City Council - Budget and Finance Committee
City Council - Budget and Finance Committee
Mon, April 13, 2026
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Meeting summaryAI-generated
City Council Budget and Finance Committee — April 13, 2026
This was a single-item informational workshop on the city's preliminary 2025 year-end financial results. Council Member Lilliquist chaired in place of Committee Chair Lisa Anderson, who participated remotely. No binding votes were taken; this was a review and discussion session.
2025 Year-End Financial Review
Finance staff member Andy Astroen (name approximate — voice-to-text artifact) presented the city's preliminary financial position through December 31, 2025, noting that official audited statements have not yet been finalized and minor adjustments are still possible.
Economic indicators. Sales tax revenue has been essentially flat for four consecutive years, ranging from $32.3 million in 2022 to $33.6 million in 2025. Adjusted for inflation, the real purchasing power of that revenue is equivalent to about $27.2 million in 2020 dollars — meaning the city is effectively losing ground each year. Early 2026 sales tax figures show some promise, partly due to newly taxable categories (IT/software, security services, live events) and a strong start in construction activity. However, lodging tax revenue has declined slightly, dropping from $2.4 million in 2023–24 to $2.2 million in 2025, with 2026 trending even lower. Staff attributed this in part to a sharp drop in cross-border travel from Canada — approximately 2.2 million fewer travelers crossed the Blaine, Lynden, and Sumas border crossings in 2025 compared to 2024, with the decline continuing into early 2026.
On the housing and permitting front, the city has a target of 800 new residential units per year; 2023–2025 showed improvement but still fell short of that goal. A notable spike in permit value occurred in October 2025 due to a hospital building permit worth $177 million. An additional $120 million in construction projects are "ready to issue," suggesting future activity. The average home listing price has come down slightly, now under $800,000 as of February, though mortgage rates around 6% continue to dampen sales volume.
Citywide finances. Total city revenues across all ~70 funds came in at $418 million, with expenses at $472 million for 2025. Expenses grew by roughly $50 million year-over-year, driven by capital project activity, rising health care and workers' compensation costs, and jail costs. Staff noted this level of expense growth is not automatically alarming — much of it reflects planned capital spending — but ongoing cost pressures in health benefits and the jail are harder to control.
General fund — the key story. The general fund ended 2025 in better shape than budgeted, largely due to three deliberate revenue-side adjustments made during the budget process: (1) increasing the share of sales tax allocated to the general fund from 60% to 68%; (2) adjusting the internal interest allocation; and (3) fully funding the fire pension levy through property tax. Together, these moves added $8.7 million in revenue to the general fund. Without them, the city would have faced a $7.2 million deficit.
Even with those adjustments, the general fund ended with a thin positive balance — just a "sliver" above the required 18% emergency reserve threshold. The estimated beginning reserve for 2026 is $23.2 million. A 3% mid-year spending reduction exercise helped hold salary and benefit growth to about 2% and kept the general fund within $3.5 million of its expense budget. On the revenue side, the general fund came in about $7 million over budget, boosted by stronger-than-expected business and occupation (B&O) tax, interest income, and EMS/Medic One billing.
Medic One fund. This fund continues to struggle. Revenues are not keeping pace with expenses. At year-end, the fund had approximately $800,000 in cash, but faced $1.2 million in accounts payable obligations due to the county shortly after year-end, resulting in a negative estimated ending reserve. Staff clarified this reflects a timing/accounts-payable issue rather than a literal negative bank balance, but it signals ongoing structural underfunding that will require attention in 2026.
Employee health benefits and workers' compensation. Self-insurance costs exceeded projections by approximately $2.5 million. The city is increasing internal allocations to all departments in 2026 to address this, which Council Member Lilliquist noted creates a ripple effect — higher internal charges reduce what departments can spend on other services.
Claims and litigation fund. Council Member Lilliquist raised a concern that this fund's reserve balance is below the city's own target. Staff confirmed they are working to increase charges to other funds to rebuild the balance, but acknowledged this puts additional pressure on all other departmental budgets including the general fund.
Capital projects. The city's top 10 capital projects by actual spend totaled $58 million in 2025. Total capital outlay was approximately $106 million against a budget of $220 million — meaning $114 million in budgeted projects are still in progress or pending. Staff noted that upcoming council meetings will include reappropriation ordinances to carry those funds forward.
Looking ahead: $7 million in budget amendments coming. Staff previewed that the next council meeting will include approximately $7 million in needed budget adjustments — described as non-discretionary costs of doing business, not new wants. These will include corrections for jail costs, increased health benefit allocations, and Medic One fund needs, partially offset by about $1 million in new grant revenue for parks. An updated multi-year "alligator graph" showing projected reserve trajectories will accompany that presentation.
Discussion on economic uncertainty. Council members Anderson and Hammill raised concerns about the potential local impacts of rising oil prices, tariffs, and broader global economic disruption — including the effect of higher food and fuel costs on consumer spending and B&O tax revenues. Staff and Mayor Lund acknowledged the uncertainty, noting the city uses conservative revenue projections and will monitor closely, but that it is too early to model specific impacts. Council Member Lilliquist observed that if consumers shift spending toward food (which is generally not subject to B&O tax), the city's B&O collections could suffer. Staff also noted that the inverted yield curve — historically a reliable recession predictor — has not yet been followed by an official recession designation, adding to forecasting difficulty.
Vote: No vote taken. This was an informational workshop.
Key Takeaways
The 2025 general fund ended in the black, but barely. The city avoided a roughly $7 million deficit only by making three significant revenue-side budget adjustments; the emergency reserve ended with just a thin margin above the required 18% floor.
A $7 million package of budget amendments is coming at the next council meeting, covering unavoidable cost increases in jail operations, employee health benefits, and Medic One — with limited revenue offsets.
