in the 2013 budget process. III 3 i 10 This page intentionally left blank 11 00DY INVESTORS SERVICE Rating Update: MOODY'S DOVINGRADES CITY OF KENT, WASHINGTON'S LTGO BONDS TO Al FROM Aa3; NEGATIVE OUTLOOK ASSIGNED Global Credit Research-06 Feb 2012 $78.3 MILLION OF RATED DEBT AFFECTED KENT(CITY OF) WA Cities (including Towns, Villages and Townships) WA Opinion NEW YORK, February 06, 2012 --Moody's Investors Service has downgraded to Al from Aa3 the City of Kent, Washington's limited tax general obligation bond rating. Concurrently, Moody's has assigned a negative outlook to the rating. RATING RATIONALE The downgrade reflects the city's significantly deteriorated financial position, resulting from recurring operating deficits and a depletion of cash and reserve levels across all governmental funds. The downgrade also incorporates the city's increased debt burden and risk associated with contingent support for a distressed component unit. The Al rating also reflects the city's large tax base, stable local economy, location within the Seattle metropolitan area and manageable debt burden. The negative outlook reflects the city's very limited financial flexibility deriving from a weak balance sheet with a high fixed cost burden; the need to divert a substantial portion of future cash flows from General fund uses to resolve deficits and internal debts throughout governmental funds; and uncertainty regarding the city's ability to implement additional expenditure cuts, preserve current levels of state shared revenues and stabilize governmental operations through structural, ongoing reforms rather than through one-time solutions. STRENGTHS - Large, relatively resilient property tax base - Stable local economy benefitting from location in Seattle metropolitan area - Increased clarity with regard to public facilities district (PFD) exposure, still manageable debt burden CHALLENGES - Significantly limited financial flexibility - Substantial fixed cost burden - Ongoing risks related to PFD exposure and potential reductions in state shared revenues WEAK BALANCE SHEET WITH LIMITED ABILITY TO ABSORB ADDITIONAL FINANCIAL PRESSURE The city's financial position deteriorated significantly from FY 2008- FY 2010, driven primarily by deficit spending on debt service, infrastructure, personnel and the city's PFD facility. The city ended FY 2010 12 with a General fund cash balance of$161,000 (0.2% of General fund revenues)- including a $2.5 million interfund loan payable- and a total General fund balance of$826,109 (1.1%). As a substantial portion of the deficit spending occurred outside of the General fund, the deterioration extends to all governmental funds.All governmental funds ended FY 2010 with a combined cash balance of$4.6 million(4.4% of all governmental funds revenues) and a combined total fund balance of-$11 million(-10.5%). Over the same period, interfund leverage increased more than 6x, to a combined $21.4 million in FY 2010, from a combined $3.2 million in FY 2008. The city's weaker funds - General fund, Capital Improvement fund, Street Projects fund and Other Projects fund- borrowed heavily from the city's strongest funds, the Sewerage and Water enterprises. The Sewerage and Water enterprises added more than$12 million and $5 million of interfund receivables over the last three fiscal years, respectively. The city also borrowed $3.1 million from its Insurance fund, significantly compressing the level of capitalization within the Insurance fund if one discounts the $3.1 million of interfund receivables. The city's FY 2011 (unaudited) results indicate operating improvements. FY 2011 total General fund balance increased to$1.73 million(2.2% of FY 2010 General fund revenues), the result of a reduction of 35 FTEs and a 3% reduction to supplies and services budgets. The city also realized more than$2.2 million ($4.5 million annualized) of expenditure savings resulting from the fire department reincorporating into an independent fire district effective July 1, 2010. Also in FY 2011, the city retired the General fund's $2.5 million interfund loan and paid down$1.75 million of the Street Projects fund's deficit (which along with the fund's own operating improvements eliminated the fund's deficit balance). Still, General fund finances remain thin, and the extent to which improvements were realized throughout governmental funds is to be determined. The Capital Improvement (CI)fund- the major governmental fund with the largest negative balance- is the city's priority for FY 2012. The city will allocate an additional 5% ($800,000) of its sales tax; impose a 4% internal tax on the gross revenues of its utilities ($2 million) and sell $6 million of surplus property- all of which will be applied to the Cl fund deficit (-$8.1 million). The FY 2012 budget also provides the city a savings buffer with which to absorb unanticipated financial pressures or further rebuild reserves. The city budgeted for full employment but expects to maintain a 2% vacancy rate, which will save approximately$1.2 million.Additionally, the city budgeted a 1.5% COLA for all bargaining groups but subsequently negotiated contracts with no COLAs for all bargaining groups. The unspent COLA money will save approximately$1 million. The city appears to be in the early stages of a turnaround, committed to rebuilding negative fund balances, paying down interfund debts and stabilizing recurring fund operations. However, the extent and manner in which the city is successful at executing this turnaround will be an important factor in determining future rating action. While a portion of the earlier deficit spending was driven by the city's position at the end of a construction cycle from which it could not pull back despite declining funding sources (i.e., tax revenues), an equal portion appears to be related to the shifting of General fund expenditure burdens, including debt service and personnel, onto other funds which had inadequate resources to finance those obligations. Moody's believes a sustainable turnaround cannot be one characterized by General fund recovery at the expense of other major governmental funds, or one supported by continued cash flow borrowing from stronger enterprises. DEBT BURDEN AND FINANCIAL EXPOSURE INCREASE WITH SUPPORT FOR DISTRESSED COMPONENT UNIT The city's direct debt burden is low at 0.7% of 2011 assessed value (AV) and consists of$78 million of LTGO debt, $7.7 million of special assessment debt (self-supporting but an obligation of the city) and $14.7 million of contracts/state loans (subordinate to LTGO and SA debt). However, the city has been covering operating losses and debt service payments for the Kent Events Center- a public facilities district (PFD)owned and operated by the city- per a contingent loan and 13 support agreement with the PFD. The PFD has a combined $61.7 million of sales tax revenue and revenue bond debt outstanding. Of the total $61.7 million, approximately$51.8 million (84%) is sales tax revenue debt secured by the PFD's 0.033% sales tax allocation (0.0337% after adjusting for the SST mitigation payment) and net revenues from the PFD's operations. $9.8 million(16%) is revenue debt secured, on a parity basis, by net revenues from the PFD's operations. Both bonds are long-term, fixed-rate obligations and do not include any derivatives or swaps features. The PFD is managed by a third party operator, with the city reimbursing 0&M expenses and remitting net revenues to the PFD (or absorbing net losses if net revenues are negative). In each of the first three years of operations - FY 2009, FY 2010 and FY 2011 -the PFD had an average $430,000 net loss from operations, which the city absorbed. As there have been