During Thursday budget workshop, council discusses revenue options, concept of ‘fiscal emergency’

Council President Neil Tibbott (Photos by Nick Ng)

With the City of Edmonds projecting an ending fund balance of $6.64 million this year and dipping into its reserves, city councilmembers and staff gathered at city hall Thursday afternoon to examine options for addressing the issue. Council President Neil Tibbott promised those viewing the meeting both in person and online that the city budget would continue to be a hot topic —  starting with “an exciting council meeting Tuesday night (Oct. 24).” From now until the end of the year, “it’s must-watch TV in Edmonds,” he said.

Related to Thursday’s discussion, the council will be conducting two public hearings Tuesday, Oct. 24. One — on 2024 property taxes — will give members of the public a chance to provide input. The city council has the option each year to consider the amount of property tax revenue required to fund the budget. The other — on city revenues — will provide community members an opportunity to comment on all other revenue sources. (The meeting begins at 7 p.m. and you can see the complete agenda here.)

Mayor Mike Nelson’s 2024 proposed budget includes a range of ideas aimed at increasing revenues, including raising utility rates, using the city’s allocation of federal American Rescue Plan Act (ARPA) funds and installing red-light cameras, along with several other sources. Thursday’s three-hour workshop also focused on many of these topics.

Council President Tibbott invited Administrative Services Director Dave Turley to provide an update on 2023 budget, which Turley confirmed is currently below 50% of the city’s reserves. By the end of the year, the city projects that budget “will come back up some” with the infusion of $5 million to $6 million in Snohomish County property taxes, he said.

The city, Turley explained, has two reserve funds: a general fund reserve that is required to be 16% of the general fund budget and a contingency reserve — which kicks in if the general fund reserve is exhausted — of 4%. As of August, the city is below 50% of its general reserve fund and predicts that fund will be $2.2 million in the red by the end of the year.

To shore up the city budget, the administration is proposing to transfer to the general fund budget $6.5 million in ARPA funds and $2 million from the building maintenance fund. The mayor has also proposed installing red-light cameras at six of the city’s most traffic crash-prone intersections, which he said will address traffic safety but is also projected to generate millions of dollars in revenue from violators.

Councilmember Dave Teitzel said he has been receiving “a lot of questions from residents” related to how both the council and the mayor have been talking about record sales tax revenues and stable property tax revenues. “With that in mind, how can it be that we are running a negative run rate when you compare revenues to expenses?” Teitzel asked. “The revenues forecast for end of year 2023 are at $51.6 million, expenses at $56.8 million. The only conclusion our citizens can draw is that we are overspending our run rate revenue and that’s what needs to be fixed. That’s how it gotten out of balance and why we are overspending our reserves. How would you respond to that. Have we not been responsible in our spending, in your opinion?”

“Honestly, we’ve been more than responsible in our spending,” Turley responded. “People don’t realize this but we run very lean in Edmonds.” A major driver of those expenses, he added, is inflation.

L-R: City Attorney Jeff Taraday and Administrative Services Director Dave Turley.

“We are not immune to inflation,” Turley continued. “When our costs went up, outside of adding a little bit of staff to our fire contract, everything we did was a direct result of inflation. It’s not bad management by council and approving bad budgets and it’s not bad administration. When the city added several positions a few years ago, “that was just catching up from running too lean for several years,” Turley said. “The reason our revenues haven’t gone up is beause we haven’t taken action to increase our revenues.”

The city also absorbed a $4 million increase in Edmonds’ contract with South County Fire for emergency medical and fire services during the past two years. The council in September approved a resolution telling the South Snohomish County Fire and Rescue Regional Authority (RFA) that the city officially intends to investigate the advantages and disadvantages of annexation into the RFA.

Councilmembers on Thursday also asked questions related to what constitutes a “fiscal emergency” — a phrase that is included in the city’s Fund Balance Reserve Policy approved by the city council in 2019. City Attorney Jeff Taraday noted the policy states that “a separate balance sheet account should be set up by the finance director for the general fund operating reserve,” and that is should be “used in instances of fiscal emergencies that include economic uncertainties, unforeseen emergencies and unanticipated operating expenses or revenue shortfalls.”

“The word emergency is some folks’ eyes can be a loaded term but the way the policy uses that term is a fairly inclusive definition,” Taraday added.