Medic One is structurally underfunded and will be a continuing budget challenge in 2026.
Revenue growth is flat in real terms. Sales tax has barely moved in four years, lodging tax is declining, and Canadian visitor traffic is dropping sharply — all presenting headwinds for 2026 and beyond.
Global economic uncertainty (oil prices, trade disruptions, tariff effects on consumer spending) adds significant forecasting risk; staff is monitoring closely but cannot yet quantify local impacts.
AI-generated summary from voice-to-text transcript. Not the official record. Verify important details with the source documents linked above.
What happened at this meeting
2025 year-end financial review
# 2025 Year-End Financial Review Summary
Staff presented a comprehensive 2025 year-end financial review showing citywide revenues of $418 million against expenses of $472 million, with the general fund exceeding budget by approximately $7 million in revenue while coming in $3.5 million under budget on expenses. Sales tax remained flat over four years at approximately 32.3 to 33.6 million (27.2 million in 2024 dollars), though 2026 showed early promise with new retail categories and strong construction activity; however, border crossing data revealed a concerning 2.2 million traveler decline in 2025, and lodging tax declined to $2.2 million, indicating weak tourism. Staff made three critical revenue adjustments totaling $8.7 million—including changes to sales tax allocation (from 60% to 68% of the general fund), interest allocation, and implementation of a fire pension levy—that prevented a $7.2 million deficit, though projections show increasing shortfalls in 2026-2029 requiring 40 position eliminations and passage of a 0.1% safe and stable community sales tax. Key budget concerns included uncontrollable cost increases in health benefits, salary growth, jail facility expenses, and the employee benefits fund growing $2.5 million due to increased medical and workers compensation claims. Looking ahead, staff will present approximately $7 million in needed expenses at the next council meeting, while emphasizing ongoing budget challenges and economic uncertainty given global impacts and historical recession indicators.
Staff presented a comprehensive 2025 year-end financial review showing citywide revenues of $418 million against expenses of $472 million, with the general fund exceeding budget by approximately $7 million in revenue while coming in $3.5 million under budget on expenses. Sales tax remained flat over four years at approximately 32.3 to 33.6 million (27.2 million in 2024 dollars), though 2026 showed early promise with new retail categories and strong construction activity; however, border crossing data revealed a concerning 2.2 million traveler decline in 2025, and lodging tax declined to $2.2 million, indicating weak tourism. Staff made three critical revenue adjustments totaling $8.7 million—including changes to sales tax allocation (from 60% to 68% of the general fund), interest allocation, and implementation of a fire pension levy—that prevented a $7.2 million deficit, though projections show increasing shortfalls in 2026-2029 requiring 40 position eliminations and passage of a 0.1% safe and stable community sales tax. Key budget concerns included uncontrollable cost increases in health benefits, salary growth, jail facility expenses, and the employee benefits fund growing $2.5 million due to increased medical and workers compensation claims. Looking ahead, staff will present approximately $7 million in needed expenses at the next council meeting, while emphasizing ongoing budget challenges and economic uncertainty given global impacts and historical recession indicators.
Agenda items (1)
Procedural (1)
24874Procedural2025 year-end financial review
The city will review how much money it spent and received during 2025 to make sure accounts are accurate and identify any budget lessons for next year.
What happened
# 2025 Year-End Financial Review SummaryStaff presented a comprehensive 2025 year-end financial review showing citywide revenues of $418 million against expenses of $472 million, with the general fund exceeding budget by approximately $7 million in revenue while coming in $3.5 million under budget on expenses. Sales tax remained flat over four years at approximately 32.3 to 33.6 million (27.2 million in 2024 dollars), though 2026 showed early promise with new retail categories and strong construction activity; however, border crossing data revealed a concerning 2.2 million traveler decline in 2025, and lodging tax declined to $2.2 million, indicating weak tourism. Staff made three critical revenue adjustments totaling $8.7 million—including changes to sales tax allocation (from 60% to 68% of the general fund), interest allocation, and implementation of a fire pension levy—that prevented a $7.2 million deficit, though projections show increasing shortfalls in 2026-2029 requiring 40 position eliminations and passage of a 0.1% safe and stable community sales tax. Key budget concerns included uncontrollable cost increases in health benefits, salary growth, jail facility expenses, and the employee benefits fund growing $2.5 million due to increased medical and workers compensation claims. Looking ahead, staff will present approximately $7 million in needed expenses at the next council meeting, while emphasizing ongoing budget challenges and economic uncertainty given global impacts and historical recession indicators.
Verbatim transcript available
169 transcript segments indexed
Welcome back from a brief break. So the next committee is budget and finance. That committee is chaired by council member Anderson. Since she is joining us remotely today, she's requested that council member Liiloquist chair that meeting um in her place and he agreed to do so.
City of Bellingham Budget and Finance Committee minutes April 13, 2026, 2:05 PM Chair: Lisa Anderson Phone: 360-778-8200 Members: Daniel Hammill, Michael Lilliquist Email: ccmail@cob.org Web: cob.org/council City Council committee meetings Standing committee members receive reports and information, ask questions, and vote on a recommended action for consideration by the full Council at the regular meeting.
There is no public comment period during committee sessions. Call to order and roll call Council President Stone called the meeting to order at 2:07 p.m. Present: Committee Chair Michael Lilliquist, Sixth Ward Committee Member Daniel Hammill, Third Ward Committee Member Lisa Anderson, Fifth Ward (Attended remotely) Budget and Finance 24874 1.
So we're going to give just a moment and I will turn it over to council member Liiloquist. >> Okay. We have one item before today which is a 2025 year-end financial review. In the packet is a December 2025 financial report which closes out the year.
2025 year-end financial review Summary: Andrew Asbjornsen, Finance Director, and Eric Johnson, Budget and Treasury Manager, present a summary of the City's 2025 year-end finance position. Council Members discussed City finances and asked questions.
