City of Lynnwood to use emergency funds to offset $2.2 million budget deficit
By Erin Freeman | Lynnwood Times Staff
Lynnwood will use its emergency reserves to fulfill a $2 million gap that emerged out of the coronavirus pandemic in the city’s budget, the decision authorized by the Lynnwood City Council.
At its July 13 business meeting, the City Council approved using the general fund reserves to neutralize a $2 million deficit in the city’s budget induced by pandemic-related revenue loss, in a 6-1 vote.
In March and April, the city, heavily reliant on sales tax, experienced a significant blow to its revenue steam due to coronavirus-induced temporary business closures, explains Councilmember Ian Cotton.
The city forecasts a loss of $9.4 million in revenues, with a $7.8 million preliminary estimated deficit imposed by COVID-19. The remaining $1.6 million attributes to revenue lost in 2019.
To fill the gap in revenue, city staff has implemented incentives and budget policy changes to confront the shortfall imposed, leaving a remaining $2.2 million deficit. Throughout numerous city council meetings, the council has discussed plausible possibilities to offset the remaining deficit, evaluating additional ways to address the gap, says Councilmember Shannon Sessions.
During the June 29 meeting, the council considered six options for closing the remaining $2.2 million gap. In the discussion, a majority of councilmembers stated a liking of using the revenue stabilization fund within the general fund reserves. Others preferred utilizing a combination of the revenue stabilization fund and the economic development infrastructure fund (EDIF), with one opting for the use of solely EDIF.
Previously indicating to be comfortable with using either of the options, Council President Christine Frizzell has since retracted that statement, now maintaining a preference for the revenue stabilization fund. The fund’s purpose lies in combatting cash flow shortages in the general fund and providing a cushion for unexpected shortages in the tax revenue receipts and is the best-suited option to address the issue, says Frizzell.
“It’s the appropriate fund to use,” Frizzell said. “This gap is not caused by any infrastructure concerns, but it is totally within the reason that the revenue stabilization fund was set up… I fully support using the revenue stabilization fund to close the gap, because that is what it was established for.”
Voting against the use of the general fund reserves, Councilmember Jim Smith presented a hypothetical anecdote regarding the delegation of household finances in emergencies to explain why Lynnwood should hesitate to use the general fund reserves, opting for the use of EDIF to offset the gap.
“For me, it would be more important if you did have an emergency in your house, you might want to put off remodeling your rec room first,” Smith said. “This is the same case I see here, even though we’ve got a reserve fund that’s for emergencies, we’ve got other sources that could pay for this without using our reserve funds.”
Originally uncertain about the city choosing to use the revenue stabilization fund, Councilmember George Hurst voted in favor of adopting the resolution, as it specifically includes information of city intent to restore the general fund reserves in the upcoming 2021-22 biannual budget.
“In the 2021-22 budget, there will be a plan and a schedule for restoring the general fund reserves,” Hurst said. “That’s what’s important to me and that’s why I would be able to support this.”
In other business, the council unanimously approved Mayor Nicola Smith to enter into a franchise agreement with Level 3 Communications, a telecommunications and Internet service provider company, to install, operate and maintain communication networks in the city rights of ways.
Kris Hildebrandt was later collectively appointed to Position No. 2 of the Human Services Commission.
Future Lynnwood City Council Business Meetings, Work Sessions and Committee Meetings can be streamed live by the public at https://www.youtube.com/user/CityofLynnwood/live.