Kennewick reviews 2024 finances; council told $55.8 million in capital carryovers and elevated reserves

Kennewick Finance Director Jessica Platt told the Kennewick City Council at a May 27 workshop that the city ended the 2023–24 biennium in a stronger financial position than projected, with higher revenues, elevated reserves and roughly $55.8 million in recommended carryovers and spring budget adjustments.

Platt said the presentation was “a high level overview of the 2024 financial results for the city,” and she highlighted three central points: revenues finished above budget, operating reserves exceed policy targets, and significant capital projects will be carried into 2025 for which the council will be asked to appropriate funds.

The review covered the city’s fund structure, operating results, enterprise funds and capital program. Platt said the city’s adjusted 2023–24 budget covers 27 funds and that taxes remain the largest revenue source citywide. In the general and street funds she reported modest revenue growth year-over-year and said property tax collections increased in 2024 — driven largely by new construction — while utility-tax receipts fell about 2 percent, which staff attributed in part to a milder winter.

Platt reported that the city’s ending general-fund balance was higher than estimated: “We were estimating that we would end the biennium with $11,700,000, and we’re ending the biennium at $15,600,000,” she said. The city’s budget policy target is a 7.5 percent reserve; Platt said, “we have a budget policy of 7.5% reserve target which we’re definitely meeting and well exceeding,” and that a strategic reserve reached $3.4 million. She cautioned the council that much of the excess balance is one-time funding and should not be used for ongoing operating expenses.

Capital carryovers and spring adjustments: Platt told the council the spring budget adjustment packet — scheduled to go before council next week — will primarily recognize carryovers from capital projects that were not completed in 2024. She said roughly $55.8 million in adjustments are proposed, including about $25 million tied to the wastewater treatment plant Phase 2 project and roughly $10 million for water projects. She also said roughly $1.7 million is requested to cover replacement vehicles that should have been included in the adopted 2025–26 budget but were not.

Enterprise funds and operations: Platt reviewed each enterprise fund. She said water consumption rose about 14 percent in 2024; staff and council attributed that spike primarily to an unusually hot spring and to earlier-than-usual residential irrigation before irrigation district supplies came online, and to the implementation of new AMI meters that may have improved measurement. Staff member John, who worked on the meters and production analysis, said month-to-month data showed a springtime spike in 2024 that was weather-related and that production this year is lower than 2024.

Platt said water and sewer rate adjustments and biennial rate reviews have been applied; she referenced several figures for recent rate changes (including figures cited in the presentation for water and wastewater increases) and noted that operating expenses were broadly in line with adjusted budgets. For stormwater, Platt said operating revenues were slightly higher than expected but that the fund is “pretty challenged” because needed capital work did not get completed in the prior biennium; staff said consultant contracts will be used to accelerate design and delivery.

Public safety and other funds: Platt said police and fire together account for about 43 percent of general-and-street fund expenditures. The ambulance utility remains an enterprise fund supported by transfers from the general fund; she said the biennium transfer into the ambulance fund exceeded $10 million and that the fund’s working capital is projected at about $9.3 million, exceeding the city’s operating reserve requirement. Building-permit revenues increased strongly (Platt reported a 34 percent rise in permit revenue for 2024) and the building-safety fund finished with healthy reserves.

Toyota Center, golf course and other facilities: Platt reported a net operating loss of about $769,000 at the Toyota Center and Arena in 2024, slightly worse than budget; she said that loss is subsidized by the general fund, lodging tax and admissions tax and noted deferred-maintenance issues at the facility. Columbia Park Golf Course posted a much smaller operating loss in 2024 than in prior years and saw revenue increases attributed to fees and merchandise.

Opioid settlement revenue: Platt said the city recorded opioid-settlement collections in 2024 and that “thus far, we’ve collected just over $800,000 in those settlement payments,” noting a figure on the slide of $633,000 representing 2024 receipts; she said those settlement funds will be directed to Benton County to support services at a rehabilitation clinic.

Council questions and concerns: Council members asked multiple clarifying questions during the presentation. Council Member Trumbo pressed on whether sales-tax trends and property-tax growth might change the city’s revenue mix; Platt said property-tax increases in 2024 were largely driven by roughly $186 million in added assessed value from new construction and that she did not expect property tax to overtake sales tax given current differences. Council members also questioned the timing and inclusion of grant funding; Platt said grant awards not yet finalized would be added in a subsequent August budget adjustment after state contract approvals.

Next steps: Platt said the detailed year-end financial summary will be provided to council later in the week, the city’s annual comprehensive financial report (audited statements) is expected in July, and the spring budget-adjustment ordinance will be presented to council for formal consideration next week. She emphasized staff will monitor revenues and expenditures closely going into 2025.

For transparency: the workshop included regular council questions and staff answers but no formal motions or votes on the budget adjustments at the May 27 meeting; council members will see the formal adjustment ordinance at a future council meeting.