Um, this presentation uh will have other additional material. It provides a summary of the city's preliminary financial position for the period that ended in December 31st, 2025. This presentation and additional financial information is available on the city's website at co.orgreports.
Um, I believe we will in the near future be having a series of ordinances which do the actual bookkeeping we need to do to close out the books and start the new year, but this is a financial report on that larger picture.
This year Alice Burson, would you like to start? >> Council member Loquist. >> Yes. >> Um, just before I noted that your third committee member is currently not in chambers, council member Hamill. Um, but I expect that he will be >> okay.
>> I think our break just went too fast. back just a moment. Um, but in his absence, someone else could sit in or but just to make you aware >> in case there's a need for a motion. Would someone like to sit in for Mr.
Hamill till he gets back? >> Skip, thank you very much. Uh, Mr. Astroen, you can Oh, >> you may go ahead and begin at full speed. >> Okay. Thank you, Council Member Liquist and and council members. Um, I will go ahead and share the 2025 uh financial review.
So, this looks very similar to what you've seen in the past. Um, the financial statements are based on uh year-end preliminary numbers for December of 2025. Uh, we're still looking to close out 2025, so we have not created the official uh financial statements that will be audited.
Uh, but this is the preliminary review. There will be some slight modifications, but I'm happy to discuss any of those changes as as we move forward. Um and the presentation is posted online so it is available currently and it will be added to the agenda as well but provided you all with a copy so you could follow along as we go.
So and welcome any questions as we uh go through this presentation. This will start with the economic data like we've shared in the past and then we'll review some of the financial numbers through December and then we'll end uh with the alligator graph and kind of where we're starting 2026 and then um what we'll be doing bringing forward for the next council meeting as well.
So um I'll go ahead and get started. Uh so this is retail sales and use tax. We show this um uh each time we come forward. uh this represents the basically 1% of the sales tax. So the sales tax 9% in 2025 this is the equivalent of that 1% of the sales tax what we've seen over the years.
So on the left axis is in millions and then on the bottom is the months that we actually receive the revenue. The revenue is a two-month lag. So what you see in March is actually January. What you see in February is actually December.
So we're showing what we've actually received in each month. So in 2022, uh, we're starting to layer this at 32.3 million. In 2023, we had a few of those outliers what we've discussed in the past. We remove those and the dotted lines and just show what was actually received for the period of 2023.
2024 again is green. The lines are very on top of each other. We're not seeing a lot of growth in our sales tax. 2025 did the exact same whereas at 33.6 million. So, we're not seeing a lot of growth in our sales tax.
It's very, very flat throughout the last four years. Uh, one benefit we're seeing for 2026 is we've actually had a bit of a strong start, but March is the only representation of 2026. So, um, that is January of 2026.
February and January of that uh kind of purple line is for uh 2025, November and December months. And in 2026, we've seen um there was an adjustment to the sales tax that's included some new uh categories of retail sales uh for 2026, which includes IT and software, also security and uh live presentation.
So, there's a few miscellaneous categories that have been added to the area of retail sales that we'll be collecting in 2026. What we've seen in the early numbers of that is it's represented about uh 25% of our growth.
And the most growth that we've seen in 26 so far has really been in construction. So we're seeing uh construction off to a a strong start for 2026. Uh but speaking of the flat revenue, so you can see over the last four years from 22 all the way through 25, we're still sitting at that 32.3 all the way up to 33.6.
Very, very flat revenue growth. And the the actual impact with inflation is that we're reducing the power of the dollar each year. And so the equivalent of about 27.2 million for 2025. Those are in 2024 uh dollars or 2020 dollars.
I apologize. Um so again, the dollars not going as far with inflation and seeing that flat uh flat sales tax numbers. We've showed this each of the times. This is our uh representation of the North American industry classification system.
So these are our top five categories of sales tax that we collect within Bellingham. This represents about 50% of what we collect for the entire city. So um motor vehicle and parts dealers has continued to be our number one area of of sales tax that is sitting uh it was very flat within the current year.
The next two categories then the second category over is really a kind of a miscellaneous retailer and that increased by about 3% uh food service and drinking places is about 2% and then you see the general merchandise is down 7% and construction of building in 2025 was down about 5%.
So um it wasn't as strong in 2025 but hopefully it can rebound into 26. All right, we've shown these slides before. I'll start on the left side. So, this is permitting and housing market activity. So, um being that construction is a is a prime driver of what we receive in sales tax within our region, we like to look these numbers to see what might be in the future or what what the state of the past and what we can kind of project into the future.
So, on the left side we have uh permit activity. The yellow line is the value of the construction project. So, that is the value of the construction project going through the permitting department. The blue the darker blue line is column I'm sorry is the permits the number of permits that have come through and then the light blue is the number of units that have come through.
So our target for units our low-end target is that 800 units per year and as you see 23 24 and 25 have been increasing but we still haven't hit that 800 units. Yes. >> Sorry Mr. As soon is this uh on that permit activity is this residential permits only or commercial and residential?
>> This is I believe all this is all permit activity that's coming up and then the units is what represents the um that is only the the actual units that are producing >> the value number going up. That could either mean a lot of really expensive homes or maybe a few big commercial projects.
>> Yeah. As you see that very steep line, the very steep yellow line I was about to get to is uh in October we had 177 million in permit revenue or permit value come through. A lot of that has to do with the hospital uh building permit coming through in October.
And so that was a significant increase within that period of time. It didn't result in in the equivalent units um that we'd see reflected. So that is a big bump uh within 2025 for the value of construction.
Um with this we do know that um the planning department also tracks the ready to issue permits and so there's about $120 million in valued for construction activity that's waiting just ready to issue.
So this doesn't have anybody that hasn't come and paid for their permits or this this is everybody that's come and paid for their permits. the ready to issue is the ones that are still sitting there ready to get paid for and then those are projects that be in the future.
