Council studies special‑purpose districts, transportation benefit and utility tax options as mid‑term budget gaps loom

City staff gave the council a detailed study‑session briefing on special‑purpose districts and other revenue tools to consider as the city plans for the 2025–27 biennium and longer‑term capital needs.

City Manager Martin Yamamoto said the city faces a projected mismatch of about $1.5 million in 2026 and noted that although the city currently has a multi‑million dollar surplus, reserves do not solve long‑term structural shortfalls. The finance director presented nine district types (including metropolitan park districts, park and recreation service areas, public facilities districts, transportation benefit districts, community renewal/tax‑increment financing, community facilities districts, local improvement districts and others), explained formation procedures under RCW and described funding tools and governance options tied to each type.

The presentation included examples and constraints. For transportation benefit districts (TBDs), staff showed that a $20–$50 vehicle registration fee on Mill Creek’s roughly 14,730 registered vehicles could raise roughly $294,000 to $736,000 annually depending on the fee level. Staff noted that some TBD revenues can be implemented by councilmatic decision while some other forms require voter approval; staff also referenced a July 1, 2022 option that permits an additional 0.1% sales‑tax surcharge in certain circumstances.

Staff discussed tax‑increment financing (TIF), which requires a project analysis, findings and state review and is limited to two tax‑increment districts per jurisdiction that cannot overlap; TIF areas are designed to fund public infrastructure that spurs private investment but require multi‑year horizons and negotiation with other taxing agencies. Local improvement districts (LIDs) and community facilities districts (CFDs) were described as project‑specific financing tools tied to property assessments or special assessments; CFDs require 100% property‑owner consent for formation while LIDs are initiated by petition or resolution and require feasibility and benefit analyses.

Council members asked staff to return with more analysis on the tools they wanted to study in depth. Several council members expressed interest in further work on transportation benefit districts, utility taxes (staff said utility tax implementation requires coordination with local utilities and can take three to six months), tax‑increment financing for targeted subareas and options for DRCC (the city’s redevelopment/discussion area). Staff asked council to prioritize which options to study further and signaled they might retain outside professional help for complex financing decisions.

Ending: Staff said they will return with more detailed revenue projections and models — initially without new revenue assumptions — and requested council direction on which districts or taxes to evaluate further so staff can provide scenarios in fall and be prepared for budget deliberations.