Name: Bellingham City Council - Budget and Finance Committee meeting, Jul 13, 2026
Start: 2026-07-13
End: 2026-07-13
Location: City of Bellingham

City Council - Budget and Finance Committee

Mon, July 13, 2026

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City Council Budget and Finance Committee — July 13, 2026

This was a single-item committee meeting chaired by Councilmember Lisa Anderson (Ward 5), with Councilmember Dan Hammill also present. Councilmember Lilliquist was initially expected but did not attend. The session was informational only — no votes were taken.

First Quarter 2026 Financial Review (Item 24987)

Finance Director Andy Asbjornson presented the city's financial snapshot for January through March 2026, with some data extending through June. He noted the report came later than usual due to staffing constraints — the department started the year with only two accountants after one went on maternity leave — and because staff were simultaneously completing the fiscal year 2025 financial statements for the State Auditor's Office. The state audit formally began June 29th, and some councilmembers may be contacted as part of the audit's risk assessment process.

Sales Tax — Cautiously Good News, But Driven by Construction

Retail sales tax collections have been surprisingly strong so far in 2026, after several years of nearly flat growth. From 2022 through 2025, total collections barely grew — only about $300,000 from 2024 to 2025. The 2026 budget projected $33.5 million, assuming continued low growth. Instead, the city has seen a notable uptick through June. The main driver is construction activity, which showed a 45% year-over-year increase in sales tax from Q1 2025 to Q1 2026. Motor vehicle and parts dealers also contributed positively. On the downside, general merchandise and food service/drinking establishments were each down 4–5%. These five categories collectively represent about 50% of all city sales tax receipts.

In inflation-adjusted terms, the real purchasing power of Q1 2026 sales tax is roughly equivalent to 2023 levels — meaningful improvement, but not a full recovery.

Permit Activity — A Warning Sign for Future Revenue

While current construction is generating strong sales tax, the forward-looking picture is more concerning. Permit activity through Q1 2026 is significantly lower than in recent years — only about 135 units received paid permits, compared to stronger figures in 2024 and 2025. There is currently $96.6 million in construction value sitting in the permitting pipeline ready to be issued, representing approximately $5.4 million in potential fee revenue, but applicants haven't yet moved forward to pull those permits. Asbjornson and Planning Director Blake Lyon attributed the delays primarily to financing challenges — developers wait until project financing is secured and market conditions look favorable before picking up permits and incurring "hard money" construction costs. Lyon noted that by the time a permit is in ready-to-issue status, the city has already completed roughly two-thirds of the review work.

The takeaway, as Anderson summarized: if permits don't pick up, the city may see a drop in construction-related sales tax revenue in one to two years.

Housing Market and Lodging Tax

Housing supply continues to grow, with more homes sitting on the market longer. Average listing prices are around $800,000. Real estate excise tax through Q1 was roughly flat with the prior year at about $1 million, with hopes for improvement in the summer selling season.

Lodging tax — restricted for tourism promotion — is flat to slightly down compared to recent years. A dip in April was followed by a rebound in May, but June showed another decline. This corresponds to a notable drop in Canadian visitors crossing the border into Whatcom County, which has declined since 2024 after several years of post-COVID recovery growth.

Citywide Revenues and Major Projects

The city collected $113 million in revenue citywide through Q1 against $99.6 million in expenditures. A large spike in the "interest and other" revenue category reflects bond proceeds for the Waite Building received in February 2026 — a one-time lump sum that skews the quarterly comparison.

The city's new "Safe and Stable" criminal justice sales tax (0.1% increase, effective January 2026) began generating revenue in March; only one month of collections is reflected in the Q1 data.

Capital spending through Q1 was $11.4 million against a total 2026 capital budget of $251 million. Major projects underway or planned include the RG Hailey and Cornwall Avenue environmental remediation (approximately $60 million, the largest single project), the Eldridge Avenue Bridge replacement, the new Whatcom County building, Post Point sludge tank replacement, the Central Library renovation (expected to begin in fall/winter), and Old Town redevelopment. The top 10 capital projects represent over half the total capital budget.