And so um there's a lot in the harper hopper. So hopefully hopefully things can move forward and people can move forward with those projects. Through the first quarter we've only seen 135 units um uh so far be tallied for the first three months of the year.
So um we're not off to the the strongest pace for the housing units, but it is very variable through the months. it can it can jump quickly and change quickly just based on uh what projects move forward.
On the right side, we see housing market activity. Um so the columns on the bottom is the supply of housing uh with the dotted line being the 5-year average of listing prices or listing um listings that are available.
And then the orange line is the average listing price. Uh we have highlighted the green bars represent February of 24, 25 and 26. And you see that the the supply has continued to grow in in Bellingham for the amount of houses that are actually out there on the market.
And with that, the average listing price has has come down a little bit. We're now under $800,000 for the average listing price through about February. Um, so that is uh good to see housing prices coming down a little bit.
The federal funds rate is still sitting at about 375 and mortgage rates, the last I saw, were about at 6%. Um, so those can drastically impact how quickly housing is sold. >> Excuse me, we have a committee member with a question.
>> Yeah, sorry. I I just want to back up here on um on slide five, the lefth hand side here, there's a um from 2019 through 2021, the the units represent a much higher value than the actual permits and that that drops off actually through 2022 and I'm trying to understand that that relationship and you had mentioned um the hospital accounted for some of those units.
I just wanted to dig into that just a little bit. Yeah. So, the units are housing units and they're using the access on the left. So, on the left you see that 2021 was a very strong year. I I forget um I apologize I didn't dig into 2021 on those numbers.
I believe that was some ADU changes and some other impacts that spurred growth within uh the unit count. That does not mean that the value will ne necessarily significantly increase. Um, so the units and the permits are using the left axis and the value is using the right access for dollars.
>> Okay, thank you. >> Any other questions on on this slide? So on the right with the housing market activity, we've actually seen um some strong growth in REIT in 2025, it it grew by about a million dollars.
So pretty significant increase for the amount of money or funds that came into the city related to real estate excise tax for 2025. Another area we look at is lodging tax. So again, the dollars are on the left and the months are along the bottom.
This is the month that we actually receive the dollars. So we'll start 2023 at about 2.4 million. 24 is the exact same at 2.4 4 million. 25 is a little bit less at 2.2 million and to start 26 we're even lower than that.
And so we've budgeted about 2.3 million but we're just not seeing a lot of uh increase within uh within stays within hotels and motel within the city of Bellingham. And so it's unfortunate to see that the the tourism is not growing.
Um this on the other hand the sales tax we saw is growing a little bit and and spurred with that construction but um we're not getting the travelers that are staying overnight within Bellingham over the last few years.
We did look at um our border crossings. So we were able to pull numbers for Bla and Lynon and Sumass borders. Uh and looking at the left axis is the number of travelers that are coming through the border and the bottom is the years of travel.
The light blue is the personal vehicles and the darker blue is the actual passengers uh associated with uh those traveling across the border. So you can see significant um growth after COVID with travelers coming back um into the US and really peaking at 2024 and then we see that big decline into 2025 of about 2.2 million less travelers in 25 than in 24.
And even looking at the first quarter of 26, we're seeing it continue to decline even from there. So, it's unfortunate that our neighbors to the north are not traveling down and we're not seeing more of that tourism dollars u for our local stay.
Um >> Andy, just a comment uh on the previous slide. As you said, it's been flat over the last few years, 2.2, 2.3, 2.4 million. If you go back 15 years, that was more like 1.4 or 1.6. So under the longer view, we've had a rather steady growth in visitors, at least the previous decade.
So this is a kind of a recent change. So the industry grew and apparently it's no longer growing. >> Yeah, it's remained fairly flat for through uh for the last three years or so. So those are are high level um kind of economic indicators that we've we've shared just kind of give you a sense of what we experienced from a sales tax perspective um from a tourism perspective and what we're seeing in the permitting and and housing market.
Uh now I'll take you into the actual data. Uh for the most part this is uh really what's in the December report that's attached to the agenda bill. The the December report goes in greater detail of all these numbers.
Um a lot more detail. This has about we we have about 70 funds for the city. So there's a lot that's encompassed within this report and within the numbers. Um so we'll start at a very very high level.
This is citywide revenues and expenses. So this is all all 70 funds basically. On the left side we have revenue of 418 million. On the right side we have expenses of 472 million. for 2025, revenue increased by about 10 million and expenses increased by about 50 million.
Uh that's not always uh concerning when we see big inflation or big increases in expenses. It really is kind of the level of what's going on with capital or services. It is increasing. It is more concerning when we have um those costs that we can't um kind of control as much when it comes to health costs that we've seen continue to increase or um our salaries and wage growth.
that is is keeping pace with inflation. So, and also when it comes to things like our jail facility um and things of that nature that are those uh services that are are necessary for continued business.
But this represents the different percentages of revenue um that the city brings in and then expenses on the on the right side. So, we'll again stay very high level. This uh is the similar slides I've shown in the past.
So, the gray represents the budget. The light blue represents 2025 and the darker blue represents 2024. And so you get a comparison of what 25 and to from 25 to 24. But then you also get the comparison to what we've done compared to budget.
So what was nice is we did see some um uh growth in in these budgeted numbers. We had BNO tax that that continued to grow in 2025. We also had REIT that did really well as I had said. Um, we also added a new solid solid waste tax last year that added about 1.3 million to our environmental environmental remediation fund to help support our pollution remediation efforts.
Um, you see a big line down here which was actually that bond sale that we had rel related to uh Pacific Street Operations Center is is kind of the one outlier there. On the citywide expenses, uh we have services, we have salaries and benefits and capital outlay.