The policy also states that the mayor can declare a fiscal emergency, but that “unanticipated operating expenses are not included in the mayor’s declaration,” Taraday said.

At Tibbott’s request, the council did not get into details of what declaring a fiscal emergency would entail. That is on the agenda for the council’s Oct. 24 meeting, although no resolution was attached to the meeting agenda issued Friday. However, shortly before the Thursday workshop, Mayor Nelson issued an email to the media lambasting the council for considering such an idea.

“This scare tactic and political stunt will jeopardize our city’s AAA credit rating,” Nelson said. “A downgrade of our credit will result in a higher interest rate for the city and cost us more money. For example, a 1% interest increase for an upcoming $8 million utility bond (over 20 years) will cost the city an additional $1 million.

The council action,” Nelson said, “will create the opposite effect of fiscal prudence.” He added that councilmembers have been briefed on the city’s plan to address the current revenue shortfall, and that “the city has already taken necessary steps to ensure 2023 will finish financially strong. Additionally, my proposed balanced budget for 2024 was based on changes we have already adopted in 2023.”

Whether the declaration of a fiscal emergency would impact the city’s bond rating was discussed by councilmembers and staff briefly on Tuesday (Nelson wasn’t present for this discussion). Answering a question from Councilmember Susan Paine, Administrative Services Director Turley stated that bond rating agencies “look at a lot of things.” One area they place importance on, Turley said, is whether the council and administration “work well together. Is there a sense that there is discord between the two?

“I’m just going to be blunt,” Turley continued. “If council is to declare a resolution stating we are in dire financial straits and we are declaring an emergency, that kind of thing may play very poorly with the bond rating agency. A public resolution on the books could have a very negative impact.”

Councilmember Diane Buckshnis disagreed, stating that the city has an AAA rating for its general fund and an AA rating for its utility bonds. “The utility bonds are treated differently because utility rates pay for the bonds,” she said.

On Friday, some councilmembers expressed dismay about Nelson’s remarks to the media.

Councilmember Jenna Nand

Councilmember Jenna Nand said said it was “very unfortunate” that she first learned about the possibility of a fiscal emergency resolution “by being cc’d on an email that Mayor Nelson sent to the local press, expressing his reservations and blaming council for potentially harming the City’s AAA credit rating, rather than the mayor attempting to have any sort of constructive dialogue with council members off of the dais.

“As was made clear to us at yesterday’s special budget meeting with the city attorney and the finance director, the inability of the mayor and the council to work together constructively to handle the business of the city and publicly airing discord like this can itself be considered a threat to the city’s credit rating,” Nand added.

“I’m very disappointed in the mayor’s comments — issued Thursday 30 minutes prior to the very important council workshop to identify ways we might work collaboratively with the mayor and his team to resolve the urgent fiscal challenges we are now facing,” Councilmember Teitzel said. “We simply can’t keep spending more than the revenue we are bringing in. That’s what has created this crisis. And it will take collaboration — not fighting — to solve the problem.”

Council President Tibbott said: “I think bond rating agencies would appreciate our efforts to support a healthy budget for years to come. Like many cities, if not all, Edmonds is responding to the challenge of an unprecedented year of inflationary pressures.”

Councilmember Vivian Olson

Snohomish County Assessor Linda Hjelle introduced the second part of the meeting, which covered how property tax in Edmonds is calculated. Councilmember Vivian Olson originally invited Hjelle to the meeting after they discussed how challenging it is for many Edmonds homeowners to understand the process of calculating property tax.“I know our residents assume, like I did for a very long time, that if our property taxes go up, then proportionally our amount of tax that we pay goes up, based on the valuation going up,” Olson said. 

Hjelle described the responsibilities of a county assessor, which include appraising real and personal property at the true and fair market value—unless a law specifies otherwise. The assessors office also handles and oversees exemptions programs, such as those for nonprofits and senior citizens. 

By the end of the third quarter 2023, Snohomish County collected nearly $1.67 billion in property taxes, which is distributed to various public services. Local school districts receive the biggest cut (34.4%), followed by state schools (29.22%), fire districts (11.34%), cities and towns (8.53%) and the county (6.27%). 