Health Benefits — A Growing Financial Concern

The most pointed concern raised was a 37% quarter-over-quarter increase in employee health benefit costs and a 41% increase in workers' compensation costs. The city is self-insured for employee health benefits. To address the shortfall, the city has already raised its medical contribution rate by $400 — described as a significant adjustment — and will bring a budget amendment forward. The additional cost to the general fund is approximately $1.2 million.

Hammill asked whether the city should consider switching from self-insurance to a traditional insurance policy to manage these escalating costs. Asbjornson explained the transition is more complex than it might appear: the city would remain legally liable for all claims incurred prior to the switch, effectively creating a period of dual financial exposure that could be even more expensive in the short term. Anderson noted that a newly funded benefits analyst position will be able to conduct a thorough analysis of this question going forward.

General Fund — Positive but Pressured

The general fund is running positive through Q1, supported by 8% sales tax growth, utility tax increases (driven by an approximately 18% utility rate increase that took effect in 2026), strong BLS (Basic Life Support transport) and GMD billing, and continued good investment returns. No property tax has been collected yet in Q1 — that will appear in the August report.

On the expenditure side, salary costs rose approximately 6%, but benefits rose 16%. The hearing examiner's office is significantly over its Q1 budget — a single lengthy hearing generated an invoice of approximately $45,000, nearly doubling the department's entire Q1 budget allotment. A budget amendment for that department will be needed.

Asbjornson noted that departments are making efforts to control costs, including a hiring pause that requires a 60-day evaluation window before filling vacant positions.

A more comprehensive mid-year report — including projections, a forward outlook into 2027, and the "alligator chart" showing the structural gap between revenues and expenditures — will be presented at the August 24th committee meeting.

Key Takeaways

Sales tax is up, but fragile: A 45% construction-sector surge is driving 2026 sales tax growth, but declining permit activity signals this momentum may not be sustainable into 2027–2028.

Health benefit costs are a red flag: A 37% spike in health claims and 41% increase in workers' comp costs are adding approximately $1.2 million in unplanned costs to the general fund; a budget amendment is coming.

Canadian tourism is declining: Border crossings from Canada have dropped since 2024, contributing to flat or falling lodging tax revenue.

$96.6 million in permits are sitting unissued: Developers have completed the approval process but aren't pulling permits, likely due to financing uncertainty — a risk to both fee revenue and future construction sales tax.

A fuller picture is coming August 24th: The Q1 report is a preliminary snapshot; the August committee meeting will include projections, a structural budget gap analysis, and a look ahead to the 2027 budget cycle.

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

First quarter financial review for 2026

# First Quarter 2026 Financial Review Summary

Finance Director Andy Asbjornson presented the delayed first quarter 2026 financial review, which showed citywide revenue collections of $113 million against expenditures of $99.6 million, with an 8% increase in sales tax driven by construction activity (45% year-over-year growth) and motor vehicle dealers, though general merchandise and food services declined by 4-5%. Key concerns included a 37-41% quarter-over-quarter spike in employee health and workers compensation costs, prompting a $1.2 million budget amendment request, as well as declining permit activity (135 units in Q1 2026) and lodging tax revenue correlated with reduced Canadian border crossings. Blake Lyon (Director of Planning and Community Development) explained that the disconnect between strong construction tax revenue and flat permits reflects a 1-1.5 year lag between permit issuance and material sales tax collection, indicating potential future revenue declines if permit activity doesn't improve. Councilmember Hamel questioned why the city maintains self-insurance rather than switching to traditional coverage, citing concerns about escalating costs and tail liability complexity. Asbjornson indicated he would provide forecasts and 2027 projections on August 24th.

Agenda items (1)

Procedural (1)

24987ProceduralFirst quarter financial review for 2026

The city will review its spending and finances for the first three months of 2026 to ensure departments are staying within budget and on track with their financial plans.

What happened

Verbatim transcript available

125 transcript segments indexed

City of Bellingham Budget and Finance Committee minutes July 13, 2026, 10:55 a.m. 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.

Okay, welcome back. So, we're going to move forward with the next committee meeting this morning. Um the next committee is budget and finance, and that committee is chaired by Councilmember Anderson. So, I'll turn it over to her at this time.