Services encompass really everything we do from a city's perspective. Um that's self- insurance costs, that's the jail, that's rent, that's utilities. It also encompasses uh capital maintenance and repairs.
So, a lot that goes into our capital plan is also right there into services. Uh you can see that we've uh a lot of times I get asked what is budgeted but not uh that we haven't been able to get to and uh that's why we were able to pull together this slide which uh represents a lot of what's budgeted or what's planned into the future and uh what was budgeted in 25 and maybe in the early stages either planning or design or just still working towards that that next step of these projects.
So the top 10 um these are all of our capital projects. Our top 10 actual projects. So this is actual spend of our top 10 projects represents $58 million of what was spent. As you see all these projects are very complicated in the fact that there isn't just one funding stream associated with them.
We added the funds uh to each one of these projects. So the POC phase 2 actually had five different funding sources that went into that project. Um we have uh Wburn operations center that also has five different funding sources.
So just gives you a representation of of how complex these projects are and what all needs to come together to fund these projects and the scope and cost of these projects. So these were the actuals of the the top 10 um spend within 2025 and the bottom is the top 10 projects that were budgeted in 2025.
And some of these um are going to be rebudgeted, but they are significant projects like RG Haley and Cornwall, the new Waccom building that we were able to bond for earlier this year. So, a lot of these projects are are on on the path but just haven't gotten to yet.
As you see within the uh bar graph on the on the right side here, actual is how much we spent on our capital outlay or our capital project budget. That's about 106 million. And then we had our budgeted items of about 220 million.
So still 114 million in projects that are being worked on or that are still planned into the future. And you'll see some of those when we move forward to the the reappropriations um in the next meeting.
But just wanted to show uh where a significant amount of what gets budgeted for the city and where those funds are going. Now we'll go into special project or special revenue funds. So special revenue funds are revenues restricted or committed for specific purposes.
These are 100 level funds. Uh a lot of uh we have the dollars and millions on the left and then we have the funds on the bottom. The shadow boxes are the budget and the darker columns are the actual spend.
So uh orange is the spend and then the blue represents the revenue. So, and then the the shadow box for the blue is the budgeted revenue. And a lot of these uh shadow boxes, the ones that were not that were not spent is really associated with those projects that are on that previous slide.
So, RG Heal and Cornwall really represented here in environmental remediation fund and will continue to be reappropriated in the next meeting. Um and then um some of the other funds that really fall into the service category are within our housing funds, our tourism and really the grant related funds.
And then our parks funds are really the park impact fees and the greenways. So a lot of activity within within these funds represents 121 million in revenue or I'm sorry 91 million in revenue and 1 million in expenses.
Next is enterprise funds. This graph is is similar to the previous one. Uh this represents our business type activities that are self-sustained through user fees. So water, sewer, and storm or water, wastewater, and storm are our three big categories.
Uh medic one is is right there next at number four. Um and water uh sewer and storm have had a significant amount of capital activity within them. sewer. Um, a lot of capital activity with the Meridian Street um, efforts and the rotor lift station.
Um, the water fund has also uh, the watershed fund and there was about $12 million in in acquisitions in 2025. So, a significant amount of acquisitions within that fund uh, to preserve around Lake Wacom.
Uh, Medic one is a fund that we continue to uh, keep an eye on. It is it is not done well from an operating perspective. of the revenues are still not meeting pace with the expenses. Um, we did have a contingency loan at the end of the year that if it was needed, uh, we were cash positive.
That's only cash positive in the sense at 12:31. At the end of December, it had cash, but then the expenses that needed to pay on the 10th for payroll and then those other expenses that come in after you're in were not adequate to meet uh, the revenues and it will be a continued area that we'll discuss into 2026.
>> Actually, Mr. your husband. On that note, I several funds in here and most notably the Medic one fund had a negative estimated ending reserves. I don't know what that means accounting wise. I thought ending reserves are sort of like cash in a bank and you couldn't have less than zero in a bank.
Um can you explain what a negative estimated ending reserve is? >> Yeah, so at year end medical had about $800,000 in the bank. Uh there was >> in my cash understanding >> cash that was cash actually sitting in the bank sitting in that fund's bank account uh there was 1.2 two million associated with payment that was necessary, GMT payments that were necessary to pay to the county because they are the administrator of the ALS uh services.
And so those funds were sitting there and hadn't been paid out to the county yet. And so that was a big impact after year in that then gets paid to the county early in January that is related to a 2025 expense that reduces then where that fund is going to end as represented for 2025 but it didn't have enough cash to be able to cover those expenses.
So if uh we ceased operations in the end at 1231 it would have still had those expenses and ended 1.2 2 million to the negative without adequate cash to be able to cover those expenses. So the Indian reserve covers the additional payments that are done after year in associated with 25.
There's also payroll that goes out on the 10th that would be associated with >> sort of like accounts payable. >> Yeah, it's sitting in accounts payable at year end. Yep. >> All right. So those are uh enterprise funds.
Um again those are business type funds. Um some significant activity of the city. Uh internal service funds. We bring these up because these are uh these are a lot of the services that the general fund and all the all the uh people that make the the city operate um are utilized when it comes to fleet and radio uh facilities funds it claims and lit and our employee benefits fund is all of our self- insurance and health benefits fund.
So there was 78.2 2 million that were paid from other funds into these funds. And then there was 96.2 million that was spent out of these funds. You see the facilities fund. Most of this is really related to POC phase 2.
So that was a giant expense within uh 2025. Um our employee benefits fund. This is an area that um has continued to grow. Uh it's uh an area that we have already had to take changes into 2026 to increase our allocations related to our uh self- insurance program.
Uh when we budget, we budget uh with numbers that we know by about July through September. And so we we don't know the full impact of the year until the year closes. And so um and we're still actually closing the year.
