July 28, 2025 6:04 pm

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Lynnwood’s revenue is taking a nosedive, not helping the city’s multi-million-dollar deficit

LYNNWOOD—Things aren’t looking good for the City of Lynnwood’s finances, Finance Director Michelle Meyer reported Monday, July 21, a $5.1 million shortfall between General Fund revenues and expenditures through second quarter. This is in addition to the city’s already projected $4.2 million deficit.

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Lynnwood Finance Director Michelle Meyer reported to the Council on Monday a $5.2 million gap between General Fund revenues and expenditures.

“We’re going through some difficult times,” said Mayor Frizzell before reading a memo she authored during Monday’s City Council Work Session. 

In that memo, Mayor Frizzell chalked the shortfall up to Lynnwood’s rapidly expanding growth (and by extension an increased demand for city services), inflation, unexpected operating costs of the new Community Justice Center (CJC), increased costs for prosecutorial and indigent defense services, lower than projected sales tax collection (which makes up about 44% of the city’s general fund revenue), and a far less-than-anticipated revenue stream generated by the new photo enforcement program.

Back in April Finance Director Meyer provided the Council Finance Committee, and subsequently the entire Council, with information regarding a projected $3 million deficit by the end of the biennium resulting from a $4.2 million deficit in the 2024 end-of-year fund balance due. At that time, Mayor Frizzell asked the City Leadership team to begin closely scrutinizing spending and identifying ways to reduce costs to address the deficit.

While the plan tackled some of the issues surrounding that $4.2 million shortfall, the city continued to see steep declines in revenues with no real end in sight. Lynnwood’s Finance team later found that the city has an additional $5.2 million gap to fill, which Mayor Frizzell’s original plan did not address.

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Financials showing a $5.1 million gap between General Fund revenues and expenditures.

In response to the Finance team’s updated analysis, Mayor Frizzell updated her plan of action calling on City Departments to reduce their General Fund operating costs by a target of 10%, while requesting Finance Director Meyer to re-forecast Lynnwood’s 2025-2026 to reflect zero percent growth in the city’s State Sales Tax, Development Service Charges, and Photo Enforcement revenues.

All of this is an addition to the already enacted cuts made in her original plan. These include instituting a hiring freeze with 20 general fund positions currently being held vacant, with exceptions only for critical functions, reduced seasonal staffing, reduced travel and training, restricted overtime unless approved by Director, reductions to programs, reduced professional services and contracts, elimination of non-critical purchases, and furloughs for Mayor and Directors in 2025 and 2026.

Regarding the “hiring freeze,” Mayor Frizzell clarified Monday, when asked by Councilman Robert Leutwyler, that this is “not across the board.” It does not apply for critical conditions such as the Wastewater Treatment Plant, she added.

On June 24, 2025, Governor Ferguson released a statement announcing that Washington State is facing a new fiscal shortfall with revenues down $720 million over the next four years and Lynnwood is not the only Snohomish County city to feel those impacts. Nearby cities Mukilteo ($2.6 million deficit), Edmonds ($20.5 million deficit), and Everett ($12.6 million deficit) are just some examples.

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Lynnwood City Council Work Session on Monday, July 21, 2025. Source: Snapshot from livestream.

“Reductions of this magnitude will require changes to level of service by means of a reduction in workforce. This includes honoring our collective bargaining agreements and working with our union partners to meet all obligations and support employees during this challenging financial time,” said Mayor Frizzell Monday. “As we head into these challenging times, my priority remains on preserving public safety, code and regulatory compliance, transportation and road maintenance, and preserving front line customer service for the public. We need to be adaptive and balance the immediate needs with a long-term resiliency for our City.”

The one good news about the budget, Michelle Meyer said, is that the City of Lynnwood has now completely used up its American Rescue Plan Act dollars (going into the 2025-2026 budget) which frees up the city to have more time to focus on how to balance the budget instead of focus on the allocation of funds.

“It changes every day,” said Meyer. “We get good news from the State of Washington one day that they are lowering the retirement contributions for our public employees, we plug that in, we think that looks good, then we get notified the next day that our health insurance rates are likely going up to double what we budgeted. It’s continual work in progress but the bad news is there’s nothing in Q2 that looks like it’s turning around.”

Lynnwood City Council member Robert Leutwyler equated the city relying so much on sales tax revenue as “building your tax on quicksand” after Meyer’s presentation.

Council member David Parshall questioned whether President Donald J Trump’s “on again, off again” tariffs had anything to do with Lynnwood’s plummeting auto sales – of which the city benefits greatly from regarding sales tax revenue.

Councilman Patrick Decker – who called the budget forecast an “overly optimistic” reading of the “tea leaves” urged the City to have more opposition to forecasts in the future, particularly as it applies to anticipated construction and how interest rates have not done anything to incentivize more, and expected, projects.  

Decker agreed with Mayor Frizzell that the city needs to make tough decisions but took it one step further. He suggested that maybe the city cannot afford large projects like its upcoming Town Square Park – a planned park in the heart of Lynnwood’s downtown core estimated to cost nearly $16 million.

“It’s nice to have but we may not be able to afford a city park. For me it would be great to have down the road, we’re talking eight, nine years down the road, but that’s not going to help if this City can’t get eight or nine years down the road to remain solvency. We have more important services we need to provide,” said Decker.

Council member George Hurst called for a third-party efficiency study and challenged Mayor Frizzell on wanting to remodel City Hall.

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Council member George Hurst called for a third-party efficiency study and challenged Mayor Frizzell on wanting to remodel City Hall. Source: Snapshot from livestream.

Lynnwood is spending a quarter of a million dollars on the Development and Business Services building, where the Public Works Department has already relocated to. DBS plans to relocate to City Hall by next June. Mayor Frizzell defended the City Hall remodeling decision stating that the city will save $2.5 million a year by consolidating services.

When Hurst asked if the costs are projected to outweigh the spending Mayor Frizzell said she would follow up with the numbers at Council’s next meeting. Michelle Meyer chimed in to specify that the City Hall remodeling costs are coming out of the Capital Projects fund, not the General Fund, but will benefit the General Fund in the long run.

Mayor Frizzell adjourned the meeting by saying the city is weighing a list of options and plans to have an update by next week.

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Lynnwood City Council Work Session on Monday, July 21, 2025. Source: Snapshot from livestream.
Kienan Briscoe
Author: Kienan Briscoe

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