>> Thank you very much. Um joining to me today um is Councilmember Hammel and Councilmember, I believe, Lillequist. No? Okay. Um so, we have one item in front of us today. Um item number 24987, which is our first quarter financial review for 2026.

There is no public comment period during committee sessions. Call to order and roll call Council President Stone called the meeting to order at 11:01 a.m. Present: Committee Chair Lisa Anderson, Fifth Ward Committee Member Daniel Hammill, Third Ward Committee Member Michael Lilliquist, Sixth Ward 24987 1.

The presentation provides a summary of the city's financial position for the first quarter of 2026. Um the March 2026 financial report is attached to um to the bill and provides detailed information related to the period.

First quarter financial review for 2026 Summary: Andy Asbjornsen, Finance Director, and Eric Johnson, Budget and Treasury Manager, presented an update on the City's financial position for the first quarter of 2026.

The presentation and additional financial information is available on the city's website at cob.org/reports. Um joining me today is our finance director um Andy Asbjornson. And um most council or all council should have received what I believe will be our slide deck, and that information will be provided online.

Um it just wasn't in our packet today, but um Andy, if you would like to cover our first quarter update. >> All right, thank you, Councilmember Anderson and councilmembers. Um this is the >> [clears throat] >> financial update for the first quarter.

I apologize it's a little bit delayed. Um we are down to two accountants to start the year with one out on maternity leave uh welcoming a new baby boy to our to our family, so she's back and uh we're getting caught up on some of our financial reports.

We've also been working on the year-end financial statements for fiscal year 25 to get those to the auditors. Uh we were able to complete that over the last few weeks ago and the state audit has just started as of June 29th.

So, we are currently have started that annual audit with the State Auditor's Office. So, a few of you may be contacted for questions or just a risk assessment associated with the audit. Again, this is a first quarter 2026.

So, I just wanted to provide a quick update. I know it's a a little bit past information and I do plan on bringing a more thorough review on August 24th. So, on August 24th, we can bring more estimates, forecast, look into 27 a little more as what we're seeing, but this will give us a snapshot starting with the economic activity.

This is economic activity going a lot of these numbers I will go through June, but then the finance report where we're getting into the details is really based on the March report that's in the packet that has the greater details and that's the that's the graphs that gets into the actual funds.

But, happy to take any questions as we as we go along on this. So, I will go ahead and get started. So, we start off with retail sales and use tax. So, this is the 1% that we collect. Um so, starting with blue back in 2022, we like to build this chart up.

Again, the the dollars collected are on the left, the months that the dollars were collected are across the bottom. So, each one of those dots are what we collected in that month and it's a 2-month lag.

So, activity of February is actually or the money collected in February is actually the activity of December. So, every time you kind of look back 2 months of that sales tax activity was 2 months ago for the period that we actually received the funds from the state.

So, you can see in 2022, 2023, 2024, it was very very flat. Um, not very much increase it's all the way through 2025. We only grew about 300,000 from 24 to 25. So, very very flat. We budgeted um, 33.5 million going into 26, uh, expecting continued just not a significant amount of growth in uh, what we're seeing in sales tax uh, collection.

And we've been uh, pleasantly surprised for what has been collected so far out of the first few months. So, the um, the dash line is what goes past our reporting period, which is not in the funds, um, but it is what we have collected through June.

So, you can see we have uh, seen a decent amount of increase uh, over the first 6 months. In 2026, we did have a few categories that were added to the list of retail sales tax. So, that was IT-related services, software, security, and also live presentations.

Uh, we're not seeing that have a significant impact to these numbers or this growth. Uh, a couple slides from now you'll see uh, more of the growth is related to construction activity that's really pushing us forward um, at this point.

So, um, and I'll get to that in a couple slides. So, what we're seeing um, in uh, sales tax nominal versus real revenue, uh, we've shown this here in 2021 dollars. Uh, we have actually seen from 25 to 26.

This is year-over-year, quarter-over- quarter for the first quarter of 25, 26 and and likewise back to 21. We have seen some real growth from 25 to 26, but that real growth takes us back to about the spending power of 23.

As you see of that uh, 7.2 million compared to the 7.2 million in 26. But, it is good to see a little bit of growth, but I'll take you into the categories that are that are giving us that growth here um, on this slide.