Hjelle emphasized that it is the “taxing industry” that establishes how much property taxes homeowners and landlords pay. “It’s first voted in, and there’s some restrictions on how much that particular amount can increase each year,” she said. “Taxing districts come by my office with the levy budget amount that has to be presented to my office by the end of November. We take that information along with the assessment information that we’ve collected at our office, and we do the calculations.”

The meeting was held in the Edmonds City Hall Brackett Room.

The assessor examines two major factors in these calculations: the highest lawful levy and the actual levy.

“Taxing districts do not necessarily have to collect the total amount that they are allowed to collect,” Hjelle explained. “Sometimes [they] choose not to do that. We still calculate what we could’ve taken [every year] if you pass the ordinances and resolutions. It’s called the highest lawful levy. Actual levy [is] what did you actually decided as a taxing district to take based on your budget.”

Taxing districts can increase their budget by 1% every year, but not every district does that. “When you don’t do that and you pass the ordinance, to bank that amount, you’re reserving your right to tax at a higher level in the future. It’s not dollars in the bank; it’s the ability to levy at a higher amount in the future,” Hjelle said.

“Does that mean you can stack the 1%?” Nand asked.

Hjelle replied that it kind of stacks. “We continue to calculate your highest lawful levy as if you’ve taken that 1% every year if you pass the ordinance to reserve that ability to do so,” she said. “There’s a statutory rate calculation cap. You could be limited by your rate in one year, but the next year if your assessed value goes up, and your rate goes down, you could have the capacity to maybe take it next year.”

One option for the council to increase revenue is to tap in to the city’s “banked capacity” from five years’ worth of property tax increases. 

Hjelle gave an example of how property tax is calculated. The current average assessed value of an Edmonds residence is about $896,700. If there is no increase in the actual levy rate, the estimated rate levied is about $0.6968. Multiply $896,700 by 0.6968 and divide the value by 1,000, and the property tax is $625.85. 

A 1% increase in the actual levy rate increases the amount levied to $0.70375, which increases the property tax to $631.06. A 5.9% increase raises the amount levied to $0.73789, which increases the property tax to $661.67.

Hjelle suggested that Edmonds residents should use the Property Tax Distribution tool on the Snohomish County website to see where their taxes were distributed in the past three years and how that has changed. “It really gives clarity to where those dollars go to,” she said. “One of my biggest goals is to give good information to people to make good decisions.”

The meeting wrapped up with each councilmember talking about the pros and cons of various revenue sources identified in the 2024 budget. You can watch the video of the meeting here.

— Story by Nick Ng and Teresa Wippel

  1. What is Mayor Nelson’s problem on working with the Council and the public? A good civic leader would admit there is an obvious budget problem and collaborate with the Council AND the public on alternatives for resolving it with the least impact on the citizens that the Mayor is supposed to represent.

    Everyone is very aware of the impacts of inflation and most people, to avoid overspending their income, will cut spending when necessary. Why has this Mayor ignored the obvious inflation increases and proceeded to overspend revenues rather working with the City Council to cut spending. It makes no sense for a Mayor to blame the City Council on something the Mayor is solely responsible for – – implementing a budget that does not exceed revenues.

    The City Council now faces making the tough decisions on taxing citizens more or making immediate cuts to the current budget as well as making cuts in the 2024 budget the Mayor has proposed to ensure the City indeed has the revenue to support basic operations. This is not a time for the Mayor to be hiring more staff especially when the City’s boards and commissions could be utilized – – for free.

    1. Joe’s points are All valid. Chief among them is how we engage citizens in the process. We have Board and commissions all volunteers who work on and advise the mayor and council on many issues. But we do not have citizen entities looking at many of our most important and costly activities. The council has committees and often ask our boards for input but for example we do not have a citizen’s board helping the finance committee or the public works committee with their important work.

      Joe’s point goes further and suggests using citizen boards to do work that would be done by hiring more staff. Good thinking Joe.

  2. So inflation is the problem. Do they consider new employees inflation? Do they consider the new park inflation? Do they consider the new city outpost inflation? Do they consider buying property to make a park bigger inflation? We have a out of control spending problem is what we have. Does the city consider that taxpayers are feeling inflation also? that we have had to cut back that we have had to put projects off? Do they even consider our financial health when making decisions? I say we need to stop the hiring reduce the bloated bureaucracy by laying some people off delay some projects, do what the people that pay their outrageous salaries have to do and that is to make do with less. Come on now tighten that belt I know you can do it, just try to remember it isn’t your money you are spending so stop acting like petulant children who are throwing a fit because mom won’t give you more money for candy. Now children I don’t have any money for candy this time but if your good children maybe next time.

