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Anacortes staff outline capital‑facilities requests and warn of REET, utility gaps
Summary
Public works and finance staff presented the city’s draft capital facilities plan, showing near‑term Real Estate Excise Tax (REET) constraints and utility funding shortfalls; staff offered options including phased projects, modest utility rate increases and prioritization of REET allocations.
City staff presented the draft 2026–2031 Capital Facilities Plan to the Anacortes City Council on Sept. 22 and warned that current Real Estate Excise Tax (REET) balances and projected collections will not meet the full list of transportation, facilities and park requests without prioritization or new revenue. Steve Hoagland and the public works team told council the city had roughly $4.3 million in REET cash on hand as of Sept. 17 but that projects already budgeted for 2025 would reduce available funds and leave the city with limited new REET for 2026 projects.
The plan matters because REET, utilities and grant income fund most public‑works construction; shortages require councils to choose which projects to move forward, delay or repackage. Hoagland walked council through water, storm, wastewater, operations/facilities and transportation requests and said staff will recommend prioritizing a subset of projects and bringing quarterly budget updates to council.
Public‑works staff showed multi‑year funding scenarios for water, storm and wastewater utilities and presented revenue options: a $5 per month equivalent rate increase for stormwater and water and a 6 percent increase for wastewater were modeled as ways to partially close gaps. For example, staff said a $5 per equivalent residential unit increase on the storm fund would produce roughly $400,000–$500,000 annually; a 6 percent wastewater increase would generate roughly $500,000 annually. Steve Hoagland emphasized those figures are model outputs and that any rate action would be subject to public hearings and formal ordinance changes.
Hoagland also described utility‑specific projects in the 2026 program: Oak Harbor‑Anacortes waterline upgrades (a multi‑year project with cost sharing), a 20‑Ninth Street reservoir project, pipeline replacements and water treatment plant repairs. He said the city has approximately $3 million held from Oak Harbor related to an intertie project and that regional customers pay their share for refinery segments.
On transportation, staff presented a long list of proposed projects — pavement maintenance, ADA improvements, Commercial Avenue and Oak Avenue safety enhancements and the Twelfth & Commercial intersection work — and noted some projects are contingent on grant awards (TIB and other state or federal grants) or on statewide supply constraints (for example, traffic signal poles are delayed). Staff said some projects previously scheduled for 2025 have rolled into 2026 because design or material lead times prevented completion this year.
For city facilities and operations, staff proposed allocating a limited REET total to facilities work in 2026 (staff suggested an example allocation such as $800,000) and asked council to accept an approach where facilities would work through a prioritized project list until the allocated REET is expended, then return for reallocation decisions. Councilmembers requested a clearer narrative on individual projects and suggested staff include more descriptive justifications (for example, “replace roof and fascia” for the Depot Plaza entry) and a ranked list the council can track.
Councilmembers pressed staff on reporting cadence and prioritization. Several members said they want measurable targets and quarterly reporting on permit and capital plan performance; Councilmember McDougall asked staff to make project reserves and intergovernmental balances (for example, Oak Harbor funds) clearer on summary pages. Hoagland and finance staff agreed to provide more explicit fund allocations and to show which projects are funded by utility rates, which by REET and which by grants.
Staff warned that if the council opts not to raise utility rates, the utilities’ capital programs will be limited and the city will need to consider operating cuts or deferrals. No rate changes or ordinance amendments were adopted at the meeting; staff said any rate change would require a separate public hearing and formal council action. Council directed staff to include prioritization and more granular project descriptions in the next CFP iteration and to present options for balancing REET, grants and utility revenues at the October budget meeting.