So, this is uh sales tax by NAIC sectors rounded by three. So, NAIC NAICS subsectors, it's the North American Industry Classification System that classifies all the different sectors into uh categories so we can track these for in their different um sales tax categories.

What we [clears throat] see here is construction of building has made a significant uh return. This is year-over-year. Um, that's a 45% growth year-over-year from from first quarter 25 to first quarter 26.

We've also seen growth in uh motor vehicle and parts dealers. So, both of these two categories have been um really significant in in bringing us to where we are in what we're seeing in the in the sales tax growth numbers.

As you see, we have a a decline here in general merchandise and also food services and drinking places of uh four and five four five and four percent. These five categories represent 50% of what is collected for sales tax within uh within Bellingham.

So, uh pretty significant categories and construction has a very significant impact to what we collect and and the economy for what we collect in our sales tax um here for the city. Which takes us into this these two slides.

Um, on the left the permit activity this really gives us an idea of what's going on with uh future construction. Uh, so this is all the activity that goes through the permitting department. There's units and permits are the access on the left.

Um, value is an access on the right and is used for the value of the permits that go through the uh permitting center. Um, and then we have the last 10 years of uh quarter-over-quarter first quarter of the year uh as a comparison.

And you see in 26 we are not off to a very strong start. So, >> [clears throat] >> 24 and 25 were uh reasonably strong. Permits were higher in 24, but units were a bit higher in 25 uh even to end the year.

In 2026, we're starting off with only approximately 135 units that are um that have been um paid for through the permitting department. So, these are all paid permits. So, this is all future uh construction activity.

Um what is um sitting out there ready to issue within the permitting department uh through June, there's value of 96.6 million in construction value waiting to be uh issued, and which is approximately 4.

5.4% 5.4 million in revenue that would be collected if those permits if anybody just comes in tomorrow or whenever their project is ready to come and collect on those permits. So, still a lot sitting there in the hopper of what could be available um all the work the permitting department is doing, but just the permits aren't getting picked up and that construction is not moving forward at this point.

If we look to the right side, we look at the housing market. Uh so, this gives us an idea of just what's going else is going on in the economy. It gives us a sense of what's going on with real estate excise tax as well.

Um these uh columns at the bottom are the supply of housing, and it uses the left access, and the orange line is the average listing price. So, you can see the average listing price has been um it's it's back to about 800,000 uh there on the on the far right.

And you see the the growth in supply just continues to grow. We just see we've seen these uh continuous growth each year in in more houses hitting the market and and and likely sitting on the market a little bit longer.

Through the first [clears throat] quarter, we've seen read about the same as the prior year. It was about a million dollars through Q1 25 and it's about the same in 26. We are hopeful that that then increases going into the summer months and more of the the busier season.

Lodging tax. So lodging tax we've seen this is very similar to the sales tax. Again thousands on the left access and then months that we collected at the bottom across the bottom. I As we grow this, we are at 2.4 million for 23, same for 24, reduction in 25.

And we're seeing again a bit of a reduction into 26. Maybe [clears throat] on par with 25. But we have this magenta line that is very very flat through the first three months. And then we have the dash line that has been collected, just hasn't been in the March, it's not included in the March report.

We did see this dip in April, which was concerning but we saw this rebound in May. So this looked likely was kind of a correction between the two periods. And now we've seen another kind of reduction in June.

So we are not seeing that lodging tax, which is really used for promotional and restricted revenue for tourism activities and and generated through tourism. We're just not seeing that expand at this time.

So with that tourism, this is quarter over quarter looking at border crossings from our Canadian neighbors. And so you see that through 21 up through 24, we were really increasing, continued to rise as we came out of COVID.

And then going into 25 and now even through the first quarter of 26, we've just been seeing these reductions in travelers crossing the border coming down into Whatcom County. So, um that is likely corresponding to that tourism um and uh revenue that we saw on the previous slide, but just some of the indicators that we're seeing.

Again, our major drivers though are what we're seeing locally is primarily in the motor vehicle fuel, uh motor vehicle uh and and parts sales, and also construction activity is really what is uh our strong uh two categories within for our sales tax generation.