annual net losses, the PFD's only revenue applicable to debt service has been the restricted sales tax allocation, which was approximately$622,000 in FY 2010. With FY 2010 debt service of$3.7 million, the city paid the balance of$3.1 million. Debt service escalates annually to MAIDS of$5.8 million in 2032, and then steps down to approximately$3.5 million annually to maturity in 2037. Assuming the PFD is an incurred obligation of the city, the city's direct debt burden would increase to approximately 1.2% of 2011 AV- an increased but still manageable debt burden. While the primary enterprise risk is now effectively captured on the city's balance sheet, a degree of risk remains, as operating losses (revenues net of O&M) are essentially open-ended. With the assumption of the PFD's debt onto its balance sheet, the city's financial flexibility becomes further limited as another fixed cost is added to its budget. Including PFD debt service, FY 2012 debt service is $13.9 million. Adding back$5.4 million of sales taxes and real estate excise taxes shifted from the General fund to the Capital Improvement fund, FY 2012 debt service of$8.5 million represents 10.8% of General fund revenues. Including the city's pension contribution of$6.7 million, fixed costs of$15.2 million represent 19.3% of General fund revenues- a notably high proportion. The city does not plan to issue additional debt in the near term. STABLE LOCAL ECONOMY, LOCATED IN SEATTLE METROPOLITAN AREA The City of Kent is located in southern King County(Aaa/Stable, LT SR GO)Washington, 15 miles south of City of Seattle (Aaa/Stable, LT SR GO). It is the third largest city in King County and the sixth largest city in the state of Washington. The local employment base is diverse, comprising a mix of corporate operations (REI); distribution/warehousing (Coldo, GE and Sysco); government; manufacturing (Boeing) and retail (Kent Station). The city's property tax base size- 2011 AV of$12.64 billion- is strong for the rating category, and has experienced relatively modest declines in recent years, in part due to the base's large commercial/industrial component, whose values are typically less volatile than residential values. Base size increased in 2010 with the annexation of Panther Lake (previously unincorporated King County) effective July 1, 2010, which added more than 5 square miles (primarily residential) and 24,000 residents to the city. The city's pre-annexation population grew more than 16% between 2000- 2010, to reach 92,411 as of the 2010 US Census. With the annexation, the city's population increased to approximately 118,000. Socioeconomic indicators are moderately strong, with median family income (MFI) representing 104.5% of the national median. The city's November 2011 unemployment rate of 9% is moderately elevated - above both state (8.3%) and national (8.2%) - but has improved from the November 2010 rate of 9.9%. OUTLOOK The negative outlook reflects the city's limited financial flexibility, deriving primarily from a very weak 14 balance sheet with a high fixed cost burden. The city's flexibility is constrained by the need to divert a substantial portion of future cash flows from General fund uses to resolve deficits and internal debts across governmental funds. Additionally, there is the risk of continued and (potentially) increasing support of the PFD, as well as numerous other uncertainties regarding expenditures, revenues and the city's ability to accordingly manage financial pressures. Specifically, there is uncertainty with regard to the city's ability to implement additional expenditure cuts as it has already enacted significant cuts over the last three fiscal years. There is also uncertainty with regard to the city's ability to preserve current levels of state shared revenues, which are substantial at $8.5 million annually(approximately 11% of FY 2010 General fund revenues). WHAT COULD MOVE THE RATING UP - Improved internal liquidity and available reserve levels - Increased self-sufficiency/decreased subsidy of distressed component unit - Structural operating adjustments to align recurring expenditures with recurring revenues WHAT COULD MOVE THE RATING DOWN -Weakened internal liquidity and available reserve levels - Deterioration of/increased subsidy of distressed component unit - Inability to align recurring expenditures with recurring revenues KEY INDICATORS FY 2010 net General fund cash, % of revenue: 0.2% FY 2010 total General fund balance, % of revenue: 1,1% FY 2010 unreserved Generalfund balance, % of revenue: 1% FY 2010 direct debt burden, % of assessed valuation(AV): 0.7% 2011 assessed valuation(AV): $12.64 billion 2010 US Census, total population: 92,411 The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com. For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support 15 provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Information sources used to prepare the rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, and confidential and proprietary Moody's Analytics' information. Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating. Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third- party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests. Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for(B) further information regarding certain affiliations that may e>dst between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter. Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery. Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Analysts Moses Kopmar Lead Analyst Public Finance Group Moody's Investors Service Matthew Jones Backup Analyst Public Finance Group Moody's Investors Service 16 Contacts Journalists: (212) 553-0376 Research Clients: (212) 553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MOODY? INVESTORS SERVICE ©2012 Moody's Investors Service, Inc.and/or its licensors and affiliates(collectively, "MOODY'S").All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE,INC.("MIS")AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES,CREDIT COMMITMENTS,OR DEBT OR DEBT-LIKE SECURITIES,AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S("MOODY'S PUBLICATIONS")MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES,CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT.CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT.CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE,AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE,SELL,OR HOLD PARTICULAR SECURITIES.NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING,OR SALE. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED,TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD,OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODYS PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however,all information contained herein is provided"AS IS"without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable,including,when appropriate, independent third-parry sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.Under no circumstances shall MOODY'S have any liability to any person or entity for(a)any loss or 17 damage in whole or in part caused by,resulting from, or relating to, any error(negligent or otherwise)or other circumstance or contingency within or outside the control of MOODY'S or any of its directors,officers, employees or agents in connection with the procurement,collection, compilation,analysis, interpretation,communication, publication or delivery of any such information,or(b)any direct, indirect,special, consequential,compensatory or incidental damages whatsoever(including without limitation,lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use,any such information.The ratings,financial reporting analysis, projections,and other observations, if any, constituting part of the information contained herein are,and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase,sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED,AS TO THE ACCURACY,TIMELINESS,COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. MIS,a wholly-owned credit rating agency subsidiary of Moody's Corporation("MCO"), hereby discloses that most issuers of debt securities(including corporate and municipal bonds, debentures, notes and commercial paper)and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from$1,500 to appro>dmately$2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities,and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at wvvwmoodys.com under the heading"Shareholder Relations—Corporate Governance—Director and Shareholder Affiliation Policy." Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657,which holds Australian Financial Services License no. 336969. This document is intended to be provided only to"wholesale clients"within the meaning of section 761 G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are,or are accessing the document as a representative of,a "wholesale client"and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to"retail clients"within the meaning of section 761G of the Corporations Act 2001. Notwithstanding the foregoing,credit ratings assigned on and after October 1,2010 by Moody's Japan K.K. ("MJKK")are MJKK's current opinions of the relative future credit risk of entities, credit comrrgtments, or debt or debt-like securities. In such a case,"MIS" in the foregoing statements shall be deemed to be replaced with"MJKK MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K.,which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. This credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser. 18 This page intentionally left blank 19 FINANCE DEPARTMENT 440 Robert Nachlinger, Finance Director Phone: 253-856-5260 N'147KEN T Fax: 253-856-6255 WASHING-ON Address: 220 Fourth Avenue S. Kent, WA. 98032-5895 February 13, 2012 To: Operations Committee From: Robert Nachlinger, Finance Director Regarding: Biennial Budget - Ordinance-Adopt MOTION: Recommend adoption of an ordinance establishing a biennial budget beginning January 1, 2013. SUMMARY: The State Legislature has provided that a code city, like Kent, may elect to have a two-year fiscal biennial budget in place of an annual budget process. The attached budget ordinance commences that process establishing a biennial budget, adds a new chapter to the Kent City Code, and requires that the Council adopt a biennial budget to commence in the fiscal biennium beginning January 1, 2013. BUDGET IMPACT: None at this time; expected savings in 2014 P:\Civil\Motions-BlueSheet\Biennial Budget Modon.docx 20 ORDINANCE NO. AN ORDINANCE of the City Council of the City of Kent, Washington, adding a new Chapter 3.04 to the Kent City Code, entitled "Biennial Budget," establishing a biennial budget beginning January 1, 2013 and providing for a mid-biennial budget review and modification, in accordance with Chapter 35A.34 RCW. RECITALS A. The State Legislature has provided that the legislative body of any code city may by ordinance elect to have a two-year fiscal biennium budget in lieu of the annual budget which is otherwise provided for. B. Chapter 35A.34 RCW provides that the City must adopt a biennial budget not later than July 1, 2012 in order to be effective January 1, 2013. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: ORDINANCE SECTION 1. — Biennia/ Budget. A new Chapter 3.04, entitled "Biennial Budget" is adopted: 1 Adopt Biennial Budget Ordinance 21 Sec. 3.04.010. Biennial Budget. Pursuant to Chapter 35A.34 RCW, the City Council hereby establishes a two-year fiscal biennial budget, for the City of Kent, beginning with the two-year fiscal biennium that begins January 1, 2013. The 2013-2014 biennial budget and all subsequent budgets shall be prepared, considered and adopted under the provisions of this ordinance and Chapter 35A.34 RCW. Sec. 3.04.020. Mid-Biennial Review and Modification. Pursuant to RCW 35A.34.130, the City Council will provide a mid-biennium review and modification of the biennial budget to commence not earlier than eight months after the start of the first year of the fiscal biennium and to take effect not later than January 1 of the following year. The Mayor shall first prepare the proposed budget modification. Once proposed, the mid-biennium modifications shall be sent to the City Council. The proposed budget modifications shall be a public record and shall be available to the public by the provision of copies at the Office of the City Clerk and by providing copies in an electronically downloadable format, if possible, available through the internet or other electronic data environment that is widely available to the public. The city council shall conduct at least two public hearings on the proposed modification. The hearings shall occur at a regular or special city council meeting. The Mayor shall provide publication of notice of the public hearings consistent with publication of notice for adoption of other city ordinances. The budget modifications must be passed by ordinance, and once passed, a complete copy of the adopted budget modifications must be transmitted to the state auditor and to the association of Washington cities. SECTION 2. — Corrections by City Clerk or Code Reviser. Upon approval of the City Attorney, the City Clerk and the code reviser are authorized to make necessary corrections to this ordinance, including the 2 Adopt Biennial Budget Ordinance 22 correction of clerical errors; ordinance, section, or subsection numbering; or references to other local, state or federal laws, codes, rules, or regulations. SECTION 3, — SeverabilitY. If any one or more section, subsection, or sentence of this ordinance is held to be unconstitutional or invalid, that decision shall not affect the validity of the remaining portion of this ordinance and that remaining portion shall maintain its full force and effect. SECTION 4, — Effective Date. This ordinance shall take effect and be in force five (5) days from and after its passage and publication, as provided by law. SUZETTE COOKE, MAYOR ATTEST: BRENDA JACOBER, CITY CLERK APPROVED AS TO FORM: TOM BRUBAKER, CITY ATTORNEY PASSED: day of 2012. APPROVED: day of 2012. PUBLISHED: day of 2012. 3 Adopt Biennial Budget Ordinance 23 I hereby certify that this is a true copy of Ordinance No. passed by the City Council of the City of Kent, Washington, and approved by the Mayor of the City of Kent as hereon indicated. (SEAL) BRENDA JACOBER, CITY CLERK P:\Civil\Ordinance\Biennial Budget Adopdon.docx 4 Adopt Biennial Budget Ordinance 24 This page intentionally left blank 25 KENT WASHING-ON OFFICE OF THE MAYOR Suzette Cooke, Mayor Phone: 253-856-5700 Fax: 253-856-6700 220 Fourth Avenue S. Kent, WA. 98032-5895 DATE: February 21, 2012 TO: Kent City Council Operations Committee FROM: John Hodgson, Chief Administrative Officer THROUGH: Suzette Cooke, Mayor SUBJECT: Infrastructure Funding Process MOTION: Information Only SUMMARY: City Council and staff have had discussions regarding methods to infrastructure improvements for streets and parks. At the city council's recent planning retreat this topic was discussed at length. Staff and committee will discuss next steps and the formation of a council ad hoc committee to track the progress. Staff will also discuss the city advisory oversite process as well. BUDGET IMPACT: N/A EXHIBITS: None • Operations Committee Agenda KENTCouncilmembers: Les Thomas, Chair * Jamie Perry * Dennis Higgins WASH NOTON February 21, 2012 