Black Diamond residents may have experienced their very own Christmas miracle, with the Black Diamond City Council agreeing to pass a city budget for 2017.
Until the end of the Dec. 27 meeting, it looked likely the council would not agree to a budget and the city would shut down come January.
But it seems pressure from residents and developer Oakpointe, plus some well-timed compromises on both sides of the council, finally brought council members together to keep the city running by passing an emergency budget ordinance.
The issue at hand was that the council majority and the mayor had two competing budgets.
The first budget – dubbed Mayor Carol Benson’s budget – was introduced to the public six months ago, had been vetted by legal and city staff and stood through two public hearings.
There was seemingly no issue with this budget until Councilman Brian Weber announced Dec. 1 he wanted to introduce some amendments.
The discussion of the amendments on Dec. 15 ended with Benson threatening to veto the amendments if they passed council, and developer Oakpointe/CCD Black Diamond Partners LLC stating that the amended budget would violate a legally-binding development agreement the city has with the developer for the Ten Trails (formerly The Villages) and Lawson Hills housing projects.
During the Dec. 22 meeting, the council majority – consisting of council members Pat Pepper, Erika Morgan and Weber – did not pass Benson’s budget, but did adopt Weber’s amendments. This prompted a direct response from Oakpointe.
“There is certainty what will happen if you guys adopt those budget amendments,” said Oakpointe CEO Brian Ross at the Dec. 22 meeting. “We are not paying for other city services and we are not going to allow you to steal our money.”
Benson vetoed the budget amendments, alleging they were not timely provided to the public, subjected the city to substantial risk of litigation and unbalanced the budget, among several other points.
The council majority seemed prepared to continue the fight over their budget amendments during the Dec. 27 meeting until Benson proposed a surprising compromise; that the council passes her budget for only three months, with a sunset date of March 31, 2017.
“It would be a compromise… to allow the city three months to go through your budget document and have work sessions so we can incorporate things you wanted to incorporate into my budget,” Benson said. “We’ve had six months with my budget and we’ve had less than two week’s with Brian Weber’s budget.”
There was resistance to this idea at first.
“Presumably, the mayor could spend all the money… before the three months ran out,” said Morgan to the jeers of the crowd. “What you people in this gallery do not understand is that there are reasons why this budget had more tight constraints on the money.”
Weber said he would approve the budget ordinance with the sunset clause, but only if another amendment was added that only allowed the city to spend 25 percent of its projected expenditures for those three months.
“If anything goes over a quarter, it would come back to council for approval,” Weber said.
It was decided that a list of items that could potentially put the city over than 25 percent spending limit will be created and given to the council for consideration in January.
Morgan wanted another amendment added to the budget that would require all contracts signed by Benson in 2017 to come before the council for approval during those three months.
City attorney Mike Kenyon of the Issaquah Kenyon Disend firm said this amendment could clash with the Black Diamond Municipal Code, which states Benson can sign contracts of $15,000 or less without council approval, and that adding the amendment to the budget ordinance did not change the city’s code.
The contract approval amendment passed the council 3-2, with Pepper, Morgan and Weber supporting it and councilwomen Tamie Deady and Janie Edelman against it.
The vote for the budget quickly followed, and the 5-0 vote to approve it was met with enthusiastic applause from the audience.
Oakpointe lawyer Nancy Rogers, who has told the council multiple times that the developer will file suit if the development agreement is breached, said this solution is “a short term reprieve” and that there is a lot to go over in the next three months.
COMPARING THE BUDGETS
City Financial Director May Miller did not disguise her criticism of Weber’s budget amendments.
In a side-by-side comparison of Benson’s budget and Weber’s amendments, Miller wrote that the amended budget “has calculation errors and is out of balance.”
Both Benson’s budget and Weber’s amendments reported a general fund revenue stream of $6,258,371, but Miller said Weber’s figure is incorrect, pointing to Weber’s proposed Master Development Review Team budget.
Weber’s amendments shrink the MDRT budget by $197,420.
