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Key takeaways:
- Lynnwood faces an estimated $10.7M deficit as revenues in the first half of 2025 fall behind projections.
- Staff now estimate “zero growth” in revenues from 2024, with revenues expected to fall short of initial projections by $21.3M.
- The mayor announced potential staff and service reductions to bridge the budget gap, but exact reductions weren’t specified.
- The council also amended council rules, including changes to remote attendance and allotted time per person for public hearings.
Despite increasing property taxes by 52% in 2024, Lynnwood finds itself in dire financial straits. New projections reveal major miscalculations made in the 2025-26 budget adopted by the council in late 2024 – with the budget plummeting 200% from an estimated positive ending balance of $10 million to a $10.7 million deficit unveiled by city staff Monday.
In other business, the council made major changes to its rules and procedures regarding remote attendance and time allotted to speakers during public hearings.
Budget updates: New projections forecast a major budget shortfall for 2025-26, prompting city leadership to pivot its financial strategies. In response, the mayor announced plans to slashspending by reducing services and cutting staff, and finance staff pulled back their budget calculations to reflect current trends.
The city council is faced with the challenge of addressing the budget crunch while under the watchful eye of voters – as both the mayor’s job and four city council seats are up for election this year.
Key numbers
- Original ending fund balance adopted in 2025-26 budget: +$10M.
- Projected total 2025-26 deficit as of July 28: -10.7M.
- Projected 2025 deficit: $4M.
- Projected 2026 deficit: $11M.
- Estimated decrease in revenue from original estimates: $21.3M.
- Shortfall from original 2025 beginning fund balance estimates: $4.2M.
- 2025 budget deficit YTD: $5.2M
- Estimated spending reductions for 2025-26: $12.3M.
How did we get here? Lynnwood’s revenues are falling short of initial projections due in part to unprecedented shortfalls in three of the city’s major revenue sources: Sales tax, permitting fees and court violation/red light camera fines.
In response, the city scaled back its once-optimistic projections for the current budget, forecasting “zero growth” in revenue from 2024 to 2025, Lynnwood Finance Director Michelle Meyer said Monday. This deviates from the city’s usual approach of building the budget to reflect Lynnwood’s trend of the population and economic growth in recent years – an approach it stuck to for the current budget.
However, 2025 has proven to be different, Meyer said. Local and nationwide economic uncertainty is restricting cash flow – a problem not unique to Lynnwood. As a result, developers are halting or even canceling large development projects that were slated to bring in millions of dollars in revenue, she added. Further, people aren’t spending as much money, as Lynnwood’s sales tax projections are lagging by $1 million.
The city also isn’t collecting as much money as anticipated from court violation fines, specifically the traffic cameras. Councilmember George Hurst alleged staff made a mistake in forecasting camera revenues, saying the estimates were based on data from a four-month period, rather than over the course of several years.
Lynnwood cracks down on spending: After reviewing city finances from the first quarter of 2025, Mayor Frizell in April directed staff to cut spending by 3%, she said at a meeting earlier this month. However, as the year progressed, it became clear that the city was on a trajectory to fall short of initial revenue projections, prompting the mayor to increase cuts by 10%.
The mayor outlined the following cuts:
- Hiring freeze of 20 vacant positions
- Reduced seasonal staffing
- Reduced staff travel and training
- Restricted staff overtime
- Reductions to programs
- Reduced professional services and contracts
- Eliminated non-contract purchases
- Estimated unpaid furlough days for the mayor and department directors in 2025-26
The city plans for more staff cuts, although no additional details were given. With people’s jobs potentially on the line, city staff declined to go into specifics before alerting the individuals involved and consulting with unions.
What can be done? The city doesn’t have unfettered access to every dollar in its budget, as local and federal laws limit how it uses certain dollars, such as infrastructure and housing funds.
However, the city has some wiggle room in its public safety fund. The Lynnwood Police Department has already agreed to reduce expenses by retaining a 5% vacancy in positions, equal to $2.5 million in savings through 2026, Meyer said.
The city can also legally dip into its emergency reserve funds, as long as the 2.5 months worth of operating funds mandated by city policy are restored by the end of the biennium, Meyer said.
Lynnwood also has some wiggle room in how much property taxes it’s legally allowed to collect from residents. Lynnwood is currently on track to collect only $7.2 million of the $10.8 million maximum lawful levy determined by state law, leaving a banked capacity of $3.6 million up for grabs. Banked capacity refers to the money a jurisdiction has not yet collected, but is legally allowed to collect under state law.
If the city chose to collect its banked capacity, it would increase the city’s property tax rate from $0.67 per $1,000 assessed value to $1. For the average Lynnwood homeowner, property taxes would jump from an estimated $422 per household to $633 annually. However, this option may not be as popular following a historic 52% tax increase passed by the council less than a year ago.
View the council presentation slides HERE: Lynnwood 2025-26 Budget Update Slides
View the line-by-line budget HERE: Lynnwood Fund Summary, Jan-June 2025
Changes to council rules
The council adopted the following changes to council rules and procedures:
- Public hearing testimony time was increased from five minutes per person to 10 minutes per person. However, the presiding officer, usually the mayor, is required to ask if they wish to speak beyond the original five minutes.
- Councilmember’s’ remote attendance allowance was increased from three to 10 meetings and is no longer restricted to emergency situations.
- Councilmembers are required to be on camera through the entire duration of the meeting. If a councilmember loses connection for more than 50% of the meeting, it is considered an absence.
- Changes were also made to deadlines for councilmembers to submit agenda materials and other council procedures.
Other business: The council approved an $800,000 settlement agreement with Marshbank Construction regarding the 196th Street Improvement Project. No other details were given, as the council discussed the matter in a closed meeting.
A full recording of the meeting can be found on the city’s website.
— Contact Ashley at ashley@myedmondsnews.com.
Mayor Frizzle and Lynnwood council, let’s start things off by being truthful and transparent. Is that even possible? Many citizens, including myself, think not. The $800,000 settlement should never remain a secret to the citizens of Lynnwood. That can be your first order of business, serving the public.