Edmonds mayor makes first pitch of plan to fill $20.5M budget deficit

EDMONDS — The city’s 2024 budget seemed balanced enough, with $51.9 million in general fund expenses and $51.1 million in projected revenues.

The catch?

To get there, Edmonds had to use $12.5 million in one-time funds and $8 million from the city’s emergency reserves.

Last year, the council approved using $6.25 million in federal COVID relief money to pay its annual contract with South County Fire. The city also saved $3.2 million through a hiring freeze last year, but those positions will likely need to be filled again, Mayor Mike Rosen said at his State of the City address in late March.

On top of dipping into reserves and using COVID relief dollars, the city also spent $3 million on so-called “unbudgeted expenses” this year, such as union contracts, police technology, library repairs, new finance software and more. Altogether, this leaves Edmonds with a $20.5 million hole not covered by the city’s projected revenue.

From 2019 to 2023, city revenues grew by 27.8%, Rosen said, but expenditures grew by 44.9%. Most of the increases came from staffing costs, he said, as the city upped salaries to stay competitive with neighboring cities.

Inflation spiked city costs by 21.7% over the past three years, but state law only allows cities to increase taxes by a maximum of 1% annually.

“That’s pretty much a recipe for a slow death if your costs are going up by that kind of pace and you can’t increase your revenue by anywhere near that,” Rosen said in his speech.

To address budget issues, Rosen assembled a “Blue Ribbon Panel” of six local volunteers with expertise in finance and economics to provide recommendations to fix the city’s budget. The committee is led by Mike Bailey, former finance director for the city of Everett. Edmonds contracted with him for $10,000.

The committee will hear from residents before making recommendations to the City Council. A town hall meeting is set for 7 p.m. April 18 at the Edmonds Public Works building at 7110 210th St. SW in Edmonds.

Bailey said the panel doesn’t have a timeline for presenting ideas to the council.

Not only does Edmonds need to get out of a deficit, it also needs to find ways to increase revenue. The city could do this by adjusting rental and concession rates, reviewing the city’s investment policy, selling city assets and ramping up efforts to pursue grants, Rosen said.

Bailey offered four options for the city to “bridge” its budget to 2025:

• Reduce city expenses, with a potential goal of cutting 25%;

• Seek voter approval for tax increases;

• Borrow internally from other city funds to provide short-term relief; or

• A combination of the three options.

City Council member Michelle Dotsch said the city should do all it can to cut spending before asking for tax increases.

“We need to take a hard look at our expenditures first,” Dotsch said at the council meeting. “Unless we really tighten our belt and we ask the community to tighten theirs, that’s just going to fall on deaf ears.”

The panel is also set to help Edmonds rework its budget process. For example, the city is changing to a biennial budget, rather than an annual one. Bailey is a “huge advocate” for biennial budgets, he said at the City Council meeting.

“I just think it kind of helps you lift your horizon up longer term and think on a bigger scale,” Bailey said.

Bailey also recommended monthly department budget reviews, along with a “robust” citywide mid-year review to keep a closer eye on how city money is spent. He proposed taking a “zero-based” or “priority-based” approach to the budget.

Rosen presented a potential timeline for how the city could get its budget on track:

• 2024: Reduce city expenses, “develop (a) strategy to replenish reserve funds” and “resolve fire service costs and issues” with South County Fire’s impending termination of its contract with Edmonds at the end of 2025;

• 2025 to 2026: Use a new budget process to fill future gaps, identify potential savings and other revenue requirements.

Council member Vivian Olson said the timeline was “aggressive,” but reasonable given the city’s financial situation.

“It’s aggressive,” Bailey acknowledged, “but its doable.”

Town hall meeting

What: The Edmonds City Council will host a town hall meeting to discuss “the city’s budget challenges and proposed steps to fiscal resiliency, options for Edmonds fire services, and the 2024 Comprehensive Plan. Questions will be taken from those attending in person or remotely via Zoom.”

When: 7 p.m. April 18.

Where: Edmonds Public Works building, 7110 210th St. SW.

Ashley Nash: 425-339-3037; ashley.nash@heraldnet.com; Twitter: @ash_nash00.