  3. The Administration has confused the public with bond classifications and ratings and states that an adverse statement (fiscal emergency) will impact a bond rating!

    Any muni bond investor, like myself, looks at the strength of the balance sheet, income streams and long-term projections (elections change the mix of management unlike the corporate structure, so management not as important).

    Since 2021, the City’s management style has been to spend excess reserves: recall the disastrous 2021 budget where timeline orchestrated by Council President Paine allowed for that simple majorities’ vote.

    The AAA rating referred to by Mayor is for a 2021 LTGO (limited-tax general obligation) issuance. This was the second AAA rating the City had received as previous administration’s fiscal management style (thank you, Scott James) was to increase reserves for “emergency” needs.

    The City’s utilities or Enterprise Funds were last rated AA. Rating companies look at the same financial criteria to support “Revenue” Bonds. The next bond issuance will be for utilities. Along with the utilities’ cashflows bond companies will look for an Enterprise Funds’ “reserve policy”. Currently, this policy and days retention is being discussed as Council reviews the rate increases for the budget.

    Lastly, numbers and trends have nothing to do with politics and my interest has always been to protect taxpayers’ dollars so to imply this is political is abhorrent.

  4. I want a mayor who will work collaboratively with our city council to problem-solve the complex issues Edmonds faces, including revenue shortfall and inflation. I want a major who will show up to the meeting, instead of volley off press releases. That’s why I’m voting for Mike Rosen.

  5. The explanation given for the current state of the City’s general fund was not acceptable. Doesn’t the Finance Director know that the residents are tracking the 47 employee increase in the first 9 months of the year, and we’re tracking the huge increases in professional services spending compared to prior administrations? When people related wages, salaries, OT, and benefits are 50.1 percent of the ‘23 adopted budget, and when you’ve actually spent at a rate of 51.5% of the budget through August- you’re on track for a 920,000 problem by year end (1.5% of general fund expenses in the ‘23 adopted budget). Council member Buckshinis commented during the meeting that Council should be looking at putting a property tax level on the ballot. I agree that it should be looked at. But don’t continue the Edmonds way of doing a lightweight analysis of complex problems. Look to our southern neighbor’s use of using citizen input on how to develop financial sustainability. https://www.shorelinewa.gov/government/departments/administrative-services/ten-year-financial-sustainability-project . Every citizen watchdog in Edmonds should be reminding the Administration and the Council that our issues are usually not unique to Edmonds. Other cities in our region have similar issues. We have the benefit of being slow to (any) change, and learning how other jurisdictions have addressed similar challenges. Will we use that benefit?

  6. I just attended the City Administrated 99 Landmark Conversation event. My take away was that this was actually a thinly disguised Mike Nelson campaign event being paid for by Edmonds City Taxpayers. Nelson even made a rare public appearance and made a speech about how they were just responding to the outcry from outside the bowl residents for more attention and a fairer share of our resources. It’s no accident that they pulled this PR stunt aimed at the Hwy 99 population just one or two days before we all get our ballots. This is all one big hoax and this Administration is running scared.

    People of Hwy 99 or Gateway Neighborhood, you are being used. There is absolutely no need for the city to be the middleman in this; or to actually buy the land. If you really want this you can form your own community action committee; get with the landowners and potential developers; and bring your own ideas before the City Council and have the ideas and planning coming from the bottom up; like it is supposed to. You’ve got smart people like Jenna Nand and Will Chen from your neighborhood already on the Council. Our city managers do not belong in the land development business and public/private partnerships should not originate from the top down.

