During a presentation to the Edmonds City Council Tuesday night, finance consultant Mike Bailey shared his plan for helping the city along the road to financial recovery.
Mayor Mike Rosen announced in January that Bailey would be leading a blue-ribbon panel of volunteer financial experts designed to help the city achieve financial resiliency and instill confidence and trust among community members.
The panel was established in response to City of Edmonds budget issues, including a much-smaller-than-anticipated ending fund balance for 2023, which prompted the council to declare a fiscal emergency in October.
Bailey is a former finance director for the cities of Everett, Redmond, Lynnwood and Renton. He is a former member of the Government Finance Officers Association (GFOA) board of directors and a national trainer and consultant for the GFOA. He has also been a facilitator at several Edmonds City Council retreats, sharing budgeting best practices.
During his presentation to the council Tuesday, Bailey shared a grid he developed when he was working at the City of Redmond, after the Great Recession impacted about 10% of the city’s budget. The grid “helped us share information and stay on the same page with respect to where we were financially,” he said.
Currently, the City of Edmonds is facing some longer-term challenges that Bailey believes will involve council action. This is due to the deterioration of the city’s fund balance for the last two-plus years and significant use of one-time funds to balance the budget.
To address the issue, Bailey told the council he is recommending use of a Government Finance Officers Association 12-step recovery program called Fiscal First Aid. “It’s a variety of steps structured so that we take a holistic look at what’s happened, where we are, how do we fix it, and how do we move forward so that it doesn’t occur again,” Bailey explained.
“The goal is to put measures in place, so that over time, we’ll recover and become more fiscally resilient,” Bailey said.
He described the three stages:
Bridging, which includes recognizing the issues, surviving and stabilizing, and developing a recovery program.
Reforming, which involves identifying “those things that caused the situation and reform them.” This includes recommendations to the council for changes, primarily in the city’s financial policies, Bailey said.
Transforming, “so that on going-forward basis, the city continues to experience fiscal health,” he said.
Bailey said the blue-ribbon panel had its first meeting on Jan. 29, and is working directly with the mayor to develop recommendations that will be brought to the city council.
“We’ve already hit the ground running,” Bailey said.
As for immediate next steps, the city has already implemented a hiring freeze, which is this case means that any open positions will be “very thoroughly vetted” by the mayor’s office before they are filled, Bailey said.
Bailey also said he has recommended that the city for now not amend the general fund budget. “I would say quite bluntly that one of the huge problems that occured over the last several years has been the amendments to the general fund budgets. So therefore rather than continuing to add to that problem…I recommend that you just hold off until we understand the situation better,” he said.
In addition, Bailey said he’s asked the mayor’s office “to advise departments that they will scrutinize any purchase requests above $1,000.”
And he’s recommending some changes to the routine city financial reports the council receives. The council’s finance committee currently gets monthly reports and the entire council receives them quarterly.
Councilmember Neil Tibbott asked what types of changes the council should expect in terms of financial reporting.
Bailey said he thinks all monthly reports should include a straightforward, month-to-month snapshot of the cash flow fund balance in the general fund. Quarterly reports should be less generic than those now supplied and instead provide interpretation of the city’s financial status, he added.
Councilmember Jenna Nand asked Mayor Rosen about the hiring freeze, stating there are city departments that are chronically understaffed such as the police department. Rosen replied that police staffing is a high priority, with several officers coming through the police academy. “We very much need to be keeping our community safe,” the mayor said, adding that Edmonds “is not the only community suffering” when it comes to police shortages. “Seattle, I believe, has something like 400 (open) positions,” he said.
Bailey also said that he reviews hundred of city budgets annually and Edmonds is not the only city facing financial challenges, pointing to the “fiscal cliff” that occurred for many municipalities when pandemic-era funding came to an end.
Councilmember Will Chen, who chairs the council’s finance committee, asked Bailey to what extent the blue-ribbon panel’s work will focus on the city’s financial policies.
Bailey replied that financial policies are important because they “help create the guardrails for future success.” While the city already has a working fund balance policy, Bailey said “there are a number of other things that the council may want to put in place that would help guide future decisions.”
Chen also asked about a time frame for the panel’s recommendations, and Bailey replied that he hopes to deliver those to the mayor by the middle of the year.
Councilmember Susan Paine wondered if the panel would be looking at the city’s expiring contract with South County Fire and whether Edmonds should join the regional fire authority. She also asked whether the group would be studying future revenue options.
Regarding fire services, Bailey said that the council has already commissioned a fire services feasibility study with Fitch and Associates to review those options, and “we don’t want to duplicate that work.” He also said that he believes addressing the city’s budget issues would require “looking at both ends” — revenue and spending.
In other business, the council:
– Heard Rosen read a proclamation in honor of Lunar New Year, which will be celebrated on Saturday, Feb. 10 in downtown Edmonds. The proclamation noted that Edmonds “recognizes and celebrates the diversity of Asian Americans in our community and their valuable contributions to the economic, cultural, and artistic vitality of our city” and added that “inclusion and representation in city recognized events and celebrations are vitally important so that all members of our community can feel accepted and connected in their city.”