But with this, we saw continued growth within our medical um and workers comp uh claims. And so it is an area that grew by about 2.5 million and really exceeded what we had projected within our budget.
So an area that uh we're looking to uh correct within 2026 and something we'll be talking about within our um amendments and reappropes as well. Now we go into our general fund. So uh we talk about the top four being the big four.
These are the big four that really uh represent almost 80% of what funds the general fund. Uh there are about 13 departments within the general fund. So all those departments are looking to share this revenue the all these revenue sources to try to fund uh those departments.
You'll see on sales tax we came in right on budget. It was a significant growth from 24 but that growth was really associated with changing the allocation to 68% of it used to be 60% in the general fund but we made three strategic changes with it going into the 25 budget to to adjust revenue to make sure that there was adequate revenue and we didn't reduce expenses as much within 25 because we were able to move um we're able to adjust the the interest alloc application which is represented right down here and we were able to adjust the allocation of sales tax from the street fund and the general fund from to the 68% within the general fund and we also uh have put in the fire pension levy that was fully that is fully funded is represented right there in property tax.
though there was three key changes within 25 on the revenue side to help to not impact the expense side and be able to keep uh keep the general fund uh balanced as possible. So we did budget about an um we did exceed budget by about $7 million within the general fund which was which was great to see.
Some of those revenue areas that really outpaced uh the budget was the interest allocation was 1.4 4 million higher than what we had budgeted. BNO tax came in about 1.4 million higher than budgeted. Electricity utility uh BNO was was higher as well.
And GMT and uh basic life support came in at about 3.5 million uh greater than what we had budgeted. So those were all uh great to see that that helped uh get us to where we were at year end where we ended cash positive um at the end of it.
So, um, those were the big big increases within the expense side or the revenue side. On the expense side, you see that we're at 1727 million. So, if you do the math from the previous page, that was about 1 point about 1.3 million to the positive.
Um, within the general fund, we had budgeted uh about 130 million. So that we came in under budget of about 3.5 on the expense side and overbudget on the revenue side by about 7 million to be able to close that $9 million budgeted gap um with with all the activity with all the variables within the general fund.
through this. We did have um some exercises within the middle of the year where we were looking to reduce some uh where we could at a 3% exercise where we are evaluating all expenses of the general fund to see where we could tighten our belt and reduce wherever we could knowing that we were in this difficult time financially.
And through that you can see that salaries and benefits only increased by about 2%. we were able to hold those to about a 2% growth and services again a very small growth to be able to maintain our budget within within three and a half million of of the total budget.
So um that was that was great to see and great to end the year. Uh we've seen this slide before the this represents the largest spin by department. Um and so police are on top followed by fire. uh the the column the bar represents the amount of uh spend uh based on percentage of budget.
The red line represents if you were at 100% of budget, you would have spent all of your budget. And so, uh, the police were at at about 115,000 over budget this year. And a lot of that had to do with, um, even we were coming up with those endofear budget allocations.
We the Watkins County was behind by about three or four months in jail bills and we were unclear on the true cost of what we're going to see from friendship diversion and also jail costs and and those are quite significant bills when it comes to the police department and so we made our best effort in in making those budget adjustments at year end, but we fell a little bit short on our projections and so there was just 115,000 um above budget on the police side.
You see municipal court, this just happens to be a a timing issue. They actually ended 42,000 under budget. And so, but when this report was created, at some point we need to create the report, but there's still ongoing adjustments and review and making sure our expenses hit the proper period.
And so, municipal court is actually under budget by about 42,000. And then you see any of the any of the spacing between the bar graph and the line really represents budget savings and and where we got to that 3.5 million in in budget savings.
And this is how we calculate uh beginning reserve and and ending reserve. So uh we ended uh the beginning reserve for 2025 was 22.1 million. uh our cash value at year end um this was updated on March 26th uh was 29 uh million and then we we add in our short-term receivables of 662,000.
We adjust that by our our known accounts payable. Um, and then acred wages that come out on the 10th. And these are all short-term expenses uh that we're able to identify at year end. That then gets us to our estimated beginning reserve for 2026.
And that leaves us with uh 23.2 million and just a sliver of economic reserve. the um emergency reserve is set at that 18%. And so that green bar on the right side represents 18%. And with all those adjustments and changes that were were able to complete in 25, we ended just above uh that bar at that that sliver of economic reserve.
So um that was great to see. And this is how uh beginning reserve is calculated when you're asking of what else goes into that calculation. And then we have our uh any reserve uh general fund projections.
So this is our alligator graph that's represents um dollars are on the left side in millions. The the columns on the bottom are our uh ending reserve balances. uh the cake that it kind of makes with the green and the dark green and then the purple represents the different types of uh of reserve balances that we have.
And then um the the colors aren't the best on this um on the screen, but the the light light green is actually the the empty amount that should be um at the top of that line would be the full emergency reserve.
And so the light green is what is missing in that emergency reserve. So, we're eating into the emergency reserve. You see a sliver in 2026 and then that growing into 27, 28, and 29. We thought it'd be useful to show what would happen if we weren't able to make those three adjustments um for our revenue side within 2025.
So, with the uh change in the sales tax allocation, with the interest allocation, and the fire pension levy adjustment, that represented $8.7 million of additional revenue into the general fund. So, there would have been a $7.2 million gap or a deficit within the general fund had those adjustments not been made.
We did uh budget a 350,000 deficit within 2026. 2026 represents our second annual budget. And so 2025 was our first time we actually were budgeting back on that annual basis. And uh we're working to continue to dial in those one-year perspectives instead of being on that bianual budget that we've had in the past.
Um and so uh 2026 we're starting with that $350,000 um uh deficit and uh like I say 2025 we did have those um the focus is really on the revenue side. we're able to adjust the deficit going into the budget based on the rev side.