So, not heavily on the tourism side, but um it is great when we have more tourism dollars and more people coming and enjoying Bellingham. That goes through the economic indicators, some some of the things that we're looking through um to give us an idea of what we're getting into going forward and a sense of what happened for the first quarter of 26.

Uh we show this slide just as high-level uh pie charts to give it a sense of the areas of revenue collection and the areas of expenditure. Again, this is citywide. This encompasses all almost 70 funds of the city.

So, really need to dig into the specific details of the funds to get a better sense of of any one of these activities, but obviously salaries and benefits are two big drivers of expenses. And then a little bit of a separation here uh or diversity on the revenue side.

So, we start with citywide revenues. Um So, taxes have been growing. We did have the first uh we established the safe and stable uh criminal justice tax that was collected. We have one month of collection in this data because it started uh we moved from 9% to 9.1% January of '26 and in March of '26 was the first month that we actually collected uh for that sales tax.

So, we are seeing that growth in that sales tax. You see this big outlier here. Um I should mention that uh budget is cut off at um what we do is divide the budget by a quarter to give a representation of what would be 25% of the year and then the taxes generated or what is actual for each of the quarters.

So, what we see here is uh interest and other. This other is actually our debt revenue for the Waite building. Uh we went out and got a new bond for the Waite building. I believe that was in February of '26.

This budget is cut in a quarter, but all that money comes in at one chunk and so that's why that looks a little bit um different when you're comparing those two numbers. But as you see, a 113 million uh was collected in revenue citywide and then 99.6 um was expended citywide.

Um a lot of that is in uh salaries and wages is number one. And then um also big is really always the services and capital. One of these big items within the services is related to RG Healing Cornwall which represents almost 60 million of what is included in those numbers.

So, big project, [clears throat] good to see that underway um and a big majority of that work is being done uh throughout '26. Capital a little bit down through Q1 from last year. Uh last year we had um quite a few uh purchases of of land through watershed and some other things that happened early.

Capital generally starts ramping up more in the summer months and so not a surprise that we're starting a little bit uh slow on the capital side. Uh but with that, here's our top 10 uh projects so far through Q1.

Uh this is our top 10 projects for spend. Uh Um, and so you see RG Haley and Cornwall in the top three there. And then some of our, um, finishing up the rotor lift station, uh, Sunset Pond Loop Trail that opened up in '26.

Um, and then some other, um, projects that you're probably familiar with along that line. Uh, these represent, um, 6.1 million of the capital project spend. On this side, we have our actuals through Q1 compared to our total budget of projects.

We've spent 11.4 million so far in quarter one. We have 251 million in projects that are budgeted for '26. So. This, um, leads us right into those, what are the large projects that are budgeted for '26?

So, these are the top 10 projects. This represents 129 million of the 251 that is budgeted. So, over 50% is represented in these top 10 projects here. So, RG Haley and Cornwall, uh, very significant project.

We've the Eldridge Avenue Bridge replacement, um, that's in still the planning stages. New WaCom building, that's underway. Um, and then the Post Point, uh, sludge tank replacement, uh, Central Library renovation project that'll be underway later on in the year, um, more likely in the fall or or towards the winter.

And then, um, Old Town redevelopment, I'm sure you've seen some of the activity going on down in around the Old Town with the streets. But just gives you a sense of those bigger projects that are that are planned for '26.

So, with that in mind, there's, um, a significant amount. So, this is our special revenue fund. So, special revenue funds are revenues restricted or committed for a specific purpose. These are 100 level funds.

Often the description of the funds gives you give you of what those funds can be used for. Uh there was a 16.4 million in revenue, expenses of 20.5. Uh the shadow boxes represent the budget at a quarter of the budget, and then the uh solid boxes or solid columns represents the actual.

So, you can see there's a lot still planned within these project funds for street, for environmental environmental remediation is really RG healing Cornwall, uh within RE quite a few projects, uh transportation fund, uh parks uh always has a lot planned within uh within that funding.

Also, within some of the actuals are the Sunset Loop Trail and Storybook Park Park. So, um we see uh just gives you a sense of the of the activity across the special revenue funds. Enterprise funds, um these are business-type activities that are self-sustained with user fees.