Karin Mei Butler, president of the Multicultural Association of Edmonds, accepted the proclamation and reminded council meeting attendees of the third annual Lunar New Year Edmonds celebration, which will welcome the Year of the Dragon with a full day of festivities in downtown Edmonds Feb. 10.
“Our Lunar New Year Edmonds celebration seeks to recognize, amplify and celebrate the distinctive diversity of Asian Americans in Edmonds and to share in celebration with all of our fellow community,” Butler said.
– Heard the annual report from the city’s hearing examiner, Phil Olbrechts.
– Approved moving to a future council consent agenda a number of proposed amendments to city building and fire codes based on international and state standards. Among the notable updates:
- The first-time adoption of the International Wildland Urban Interface Code, aimed at mitigating the risk of wildland fires. Construction requirements for these areas include ignition-resistant roofs, eaves, sliding gazing, vents and decks, and landscape and vegetation management.
- Adjustment of building permit and application timelines to allow for additional permit processing flexibility.
- Building code appendices for solar readiness and construction material management are proposed for adoption.
– Authorized councilmembers to continue discussions with Gov. Jay Inslee’s staff regarding Edmonds Marsh restoration. Former Councilmembers Diane Buckshnis and Dave Teitzel met with the governor’s staff in November 2023 to talk about marsh issues, including the status of the adjacent Unocal property now undergoing cleanup of petrochemical pollutants. With Buckshnis and Teitzel now retired from the council, the issue was brought back Tuesday night for review to see if councilmembers wanted to continue the effort.
In January 2005, Unocal and the Washington State Department of Transportation (WSDOT) entered into a purchase and sale agreement for the property, a former bulk fuel terminal and asphalt production plant. At the time, WSDOT intended to use the site for a multimodal transportation center known as Edmonds Crossing, but that plan has been abandoned. Since 2017, contractors for Chevron — which purchased the property from Unocal — have been working under a Department of Ecology order to clean up contamination on the site.
City of Edmonds officials and marsh advocates have been hopeful that the city could eventually purchase the property from WSDOT, which would assist with both the city’s marsh restoration and Willow Creek daylighting efforts and promote the return of salmon runs there. In an effort to promote further discussion about the issue and next steps, the council in May 2023 approved a memorandum of understanding (MOU) between the city and WSDOT related the Unocal property.
Mayor Rosen has indicated that he and Director Todd Tatum would attend the next meeting representing the city, along with Councilmember Tibbott and Council President Olson who would represent the council.
The lone vote against continuing discussions was Councilmember Susan Paine. She said she believed such a meeting “might be a little bit premature” given that the Washington State Department of Ecology is hosting a meeting next week to provide an update on the cleanup effort.
— By Teresa Wippel
Great reporting as usual. I would like to point out another thing that Mr. Baily said that was overlooked in this article. While he didn’t use the word “bankrupt”, he did say that the city has a cash flow problem and will need to borrow money to “stay in the black” and meet our General Fund obligations this year. The city is out of money!!! In essence, we’re bankrupt.
Obviously, anytime you borrow money you have to pay it back (with interest). Hence, we will need to tighten our belts in order to do so. I’m not sure the full Council really understands what that means yet.
Mr. Baily went on to say that we will need to reduce expenses while we look at additional revenue options. Code words for increased taxes. And by my estimates, the increase will be LARGE. The prior administration and Councils have dug a financial hole so deep that we can expect the city to be in financial distress for some time. Citizens should start to save now to pay the increased tax bill in 2025 for the fiscal mismanagement by the city.
The really unfortunate thing is that our current situation was forecast over two years ago and we did nothing about it. Now we’re going to pay dearly.
With someone who has more knowledge about this topic – perhaps a current or former CM – what is the current state of the Landmark project, and at what point and by whom can the project be potentially removed from consideration? I am aware of the last decision made, but, in consideration of the above information and the constant drum beat of concerns about the city’s finances, I have to imagine regardless of personal thoughts about the validity of the project, we are going to have to be realistic about that. I find it odd that it has not been discussed to this point. The argument before was “we have time,” but if I am understanding correctly on the above, the financial fixes for the city are going to take far more time than the Landmark project has. Would be very interested in hearing more specifics. This is consequential to the entire city, but as a Lake Ballinger resident, even more so. Speaking candidly, I am more concerned about the EPD being fully staffed at the moment than continuing a project with very little clarity; in regards to where we are spending our very valuable dollars at the moment.
Tom, your observations are good. I can assure you our financial challenges are profound and will will continue to be for the next several years. So, this will come down to what our city leaders and our citizens conclude about our needs and wants in the near and long term. I’m no longer a local legislator, but my opinion as a citizen is the Landmark project should not be prioritized at a time of fiscal crisis for the city. Longer term, when the city is on stronger financial footing, we should absolutely be focusing on bringing greater amenities to the Highway 99 corridor. But for now, our scarce resources should be directed to public health/safety (including police staffing and ensuring continued high quality delivery of fire/EMS services), streets and completion of the wastewater treatment project.