In 2026, it was a large effort really on the expense side. Um we had a reduction of 40 positions with also freeze positions. Um and we we had all uh we're looking across all departments to try to reduce costs as much as possible to try to reduce that $10 million gap that we started with to enter the 2026 budget season.
And with that too, we were able to pass the safe and stable community sales tax to at least add a little bit of revenue at that 0.1% um thanks to the the efforts of our police department and being able to meet all the eligibility requirements uh necessary for those grants and those and the additional sales tax uh for the for the city.
And so with that, that's how we've closed the 2026 at that time. But now looking into next council uh meeting, we we're going to be bringing forward the um really with the year-end number and being able to see the true costs of being doing business and and what those costs represents when it comes to um the jail costs, our our health benefits costs that have increased, our Medic one fund that hasn't been able to maintain um adequate revenues to be able to cover the expense side.
So, uh, next, uh, council meeting, we're looking to bring forward about $7 million in in needed expenses really. I mean, there's not really any any wants in this. It's really what we feel like is needed for ongoing operations.
There is about a million dollars in revenue that's recognized. A lot of that has to do with a grant that's moving forward for the parks department. Um, and so, uh, some of those big changes are the fact that we are adjusting our our medical, uh, and workers comp self- insurance, uh, inputs into our self- insurance program.
And so, we've had to elevate those and that has an impact to all of our departments because that's just based on each individual and each full-time equivalent um, and each person on the payroll. and really uh completely needed as we're trying to keep pace with our legal requirement within our self- insurance programs when it comes to workers comp and our medical side.
So, you're going to see those increases and we can go through more detail of what those increases will look like um for next month. So, this shows uh a sliver of of going into a deficit, but we are projecting to bring that uh new alligator graph on our next um our next meeting to be able to show you what that represents going forward.
and we'll continue to make efforts. We're always um from a finance perspective, we are always in budget season and we're always uh looking to make adjustments either on the revenue side or expense side and continue to bring those lines back into balance so that we can make sure that we can sustain um services into the future and and uh provide all the necessary services that are are required of the city and that we want as a city.
Um and with that um it takes us into uh what does the future hold and it's it's very very unknown at this time. There's a lot of um unusual activity. We've shown this graph before. This is the 10-year uh 10 year over twoyear.
So this is if you had an investment at a 10-year or an investment over a two-year. Uh if when when the yield curve goes negative. So when your investments at a 10-year are less than what an investment of a two-year is, um that's when it drops below the line.
So every time historically going back all the way to 77, every time this graph has dropped below the zero line, uh there has been the blue column represents a recession. And so, uh, every time historically in the past this has happened, there's been a blue line to follow when it's dropped below that zero, um, uh, percent change.
And as you see, we're out in 24, 25, 26. Uh, this was one of those leading indicators that's been historically accurate. And we have not seen the blue column uh, to represent whether we are in a recession or how we're coming out of this uh, economic challenge.
And it continues to be challenging to try to figure out how to forecast in this environment with uh continued uh uh changes at different levels um that uh we have not seen in our sales tax. Uh seeing more of that current inflation when it comes to the energy bills, when it comes to gas prices with the straight hormones uh being not open um at the moment or or in different phases of of opening.
Um, so there's a lot of different things that are impacting uh the global economy that then will have impacts um locally as well as we're as as time moves on. Uh at this point uh we know the Fed is well it depends on who you listen to, but what I've seen is that the Fed is continuing to plan to wait and see at this point.
Not to reduce interest rates or increase interest rates, but kind of a wait and see method. Um, I think that's what we're all doing from a economic perspective to try to determine where we're at and where we're headed.
Um, we've planned for very flat growth um through we've been very conservative in our projections and so uh we will continue to update all of you as we have updated numbers and uh hopefully have some uh new projections uh moving forward.
But that's what we know at this time and and that is how we've um closed out 2025. Happy to take any questions. >> Okay. Thank you, Andy. Again, I'm chairing uh because uh Miss Anderson is remote. Any questions from the committee?
>> Dan? >> Uh thank you and thanks for the presentation. Uh just going back to slide 15 for the general fund revenues. Uh I just wanted to get a finer point on what accounts for the increase in BNO and utility uh 2025 revenues.
And you mentioned the interest category perhaps influencing that. I just wanted to understand that a little bit better. >> Uh so you're talking utility tax and BNO tax. >> Uh correct. >> Uh so BNO tax um we feel like a lot of that increase um has to do with being fully staffed within our department as well.
And so we've had a really good team on our BNO side that's been working with our our um business community out there to try to get people caught up and and paying uh timely and be able to work with them through that process.
And so um some of that is is catchup as we're being able to be uh uh fully staffed within that department. Um and we anticipate that being um not a continuous growth growth pace. it generally follows the same growth pace as our sales tax.
And so we think that that'll come more in line within 2026. And then on the utility side, that really represents a lot of that is 700,000 of that is really related to electricity. And so really electricity use, electricity uh costs go up and then then there's a greater percentage that comes into the city related to the utility tax on that utility.
And so um a lot of the growth there is represented just in that one source. Thank you. >> Lisa, you have a question. >> Yeah, thank you and thank you for sharing. Um, so with the the current situation with the war and then the fastly you know fast escalating um cost of fuel and I assume shortly behind that will be consumables.
um the city itself is going to be incurring probably much larger costs than what we had originally budgeted for. So I'm wondering um and this might be for the mayor too, what steps are we taking to um address what is probably going to be hitting our budget and then when would we expect um maybe um budget amendments um in order to address some of those escalating costs?
Um at this point as you as you know a lot of these numbers lag and when we know the true impact and so uh we continue to monitor those uh impacts. Obviously it'll be gas prices and those things that we're seeing increase more immediately and so we can evaluate with that within the police department within the fire department and and the impacts on their budget.
