Finance director outlines contingency plan for possible $5.5 million sales-tax shortfall

Redmond Finance Director Cochran told the Committee of the Whole on June 10 that staff have prepared a contingency plan to address a projected general-fund shortfall of about $5,500,000 tied to a sharp, rapid decline in sales-tax revenue.

The presentation summarized assumptions and near-term levers the city could use to bridge a sudden revenue gap and outlined a two-phase approach: an initial line-item reduction analysis followed by a programmatic review to evaluate impacts on services.

“We would be general fund only looking at about a $5,500,000 loss really associated to, sales tax,” Director Cochran said, describing staff analysis of a steep, short-term downturn. Cochran told council that staff ran scenarios of 1%, 3% and 5% departmental reductions and that departments could “comfortably manage up to the 3% mark.” She said a 5% reduction would be “a stretch” and could require use of salary and benefit contingency or stopping some external transfers.

Cochran described the initial administrative actions considered as “low-hanging fruit”: reducing supplies, travel and training, and freezing vacant positions. She said staff’s next step is to convert the line-item work into a programmatic assessment to show which programs might be postponed, paused or eliminated and what community impacts those choices would produce.

Council members asked for specific policy guidance the city might use if an extended downturn occurred. Council Member Critzer recalled the pandemic-era conversations about furloughs and said the council should establish guidance in advance. Cochran responded that furloughs are “probably not one that you would hear as a recommendation from me” and called them a short-term response that can become a longer-term problem. “Furloughs is not something that I support from a city perspective,” she said, while also offering to present pros and cons if the council wanted them.

Council Member Stewart urged staff to monitor unspent human-services funds and other revenue streams so the council can respond quickly to community needs if demand rises. Council members also asked for the memo of assumptions and a timeline: Cochran said staff aim to complete the documented contingency analysis and provide an update in July, with a broader study session on the long-range financial strategy expected in October.

Next steps: staff will finalize the contingency documentation showing assumptions and potential departmental savings, continue work with communications to display this work publicly, and begin the programmatic phase to identify specific services that could be affected by deeper cuts.