Thanks David. I always appreciate your input. Yes – I am all for investments in the HWY99 corridor, but investments which don’t take away from vital and oftentimes, very basic city functions. Looking around at the state of the highway and the multitude of vacant buildings, I have to imagine there is something more fiscally responsible that can be done sooner than later to address some of the concerns that the Landmark project encompassed. Namely, an expansion of police services through a physical (and visible) plant and a community gathering space. Perhaps even a re-work of the mini city hall to accommodate one or the other would be appreciated I am sure by many, and in a location which suffers from an inordinate amount of property crime and vandalism. I might also add that a low cost option to serve the corridor would be to tighten our code and enforcement around the motels to discourage or outright shut down illegal activity. Even Seattle found a way to make that work for properties that were well known to draw crime. One might even argue that addressing these issues first would make an ultimate major project like Landmark when the finances make sense all the more successful. Thanks again for the input.
And who should be held accountable for getting our city into this avoidable financial mess?
Mr. Wambolt, well how many of the current council members were on council in 2022-2023 (that is a rhetorical question)? Yes, 5 of the 7. Because as Mr. Bailey succinctly reports; “the huge problems that occurred over the last several years”. And again from Mr. Bailey; “Currently, the City of Edmonds is facing some longer-term challenges that Bailey believes will involve council action. This is due to the deterioration of the city’s fund balance for the last two-plus years and significant use of one-time funds to balance the budget.” The gang of 5 will be on council through 2025-2027. God help us (and our taxes).
Tom, the current state of the landmark 99 project approved by Council for ‘investigation’ and acceptance of the option to purchase is: RFP for development partners issued on Jan 25, bidders conference on Feb. 12th, proposals due Mar 22, Council presented with staff’s proposed Intent to Award letter(s) in late April, City Council considers the Intent to Award letters in May 2024. These dates are from the RFP document. It’s obvious to me that they conflict with the Mayor’s timeline of having new financial mgmt advice to Council by mid-2024. Another key status comment for the Landmark 99 project plan is that staff missed the milestone of ‘by the end of 2023’ for presenting Council the financing options. Another key milestone is that staff asked for funding for $300k for a consultant to negotiate the property development agreement with the RFP responder(s) , it then withdrew that request when it became apparent that the fund they wanted to spend was earmarked funding for a different purpose. Mr. Bailey advised Council to not amend the 2024 budget in the near term. So that means the staff have to move their consultant spending budget from a different program in order to come up with money to hire a consultant to work on these RFP responses if folks in City mgmt. will actually follow Bailey’s advice.
Thank you for presenting the plan to help Edmonds recover from its grave financial issues. While it’s painful for me to know our city is in this shape, it is also a consolation that we have acknowledged it and have a plan in place to recover. I do hope that all residents can get behind this and realize that any cuts we make – which should be the first line of action to take, before increasing the cost of living here for all of us – is for the betterment of our community in the long run. Maybe some of the services our city provides could be picked up by non-profits and churches. As someone who practices living within my means, sometimes I have to say no to something I really want and instead focus on what I really need. The City of Edmonds needs to focus on getting in better financial shape for the good of all of us.
Just to be clear, our city elected officials have done more than HOPE the city will purchase the Unocal property. They have provided WSDOT with a Memorandum Of Understanding (MOU) that Edmonds WILL purhase the Unocal property which is in deep current litigation and controversy between Chevron (the oil company polluters) and WSDOT (the current owners), both of which want to be legally and and financially clear of any more responsibility for more clean up costs that are all but a certainty in order to do what we want with the land. Does anyone else see the irony of essentially promising to buy such a valuable property when you just found out you are out of money? Why any of our CMs would be opposed to being in discussions about this with our state governor (who claims he is all about the environment and saving salmon) is beyond bizarre. Getting to him before we make a colossal and possibly expensive mistake in a poorly thought out and executed purchase is the whole point of doing it sooner than later, even if we can get grants to buy it. It is encouraging, though, that the other CMs got the point.
Thanks for summarizing the meeting which I was unfortunately unable to attend last night. An old boss of mine used to say that, when you find yourself in a hole the first thing you have to do is to stop digging. I’m hopeful that the establishment of this commission to investigate our city finances and make recommendations is a clear sign that we have stopped digging. It’s going to take some time to repair the damage that has been done and I’m sure it is going to cost us in terms of increased property taxes ands delays in some projects but it is essential that we get Edmonds back on a sound financial footing while continuing to operate essential services and invest in the growth of our community.
Niall,
Funny, because I received the same advice early in my career too. Unfortunately, it does not appear that the city has stopped digging. The very nature of having to borrow money to meet expenses suggests as much. The adopted budget had no borrowing provisions in it. So, in less than two months we’re now talking about needing to borrow to meet our financial obligations. They’ve spent all of our money, now they want to get a credit card.
Hopefully Edmonds Mayor and City Council will follow the recommendations by finance consultant Mike Bailey. Unfortunately, much too often the city, in the past, has employed consultants with an agenda to tell them what they WANT to hear instead of what they NEED to hear.