Covington could ask voters this fall to approve a slight sales tax increase to breathe new life into its streets fund which is in danger of drying up by 2017.

Derek Matheson, Covington’s city manager, said Monday that in the fall the budget forecast for the street fund, which pays for the maintenance and operation of the city’s street system, showed it “is in dire straits,” with a projected shortfall of $56,000 this year with the fund potentially running out of money by 2017. The need for street maintenance, however, would continue.

That comes, Matheson said, even after Covington eliminated the annual street overlay program not to mention the fact there is no capital money in the fund for grant matching opportunities and $250,000 was shifted from the general fund.

This shortage is a result of one initiative passed in the late 1990s.

“It’s due primarily to the passage of I-695, the motor vehicle excise tax, which was a huge source of revenue that went into city’s street funds,” Matheson said. “When that revenue source went away it was only a matter of time when every city’s street fund fell on hard times and the economy just hastened hard times. We’re not unique, which is why many cities around the state have formed transportation benefit districts, though we’re one of a few to use the sales tax (option).”

Revenue for the street fund currently comes from a mix of gas tax, franchise fees and the $250,000 subsidy from the general fund, Matheson added.

If the sales tax increase is approved, the street fund would be bolstered by a 0.02 percent increase in sales tax, from 8.6 percent to 8.8 percent, which could raise hundreds of thousands of dollars annually for the street fund.

Many other cities opted to go with a license tab fee that city councils could approve up to $100 annually without going to voters for approval.

After the city completed its budget process, the council received a report from a committee which spent more than a year looking at the city’s spending and revenue to provide community input on the process.

Members of Covington’s Budget Priorities Advisory Committee proposed in its report to City Council Jan. 22 some mechanisms to increase cash flow into the city’s coffers to, among other things, help boost the city’s street fund. One of BPAC’s core recommendations was a transportation benefit district, which the committee members supported unanimously.

This committee was formed after the Covington City Council adopted a charter Sept. 13, 2011, as part of the city’s efforts to create greater engagement with residents.

Covington’s management team discussed the process at its retreat in March 2011 and came up with outcomes to help guide the development of the process. Covington’s management team felt it was important to be able to convey a clear sense of the community’s priorities for the city’s existing revenue as well as new revenue.

“With the BPAC we made a concerted effort to represent a wide political spectrum from left to right, so to get consensus from them on the sale tax is significant,” Matheson said.

BPAC recommended a TBD over a vehicle license fee, Matheson said, because the sales tax in the TBD would raise about three times more than the license fee.

“We expect a large portion of the sales tax to be paid by non-residents shopping Covington,” Matheson said. “The City Council has already had some preliminary discussion as to how to use the money.”

At the council’s meeting Tuesday night there was a public hearing on the proposal and the members voted to establish a TBD ordinance. In May the City Council, meeting as the Transportation Benefit District Board, would discuss the use of funds with a plan to go to voters in the November general election for approval of the sales tax increase, Matheson explained.

Part of the TBD Board discussion would involve moving to make the street fund solvent, reinstatement of the street overlay, establish a small grant matching fund so city staff could pursue grants to maintain the street system and could shift the $250,000 back to the general fund.

“We’re also doing a citizen survey, a scientific survey, this year,”  Matheson said. “We can ask some general questions about the specific use of the funds, particularly that $250,000 returned to the general fund.”

One possibility for that quarter-million dollars could be to hire another police officer, though, that has yet to be determined.

In the meantime city staff will provide public outreach to provide information — without advocating for the sales tax increase because state law prohibits that — via the city’s website, social media and other means. Matheson said it is likely a campaign committee, independent of the city, will form and Mayor Margaret Harto is working on that on her own time.

“The sales tax is for a 10 year period and after 10 years the voters would have to reauthorize it,” Matheson said. “Because Covington is just outside the Sound Transit District our sales tax is (nine-thousands of a percent) lower than most of South King County, even if the voters pass this … sales tax we’ll still be (seven-thousandths) lower than most of South King County.”