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In adopting the 2025-2026 biennium budget, we’ve positioned the City’s finances to keep pace with the exponential growth that Lynnwood has experience over the last decade. This rapid expansion has led to an increased demand for city services. In response a series of policy decisions were made to add critical services and programs to meet the needs of our growing community.

However, many of these decisions were implemented without sustainable and long-term funding mechanisms. As a result, the city has increasingly relied on its fund balance to cover ongoing costs; Consequently, reducing our financial flexibility, and resilience in the face of economic fluctuations.

These necessary investments, combined with other ongoing budgetary pressures, have placed out city’s finances on an increasingly unsustainable path. Over the past several years there have been numerous budgetary pressures outside of our direct control. Inflation has influenced many facets of our city government, we have experienced substantial increases to the cost of professional services, fleet, equipment, and supplies. We have witnessed considerable increases to the cost of our liability insurance. The effort to fully operationalize our newly constructed jail has brought about unexpected costs. We are also looking at serious increased costs to provide prosecutorial and indigent defense services in our courts due to a new Washington Supreme Court ruling that will have a significant financial impact for years to come.

The City is now confronting a substantial budget shortfall, driven by the continued instability of the national economy. Like many jurisdictions across the country, Lynnwood is experiencing a notable decline in revenue, with no clear sign of stabilization in the near term. Locally, this has resulted in lower-than-projected sales tax collections, and decreased revenues from construction permits. We are also seeing lower-than-forecasted revenues from the photo enforcement program.

Sales tax makes up a significant portion of the Lynnwood’s revenue. While this resilience yields strong fiscal returns during periods of economic growth and consumer confidence, it also exposes the city to significant financial volatility during economic downturns or shifts in consumer spending which we are seeing today. These trends are making it increasingly difficult to sustain city operations at currently budgeted levels.

On April 23, 2025, 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, I asked the City Leadership team to begin closely scrutinizing spending and identifying ways to reduce costs to address the deficit.

We took measures that helped to address the $4.2 million gap while we closely monitored our city’s monthly sales tax revenue reports as well as state revenue reports. These efforts were helpful; however, the national environment of economic uncertainty has continued, and the turbulent national economic realities have caused a steep decline in revenues, with no real end in sight. 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. Unfortunately, the economic challenges have only intensified. Our Finance team has prepared Preliminary Second quarter Financial Statements covering January 1 – June 30, which mirrors these sentiments and shows that we have an additional $5.2 million gap between General Fund revenues and expenditures through second quarter.

Steps Being Taken to Address Budget Shortfall

We have some tough decisions ahead as we strategize how to set our city finances on a sustainable funding model for the future. I have asked Director Meyer to re-forecast our 2025-2026 budget to reflect zero percent growth in our portion of State Sales Tax, Development Service Charges, and Photo Enforcement revenues. The updated forecast will show a bleak outlook for our City’s finances without strategic and decisive action.

Our City Leadership team is considering and evaluating all options to determine how City services might be restructured, reduced, or eliminated. We have asked departments to reduce their General Fund operating expenses by a target of 10%. The following cost-saving measures are currently enacted:

• Instituted 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
• Eliminated non-critical purchases
• Furloughs for Mayor and Directors in 2025 and 2026

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.

Next steps

With these measures, we have identified sizable reductions, however unless the national economy significantly improves, we will need to identify additional reductions. As we look into the future, it is critical that City Council provides guidance on restructuring the City’s expenditures and exploring new revenue options for the long-term financial sustainability of our city. These are difficult deliberations, and it is our belief that by taking action now with cost-saving measures and revenue options, we can minimize the need for more drastic changes into the future. After Council’s summer recess, we will reconvene to discuss priorities and solutions for the future.

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.

Earlier today I informed our employees about the ongoing budget challenges. We have also notified the City’s Bargaining Units of the current budget deficit and the future outlook. Like many public agencies, we are navigating unprecedented financial uncertainty. The decisions ahead will not be easy and will not be made lightly. We will continue to keep our city employees, the City Council, and the public informed.

Thank you for your continued commitment to Lynnwood. We will confront these challenges together, with transparency, compassion, and determination.

Mayor Christine Frizzell took office as the Mayor of the City of Lynnwood in January of 2022. Mayor Frizzell coordinates and directs the overall management and administration of all city departments, implements council policies and directives and provides intergovernmental coordination between the City Council, city staff and other governmental entities.

COMMENTARY DISCLAIMER: The views and comments expressed are those of the writer and not necessarily those of the Lynnwood Times nor any of its affiliate.

Author: Lynnwood Times Staff