Council begins discussing ways to mitigate financial impacts of COVID-19

City Finance Director Scott James

How the city, its residents and its tenants are being financially impacted by COVID-19 were topics of conversation for the Edmonds City Council during its Tuesday, April 14 meeting, held remotely via Zoom to comply with Gov. Jay Inslee’s stay-at-home orders.

Related to the city, Finance Director Scott James presented a proposed Crisis Financial Management Policy for council review. James started out by noting that Edmonds is entering the crisis “in the strongest financial crisis the city has ever been in,” with healthy reserves. However, it may take weeks or even months to realize the true financial impact of COVID-19 on the city’s finances, James said.

“I know there’s a lot of interest in how deep the city’s finances are being impacted,” James told the council, adding the city is concerned about that as well. “However we cannot furnish the estimated financial impacts to you tonight.”

The policy document presented Tuesday night sets guidelines for the city council, mayor and staff to use to identify and close spending gaps during a crisis, and establishes three levels of trigger points that would initiate action by the city administration and council. These include city fund balances dropping below a certain percentage, and/or reductions in the general fund and contingency reserve funds. Responses to these various triggers include a hiring freeze, a moratorium on non-crisis issuance of bonds, and freezes on non-essential expenditures.

One of the reasons the city doesn’t yet have a complete picture of the COVID 19 impact? James noted that as of March, the city had already received $2,187,876 in sales tax revenue (out of a 2020 budget of $8.45 million). But that revenue was actually collected by the state starting in November, so there is a lag, James said. In addition, the Washington State Department of Revenue has granted an extension to business filers due to COVID-19, and sales tax payments won’t be filed with the state potentially until August, James said. As a result, the city will have to rely on estimated projections.  James said these will be determined through a range of methods, including the use of monthly sales tax reports from the state as well as outreach to larger industries like auto dealerships and Realtors to learn how they are being impacted by COVID-19.

The council discussed the crisis financial plan as part of a “Committee of a Whole” meeting, held in lieu of separate in-person committee meetings usually held simultaneously. A remote business meeting followed the committee meeting Tuesday night.

Some of those business meeting items had also been discussed in detail during the earlier committee of a whole Tuesday. Among them was an emergency ordinance proposed by Councilmember Luke Distelhorst to transfer $100,000 from the council’s existing Homelessness Response Fund to assist Edmonds residents — both individuals and families — on limited incomes who have been financially impacted by the  COVID-19 outbreak. As proposed, the measure would apply to those residents who earn less than 60% of the Snohomish County median income.

While there was praise for Distelhorst’s work on the issue, councilmembers had a lengthy discussion about whether the timing was right to take money out of the Homelessness Response Fund. For starters, the city is working to fill a part-time human services manager position — approved last year  — and one likely focus of that position would be to work on the long-term issue of homelessness in Edmonds. In addition, some councilmembers wondered whether the $100,000 would stretch far enough to provide meaningful relief to those who need it. Finally, a question was raised about whether those impacted by COVID-19 could find short-term help elsewhere.

“A lot of these things we are talking about that this fund could pay — folks can go to the (State) Department of Social and Health Services to get some level of funding for this,” Council President Adrienne Frlaey-Monillas said.

Distelhorst moved that his proposal be delayed until May 5 to better understand the city’s financial situation and also to address council concerns. Fraley-Monillas proposed an amendment — that passed unanimously — to make the date “May 5 or earlier”depending on available financial information. Councilmember Laura Johnson reiterated the importance of addressing ways to help those impacted by COVID-19. “It’s not a ‘put on the back burner’ sort of issue,” Johnson said. “It’s a pot that’s about to start boiling that we need to continue to stand in front of and watch closely.”

In the end, the council voted unanimously to approve Distelhorst’s motion as amended.

The city rents space to seven tenants in the Frances Anderson Center. (File photo)

The council also had an in-depth discussion — both during its committee meeting and business meeting — about a proposal to provide financial relief for the seven tenants who rent space in the city’s Frances Anderson Center. Many of the tenants — which include Main Street Kids child care, Edmonds Montessori, the Olympic Ballet, Sno-King Youth Club, Sculptors Workshop, Edmonds Senior Center and the Edmonds Arts Festival Foundation — have been in the building for more than 20 years, and the city values the services they provide to the community, Deputy Parks Director Shannon Burley said.

Burley noted that the leases for the organizations have never before been brought to council for ratification, so the first order of business was to consider approval of those. Rental rates are calculated per square foot, and there are yearly increases based inflation. They range from Olympic Ballet, which pays approximately $5,200 monthly for its space, to the Edmonds Arts Festival Foundation, which pays $608 monthly to exhibit its artwork in the building.

In discussing the rationale for the rent relief proposal, which would be effective through August at the latest but may only involve a month or two, Burley explained that six of the seven Frances Anderson Center tenants are not able to operate due to Gov. Inslee’s stay-at-home order. (As a day care, Main Street Kids is considered an essential business so has remained open.)

“We do believe it is unfair to charge rent to the tenants who are not legally allowed to use the leased premises as intended,” Burley said.

Staff is seeking authorization “to work with tenants to find some relief for them that would help sustain their ability to continue serving the community,” Burley said. In the worst-case scenario, the city could lose up to $63,000 in revenue from April through August by providing free rent.

Burley cited the letter sent by Mayor Mike Nelson in late March to city landlords asking them to work with tenants in light of the financial crisis brought about by COVID-19.

“As landlords, this is our best attempt to do just that,” Burley said. “Work with our tenants to weather the financial storm.”