Um so, the big ones here are really water, sewer, and storm. Also, right behind it is our Medic One, our ALS transport uh service by the by the fire department. Um so, here again, a lot of the changes here are the are the big uh projects still waiting to come.

Uh some of these increases in revenue are really the the change in the rates that got established within uh '26. So, we had about an 18% rate increase going into our utilities uh to go [clears throat] down fund a lot of those future projects that are necessary for uh specifically sewer with a lot um uh lined up.

Um but also um some more on their way with water. Um Medic One is slightly to the good uh through Q1, so that's that's good to see. Um but development services, um there is a lot that's going on development services, a lot of work development services doing that the the revenue is not coming in for, so um I know uh Blake is evaluating other ways to there's been discussed here on on ways to bring in additional revenue or pay for some of those additional labor hours that go into the work being done by the permitting department.

So, and then hopefully just more folks come in and get their permits and and we actually recognize more of that revenue and and more construction gets done. Internal service funds, we always bring these forward because this is a significant amount of really spending for any funds that have personnel in them.

And so, a lot of this is a major cost to the general fund as well. So, these are business type activities that provide goods and services to city departments. >> [cough and clears throat] >> Again, same as the previous slides.

The names of the funds really give you a sense of what they're for. So, fleet and radio funds, facilities, tech and telecom, claims and lit. So, we have all these funds that provide the services for the internal customers.

What we have here is employee benefits fund. That's an area that we have a little bit more concern about. As you see the shadow box is down here at about 6 million while our expenses are significantly increasing.

So, what we're seeing within our health benefits fund is about a 37% quarter over quarter increase in costs of just Q1 for health benefits and also 41% increase in workers comp costs. So, we are seeing our our health care costs continue to rise and that is an area that we've already had to take action on.

We've already increased our workers I'm sorry, our medical comp rate by $400, which is a very significant increase, but to ensure that we have adequate funding within our health benefits fund to meet our legal requirement for having a self-insured um um plan.

Uh we had to increase those funds at this time to to help [clears throat] offset that and try to try to build a reserve balance, but at this point we're still evaluating those numbers uh each month to see if we need to continue to make an adjustment to that.

But our benefit side our benefit costs have been a significant um cost driver to um our escalating costs that are that are hard to control at this point. This looks a little bit different because um the blue box is revenue, so it looks like we're to the positive, but one unusual thing happens in this fund where we actually collect three payments in January and only one payment in December.

So it it skews the way it looks. We start to the positive, but then that's eaten away and then December always looks a lot worse just by the way that we do the accounting for how the revenue's collected in this fund.

So this basically has an extra payment. I would say if you remove that, we are likely this would show more to the negative on that fund. So an area of of concern that we're definitely um already taking action on and we'll bring a budget amendment forward with.

That cost is approximately 1.2 million to the general fund of additional costs to try to bring our health benefits um to be able to afford our health benefits costs. Takes us into the general fund. So on the general fund side um we have seen about an 8% increase to um sales tax.

So we saw that within the construction activity. We also as represented with that safe and stable sales tax, which we collected just one month of that, but that is an increase year over year. B&O we had a great year last year, and so this number is not too concerning.

It's great to see that those both numbers are continuing to exceed where we're at from our our budget perspective. It is about on pace as it was from the previous year. Uh utility tax, we had those increases within our utility funds.

Uh those rates really start hitting more in February and March with uh with the activity. So when we bill in January, that's often for December and so it takes a little bit for those to actually be represented in the numbers.

Um we have seen an increase uh when it comes to electricity and we will see that in water, sewer, storm. Um but we're also seeing reductions within natural gas, cable, and telephone within that number.

Sales tax, B&O tax, utility tax, and property tax are generally the big four, but as Q1 we have not collected any property tax yet. So you'll see that when I bring forward the the August 24th numbers.

Uh the rest of the general fund, what has done well is really BLS has done really well. That's the big number pushing up these charges for service. Um in the blue, uh grants and revenue sharing, really the GMT funds.

