LYNNWOOD — Lynnwood has received a clean audit from the state for the first time since 2008.
The state Auditor’s Office released the report earlier this month. The city in 2015 and 2016 took steps to address the problems found in years past, the report says.
“It’s a big deal to get a clean audit …” Finance Director Sonja Springer said Friday. “It’s been great to see this happen.”
The city has benefited from increased revenues from sales tax, according to documents Lynnwood submitted to the state. That’s due to a healthy retail sector but also the surge in development. Lynnwood has seen a spike in large construction projects in recent years, and the materials and labor generated significant sales tax.
Lynnwood last year was home to $112.7 million in new construction, the city reported. That was less than 2015 but far more than 2014.
Sales tax accounted for more than 30 percent of general fund revenues, the biggest contributor. Public safety absorbs just more than half of the city’s general fund spending, a number that includes the city jail but not the municipal court.
Aging infrastructure remains a challenge, and the city can’t assume the economy will continue to work in its favor, the state was told. Staff have tried to make sure money is set aside for future capital improvements, such as utilities, roads and parks, Springer said. She cited as an example the ongoing Meadowdale Playfields renovation.
The city passed the 2017-18 budget in November. The general fund budget is $60.2 million for 2017.
Auditors also noted a healthier percentage of savings. Lynnwood has several reserve accounts that it has put more focus into growing. Combined, those funds totaled $16.6 million by the end of June 2017.
The increase in reserves is the result of policy changes, Springer said. That amount does not include a separate reserve fund, started in 2014, for economic development and infrastructure projects. That fund is on track to meet $6.3 million by the end of 2018, she said. It is fed by construction sales tax and permit revenues.
Lynnwood’s budget struggles have lasted for two mayors. The former finance director left in fall 2014. Springer was hired in 2015. The city recently announced it had received a national award for the most recent budget.
Another change is ahead.
The city fire department is merging Oct. 1 with Snohomish County Fire District 1 into a new government body. Lynnwood continues to draw an emergency medical services levy. It will hand that revenue to the new agency, South Snohomish County Fire and Rescue, which eventually will run its own levies.
Lynnwood leaders also have talked about reducing property taxes, because the city no longer will be funding firefighting directly. The City Council has passed a resolution to that effect. The new estimated levy rate will be shared at a public hearing in November, Springer said.
The final rate, which would start in 2018, depends on assessed values across the county.
“The transition isn’t completed yet, so we are still working out the exact cost savings,” city spokeswoman Julie Moore said.
Though there were no findings in the audit, the state did issue a management letter in August. The letter is considered a recommendation for future financial reporting. It says the city placed certain bond revenues under the wrong category, which Lynnwood corrected while auditors were on site. The state also asked for better documentation of assets such as sidewalks, sewer mains and water pipes.
“We are implementing those changes,” Springer said.
What about the golf course?
The city-owned Lynnwood Municipal Golf Course continued to struggle financially in 2016, which was attributed to weather conditions. The course owes money to the general fund. An earlier loan to the course was a problem for auditors years ago because it was drawn from utility funds, which was deemed inappropriate.
The City Council last year extended the repayment timeline. It added $550,000 to the loan for improvements such as new parking stalls. That brought the course’s debt to the general fund to almost $1.9 million. It is supposed to be paid off by 2029. The remaining balance is $1.5 million.
The land, which is next to Edmonds Community College, is used by the city under a long-term contract with the college. A private firm runs day-to-day operations. Revenues have improved under that partnership, making it easier to keep up with the payments, according to the city.