4:00 p.m. Item Description Action Speaker Time Page 1. Approval of Minutes YES 1 Dated January 17, 2012 2. Approval of Check Summary Reports Dated YES Bob Nachlinger January 1 through January 31, 2012 3. Biennial Budget YES Tom Brubaker 15 Min. 19 4. Infrastructure Funding Process NO John Hodgson 10 Min. 25 (Information Only) Unless otherwise noted, the Operations Committee meets at 4:00 p.m. on the I" and 3r' Tuesdays of each month. Council Chambers East, Kent City Hall, 220 4th Avenue South, Kent, 98032-5895. Dates and times are subject to change. For information please contact Nancy Clary at 253) 856-5705 or Pam Clark at (253) 856-5723. Any person requiring a disability accommodation should contact the City Clerk's Office at (253) 856-5725 in advance. For TDD relay service call the Washington Telecommunications Relay Service at 1-800-833-6388. This page intentionally left blank 1 KENO W/9XINOTOH OPERATIONS COMMITTEE MINUTES February 7, 2012 Committee Members Present: Les Thomas (chair), Dennis Higgins, Jamie Perry The meeting was called to order by L Thomas at 4:00 p.m. 1. APPROVAL OF MINUTES DATED JANUARY 17, 2012. J. Perry moved to approve the Operations Committee minutes dated January 17, 2012. D. Higgins seconded the motion, which passed 3-0. 2. MOVE TO RECOMMEND COUNCIL APPROVE THE REAPPOINTMENT OF BARBARA SMITH TO THE LODGING TAX ADVISORY COMMITTEE. Barbara Smith's new 3-year term will expire on December 31, 2014. She will fill the role as the representative in activities funded by the lodging tax. D. Higgins moved to recommend Council approve the reappointment of Barbara Smith to the Lodging Tax Advisory committee. J. Perry seconded the motion, which passed 3-0. 3. MOVED COUNCIL TO RECOMMEND THE OPERATIONS COMMITTEE AUTHORIZE ADMINISTRATION TO WRITE-OFF SD( UNCOLLECTIBLE ACCOUNTS TOTALING $98,141.33 AND FORWARD THIS MATTER TO THE CITY COUNCIL MEETING OF FEBRUARY 21, 2012. B. Nachlinger briefly reviewed the listed accounts. Last year's write-offs totaled $15,000.00. J. Perry moved council to recommend the Operations Committee authorize Administration to write-off six uncollectible accounts totaling $98,141.33 and forward this matter to the city council meeting of February 21, 2012. D. Higgins seconded the motion, which passed 3-0. 4. ANIMAL SERVICES CONTRACT UPDATE (INFORMATION ONLY) J. Hodgson, Chief Administrative Officer and J. Watling, Parks, Recreation and Human Services Director provided an update. King Co and the contracting cities have a new 3-yr contract. King County is investing more into the project so the cost for Kent will be $270k, which is a $100k reduction from the previous contract. The extended period of time gives the contracting cities until May 1 to determine whether they will provide individual services outside the County. A Letter of Intent will be submitted to the County at that time. Kent will still consider forming a Humane Society type of organization, which would serve to help and educate responsible pet ownership. J Watling continues to work with the County committee and the local group of vets and animal advocates. King County and Dow Constantine have changed their original position and have indicated that they do not want to be out of the animal services business. Future discussion will include the existing shelter and how long that building will last. A contract with the County would be built around an adjustable Consumer Price Index and revenue from licensing. The Operations Committee was unanimously in favor of moving forward with the three-year contract. 2 Operations Committee Minutes February 7, 2012 Page: 2 S. MOVE COUNCIL APPROVE THE RESOLUTION TO WAIVE THE COMPETITIVE BIDDING PROCEDURES FOR THE REPLACEMENT OF THE NETTING AT RIVERBEND GOLF DRIVING RANGE. As a result of the ice storm, the netting at the Riverbend Golf Driving Range became heavy with ice and collapsed, causing damage. The range is currently open with limited use although it poses as a threat to the adjoining apartment building, Colony Park, and pedestrians on the Green River Trail. Revenue is being lost due to the limited use. To control our losses, T. Brubaker, City Attorney proposed Council authorize waiving competitive bidding for the replacement of the netting at the Riverbend Driving Range and place it as an action item under Other Business at tonight's Council meeting. The City's Insurance Company will pay for the repairs and three bids have already been obtained. D. Higgins moved that Council approve the resolution to waive the competitive bidding procedure for the replacement of the netting at the Riverbend Golf Course Driving Range. J. Perry seconded the motion, which passed 3-0. 6. BOND RATING (INFORMATION ONLY) The Mayor informed council that the City rating with Moody's Investor Services downgraded the Limited Tax General Bond from an Aa3 to an Al status (one notch lower). The Mayor is contributing this to the economic challenges we have been experiencing, including Streamline Sales Tax and Annexation funds, which other cities are not relying on as much as Kent. She presented the council with additional information for the discussion and will distribute to the other council members. J. Perry commented the budget is going to be discussed at the council retreat and this information will be a good framing. The Mayor discussed the importance of sustainable funding models and what actions the city is already taking. The Moody report notes that the "city appears to be in the early stages of turnaround, committed to rebuilding negative fund balances, paying down interfund debts and stabilizing recurring fund operations.". City staff will work through Operations Committee Chair Thomas to schedule committee discussions that specify suggestions for consideration in the 2013 budget process. J. Perry noted she discussed with L. Thomas and D. Higgins she is going to "revamp"the city financial policies and will bring them to Operations for discussion. The meeting was adjourned at 4:40 p.m. by L. Thomas. Pamela Clark Operations Committee Secretary 3 RESOLUTION NO. A RESOLUTION of the city council of the city of Kent, Washington, w6 ing competitive bidding procedures for the $0 cement of the netting at the Riverbend D$m4 g Ran THE CITY COUNCIL THE b KENT, WASHINGTON, DOES HEREBY RESOLVE AS FOLLb7WS� , RESOLUTION ar. SECTION 1. Firt .nas. The city council of the city of Kent, Washington, makes the following findings to establish an emergency waiver of competitive bidding requirements pursuant to RCW 39.04.280: A. On January 19, 2012, the city of Kent was hit with a snow, ice, wind and rain storm that caused catastrophic damage throughout the city. Power was lost, trees were damaged, streets were shut down, and the general operations of the city were disrupted. B. The netting at the Riverbend golf course driving range was completely destroyed. The net collapsed, shattering snow and ice onto the Emergency Resolution Riverbend Driving Range Netting 4 driving range facility, onto the adjoining Green River trail, and on to neighboring property. C. The driving range is open daily, year-round. With the net down, patrons are not able to use the driving range as it normally functions, and as a result, patrons are not as likely to use the city's driving range, resulting in economic loss to the city's golf course facilities. D. The heavily-used Green River pedestrian/bike trail borders the south side of the driving range, resulting in the potential for the increased risk of harm to persons using the trail, and add!.Tonal damage to the trail. E. The Colony Park apartm , bor the west side of the driving range. These apartments, its r i 'ts, vi ftors, and vehicles are subject to damage from errant g --balls