So I I hope maybe you recall last year we had a switch in service providers for our billing service within our transport services. And so the beginning of the year we weren't collecting as much in the BLS and GMT as they were um moving forward with that new service provider and then uh there was more back bills done later on in the year.

So now we're we're not having a direct comparison to what the activity is, but it I we have overall still seen growth in those numbers within BLS and GMT. So so that's great to see. And we continue to see good returns on our investments um as rates have continued to remain high and the federal funds uh rate has not uh been adjusted uh really for a while.

So general fund expenditures, um so again, our biggest uh expense is really in salaries and benefits and then the services that go into providing all of the resources for the for the folks that work within the general fund.

There are 13 departments within the general fund, so there's a lot going on within the general fund. Uh salaries and benefits, so salaries increased approximately 6% but benefits through Q1 were up 16% and so and that will continue with our adjustment with that we just made for the workers comp and as you recall when we brought forward already an adjustment for medical comp within our reappropriations and so um that benefit side just continues to to escalate.

And then this is our comparison of general fund percent of budget spent by department. So it goes from department spend the highest amount of spend to the lowest and then the the red bar is at 25% of budget.

So if you're at the red bar below the red bar, um you're doing really well but if you're above the red bar, it's it's really still Q1 and so some some spending doesn't happen on equal at equal pace and so with that the library often will make purchases earlier on the year that maybe won't exist later on in the year.

So um not big concerns there. Uh and the biggest the biggest adjustment is probably at the bottom which is is the lowest amount of spend but having probably the most activity that we've seen out of a hearing examiner for some time.

Um so uh there's been a lot of activity. Uh we have an invoice currently for one hearing, a very long hearing that was approximately $45,000. So uh we have just that one almost doubles that Q1 budget.

So and that's not the only work that's being done through the hearing examiner this year. So we're definitely going to have to bring some adjustments to that department for this year. So, things [clears throat] overall within the general fund within the general fund have been positive.

It's great to see that growth in sales tax. We've seen a little bit of growth in the utility tax, the investment income that BLS and GMT are really really helping prop us up to try to keep that to the positive side, which we have been positive through the first quarter.

On the expense side, we're seeing those other demands when it comes to the benefits within the the health benefits area. And so, and still an unknown economic outlook as we're unclear on on what's going on at the at the federal level or or how long we can sustain this continued growth in sales tax where we see permit activity kind of declining and we're really propped up more on that construction side of things to really help on the sales tax side.

Um So, with that though, the departments um have been doing a a great job really uh making a lot of effort on saving costs where we can. We have the pause when it comes to rehiring where we evaluate each position to to see if it's necessary at that time and and provide that window of of 60 days prior to moving forward with a with a the hiring process to try to increase those cost savings.

So, everything we can do now will help moving into that 27 budget period. Um And so, we will bring a lot more information on August 24th as we can bring some projections and we'll bring the alligator chart again.

I'm sorry we don't have it in this slide deck as we'll give you one quarter off from the alligator chart. And then we'll bring it back on the 24th as we evaluate what is moving forward, uh but it does look the same.

We do need to continue to make adjustments and uh our costs continue to rise within the public safety realm and across the board when it comes to benefits and other costs that we're facing with with the city.

Um and that is what I had uh for the Q1. Happy to take any questions. >> Committee, um any questions before I ask one? Uh Councilmember Hamel. >> Uh thanks for the presentation. My question is on page five of the slide deck for the permits um or permit activity.

Uh just trying to get a handle on something that you said about the that this is kind of a look backwards sort of or like recent historical, you know, permit is issued, there's a lag time between when that permit is issued and then the the units then subsequently being built.

And do we And do we have a handle on why that delay happens or what causes that? Is it like lining up financing for the projects or what do we know about that? >> Morning, Blake Lyon, Director of Planning and Community Development.

Yeah, um general financing and availability of financing. So, as Annie mentioned, much of that's reflected on. We get land use applications that'll come in. We'll often do the initial project approvals for those entitlements and then they're sitting there uh will often times go through the building plans examination work as well and then we're there in what we call a ready-to-issue or uh a hold status for the applicants to come in and um that's when their building permit fees are done.

So, we've done essentially 2/3 of the work already and then it's sitting in a hiatus and then the major permits, that number that Annie's reflecting also includes system development charges, impact fees, things of that nature.