The problem here is that the MDRT budget money doesn’t come from the city – it’s provided to the city through a development agreement with Oakpointe, Miller said, and the agreement calls for the MDRT budget to be fully funded at $1,267,475 (which is the funding level in Benson’s budget), and not at Weber’s level of $1,070,005.
Nancy Rogers, representing Oakpointe in a letter sent to the council on Dec. 22, wrote that Weber’s amendments to the MDRT budget violates the development and funding agreement the developer has with the city, and Oakpointe “is not obligated to pay for some of the matters assumed in the Weber budget.”
If Oakpointe doesn’t fund the $197,420 that Weber moved to other parts of the city’s general fund, his general fund budget is actually closer to $6,060,951, Miller said.
Additionally, since Weber allocated that $197,420 to other parts of the general fund budget, the rest of the budget is now unbalanced, Miller said.
Weber’s ending fund balance was also a concern to Miller.
“The auditors look at that every single year, and say, ‘if your expenditures are going up every year, as they normally do, you need to keep increasing the ending fund balance every year,’” she said.
But that doesn’t happen in Weber’s budget amendments, which reported an ending fund balance of $1,005,291.
This is lower than Benson’s reported ending fund balance of $1,011,291. Benson’s ending fund balance would add $117,176 to the ending fund balance over the previous year, Miller said, while Weber’s amendments would shrink the ending fund balance by $218,420 from last year.
However, Miller said Weber reported his ending fund balance incorrectly in his budget amendment documents, and his actual ending fund balance would be closer to $792,871 – a difference of more than $212,000.
Miller had other issues with Weber’s amendments as well, including what looks like a 2.5 full time employee reduction and the collecting of grant money revenue without spending it.
“As a professional finance director that’s been in government for over 40 years, I cannot recommend that we adopt a budget that isn’t in compliance and is so confusing, I can’t even imagine how we can monitor it,” Miller said. “I recommend that we adopt the Mayor’s budget.”
Weber disagreed with Miller’s analysis of his amendments.
“The budget moves money within the general fund and does not affect the balance. The budget is just as balanced as the original budget,” he said.
As to his changes to the MDRT budget, Weber said the council has the authority to change how the MDRT is budgeted and run, including a decrease in funding and the addition of a city administrator and a director of planning development and environmental review.
“The council has the authority to make that decision through its budget authority,” Weber said. “The developer may decide to challenge this authority or withhold their funds. They have a right to do that, but I believe that any responsible developer would understand that improving the management of this city would be in their interest too.”
NEED A PUBLIC HEARING?
Since Weber’s announcement of budget amendments on Dec. 1, residents made it very clear they expected to be given ample time and space to review the amendments before they could be adopted.
According to the Municipal Research and Services Cetner (MRSC), state law restricts cities from holding public hearings on budgets after Dec. 7.
So with the final public hearing was closed Dec. 1 and no further public hearing opportunities, residents called Weber’s actions deceptive, and some alleged that the amendments couldn’t be legally adopted unless they went through the public hearing process.
Weber said his amended budget “does not need to be re-advertised, and the public process that was conducted is still relevant, because my amendment changes only a few items of the actual budget document.”
State law seems to agree with Weber; the state only requires two public hearings for budgets that are held on different days and no later than Dec. 7. The state does not require further hearings for amendments made after the final public hearing.
Kenyon expressed this in a Dec. 29 email, but added that the public should (and will) get ample time to review the amendments.
“A city council typically can amend its budget after the public hearing is closed and before adoption of the budget ordinance. But this general rule only applies when the content of the amendment falls fairly within the scope of the alternatives available for public comment at the public hearing,” Kenyon wrote. “The legal point here is only that council member Weber’s budget first came to light at the very end of the budget process and after public hearing had already been closed. The public has a right to weigh in on the merits of council member Weber’s proposal, in the same manner as the public commented on the merits of the Mayor’s proposal.
“The public clearly has not had the opportunity yet with respect to council member Weber’s budget but, given Tuesday’s night’s compromise decision by a unanimous city council, that opportunity will begin next month.”