he netting is not immediately r replaced, F. The aboe-ddes , ' Mtaaation constitutes an emergency that results from an ur�fpresee'N, irC; nstance that was beyond the control of the city that presents< reap immediate threat to the proper performance of the city's golf facilitiel the Green River trail, and it will result in a material loss and damage to public and private property. G. The city council finds that it is appropriate for the city to enter into an emergency public works contract for the replacement of the Riverbend golf course driving range netting. SECTION 2. Emergency Declared; Competitive Bidding Requirements Waived. Based on the preceding Findings, an emergency exists and in accordance with RCW 39.04.280, it is appropriate to waive competitive bidding requirements and to directly contract with a contractor 2 Emergency Resolution Riverbend Driving Range Netting I 5 the city determines is best able to replace and install the driving range netting. City staff is directed to employ its best efforts to obtain the most advantageous pricing for this work, given the existence of this emergency. SECTION 3. — Severabilitv. If any section, subsection, paragraph, sentence, clause or phrase of this resolution is declared unconstitutional or invalid for any reason, such decision shall not affect the validity of the remaining portions of this resolution. SECTION 4, - Effective Date. This resolution shall take effect and be in force immediately upon its passage t PASSED at a regular open public izeting bye city council of the city of Kent, Washington, this 7th day ofy Febru4 ; 2012. CONCURRED in by th, may.. L city of Kent this 7tn day of February, 2012. z* � 3 �( p d� SUZETTE COOKE, MAYOR ATTEST: BRENDA JACOBER, CITY CLERK APPROVED AS TO FORM: TOM BRUBAKER, CITY ATTORNEY 3 Emergency Resolution Riverbend Driving Range Netting 6 ! keby certify that this * a true and correct copy of Resolution No. passed R mew coca 7 the city of Gm Washington, the » day of February, 2012. BRENU yc R% CITY CLERK dy^ > � �, 01 4/ , . Emergency Resolution erbend Driving Range Netting 7 OFFICE OF THE MAYOR Suzette Cooke, Mayor ', 2204th Avenue South Kent, WA 98032 Fax: 253-856-6700 PHONE: 253-856-5700 o-vrx-,.s aueuuxcuwvxv;;yea=.,a.-M.s�anean '.. City of Kent's Bond Rating Moody's Downgrades LTGO Bonds to Al from Aa3 Response from Kent Mayor, Suzette Cooke Introduction For nearly four years, city government has been in persistent contraction. Rising costs and deteriorating revenues have forced reductions in every area our budget. We have significantly cut internal supports - like training and supplies, reduced staff, cut programs, and delayed projects until economic conditions stabilized, trying to maintain a level of service that least damages our residents and job base. As Moody's notes, "Specifically, there is uncertainty with regard to the city's ability to implement additional expenditure cuts as it has already enacted significant cuts over the last three fiscal years." (bold added) Last year the Council established a strategic goal to develop and implement a sustainable funding model for city services. To this end, along with program and staff cuts, I included several new revenue sources and rate increases in the proposed 2012 budget. Council adopted a portion of the proposals. Uncertainty created by the economic recession has placed a financial burden on all levels of government. Locally we know South King County sales tax revenue is down 32%, the sluggish construction industry has gutted our development fees income, and the dearth of property sales has reduced REET revenue (Real Estate Excise Tax) by 75%. As the State and King County re-align their budgets, they have either reduced committed revenues to us (such as Stream-lined Sales Tax) or transferred the responsibility of providing services down to us with no attached revenue (such as animal control). The trickle-down effect has left Kent financially "_. vulnerable to acts and decisions outside our control. As Moody's states, y "There is also uncertainty with regard to the city's ability to preserve current Y levels of state shared revenues...." U 3 Page 1 of 3 0 MAYOR SUZETTE COOKE e -R.�: x .��ss. •t+Asa: c v � »c=_.rr.a".r�.s..<r.::aza v aw seq..us;ss� -nn.ww. :..... .::.....€ x:vze.: ,m•-.2...,::.r; ,. „<:€, >;s Kent Bond Rating 8 O 1. Why was the city's credit rating downgraded? Taken directly from Moody's report, "The downgrade reflects the city significantly deteriorated financial position, resulting from recurring operating deficits and depletion of cash and reserve levels across all governmental funds." The downgrade also incorporates the debt burden and risk associated with backing the Public Facilities District for ShoWare Center. 2. What is the effect of this rating change? What is the cost to the city? There is no immediate cost to the City. This downgrade does not affect current indebtedness or bond payments, nor would it affect voter-approved or revenue bonds. Where it would have a negative impact is if the Council was to approve councilmanic bonds, the interest rate we pay would increase approximately one-tenth of a percent (0.1001o). Any impact to a Kent municipal bond holder would only occur if the bonds were sold before maturity, in which case the sales price would be slightly less. The bond amount at maturity remains unchanged. 3. Is the city planning to issue any debt in the near term? The only type of debt that was downgraded is LTGO - Limited Tax General Obligation. We have no plans to issue LTGO bonds. 4. What can the City do to improve its credit rating? • Continue to improve our general government fund levels so we can eliminate our reliance on water and sewer reserves to finance short-term cash flow needs. • You approved an amended contract with ShoWare Center's operator that reduced annual management fees by over 50% (.$120,000 savings). • Continue working with ShoWare management and the Seattle Thunderbirds to increase self-sufficiency for ShoWare operations to help the Public Facilities District (PFD) pay off its capital debt. 2 I Kent Bond Rating g • Liquidate land and facilities that are not critical to the City's long-term goals in order to reduce our debt burden. • Implement a two-year budget that establishes a longer-term financial commitment to strategic goals. • Restore the general fund balance to 10%. • Establish a capital reserve fund and an emergency reserve fund (as recommended in the 2011 preliminary budget). • Increase the variety and amount of revenue from taxes and fees (such as business licenses, internet cable tax, business & operations tax). S. Are the city's finances on solid footing now? No. While the economy shows signs of a weak turn-around, we are at the mercy of the State Legislature. Our 2012 budget assumes nearly $14.5 million (15% of our general operating budget) in state-shared revenues. Where do we go from here? On a good note, Moody's report lists our strengths as having a large, relatively resilient property tax base; a stable local economy; and a 'still manageable debt burden" with regards to the PFD (ShoWare Center). "The city appears to be in the early stages of a turnaround, committed to rebuilding negative fund balances, paying down interfund debts and stabilizing recurring fund operations." Moody's downgrade illustrates our need to play to our strengths and mitigate the challenges we face that are within our control. Those challenges include increase our financial flexibility, reduce our fixed debt ratio, re-visit our balance between revenue and expenditures, and convince the State to keep its financial commitments to us. We will work through Operations Committee Chair Thomas to schedule