So, what we're hearing from the development community is often times pulling their finance that project financing together and making sure that the general economy is there to absorb their project so they're not having the holding cost cuz that's when they get into the vertical and the hard money that's associated with it.

>> Um Thank you. I A request is not not as much of a question, but during um I have a little bit of concern, which is not something that um I can necessarily prevent, but the escalating cost of the uh being self-insured in medical.

And we had a really lengthy, good discussion because I was asking, like, can we move from being self-insured to um like an insurance policy in order to be able to address these escalating costs? At what point do we look at making that kind of switch?

And and I learned quite a bit talking with you that there is the um duality of liability for a period of time, which we would have to fund and then also funding forward with an insurance. Could you on a cliff note maybe share that information cuz I think for other counselors who may not have sat down with you and discussed that, my thought was like, well, why aren't we looking at a different methodology because if we're we've been increasing our medical costs and now we're going to have an adjustment of 1.2 million, at some point I felt like there's a tipping point and there's a lot more to consider than just the actual cost of doing a different insurance.

So, would you mind covering a little bit of that background so everybody else is on the same page why I haven't been asking us to do that. >> Yeah, I well I think it is good to always analyze the best method moving forward and that's really the bringing forward that benefit analyst too so we can really evaluate what's in our benefits, what we can do moving forward.

Maybe maybe in the future the best plan is to go insured. So self-insurance can be really positive when um when we have a very healthy population and everything is is working really well and unfortunately we're just in one of those situations where we have more claims and so folks are experiencing more difficulty and and that is impacting our our health benefits fund.

So at times self-insurance can be really good and other times we'll have these heavier or higher years and then we'll have these lower years. So it's really trying to figure out how to balance that but moving into a a new insurance program we would be still liable as a self-insurer for everything prior to moving to that new insurer.

So I believe that new insurer would just focus on when we we would sign up for that new insurance moving forward and so we'd still be liable for a lot of significant potential claims in the past so at that point you do kind of experience kind of a dual um insurance policy for a period of time which can be even more expensive for that period of time.

So um did that answer your question? >> Yeah, which can take years so we would be paying two different systems so it would escalate the cost so it wouldn't just be straight across so anybody dealing with a medical now we would still be liable until treatment or time that that cost no longer existed.

So it's more than just switching to an insurance policy and thank you for mentioning the the benefit position that we'll be able to really kind of do that heavy lift to see when it might make a difference cuz I I know we fund positions, but it's a good reminder that there will be somebody coming on board who will be able to specifically do that analysis in the future.

Um any other questions? Uh Councilmember Huffman. >> Thank you. I'm not on this committee, but um it's really interesting. Slide number four, there is a pretty big jump in construction of buildings tax revenue um over last year, yet on the permanent and housing uh slide, we see that permits are not increasing.

Um and so I'm assuming that's not construction of housing that we're seeing that increase from. What But maybe I'm wrong. What can we attribute that jump in revenue to? >> I think you can attribute uh just when you think about that the chronology or the sequencing of projects.

So, when we talk about applications coming in and getting building permits, and then they're going out and purchasing those construction materials to build those buildings. So, it's the time that it takes a building to get through the process.

So, when we talk about the actual sales tax dollars, and Annie can correct me if I'm wrong, that's actually the uh acquisition of those of physical building materials that are happening by our development community.

So, those are often permits that were issued a year or maybe a year and a half prior, and they're just catching up with the sales tax dollars associated with that. So, what you're seeing in the in the permit revenue decline is future projects that will be built.

So, you may see a lag in some of these sales tax dollars if we don't get those permits moving. >> Thank you. >> Thank you. Um yeah, I was thinking that um maybe in a year or two we might actually see that decline.

So, our planning purposes uh we might see less money coming in on the construction and building because of the permits. Anyway, um any other questions? And no, this was for information only. So, thank you very much and we look forward to the August report.

Hopefully, everything continues to hopefully brighten. Um I'll turn the session back over to Council President Stone. Thank you. >> Thank you very much. Um so, that concludes the committee meetings um for this morning, but we will reconvene at 1:00 p.m.