LYNNWOOD—At Tuesday’ Finance Committee meeting, Assistant City Administration Monisha Harrell shared that a financial review by newly appointed interim finance director Sandra Fujioka following the sudden resignation of the city’s previous financial director a few months ago, discovered inconsistencies and inaccuracies from the prior administration not disclosed to the council worsening the city’s 2026 deficit.
“Yesterday, my team notified the Finance Committee that the financial information available to me in March regarding the City’s general fund did not reflect the City’s true financial standing,” Mayor George Hurst released in a statement on Wednesday. “Because of the work by Assistant City Administrator Monisha Harrell and former Interim Finance Director Sandra Fujioka, it is now clear that the City’s deficit is more significant than previously reported, primarily due to longstanding deficiencies in financial systems and processes.”
Harrell also disclosed to the council a “Management Letter” from the Office of the Washington State Auditor dated October 20, 2025, of “specific matters” identified during its accountability audit which were “not included as findings” in its original report but warrant “attention to management.” The letter was never shared with the council, Harrell disclosed and called to “strengthen” internal control.
In her briefing to the Finance Committee, she disclosed the following findings from the financial review:
- Overly optimistic forecasts for resources
- A 23% increase in authorized employees and the use of “one-time resources”
- Investment in a significant capital facility the Criminal Justice Center (CJC)
Beginning in early 2025, it was identified that certain General Fund revenues were not performing in accordance with the adopted budget. Budget estimates were updated and a gap of $25 Million for the biennium was set as the target to close. Throughout 2025, a combination of departmental cuts, transfers-in from other funds and Council action to reduce the minimum fund balance policy from 2.5 months to 2 months and increase certain revenues brought the remaining gap down to $3.75 million by the end of 2025.
In early 2026, City Council took action to implement the Public Safety Enhancement Sales Tax authorized by the State legislature. A conservative estimate of $1.75 Million is anticipated from collections of that tax which went into effect on April 1, 2026. Departments also identified an additional $2 Million in reductions to fully close the $25 Million gap for this biennium.
At his State of the City in March, Mayor Hurst struck an optimistic tone highlighting the elimination of a $25 million budget deficit based on information available at the time, progress on long-anticipated infrastructure projects and new initiatives aimed at public safety, housing and immigrant support. However, with these new findings by the financial review team contributing to the financial health of the city, he is taking a “sharper focus” to “actively” improve systems and processes, he said.
“Following this discovery, we have taken immediate action to minimize the deficit’s impact on the next biennium,” Mayor Hurst shared. “I have instructed our directors to take a critical look at their budgets to determine how to reduce expenditures while maintaining critical services. We are reviewing our contracts and possible redundancies to be more efficient. We are also revising our internal processes to improve tracking to provide more clarity and certainty.”
Harrell added that the city will commence official audits of budgets and policies, review current expenses to slow General Fund losses, update revenue forecasting policies to better maintain future fiscal integrity, and work with the council to develop a 2027-2028 City Budget that reverses deficit spending.
The Mayor’s office is expected to provide an update to the city’s financial situation at the September 8 Budget Summit with the entire City Council.
June 2026 Sales Tax Report
Reported June Sales Tax collected (January 1, 2026, through April 30, 2026) show modest growth of 3.3% compared to the same period in 2025 with strong showings in the retail, food, manufacturing, and professional services sectors. The construction sector was down 13.31% compared to the same period last year continuing a four-year (2023 through 2026) downward trend of 39.62% or $637,714 reduction in revenue. Although motor vehicle and part deals for the June report were slightly down -0.44% at $3.43 million, this sector also has been trending downward since 2023 from a high of $4 million for the same period.
The City of Lynnwood experienced a strong first quarter General Fund revenue growth of 21.07% at $16,585,089 with a modest increase of 3.45% in expenditures to $17,660,168 for a net loss of $1.075 million, well below the net loss of $3.372 million in the first quarter of 2025.
Author: Mario Lotmore