Councilmember Susan Paine said she was worried about the impact of such relief on the city’s budget, which will be facing challenges of its own. And Councilmember Vivian Olson said she was concerned about whether such relief could be viewed as a gift of public funds — especially since two of the businesses are for-profit entities. Olson said that she would like to speak with the State Auditor’s Office before further considering the proposal.

The leases were approved 6-1, with Councilmember Paine voting no.

Then it came time to vote on rent relief for Frances Anderson Center tenants, with the council discussing whether to place the issue on the consent agenda for next week. However, Olson argued strongly for the measure to instead appear on the regular agenda so that it could be discussed further prior to a vote. In addition, she said that would give her an opportunity to present to the council her findings from the auditor’s office.

The proposal to have the measure on the consent agenda failed 3-4, and the council then unanimously approved Olson’s proposal to place it on next week’s regular agenda.

Also on Tuesday, the council:

– Approved an agreement for the city to join AWARN — A Water/Wastewater Agency Response Network that allows water and wastewater systems to receive rapid mutual aid and assistance from other systems in an emergency.

– Agreed to have City Attorney Jeff Taraday draft an ordinance for next week’s consent agenda that reinstates a portion of city code that was mistakenly deleted as part of the city’s recently amended emergency disaster preparedness ordinance.

– Agreed during the committee of the whole meeting to place the following items on next week’s consent agenda for approval: Acceptance of bids for the city’s Phase 7 Sewerline Replacement Project and 2020 Pavement Preservation Program, and an ordinance authorizing extension of development permit expiration dates due to COVID-19 impacts.

— By Teresa Wippel

8 Replies to “Council begins discussing ways to mitigate financial impacts of COVID-19”

  1. The attempt to ratify last night was related to the March 5th Mayoral Proclamation of Emergency, not the March 22nd Emergency Order. Council chose to modify the Mayor’s March 22nd Emergency Order rather than ratify it back on March 24, 2020.

    The City’s Comprehensive Emergency Management Plan states that:

    The Proclamation of Local Emergency is made by the Office of the Mayor and is the legal method which authorizes the use of extraordinary measures to accomplish tasks associated with disaster response. The proclamation is normally a prerequisite to state and federal disaster assistance. The Proclamation of Local Emergency must be ratified by the City Council as soon as practical following the emergency.

    As ratification is normally a prerequisite to state and federal disaster assistance, it is very important that it be done properly. City Councils usually adopt Resolutions to ratify so there is clear documentation of the ratifying legislation.

    What took place last night was confusing. Ratification needed to be done as soon as practical and that is not what happened.

    Ignored

    1. Thanks Ken – I thought I understood it and I spent a lot of time listening to the recording and going back through past meetings. But clearly I did not. I’m going to delete that for now and try to get better clarity from the city.

      Ignored

  2. You are welcome Teresa. It is a big challenge to track all that is going on at the City government level. Please know your efforts are greatly appreciated.
    My hope is that the Mayor will issue a Proclamation of Emergency that can be timely ratified by Council. Council met several times after March 5th and never ratified the March 5th Proclamation. I hope that a future Ratification will be done via Resolution like other cities have done. Ratification is a legislative process and this process was supposed to be done “as soon as practical”. My thought is that it is wise to be extra cautious and make sure we’ve met all the prerequisites for possible state and federal assistance.

    Ignored

  3. Ken is correct. We need to do very important things like this thoughtfully and correctly. Grants and other very important things like the safety of our citizens my be at stake.

    Ignored

  4. As a person who struggles to understand the intricacies of city government, taxation, and public administration in general, I want to complement the current Mayor, Council, Teresa and the two gentlemen commenting here on their efforts at giving us good local government at this so difficult time for our city, county, state and nation. Good folks all in my opinion.

    Ignored

    1. Thanks Clinton and Darrol for commenting on this. The Edmonds City Council has a history of ratifying via Resolution. One can look at the City’s website and find many examples. Resolutions 1052 and 1092 were interesting. Both Resolutions document that the City Council itself Declared an Emergency and ratified contracts after the fact that had been entered into without competitive bidding.

      I think best practice would be for the item requiring ratification to be included in a City Council Agenda Packet so Council can refer to it during their deliberations. This was not the case last Tuesday night. The March 5th Proclamation wasn’t even in the April 14th Agenda Packet. Maybe if it had been, Council would have modified the Proclamation so that it referenced our CEMP and so that it established an end date that Council could extend if necessary.

      A Resolution is of value as it provides clear documentation of the ratifying legislation. A Motion can be considered the equivalent of a Resolution, but why would the City Council do it one way one time and a different way another time? This simply causes confusion.

      I am not sure why Council thought it okay to ratifying something last Tuesday night that had to be ratified “as soon as practical”. Many weeks and Council meetings had passed since the Mayor’s Proclamation on March 5th. I believe a far better solution would have been for Mayor Nelson to issue a new Proclamation of Emergency that City Council could ratify “as soon as practical”. I believe Council would have been wise to act consistent with past practice and ratify via Resolution. If so, the City would be better able to show the State and/or the Federal Government that all was done properly and timely as required by our Comprehensive Emergency Management Plan (CEMP).

      Instead, we are left with a 40-day gap between Proclamation and ratification and only Council Meeting Minutes to document that Ratification took place. Making it worse, on the same night of April 14th, City Council discussed ratifying certain building use agreements for tenants of the Frances Anderson Center via Resolution. Again, why ratify one item via Resolution and ratify another item via Motion during the same City Council meeting? This simply causes confusion.

      Ignored

  5. I’m impressed with council member Olsen’s measured, coherent and independent approach to the issues. There may be some advantages to having a buddy-system and voting block such as is demonstrated often with council members Monillas, L. Johnson and Distelhorst, but Ms. Olsen’s commitment to the team and to the citizens seemed to prevail somewhat last night.

    Ignored

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