Mercer Island council adopts midyear financial update and amends 2025–26 budget

The Mercer Island City Council on Sept. 16 received a second‑quarter financial status update and unanimously adopted a budget‑amending ordinance tied to the city’s 2025–26 biennial budget.

Finance Director Matt Mornick and Financial Analyst Ben Schumacher presented revenue and expenditure results through June 30 and described a change in accounting that affects year‑over‑year comparisons. Mornick told the council the city’s account in the Washington Local Government Investment Pool (LGIP) held about $82,000,000 and that most of those funds are committed to projects and operations under the adopted biennial budget.

"It's important to when you think about this number that this is not available resources. This is working capital that keeps the city's operations running," Mornick said. Deputy Mayor Rosenbaum asked for clarification; Mornick and City Manager Jesse Bonham explained that many fund balances are restricted for specific uses and that interest earnings on a fund must be returned to that fund.

Ben Schumacher reviewed drivers of the midyear variance. General fund revenues were higher than in 2024 by about $2.7 million through the second quarter, led by stronger sales tax and higher interest earnings. Expenditures in the general fund were about $1.3 million higher, driven by increased employee compensation, benefits and insurance. Utility fund revenues rose roughly $1.1 million versus 2024, a result of rate increases that took effect Jan. 1, 2025 (water 8%, sewer 4.5%, stormwater 8%), while utility expenditures rose about $4.2 million because of aggressive capital spending.

Staff noted that real estate excise tax (REET) revenues remain volatile, with transaction counts falling from a 2021 peak and rebounding modestly in early 2025; REET is a primary funding source for streets and capital improvements. Schumacher said staff had budgeted LGIP yields at roughly 3.75% but that yields remained higher than forecast in the first half of 2025, increasing interest earnings. Councilmember Becker and others asked about insurance cost increases and whether staff would pursue state engagement; staff said they would follow up.

The ordinance to amend the 2025–26 biennial budget (listed as the standard quarterly budget amending ordinance) was moved by Deputy Mayor Rosenbaum and seconded by Councilmember Reynolds and adopted by unanimous roll call. Staff recommended continued updates and a comprehensive capital program presentation at the next meeting.