But um at this point it's too uh it's too early to determine what those true impacts will be. I think as we get to midy year and um as we see those numbers change, we'll we'll look to bring that uh of course to the mayor and to council as as we see um a need there.
Uh it's too hard to say at this point how that will directly impact us. So >> follow up, Lisa, or >> Yeah, just um it's been a little while and maybe before some um people's employment, but is anyone on staff taking a look at some of the analytics of what happens to the economy locally when there's a sustained war?
So we can kind of predict what those impacts might be on um consumer spending, taxation, and investments. >> Um it's that's a difficult uh question to answer. I I think we are we're in um uncharted territory.
We haven't really had a war like we're experiencing right now. We haven't had economic disruption like we've had uh through a a critical strait that brings a lot of goods um not only gas or oil but also fertilizer and other things that can impact um other types of goods.
Um it's been I believe approximately six weeks uh so far. So it really depends on on how long this continues to go on and and and what those impacts are. Um and so I I don't know that we have a good way to establish um projections on on local impacts, but we definitely have know the line items to look out for that we will be uh very closely monitoring and also keeping aware of any higher level economic activity that can then impact us locally um and and what we're seeing from revenue perspective and how we can reduce those costs on an expense side.
So, um, at this point, I think it's continue to monitor and keep a a close eye on those on those numbers. Mayor. Uh, I think Andy gave a a a great response and I think what's important to re-emphasize for all of council and the public that's listening is um while we had some leading indicators on sales tax um that showed that like we had a good December locally, we know that in um in the um the recent sales tax revenues that we've received um we are when we come back to you at the next meeting with those adjustments, the cost of doing business for the city has increased dramatically.
And so we are still in that cycle and by necessity um being sensitive to those increased expenses and the increased costs to do our our business every day. We are paying very close attention. So as soon as we can see those impacts, we will be working on strategies to adapt and respond.
Yeah, I really appreciate that. But to, you know, Miss Anderson's point, one of the things economists are predicting most reliably with increased uh oil prices, it'll have a follow-on effect with food in particular.
What that means is the consumers are spending more on food and less on the other retail consumables. And our BO tax is based upon those other consumables and not on food. So, I mean, we it's one of those probable impacts that, as you say, we'll have to monitor and see.
>> Dan, >> yeah, I just want to follow up on that um line of um conversation. When it comes to BNO and sales, it um it it seems to me that the prices have just gone through the roof when it goes out when it comes to um like a family going out for dinner or um just buying groceries at at the store.
um those uh impacts are felt at a um a household level and I just I just want to understand um what the prediction might look like moving into the future for the for BNO and sales in particular uh when it comes to those more consumable or consumer costs if we have a a handle on that or not.
Uh we we try to rely on our modeling on and not to not to influence it based on um assumptions that that may or may not come true. We we we try not to um budget or expect a recession, but we we budget based on what's happened in the past and what we've what we've seen historically.
And then uh through that I mean we the current sales tax budget uh budgeted revenue is is not a revenue it's not a significant growth. It's very very flat. It's almost equivalent to the to the 25 number.
So we're not we're not expecting growth in 26. We're being very conservative on what those uh what those are. But then we've already seen the first three months of the year outpace uh outpace last year by about 500k.
So we uh it's we really need the actuals and really to feed a continued actual numbers within the the modeling so that we can evaluate what we need to do move forward. But we do continue to put with the modeling.
I would say that we do um use the lower end of uh what we would expect from a conservative perspective. We're not we're not shooting on the high side of projections or statistical projections. we're we're shooting more on the lower side knowing that all the impacts that there are out there, but we also know that the economy is um is a little bit different.
What what we saw within COVID was not as impactful as what we had expected to happen within CO. Um, I just read today with the with even with the oil crisis, it is not as impactful as it would have been in the 70s when there was more of a reliance on oil.
And there's there's more of uh there's more to the full there's so many variables now in the economy that can that can offset. So, it's really hard to say which one to lean on at the moment or or how that will impact us directly locally.
Um because if people are are not traveling as much then that brings the economy more to Bellingham too where we are the hub of of Wakom County and kind of the community and that's what we saw within COVID.
And so it kind of changes on just where that retail base is and and who who the city's doing business with um and we see the flow of Canadians is not as as much anymore but we still see the sales tax increase.
So um it it kind of continued to evolve and it's not weighted on any one industry. Thank you. >> We're a little bit over time, but I have one other quick question. Maybe there's some council members, too.
Um, the claims of litigation fund, it shows uh again the uh original or the prior estimated ending reserves and the uh current one, it's below what I believe is our target. We're largely self-insured with backup umbrella policies, but we handle most of our claims litigation costs on our own with that fund.
How comfortable are we with the size of that fund right now? >> Uh we are making efforts to increase the uh revenue that goes into that. >> We're a little bit uncomfortable. >> So yeah, anytime we see not hitting projections, what we're trying to do within our internal cost allocations is uh shoot to be able to get back to our goal on our reserve balances.
And so that fund has increased the uh charges that it is charging the other funds to try to get to where we would like it to be from. >> Good news, bad news. What you're saying is we could bring that fund balance up, but we do that by internal charges, which of course impacts all the other departments.
>> Yeah, [snorts] they're they now then have to fit it in their budgets and maybe downshift on other expenses. >> It directly impacts the general fund as well. >> That's kind of what I expected. Thank you.
Any further discussion on this? We are a little bit over time, but I do appreciate the length of the discussion. Seeing none, on behalf of the chairman Anderson, I will uh adjourn the finance committee meeting and turn the meeting back over to Council President Stone.
>> Thank you very much. Um I recognize that a number of members of the audience have joined us for committee the whole items and I'm gonna still even though we are running a little behind um push forward.
We usually have a 10-minute break um before this next committee just to give us all a chance to stretch stretch and um hopefully we'll be more attentive for the for the afternoon items as well. So, we are just a couple minutes before we write now.