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After hearing additional details from both Mayor Mike Rosen and a panel of advisors about Edmonds’ financial challenges, the Edmonds City Council Tuesday night voted 6-1 to support a resolution that ends the city’s current work on the $37 million Landmark 99 project.
Councilmember Will Chen made the motion to adopt resolution, which had been proposed by city staff. Pointing to the city’s financial challenges — which were highlighted Tuesday night in a report from the mayor’s appointed Blue Ribbon Panel of financial advisors — Chen said that “the best step… is for us to take a step back” from the Landmark project.
Approval of the resolution means that the city won’t exercise its option to purchase the 10-acre property, which would have required Edmonds to pay $1 million in earnest money by March 31, 2025, and complete the purchase by Sept. 30, 2025.
Instead, the council pledged to continue working to make community investments in the Highway 99 subarea as an alternative to purchasing Landmark. These include council passage of a community renewal plan, research into the availability of tax increment financing and ensuring inclusion of those planned investments in the city’s Capital Improvement Plan.
Those investments were recommended Tuesday night during a presentation by city staff who had been working for the past year on the Landmark project — Community and Economic Development Director Todd Tatum and Planning and Development Director Susan McLaughlin. McLaughlin reminded the council that the Landmark project was envisioned as a catalyst for change in an area, providing opportunities for public-private partnerships. Tatum spoke to the complexities of arranging financing for the project, especially given the city’s current financial situation. Specifically, Tatum said that “our lack of fiscal resources affords us no management reserves to manage risk as we move forward. That’s certainly a concern should we get into this project and meet bumps in the road as you inevitably will.”
Added McLaughlin: “What we found is our conversations is that really without previous planning and investing for an acquisition like this, we had less leverage at the table with a development partner. So establishing an investment fund will not only strengthen our negotiation power but it will also strengthen our confidence when we come to council for these decisions, that we actually have the resources to pursue.”
The rejection of the Landmark property purchase comes one year after the council authorized then-Mayor Mike Nelson to sign an option agreement for the 10-acre site, located at the southern edge of Edmonds’ Highway 99 neighborhood. The agreement initially included a refundable deposit of $100,000 to hold the property — home to the Burlington Coat Factory and Antique Mall businesses — for six months, to conduct public engagement and further study the idea. In December 2023, the council voted 4-3 to continue exploring whether the city should acquire the property; ending the effort now means the city will forfeit the $100,000 deposit.
Councilmember Susan Paine was the lone “no” vote on the resolution, stating throughout the evening’s discussion that the Highway 99 community has been ignored for too long and deserved more attention from the city. A similiar sentiment was expressed by Councilmember Chris Eck, who said that although she would be supporting the resolution, it was critical that the city begin “investing equitably” across all Edmonds neighborhoods — and following through on the Highway 99 community investments mentioned in the resolution. “These community members who live in this part of town are probably tired of waiting,” Eck said. “We have to show them at some point that we really are serious about treating them like all other neighbors throughout Edmonds.”
Councilmember Jenna Nand, who along with Chen lives in the Highway 99 area, proposed an amendment that would have removed a sentence in the resolution stating the council “supports the mayor’s recommendation to cease immediate work” related to the proposal. Nand said that deleting that sentence would leave the door open to future negotiations with the Landmark 99 landlord; although others pointed out that the resolution also stated the city should “monitor the Landmark site” and engage in discussions with current or future landlords if appropriate. The amendment failed on a 3-4 vote, with Paine and Eck supporting.
Additional amendments on various aspects of the resolution — made by Councilmembers Dotsch and Olson — failed to pass. In the end, Councilmembers Chen, Dotsch, Eck, Nand, Olson and Tibbott voted to support the measure.
The Landmark decision came after the council heard two different presentations that focused largely on the city’s financial woes, and how to address them.
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First, during a special 5:30 p.m. meeting, Mayor Rosen spend an hour updating the council on a list of topics of interest and answering questions about them. Among the subjects he touched on were:
The status of the city’s wastewater treatment plant: The plant was originally built in 1957. In 2020, the council approved replacing the plant’s aging sludge incinerator with a new gasification system. The intent was threefold: reduce the city’s carbon footprint, increase energy efficiency and create a marketable byproduct. “It’s very new technology so whenever you are introducing something new with something old it comes with some challenges,” Rosen said. The sludge being treated varies in consistency both day to day and seasonally, which makes it difficult for the machinery to handle. “We’re still experiencing troubles,” Rosen said. The goal is to ensure the system operates smoothly and consistently without shutting down, and then training staff to operate it. Meanwhile, the city is continuing to truck the sludge byproduct to Oregon “until we can solve this problem,” Rosen said.
The elimination of the city’s hate portal and addressing ongoing community concerns about disturbing behavior: Shortly after he took office in January, Rosen eliminated the controversial online portal that had been established by then-Mayor Mike Nelson in 2021 to report incidents of bias, discrimination and hate. Rosen cited infrequent use of the portal and that it overlapped with other existing city reporting tools. However, the mayor said Tuesday that he’d heard from two councilmembers regarding recent “unfortunate experiences” by community members, adding the issue was “frustrating” because the nature of such events may not “cross a legal line” that would require police action. During a discussion about the issue, he told councilmembers he would work with the city’s diversity, equity, inclusion and accessbility commission to pursue other possible reporting alternatives.