committee discussions that specify suggestions for consideration in the 2013 budget process. III 3 i 10 This page intentionally left blank 11 00DY INVESTORS SERVICE Rating Update: MOODY'S DOVINGRADES CITY OF KENT, WASHINGTON'S LTGO BONDS TO Al FROM Aa3; NEGATIVE OUTLOOK ASSIGNED Global Credit Research-06 Feb 2012 $78.3 MILLION OF RATED DEBT AFFECTED KENT(CITY OF) WA Cities (including Towns, Villages and Townships) WA Opinion NEW YORK, February 06, 2012 --Moody's Investors Service has downgraded to Al from Aa3 the City of Kent, Washington's limited tax general obligation bond rating. Concurrently, Moody's has assigned a negative outlook to the rating. RATING RATIONALE The downgrade reflects the city's significantly deteriorated financial position, resulting from recurring operating deficits and a depletion of cash and reserve levels across all governmental funds. The downgrade also incorporates the city's increased debt burden and risk associated with contingent support for a distressed component unit. The Al rating also reflects the city's large tax base, stable local economy, location within the Seattle metropolitan area and manageable debt burden. The negative outlook reflects the city's very limited financial flexibility deriving from a weak balance sheet with a high fixed cost burden; the need to divert a substantial portion of future cash flows from General fund uses to resolve deficits and internal debts throughout governmental funds; and uncertainty regarding the city's ability to implement additional expenditure cuts, preserve current levels of state shared revenues and stabilize governmental operations through structural, ongoing reforms rather than through one-time solutions. STRENGTHS - Large, relatively resilient property tax base - Stable local economy benefitting from location in Seattle metropolitan area - Increased clarity with regard to public facilities district (PFD) exposure, still manageable debt burden CHALLENGES - Significantly limited financial flexibility - Substantial fixed cost burden - Ongoing risks related to PFD exposure and potential reductions in state shared revenues WEAK BALANCE SHEET WITH LIMITED ABILITY TO ABSORB ADDITIONAL FINANCIAL PRESSURE The city's financial position deteriorated significantly from FY 2008- FY 2010, driven primarily by deficit spending on debt service, infrastructure, personnel and the city's PFD facility. The city ended FY 2010 12 with a General fund cash balance of$161,000 (0.2% of General fund revenues)- including a $2.5 million interfund loan payable- and a total General fund balance of$826,109 (1.1%). As a substantial portion of the deficit spending occurred outside of the General fund, the deterioration extends to all governmental funds.All governmental funds ended FY 2010 with a combined cash balance of$4.6 million(4.4% of all governmental funds revenues) and a combined total fund balance of-$11 million(-10.5%). Over the same period, interfund leverage increased more than 6x, to a combined $21.4 million in FY 2010, from a combined $3.2 million in FY 2008. The city's weaker funds - General fund, Capital Improvement fund, Street Projects fund and Other Projects fund- borrowed heavily from the city's strongest funds, the Sewerage and Water enterprises. The Sewerage and Water enterprises added more than$12 million and $5 million of interfund receivables over the last three fiscal years, respectively. The city also borrowed $3.1 million from its Insurance fund, significantly compressing the level of capitalization within the Insurance fund if one discounts the $3.1 million of interfund receivables. The city's FY 2011 (unaudited) results indicate operating improvements. FY 2011 total General fund balance increased to$1.73 million(2.2% of FY 2010 General fund revenues), the result of a reduction of 35 FTEs and a 3% reduction to supplies and services budgets. The city also realized more than$2.2 million ($4.5 million annualized) of expenditure savings resulting from the fire department reincorporating into an independent fire district effective July 1, 2010. Also in FY 2011, the city retired the General fund's $2.5 million interfund loan and paid down$1.75 million of the Street Projects fund's deficit (which along with the fund's own operating improvements eliminated the fund's deficit balance). Still, General fund finances remain thin, and the extent to which improvements were realized throughout governmental funds is to be determined. The Capital Improvement (CI)fund- the major governmental fund with the largest negative balance- is the city's priority for FY 2012. The city will allocate an additional 5% ($800,000) of its sales tax; impose a 4% internal tax on the gross revenues of its utilities ($2 million) and sell $6 million of surplus property- all of which will be applied to the Cl fund deficit (-$8.1 million). The FY 2012 budget also provides the city a savings buffer with which to absorb unanticipated financial pressures or further rebuild reserves. The city budgeted for full employment but expects to maintain a 2% vacancy rate, which will save approximately$1.2 million.Additionally, the city budgeted a 1.5% COLA for all bargaining groups but subsequently negotiated contracts with no COLAs for all bargaining groups. The unspent COLA money will save approximately$1 million. The city appears to be in the early stages of a turnaround, committed to rebuilding negative fund balances, paying down interfund debts and stabilizing recurring fund operations. However, the extent and manner in which the city is successful at executing this turnaround will be an important factor in determining future rating action. While a portion of the earlier deficit spending was driven by the city's position at the end of a construction cycle from which it could not pull back despite declining funding sources (i.e., tax revenues), an equal portion appears to be related to the shifting of General fund expenditure burdens, including debt service and personnel, onto other funds which had inadequate resources to finance those obligations. Moody's believes a sustainable turnaround cannot be one characterized by General fund recovery at the expense of other major governmental funds, or one supported by continued cash flow borrowing from stronger enterprises. DEBT BURDEN AND FINANCIAL EXPOSURE INCREASE WITH SUPPORT FOR DISTRESSED COMPONENT UNIT The city's direct debt burden is low at 0.7% of 2011 assessed value (AV) and consists of$78 million of LTGO debt, $7.7 million of special assessment debt (self-supporting but an obligation of the city) and $14.7 million of contracts/state loans (subordinate to LTGO and SA debt). However, the city has been covering operating losses and debt service payments for the Kent Events Center- a public facilities district (PFD)owned and operated by the city- per a contingent loan and 13 support agreement with the PFD. The PFD has a combined $61.7 million of sales tax revenue and revenue bond debt outstanding. Of the total $61.7 million, approximately$51.8 million (84%) is sales tax revenue debt secured by the PFD's 0.033% sales tax allocation (0.0337% after adjusting for the SST mitigation payment) and net revenues from the PFD's operations. $9.8 million(16%) is revenue debt secured, on a parity basis, by net revenues from the PFD's operations. Both bonds are long-term, fixed-rate obligations and do not include any derivatives or swaps features. The PFD is managed by a third party operator, with the city reimbursing 0&M expenses and remitting net revenues to the PFD (or absorbing net losses if net revenues are negative). In each of the first three years of operations - FY 2009, FY 2010 and FY 2011 -the PFD had an average $430,000 net loss