Lynnwood to cut nine employees, $11.7M in spending amid $10.7M deficit

Key takeaways: 

• Mayor Christine Frizzell announced plans to cut $11.7 million in expenses and lay off nine employees to address a $10.7 million 2025-26 budget shortfall. 

• All general fund departments were asked to cut expenses by 3–10%. 

• The council also discussed a development agreement and temporary financial backing for “The District” redevelopment project.  

The City of Lynnwood plans to cut $11.7 million in expenses from its adopted 2025-26 biennial budget, including the elimination of nine staff members in an attempt to address a $10.7 million shortfall, Mayor Christine Frizzell announced Monday at a city council meeting. The council also reviewed a redevelopment agreement and a short-term financing plan with the Lynnwood Public Facilities district regarding their redevelopment plan near the Lynnwood Event Center. 

PFD development agreement and short-term financial backing

The Lynnwood Public Facilities District (PFD) plans to redevelop the property around the Lynnwood Event Center into a mixed-use development city center area known as “The District.” The PFD requested the council’s approval of a development agreement and a short-term loan agreement to lower development costs for the PFD– at no cost to the city. 

Read more about “The District” here. 

What’s in the contract? 

• If the council approves the development agreement, it would take responsibility for construction of an extension of 194th Street Southwest and creation of a new street, 38th Avenue, known as “ring road.” 
• The cost of the new street is estimated at $18 million, city documents say. 

Funding

The district anticipates the following funds:

• $5 million from Washington Transportation Improvement Board grants
• $10 million from a council-approved Tax Increment Financing model
• $3 million from city transportation revenue
• A PFD loan for 30% of the design phase

Why? 

• The PFD needs the city to enter the agreement to legally move forward with the redevelopment, ensuring consistent building rules and that the city will build the new roads. 
• This contract is also crucial for the PFD to get loans at lower interest rates, as the city’s financial backing helps them fund project designs and environmental cleanup.

The PFD also requests short-term financial backing for a $15 million loan the district is seeking from the Snohomish County Treasurer’s Community Investment Program. The loan will be issued on a five-year term, with potential for renewal, Lynnwood Finance Director Michelle Meyer told the council Monday. 

Because state law limits public facilities districts to borrowing against revenues, the PFD needs the city’s backing to secure a $15 million loan at lower interest rates. Meyer said the district has never missed a bond payment and the state Department of Commerce confirmed it has sufficient revenue to repay the debt.

Cost breakdown

• The PFD will use $9 million of the $15 million loan to pay off existing debt. The remaining funds will be used to advance the project into the schematic design phase and clean up soil contamination onsite from a former dry cleaner. 
• $400,000 of this loan will go to the city to design the new ring road set to loop around the planned development. 

Budget update

Mayor Christine Frizzell on Monday announced plans to cut $11.7 million in expenses in light of a $10.7 million general fund deficit projected for 2025-26. Financial reports for the the first half of 2025 show revenues trailing forecasts by $4.2 million and expenses exceeding revenues by $5.2 million. 

Staff cuts: 

The $11.7 in cuts included staff reductions. Nine city employees were told last week that they would be laid off, Frizzell said. The city worked with labor unions to ensure compliance with collective bargaining agreements, per city documents.

“A budget is not something that is set in stone. It is a plan and plans often change and need to be reassessed, reimagined and recalculated,” Frizzell said Monday. “…It was with heavy hearts and much consideration that cuts were made to staff last week. With these measures, we have identified sizable reductions. However, until the national economy significantly improves, we may need to identify additional reductions.”

Against a backdrop of rising costs nationwide, the city’s key revenue streams – including sales tax, development services/construction permit and traffic camera tickets – have seen significant shortfalls, leading staff to a revised forecast of zero revenue growth through 2026, Finance Director Meyer said. Staff also lowered revenue projections for the biennium by $20.5 million. 

However, the city still faces a projected General Fund deficit of $3 million by the end of 2025, which violates city policy. Even if the city lowers its minimum fund balance policy from 2.5 months of operating costs to 2 months, a projected gap of $8 million for 2026 remains.

Find a breakdown of the budget deficit here. 

In response, the mayor directed all city departments operating under the general fund to reduce spending by 10%, and a 6% reduction for the police department.   

Spending cuts: 

Executive

• Adopted 2025-26 budget: $4,541,653
• Reductions as of Sept. 11: $478,100 

Municipal Court

• Adopted 2025-26 budget: $6,026,600 
• Reductions as of Sept. 11: $182,200

Human Resources 

• Adopted 2025-26 budget: $2,657,900
• Reductions as of Sept. 11 as of Sept. 11: $257,000

Finance 

• Adopted 2025-26 budget: $8,505,651
• Reductions as of Sept. 11: $824,300

Information Technology

• Adopted 2025-26 budget: $7,049,400
• Reductions as of Sept. 11: $719,900

Police

• Adopted 2025-26 budget: $67,203,303
• Reductions as of Sept. 11: $4,090,000
  • 13% patrol staffing 
  • 20% reduction in traffic unit staffing
  • 43% reduction in community outreach, crime prevention and volunteer program staffing
  • 29% reduction in planning, training and accreditation unit staffing
  • 20% reduction in special operations staffing
  • 40% reduction in community health and safety section (CHSS) (animal control and CHSS Officer)
  • 10% Reduction in detective unit staffing
  • 33% reduction in Lynnwood’s participation in the Snohomish County Regional Drug Task Force. 
  • Extension of police fleet service life by two years
  • Significant reduction in Fund 105

Parks and Recreation 

• Adopted 2025-26 budget: $21,847,918
• Reductions as of Sept. 11: $2,117,300

Public Works 

• Adopted 2025-26 budget: $8,347,500
• Reductions as of Sept. 11: $1,161,500

Development and Business Services

• Adopted 2025-26 budget: $14,089,888
• Reductions as of Sept. 11: $1,843,300

Looking ahead, Frizzell said the city needs to explore new revenue sources to ensure long-term financial stability. Discussions on potential sources, including a business and occupation (B&O) tax are planned for future meetings. 

Read more about the spending cuts here.

View the full meeting agenda here.

A recording of the meeting can be found on the city’s website.

— Contact Ashley at ashley@myedmondsnews.com.