Retail theft at businesses, especially along Highway 99: “My guiding principals are safety in general,” Rosen said. The goal is to figure out ways to preserve and enhance quality of life for those who live and work in the area, but also ensure those in need of food, shelter, behavioral health care and other needs are taken care of. Police are “trying to be very responsive” to graffiti and encampments, and the mayor said he has been scheduling meetings with officials representing businesses that are often victimized by retail theft, including those located in the Safeway and Burlington complexes and Winco. The mayor said he is also evaluating the role of the city’s Neighborhood Center office, located next to Safeway, and is considering “a much greater, permanent police presence in the area. It’s very preliminary at this point but it would be more than a satellite office.” Answering a followup question from Councilmember Chen, Rosen said he has been in discussion with South County Fire about the possibility of sharing the former Value Village property, located near Swedish Edmonds Hospital, for a joint fire and police facility.
The process for budget development: With the city moving to a biennial budget this year and following a budgeting by priorities process, Rosen said that would be “a big change” and predicted “it’s going to be bumpy.” He stressed the importance of public involvement in the process, with a statistically valid survey on budget priorities and a parallel survey process for other community members planned, plus community meetings. The council has scheduled a budget retreat Aug. 16 to discuss the findings.
Rosen also outlined Edmonds’ current budget situation, noting that the city had hoped to save $3.2 million by not hiring for unfilled positions, with the goal of ending the 2024 budget year with $2.2 million. That hiring “chill” covers 30 positions, with 19 of those in the general fund. In addition, the city has eliminated three full-time positions and the mayor said he has put on hold on some major purchases, reduced rental costs and professional and membership fees, and increased revenues. All of that added up to a savings of $3,660,000.
However, that savings has been impacted by several things:
– An ending 2023 fund balance that was $500,000 below the adopted budget.
– A revenue forecast that was off by $200,000.
– A police union contract that was $1.1 million above what was budgeted
– Damages from the June 2023 library flooding that was $408,000 beyond what the insurance covered.
“So we’ve added back to our problem, $2,208,000,” Rosen said. Subtract that amount from the $3,660,000 in savings, and the final balance is $1,452,000.
Returning to that original $3.2 million in hoped-for savings through unfilled positions, and subtracting $1,452,000 from that amount, the total is now $1,748,000 — below the $2.2 million originally projected for the year-end balance
As a result, the city has gone back to its department directors, asking for additional budget savings. It is also exploring ways to generate revenue by possibly offering use of equipment or services that other cities don’t have. And the city is “looking at what we can sell,” Rosen said.
Answering a question from Paine about examples of what was specifically eliminated, Rosen pointed to the planned $380,000 fence around the Public Safety Complex parking lot, a $250,000 hook life system and $150,000 in professonal services. He also cited the cancellation of a rental agreement for a satellite parks equipment facility, which saved the city another $42,000.
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The council also heard a report from the mayor-appointed Blue Ribbon Panel of certified public accountants and other financial experts regarding its conclusions and recommendations related to ensuring Edmonds’ financial health.
Consultant Mike Bailey, who led group, said the six-member panel offered the following observations:
General fund balances far below required policy targets, mainly due to additions to authorized expenditures occurring in 2022 and 2023 budget processes, plus additional authorized budget amendments in both years. “Revenues were not increased nor were sources of funding for the budgeted increases in expenditures identified at the time of the proposed budget amendments. As a result, expenditure budgets have exceeded revenue estimates by almost $20 million during the most recent two-year period,” the panel wrote.
Revenue estimates that were overstated in 2020, 2022 and 2023 in a cumulative amount of $7.6 million. “Revenue estimates are the basis for balancing a budget against authorized expenditures,” the panel noted. “Therefore, if it weren’t for staff underspending the authorized budgets, deficits in these three years could have been as high as $27.6 million. Spending was less than budgeted amounts by $16 million during these three years. which meant that expenditures exceeded revenues by $11.6 million – still a significant problem.”
The council didn’t have sufficient information to make proper decisions. “Revenue estimates were not adequately documented, which limited the potential for scrutiny of the estimates,” the panel said. Long-range forecasts were provided but contained no insights into the assumptions, which proved to be unrealistic. “Inadequate documentation and discussion occurred when budget amendments were proposed. Amendments in 2020-2023 amounted to a net increase of expenditures above revised revenues of $11.3 million.”
An antiquated budget process and related software systems. “The city has been embarking on an update to their core financial systems for years (the system was purchased by another company in 2004 and subsequently discontinued),” the panel wrote in its report. In addition, Edmonds “financially committed to a contemporary budget development and transparency system two years ago but never implemented the software. The software subscription costs are being paid by the city with no benefit from the systems. No centralized procurement systems are in place. No methods to evaluate the effectiveness of city programs using program metrics exists. An apparent lack of collaboration within city operations at several levels likely contributed to inefficient services to the community.”
The panel recommended resolving the current budget imbalance through a combination of:
New sources of non-tax revenues: Red light cameras, increased fees and other revenue increases,
Expense reductions: head count reductions, furloughs, professional service and other non-compensation reductions,
New taxes: A 1% annual increase for emergency medical services and the city’s general fund for 2025 and 2026, although the report noted that’s not going to close the gap. An additional property levy for the general fund and/or for the city to join South County Fire will require a vote and would not impact the revenues until 2026. (Since there will be a lag of significant revenue increases until 2025, the panel recommends “bridging” the 2025 budget by borrowing internally from available surplus resources in other city funds).
Now that the Blue Ribbon Panel’s work is done, Councilmember Nand asked who would be overseeing the city’s overall financial strategy going forward. Rosen answered that it would be him and Deputy Administrative Services Director Kim Dunscombe, with assistance from Mike Bailey, who has agreed “to stick around for a while.”
Bailey had recommended that the council receive a financial update as part of its standing agenda each week, and Councilmember Dotsch made a motion to begin receiving that report, which the council passed.
Both councilmembers and Mayor Rosen expressed their gratitude for the Blue Ribbon Panel volunteers, who had been working on the issue since early this year. “I am so grateful for you all,” Rosen said.
You can see more details regarding the panel’s findings at this council agenda link.
— By Teresa Wippel