from operations, which the city absorbed. As there have been annual net losses, the PFD's only revenue applicable to debt service has been the restricted sales tax allocation, which was approximately$622,000 in FY 2010. With FY 2010 debt service of$3.7 million, the city paid the balance of$3.1 million. Debt service escalates annually to MAIDS of$5.8 million in 2032, and then steps down to approximately$3.5 million annually to maturity in 2037. Assuming the PFD is an incurred obligation of the city, the city's direct debt burden would increase to approximately 1.2% of 2011 AV- an increased but still manageable debt burden. While the primary enterprise risk is now effectively captured on the city's balance sheet, a degree of risk remains, as operating losses (revenues net of O&M) are essentially open-ended. With the assumption of the PFD's debt onto its balance sheet, the city's financial flexibility becomes further limited as another fixed cost is added to its budget. Including PFD debt service, FY 2012 debt service is $13.9 million. Adding back$5.4 million of sales taxes and real estate excise taxes shifted from the General fund to the Capital Improvement fund, FY 2012 debt service of$8.5 million represents 10.8% of General fund revenues. Including the city's pension contribution of$6.7 million, fixed costs of$15.2 million represent 19.3% of General fund revenues- a notably high proportion. The city does not plan to issue additional debt in the near term. STABLE LOCAL ECONOMY, LOCATED IN SEATTLE METROPOLITAN AREA The City of Kent is located in southern King County(Aaa/Stable, LT SR GO)Washington, 15 miles south of City of Seattle (Aaa/Stable, LT SR GO). It is the third largest city in King County and the sixth largest city in the state of Washington. The local employment base is diverse, comprising a mix of corporate operations (REI); distribution/warehousing (Coldo, GE and Sysco); government; manufacturing (Boeing) and retail (Kent Station). The city's property tax base size- 2011 AV of$12.64 billion- is strong for the rating category, and has experienced relatively modest declines in recent years, in part due to the base's large commercial/industrial component, whose values are typically less volatile than residential values. Base size increased in 2010 with the annexation of Panther Lake (previously unincorporated King County) effective July 1, 2010, which added more than 5 square miles (primarily residential) and 24,000 residents to the city. The city's pre-annexation population grew more than 16% between 2000- 2010, to reach 92,411 as of the 2010 US Census. With the annexation, the city's population increased to approximately 118,000. Socioeconomic indicators are moderately strong, with median family income (MFI) representing 104.5% of the national median. The city's November 2011 unemployment rate of 9% is moderately elevated - above both state (8.3%) and national (8.2%) - but has improved from the November 2010 rate of 9.9%. OUTLOOK The negative outlook reflects the city's limited financial flexibility, deriving primarily from a very weak 14 balance sheet with a high fixed cost burden. The city's flexibility is constrained by the need to divert a substantial portion of future cash flows from General fund uses to resolve deficits and internal debts across governmental funds. Additionally, there is the risk of continued and (potentially) increasing support of the PFD, as well as numerous other uncertainties regarding expenditures, revenues and the city's ability to accordingly manage financial pressures. Specifically, there is uncertainty with regard to the city's ability to implement additional expenditure cuts as it has already enacted significant cuts over the last three fiscal years. There is also uncertainty with regard to the city's ability to preserve current levels of state shared revenues, which are substantial at $8.5 million annually(approximately 11% of FY 2010 General fund revenues). WHAT COULD MOVE THE RATING UP - Improved internal liquidity and available reserve levels - Increased self-sufficiency/decreased subsidy of distressed component unit - Structural operating adjustments to align recurring expenditures with recurring revenues WHAT COULD MOVE THE RATING DOWN -Weakened internal liquidity and available reserve levels - Deterioration of/increased subsidy of distressed component unit - Inability to align recurring expenditures with recurring revenues KEY INDICATORS FY 2010 net General fund cash, % of revenue: 0.2% FY 2010 total General fund balance, % of revenue: 1,1% FY 2010 unreserved Generalfund balance, % of revenue: 1% FY 2010 direct debt burden, % of assessed valuation(AV): 0.7% 2011 assessed valuation(AV): $12.64 billion 2010 US Census, total population: 92,411 The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com. For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support 15 provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Information sources used to prepare the rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, and confidential and proprietary Moody's Analytics' information. Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating. Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third- party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests. Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for(B) further information regarding certain affiliations that may e>dst between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter. Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery. Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Analysts Moses Kopmar Lead Analyst Public Finance Group Moody's Investors Service Matthew Jones Backup Analyst Public Finance Group Moody's Investors Service 16 Contacts Journalists: (212) 553-0376 Research Clients: (212) 553-1653 Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 USA MOODY? INVESTORS SERVICE ©2012 Moody's Investors Service, Inc.and/or its licensors and affiliates(collectively, "MOODY'S").All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE,INC.("MIS")AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES,CREDIT COMMITMENTS,OR DEBT OR DEBT-LIKE SECURITIES,AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S("MOODY'S PUBLICATIONS")MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES,CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT.CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT.CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE,AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE,SELL,OR HOLD PARTICULAR SECURITIES.NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING,OR SALE. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW,AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED,TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD,OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODYS PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however,all information contained herein is provided"AS IS"without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable,including,when appropriate, independent third-parry sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.Under no circumstances shall MOODY'S have any liability to any person or entity for(a)any loss or 17 damage in whole or in part caused by,resulting from, or relating to, any error(negligent or otherwise)or other circumstance or contingency within or outside the control of MOODY'S or any of its directors,officers, employees or agents in connection with the procurement,collection, compilation,analysis, interpretation,communication, publication or delivery of any such information,or(b)any direct, indirect,special, consequential,compensatory or incidental damages whatsoever(including without limitation,lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use,any such information.The ratings,financial reporting analysis, projections,and other observations, if any, constituting part of the information contained herein are,and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase,sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED,AS TO THE ACCURACY,TIMELINESS,COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. MIS,a wholly-owned credit rating agency subsidiary of Moody's Corporation("MCO"), hereby discloses that most issuers of debt securities(including corporate and municipal bonds, debentures, notes and commercial paper)and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from$1,500 to appro>dmately$2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities,and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at wvvwmoodys.com under the heading"Shareholder Relations—Corporate Governance—Director and Shareholder Affiliation Policy." Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657,which holds Australian Financial Services License no. 336969. This document is intended to be provided only to"wholesale clients"within the meaning of section 761 G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are,or are accessing the document as a representative of,a "wholesale client"and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to"retail clients"within the meaning of section 761G of the Corporations Act 2001. Notwithstanding the foregoing,credit ratings assigned on and after October 1,2010 by Moody's Japan K.K. ("MJKK")are MJKK's current opinions of the relative future credit risk of entities, credit comrrgtments, or debt or debt-like securities. In such a case,"MIS" in the foregoing statements shall be deemed to be replaced with"MJKK MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K.,which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. This credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser. 18 This page intentionally left blank 19 FINANCE DEPARTMENT 440 Robert Nachlinger, Finance Director Phone: 253-856-5260 N'147KEN T Fax: 253-856-6255 WASHING-ON Address: 220 Fourth Avenue S. Kent, WA. 98032-5895 February 13, 2012 To: Operations Committee From: Robert Nachlinger, Finance Director Regarding: Biennial Budget - Ordinance-Adopt MOTION: Recommend adoption of an ordinance establishing a biennial budget beginning January 1, 2013. SUMMARY: The State Legislature has provided that a code city, like Kent, may elect to have a two-year fiscal biennial budget in place of an annual budget process. The attached budget ordinance commences that process establishing a biennial budget, adds a new chapter to the Kent City Code, and requires that the Council adopt a biennial budget to commence in the fiscal biennium beginning January 1, 2013. BUDGET IMPACT: None at this time; expected savings in 2014 P:\Civil\Motions-BlueSheet\Biennial Budget Modon.docx 20 ORDINANCE NO. AN ORDINANCE of the City Council of the City of Kent, Washington, adding a new Chapter 3.04 to the Kent City Code, entitled "Biennial Budget," establishing a biennial budget beginning January 1, 2013 and providing for a mid-biennial budget review and modification, in accordance with Chapter 35A.34 RCW. RECITALS A. The State Legislature has provided that the legislative body of any code city may by ordinance elect to have a two-year fiscal biennium budget in lieu of the annual budget which is otherwise provided for. B. Chapter 35A.34 RCW provides that the City must adopt a biennial budget not later than July 1, 2012 in order to be effective January 1, 2013. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: ORDINANCE SECTION 1. — Biennia/ Budget. A new Chapter 3.04, entitled "Biennial Budget" is adopted: 1 Adopt Biennial Budget Ordinance 21 Sec. 3.04.010. Biennial Budget. Pursuant to Chapter 35A.34 RCW, the City Council hereby establishes a two-year fiscal biennial budget, for the City of Kent, beginning with the two-year fiscal biennium that begins January 1, 2013. The 2013-2014 biennial budget and all subsequent budgets shall be prepared, considered and adopted under the provisions of this ordinance and Chapter 35A.34 RCW. Sec. 3.04.020. Mid-Biennial Review and Modification. Pursuant to RCW 35A.34.130, the City Council will provide a mid-biennium review and modification of the biennial budget to commence not earlier than eight months after the start of the first year of the fiscal biennium and to take effect not later than January 1 of the following year. The Mayor shall first prepare the proposed budget modification. Once proposed, the mid-biennium modifications shall be sent to the City Council. The proposed budget modifications shall be a public record and shall be available to the public by the provision of copies at the Office of the City Clerk and by providing copies in an electronically downloadable format, if possible, available through the internet or other electronic data environment that is widely available to the public. The city council shall conduct at least two public hearings on the proposed modification. The hearings shall occur at a regular or special city council meeting. The Mayor shall provide publication of notice of the public hearings consistent with publication of notice for adoption of other city ordinances. The budget modifications must be passed by ordinance, and once passed, a complete copy of the adopted budget modifications must be transmitted to the state auditor and to the association of Washington cities. SECTION 2. — Corrections by City Clerk or Code Reviser. Upon approval of the City Attorney, the City Clerk and the code reviser are authorized to make necessary corrections to this ordinance, including the 2 Adopt Biennial Budget Ordinance 22 correction of clerical errors; ordinance, section, or subsection numbering; or references to other local, state or federal laws, codes, rules, or regulations. SECTION 3, — SeverabilitY. If any one or more section, subsection, or sentence of this ordinance is held to be unconstitutional or invalid, that decision shall not affect the validity of the remaining portion of this ordinance and that remaining portion shall maintain its full force and effect. SECTION 4, — Effective Date. This ordinance shall take effect and be in force five (5) days from and after its passage and publication, as provided by law. SUZETTE COOKE, MAYOR ATTEST: BRENDA JACOBER, CITY CLERK APPROVED AS TO FORM: TOM BRUBAKER, CITY ATTORNEY PASSED: day of 2012. APPROVED: day of 2012. PUBLISHED: day of 2012. 3 Adopt Biennial Budget Ordinance 23 I hereby certify that this is a true copy of Ordinance No. passed by the City Council of the City of Kent, Washington, and approved by the Mayor of the City of Kent as hereon indicated. (SEAL) BRENDA JACOBER, CITY CLERK P:\Civil\Ordinance\Biennial Budget Adopdon.docx 4 Adopt Biennial Budget Ordinance 24 This page intentionally left blank 25 KENT WASHING-ON OFFICE OF THE MAYOR Suzette Cooke, Mayor Phone: 253-856-5700 Fax: 253-856-6700 220 Fourth Avenue S. Kent, WA. 98032-5895 DATE: February 21, 2012 TO: Kent City Council Operations Committee FROM: John Hodgson, Chief Administrative Officer THROUGH: Suzette Cooke, Mayor SUBJECT: Infrastructure Funding Process MOTION: Information Only SUMMARY: City Council and staff have had discussions regarding methods to infrastructure improvements for streets and parks. At the city council's recent planning retreat this topic was discussed at length. Staff and committee will discuss next steps and the formation of a council ad hoc committee to track the progress. Staff will also discuss the city advisory oversite process as well. BUDGET IMPACT: N/A EXHIBITS: None