  7. Mayor Nelson abuses taxpayers in order to promote his campaign for re-election as Edmonds Mayor. The evidence is the glossy folded heavy paper “budget message” recently mailed by Nelson to the residents of Edmonds at City/ taxpayer expense. His “budget” message is a thinly veiled campaign message with his grinning face displayed large on the front page. This kind of abuse is typical of Nelson who has frequently ignored or skirted rules when it suits him. I don’t recall getting such a message in the past so, why now in an election year campaign? He apparently can’t raise enough money for his campaign to fund his messaging so, he uses taxpayer funds. Sneaky politics is the only conclusion one can reach. Use of taxpayer funds and facilities to support a campaign is a violation of RCW 42.52.180 which prohibits public employees to “use or authorize the use of facilities of an agency, directly or indirectly, for the purpose of assisting a campaign for election of a person to an office… “. Nelson is not a man to be trusted with our future. Mike Rosen is a man of integrity and deserves our vote.

  8. Right on Mark. I got my glossy brochure yesterday and it went directly from our mailbox to our recycle bin which is located right near by for just such needs. I also got a “glossy” from CM candidate Eck which was the second one from her in a week and it went directly to the round file too. Newsflash kids, nobody wants that crap, hardly anyone actually reads it, and it costs someone (usually us tax payers in one way or another) a small fortune. Enough already. Just to be fair, I’m also routinely tossing “glossy’s) from people who I support. I just think how all that money could be put to so much better use.

    1. Clinton,

      In referencing Chris Eck’s “glossy” in your comment, you missed Mr. Bucklin’s point. Candidate Eck has the right to use her campaign funds to send as many mailers as she chooses.

      Mark was referring to the City of Edmonds “glossy folded heavy paper “budget message” recently mailed by Nelson to the residents of Edmonds at City/ taxpayer expense.” He went on to say “Use of taxpayer funds and facilities to support a campaign is a violation of RCW 42.52.180…..etc”

      The mailers you threw in your bin are not comparable.

      1. Hi Joan. Thanks so much for bringing this up again as I need to correct myself a bit. I got to thinking about it and looked in my recycle bin to be sure I was right about the two brochures from candidate Eck and discovered the other one was one about twice the size from candidate Paine. I toss that junk mail so fast I confuse myself. My comment was not true regarding candidate Eck and I apologize profusely because I don’t like to be part of any disinformation job.

        And no I did not miss Mr. Bucklin’s point. I realize the Budget message was the Mayor campaigning on our dime with total misrepresentations of facts and the other messages are wasting the candidates’ doners’ money, that could have been better spent actually helping people instead of wasting natural resources and filling landfills that they profess to be so concerned about all the time.

  9. I know in 2012 we had a budget of 33 million and what just a dozen years later it is over 120 million. I have asked questions about it several times and I am yet to hear a good reason why. I know I don’t always ask the best questions maybe you people don’t care about it. I did receive 2 responses from council neither one really answered the question they showed they know how it works but couldn’t explain why. As it is now we have what 51 million in revenue and 56 million in spending and a budget of 120 plus million. I might be a idiot bit I am not stupid. Government has gotten to far over its skis and is looking like it might crash. We have a government that can’t support its size without considerable support from county state and federal grants to support itself, hence the need for a full time grant writer. Yes getting outside money to improve Edmonds is great but we shouldn’t be reliant on that money to support our city we need to live within our means our city government has grown to large to support itself we need 2012 type of fiscal responsibility.

  10. The mailer is identical to the “Budget Message” included with proposed budget. “Message” has several errors and misleading information. Important updates are necessary to help Council and Public. Points below are part of Public Information Requests and direct observations of elected officials at several public meetings.

    Fire Service: “Majority of City Council have refused to take action”. Totally wrong and misleading! Spring council meeting, SCF Commissioners suggested informal discussions about joining SCF. Several CM’s, Finance Director, and City Attorney were at the public Finance Committee when council decided to reach out informally to SCF. No legal pushback to informal meetings. Three meetings were immediately held, 6 CM’s attended. Finance Director at all 3 meetings and Mayor Nelson was at 2 of the meetings!! Council did not “refuse” to initiate contact. CM Teitzel took exception to the mayor’s comments at a Council Meeting. We will sorely miss CM Tietzel!

    We dictate the level of fire service and pay that full cost. Per SCF most of the cost is Labor. The Labor contract was recently settled and we were billed for 3 years of added Labor. The Budget message reference to $4m increase in past 2 years actually included labor increases for 5 years.

    Budget estimate 2024 $12.5m. Wrong! Per SCF 2024 billing will be $11,631,228. $868,772 savings!
    Correction Needed.

    Later: Your taxes and Fire Service.

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